Dive Brief:

• The 9th U.S. Circuit Court of Appeals on Monday ruled that California is not compliant with the Public Utility Regulatory Policies Act (PURPA), upholding a previous district court decision and contradicting a 2015 decision from the Federal Energy Regulatory Commission (FERC).

• Winding Creek Solar first challenged the California Public Utilities Commission (CPUC) in June 2013, arguing that one of the state's mechanisms for implementing PURPA, the Renewable Market Adjusting Tariff (Re-MAT), was not compliant with the federal law intended to drive utilities to purchase more power from small renewables generators. FERC ruled the alternative standard option contract was compliant.

• The ruling is a victory for renewables developers in the West. However, in June, the 9th Circuit ruled in favor of Montana regulators in a case over contract prices, frustrating solar developers and raising concerns over the federal government's ability to implement PURPA.

Dive Insight:

PURPA fights are heating up across the West as tensions mount between renewables developers and the utilities purchasing power from them. 

The court's rejection of California's approach to implementing the 1978 federal law could give PURPA more power in less liberal states fighting their own regulatory battles, Eric Lee Christensen, counsel for the plaintiffs in this case, told Utility Dive. And the federal court's contradictory stance with the 2015 FERC ruling could be a sign of even more change to come.

"To the extent FERC is inclined to take a look at PURPA, this case probably won't dissuade them from doing so," Todd Brecher, who focuses on energy litigation as counsel for Akin Gump Strauss Hauer & Feld, told Utility Dive. "Here, [FERC] took a look at the California program and thought it was fine. That what California was doing was consistent with PURPA. But the [9th Circuit] Court said, 'No. PURPA doesn't give you as much flexibility as you think you have.'"

The main question was whether the state had a program that effectively implemented PURPA. Winding Creek Solar first challenged Re-MAT, arguing that the program was not PURPA-compliant because of a cap on the volume of energy that utilities had to purchase from qualifying facilities (QFs). 

FERC ruled that because the state also offered a standard contract, which did not place a cap on the amount of power a utility could purchase from a QF, the CPUC's programming was PURPA-compliant.

What the U.S. District Court for the Northern District of California, and then the 9th Circuit determined, however, was that the standard contract was also not PURPA-compliant. Because the standard contract's pricing mechanisms are based on fluctuating variables, "you have no way of predicting what the price is going to be a week from now, [or] a month from now," said Christensen. "That means there's no long term, set, firm price [and] that's one of the options that FERC PURPA regulations require."

Now, California will either have to adjust one of its two existing programs  — ReMAT and the standard contract —   or create a new program that is PURPA-compliant, said Christensen. And for other states subject to the 9th Circuit's jurisdiction, such as Montana and Idaho, the ruling could have further long-term implications.

"For California I think [this decision] makes it clear that PURPA is still the law of the land," said Christensen. "In many ways ... the ruling's going to be more important in the other states who have less progressive policies on renewables and in a lot of states PURPA is really the only game in town in terms of encouraging renewables development."