UPDATE: Sept. 21, 2020: The Solar Energy Industries Association (SEIA) filed a petition for review on Friday against the Federal Energy Regulatory Commission, claiming its July final rule on the Public Utility Regulatory Policies Act (PURPA) discourages small solar development, particularly in western, non-competitive markets.

SEIA's request, filed with the United States Court of Appeals for the Ninth Circuit, follows FERC's denial of several entities' requests for rehearing. FERC denied the requests on Thursday, but said in its order it "may modify or set aside" aspects of the order, meaning that it may later provide some explanation or changes based on issues raised in the rehearing requests.

Dive Brief:

• Several organizations challenged federal regulators' July final rule on the Public Utility Regulatory Policies Act (PURPA) in protests filed last week, arguing the regulatory body acted unlawfully in its order.
• Protesting parties said the Federal Energy Regulatory Commission's final rule disadvantages small generation projects that qualify for PURPA payments by eliminating the ability of a qualifying facility (QF) to enter into long-term, fixed contracts. The assertion that eliminating these contracts, among other changes, continues to encourage QF development is "clearly erroneous," the Solar Energy Industries Association (SEIA) wrote in its comments filed Aug. 17.
• The parties' requests for rehearing are unlikely to lead to any major rule changes from the commission, and will likely instead lead to parties filing a lawsuit in federal court, said Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program. "It would be unusual for FERC to reverse major parts of a rulemaking on rehearing. Most of the rehearing requests are about major flaws in FERC's new approach," he said in an email. "I expect some of the rehearing parties will sue FERC in federal court."

Dive Insight:

PURPA was passed in 1978 in an effort to encourage domestic energy production and reduce overall energy demand. The law in part calls for FERC to implement regulations that encourage the development of QFs, often small power generators, but the Electric Power Supply Association, SEIA and others argue FERC's latest ruling defies the federal law by granting states the ability to eliminate provisions that have been proven to help encourage QF deployment and development.

"In revoking the long-standing regulations that provide the Qualifying Facility with the right to elect to be paid a long-term energy rate in a contract for long-term energy delivery the Commission is actively discouraging the development of Qualifying Facilities in contravention of the statutory direction to encourage the development of such facilities," SEIA wrote in its request for rehearing.

Utilities have long opposed PURPA, claiming that by forcing utilities to enter into long-term, fixed price contracts with QFs, the law was driving up costs for customers. State regulators were also critical of previous PURPA requirements under FERC, including the "one mile rule" which critics said allowed larger facilities to disaggregate their capacity into smaller projects in order to qualify for PURPA contracts.

FERC in its explanation of the changes said the rules were intended to provide states with greater "flexibility", as well as reflect the lower costs of wind and solar seen in today's markets. 

"Most of the renewable energy projects developed these days are done outside of PURPA. That to me is total proof that renewables can compete in our markets. And I do not expect that to change," FERC Chair Neil Chatterjee said in July after the final rule was approved.

But in requests for rehearing, critics of the rule change argued that subjecting QFs to the wholesale avoided cost rate without a minimum contract length could render many QFs "unfinanceable."

"Indeed, under Order No. 872, QFs could face a world in which there is no minimum contract term, a payment of zero for their capacity, and an avoided cost energy price based on highly volatile and unpredictable short-term markets," argued a Northwest regional coalition of small power producers, wind and solar groups. "Obviously, this would render it impossible to finance a QF, and no reasonable person could conclude that such requirements ‘encourage' QFs."

SEIA also protested the adjustment of the one mile rule, which is intended to prevent facilities 10 miles apart or further from aggregating as one project, and a provision of the rule that allows utilities within an organized regional transmission market or independent system operator to seek a waiver in order to avoid purchasing from projects larger than 5 MW.

Other parties that filed a request for rehearing include a coalition of public interest organizations and wind power developer One Energy. California investor-owned utilities also filed Aug. 17, asking FERC to clarify whether a 2010 order from the U.S. Court of Appeals for the Ninth Circuit still applies. The order mandated utilities in the state set costs at an avoided tier rate.

FERC was not able to comment further on the requests for rehearing, as they are a part of a pending contested proceeding.