20120529Augmentation.pdf

RECEIVED
MAY 29 PM 12: 02
ATTORNEYS AT LAW ,
Tel [phone] Fax [phone]
P.O. Box 7218 Boise, ID 83707 - 515 N. 27th St. Boise, ID 83702 JTiL1I h:
May 29, 2012
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
RE: IPC-E-11-15 -Grand View Solar PV Two, LLC v. Idaho Power -
Augmentation of Record to Consider New Legal Authority
Dear Ms. Jewell:
I write on behalf of Grand View PV Solar Two, LLC in the above captioned docket and
respectfully request the Commission augment and consider on the record a recent order
issued by the Federal Energy Regulatory Commission ("FERC") that specifically address
a state commission's legal ability to issue a ruling on REC ownership. There is currently
pending a Motion for Summary Judgment in this docket with legal briefing. The very
relevant FERC issuance was made just weeks ago and would have been referenced by
Grand View in its briefing had it been available at the time.
In Morgantown Energy Associates, Docket Nos. EL 12-36-000 and QF89-25-008 and City
ofNew Martinsville, West Virginia, Docket Nos. EL12-48-000 and QF85-541-00, issued
on April 24, 2012, FERC made the following finding:
In making this statement, the Commission reasoned that, under PURPA and the
Commission's regulations, electric utilities must purchase energy and capacity
made available by QFs, and that rates for these purchases must be just and
reasonable to the electric customer of the electric utility and in the public interest,
and not discriminate against QFs. Additionally, an electric utility is not required
to pay the QF more than the avoided costs of generating the power itself or of
purchasing from another source. The Commission stated that these avoided cost
rates, "in short, are not intended to compensate the OF for more that capacity and
energy." To the extent that the West Virginia Order finds that avoided-cost rates
under PURPA also compensate for RECs. the West Virginia Order is inconsistent
with PURPA.
At p. 18 citations omitted, emphasis provided. A complete copy of the FERC decision is
attached.
Idaho Public Utilities Commission
May 29, 2012
IPC-E-1 1-15
Page 2
Grand View respectfully requests that the Idaho Public Utilities Commission augment its
record and rule on this matter with the attached FERC order aiding to inform its decision.
Sincerely,
,frL
Peter Richardson
Richardson & O'Leary PLLC
Attorney for Grand View Solar PV, Two
Cc: parties of record
139 FERC ¶ 61,066
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Jon Wellinghoff, Chairman;
Philip D. Moeller, John R. Norris,
and Cheryl A. LaFleur.
Morgantown Energy Associates Docket Nos. EL 12-36-000
QF89-25-008
City of New Martinsville, West Virginia Docket Nos. EL 12-48-000
QF85-541-001
NOTICE OF INTENT NOT TO ACT AND DECLARATORY ORDER
(Issued April 24, 2012)
1. In a November 22, 2011 decision,' the Public Service Commission of
West Virginia (West Virginia Commission) held that an electric utility that purchases
electric energy and capacity under an electric energy purchase agreement 2 with a
qualifying facility (QF) formed in accordance with the Public Utility Regulatory Policies
Act of 1978 (PURPA)3—and not the owner of the QF—owns the renewable energy
credits (REC) associated with that purchase.4 In response to subsequent petitions filed
with this Commission, we hereby give notice that we decline to initiate an enforcement
action pursuant to section 210(h) of PURPA.5 However, as discussed below, we
conclude that certain statements in the West Virginia Order are inconsistent with the
requirements of PURPA.
1 Monongahela Power Company, Case No. 11-0249-E-P, (Pub. Serv. Comm'n of
W. Va. Nov. 22, 2011) (West Virginia Order).
2 In this order, the Commission refers to such agreements by the term they are
more usually known as—power purchase agreements (PPA).
16 U.S.C. § 824a-3 (2006).
"West Virginia Order at 56.
