Dive Brief:

• The Idaho Public Utilities Commission has granted a request made by the state's major utilities to reduce the length of negotiated renewable energy contracts covered by the Public Utility Regulatory Policies Act (PURPA) of 1978, the Idaho Statesman reports.
• The decision reduces the length of contracts to two years, after regulators found longer contracts led to customers paying higher costs for renewable power.
• Renewable developers argued shorter contract terms will dramatically reduce solar and wind development in Idaho, but regulators said they were not convinced and believe shorter terms will better reflect actual avoided costs.

Dive Insight:

PURPA — designed to ensure utilities get their power from a diversity of sources — requires utilities to purchase power from renewable energy projects covered by the law, referred to as Qualifying Facilities (QFs).

The PUC had already shortened PURPA contracts this year, reducing lengths to five years in February while it investigated Idaho Power's claims that it had more than 1,300 MW of qualifying solar capacity seeking interconnection, on top of 400 MW already approved. For some perspective, the utility currently has 1,297 MW of non-hydro renewable energy on its system or under contract, according to the PUC. That's about 40% of its 2014 peak load of 3,184 MW and 120% of its total minimum load of 1,073 MW. 

PacifiCorp, operating as Rocky Mountain Power in eastern Idaho, joined the case and told regulators it had more than 275 MW of projects seeking contracts. According to the PUC, PacifiCorp has 189.6 MW of existing Idaho PURPA contracts – for a total of 465 MW of existing and proposed PURPA generation, enough power to supply 108%  of the utility's average load.

Despite concerns from renewable developers that shorter contract lengths would reduce the certainty needed to develop projects, regulators were unconvinced. “The utilities all have ample amounts of PURPA on their systems and additional renewable generation is in the queue,” the PUC said.

Regulators said the shorter contract lengths would benefit consumers because rates paid to developers would more closely align with the true avoided costs. Shorter contracts means the power price “becomes a truer reflection of the actual costs avoided by the utility and allows QFs and ratepayers to benefit from normal fluctuations in the market.”

The PUC added that utilities would still be required to purchase from qualifying renewable developers, but with a shorter contract length that “merely functions as a reset for calculation of the QFs avoided costs in order to maintain a more accurate reflection of the actual costs avoided by the utility over the long term.”

The commission said it held two public hearings into the issue and received more than 200 written comments from customers.

Some opposed to the change argued qualified facilities should be treated similarly to utilities, which are able to build generation sources with recovery for investment spread over decades, out to 50 years in some instances.

"QFs differ from utility sources in several significant ways," the PUC said in a statement. "Utilities cannot be compensated for energy produced from a generating facility without first establishing the need for that generation through the PUC’s Certificate of Need process. That’s different than PURPA, which requires utilities to buy QF power whether the power is needed or not."

The commission also said a utility-authorized resource is "typically subject to competitive bidding, cost scrutiny and oftentimes is able to fit into the utility’s need for dispatch better than a mandatory QF." The fuel component for utility plants is also adjusted every year, regulators noted, but is fixed for fuel-based QF contracts.