Montana PSC suspends PURPA rates for small solar farms

Dive Brief:

Montana’s Public Service Commission has temporarily suspended guaranteed rates for small solar projects at the request of NorthWestern Energy.
The rates, set by the PSC under the Public Utility Regulatory Policies Act (PURPA) of 1978, called for payments of $66/MWh that are passed through to rate payers. Developers will now need to negotiate with the utility for power purchase agreement rates on a case-by-case basis.
Green energy advocates said the ruling blindsided solar companies developing Montana projects under the PSC’s published terms, which hadn’t changed since 2012.

Dive Insight:

Despite the fact that a Montana Court in March upheld a PSC order denying a bid from NorthWestern Energy to reduce its avoided costs rates under PURPA, the PSC has issued an emergency order to suspend PURPA rates for all but six solar projects in the state.

Commissioner Roger Koopman, who voted in favor of the suspension, said solar developers are streaming into Montana to take advantage of the high rates.

"They look at Montana and they kind of flood in here thinking we can cut a really fat hog with this $66 rate, which is totally unfair to the rate payer and totally unfair to Montana businesses, totally unfair to Montana industries," he told Montana Public Radio.

In May, NorthWestern said hook-up applications from solar companies unexpectedly surged. The utility says that since January 2015 there were 97 requests.

NorthWestern attorney John Alke told the PSC the utility had nine solar farms under contract, mostly with Cypress Creek Renewables of California. He said NorthWestern had also agreed to terms with North Carolina-based FLS Energy for 14 Montana projects to be built in the next 18 months, though it had not finalized the deals. Alke also said NorthWestern would also accept 21 projects from Pacific Northwest Solar of Oregon.

The PSC’s vote means small solar companies will now have to negotiate with NorthWestern on a case by case basis, until the commission establishes a new rate, to replace the old one.

Until then, Commissioner Travis Kavulla said NorthWestern’s starting bid for solar energy will likely be much less than the suspended rate, and that could prevent solar projects from moving forward.

Reforming PURPA has been a popular topic among many western U.S. utilities, particularly those owned by Warren Buffett's Berkshire Hathaway Energy. Its utilities have sought to shorten PURPA contracts in Utah, Idaho and Oregon, and introduced proposals in both the U.S. Senate and House in the past year.

Last August, Idaho regulators voted to reduce PURPA contracts from 20 years to two, and Utah regulators slimmed them to 15 years in January. BHE's federal proposals, however, were left out of a House energy bill currently under consideration in a conference committee with the Senate.