Montana court upholds PSC order to keep original PURPA rates

Dive Brief:

A district court judge upheld the Montana Public Service Commission order that denied the bid from NorthWestern Energy to reduce its established avoided cost to buy electricity from an independent power producers, the Missoulian reports.
Montana's utility regulators last year denied NorthWestern's request to decrease the rates paid to small generators under the Public Utility Regulatory Policy Act (PURPA), saying the utility must maintain the "standard rate" it pays to projects 3 MW or less.
NorthWestern filed a complaint shortly afterwards, but Judge Mike Menahan, who ruled to uphold the PSC order, said the utility's “calculated proposed rates [use] a flawed methodology.”

Dive Insight:

Debates over PURPA contracts have heated up in the Western states, as witnessed in Utah, Oregon and Idaho. Now Montana's major utility, NorthWestern Energy, sought to reduce contract payments, but its efforts have been largely unsuccessful.

Under PURPA, utilities are obligated to buy generation from certain "qualifying facilities" to ensure they have "nondiscriminatory access" to power markets. In a 2006 ruling (QM14-3-000), the Federal Energy Regulatory Comm decided that QFs of 20 MW or larger can achieve that market access through wholesale markets, but PURPA's backers say it still provides important market access protections for smaller non-utility generators.

PURPA was initially signed into federal law in 1978 to ensure utilities were sourcing power from a diversity of companies and resources, not just themselves. The law opened the door to more renewable energy.

While federal regulators have set the standard for the size of QFs, state regulators have the authority to set rates and sign off on contracts. PURPA has come under increasing scrutiny during the past year with three Republican members of the U.S. Congress writing a letter to the FERC asking that they schedule a technical conference to examine PURPA and to consider changes based on changes in the market in the last four decades.

Berkshire-Hathaway has also pushed for changes to the law on the federal level, lobbying for the inclusion of a proposal to exempt many utilities from PURPA purchases in a broad energy bill unveiled by the House last year. Lawmakers removed the proposal along with language aimed at curbing FERC's regulation of hydro power.