16 U.S.C. § 824a-3(h) (2006).
Docket Nos. EL 12-36-000, et al. -2-
I. Back2round
2.Morgantown Energy Associates (Morgantown Energy) owns and operates a
50 MW waste-coal cogeneration facility, which has been self-certified by Morgantown
Energy as a qualifying cogeneration facility.6 Morgantown Energy and Monongahela
Power Company (Monongahela Power) are parties to a PPA (Morgantown PPA), entered
into on March 1, 1989, whereby Morgantown Energy sells its capacity and energy to
Monongahela Power in return for an avoided cost rate in accordance with PURPA. The
Morgantown PPA was approved by the West Virginia Commission, with Morgantown
Energy generating electric energy under the Morantown PPA since April 1992. The
Morgantown PPA is silent with respect to RECs. Morgantown Energy, however, is
certified to produce RECs under Pennsylvania state law.8
3.The City of New Martinsville, West Virginia (New Martinsville) owns and
operates a municipal electric system serving approximately 1,800 customers. It also
owns and operates a hydroelectric generation facility with an approximate capacity
of 37.4 MW that began commercial operation in 1988. New Martinsville's facility was
certified as a QF by the Commission in Docket No. QF85-541-000.9 New Martinsville
and Monongahela Power are parties to an electric energy purchase agreement
(New Martinsville PPA), entered into on April 1, 1986, and approved by the
West Virginia Commission, whereby New Martinsville sells its capacity and energy to
Monongahela Power in return for an avoided cost rate in accordance with PURPA. The
New Martinsville PPA is silent with respect to RECs.'° New Martinsville, however,
voluntarily filed a petition with the West Virginia Commission to certify itself as a
qualified energy resource, allowing it to produce RECs under West Virginia state law.
6 Morgantown Energy Petition at 1 n.2; Morgantown Energy, FERC Form 556,
Docket No. QF89-25-007 (filed Aug. 17, 2011).
7 Morgantown Energy Petition at 8; West Virginia Order at 47.
8 Morgantown Energy Petition at 9.
9 New Martinsville Petition at 2; City of New Martinsville, West Virginia,
35 FERC 161,322 (1986).
10 New Martinsville Petition at 3
11 Id at 9. New Martinsville states that, although the West Virginia Commission
approved its petition for certification as a qualified energy resource, the ownership of the
RECs associated with electric energy generated by New Martinsville was determined by
the West Virginia Order at issue here to belong to Monongahela Power. Id
Docket Nos. EL12-36-000, et al. -3-
New Martinsville adds that it needs to own RECs itself to comply with West Virginia
renewable energy portfolio standards. 12
A. Renewable Energy Credits
4.A number of states have enacted statutes creating renewable portfolio standards
that, in general, require utilities to procure a percentage of their generation from sources
that meet certain renewable energy criteria.' i To demonstrate compliance with
renewable portfolio standards, a utility subject to these standards is required to own RECs
to demonstrate its participation. 14
5.West Virginia enacted its renewable portfolio standards statute, the Alternative
and Renewable Energy Portfolio Act (West Virginia Act), in 2009.15 The West Virginia
Act requires electric utilities to own alternative and renewable energy resource credits 16
(i.e., RECs)7proportional to the electric energy sold by the electric utility to its retail
customers.' The West Virginia Act awards RECs to electric utilities" that venerate
electricity from specified alternative or renewable energy resource facilities. 9 If an
electric utility does not itself generate enough electric energy from its own alternative or
renewable energy resource facilities to meet its REC requirement, it may purchase
RECs.2°
12 New Martinsville Petition at 9.
13 Morgantown Energy Petition at 8.
" See id. at 9
15 W. VA. CODE ANN. § 24-2F-1 (2011); Morgantown Energy Petition at 10.
16 W. VA. CODE ANN. § 24-2F-3(4). The statute defines an alternative and
renewable energy resource credit as "a tradable instrument that is used to establish, verify
and monitor the generation of electricity from alternative and renewable energy resource
facilities, energy efficiency or demand-side energy initiative projects or greenhouse gas
emission reduction or offset projects."
'7 W. VA. CODE ANN. § 24-2F-3(2).
'8 W VA. CODE ANN. § 24-2174(b).
19 W. VA. CODE ANN. § 24-2F-3(3),-3(l3).
20 W.VA. CODE ANN. § 24-2F-4(c).
Docket Nos. EL 12-36-000, et al. -4 -
6.The West Virginia Commission has issued a series of rules and orders addressing
the provisions of the West Virginia Act .21 The West Virginia rules provide detail with
respect to the awarding of RECs to a qualified energy resource.22 These rules provide
that these credits may be "included in, or bundled with," the purchase of energy, or may
be "purchased independently, or unbundled from," energy purchased from a qualified
energy resource. 23 Additionally, the rules set forth the procedure by which a qualified
energy resource may apply for certification from the West Virginia Commission allowing
it to produce RECs.0 The rules also make available to electric utilities cost recovery and
rate incentive mechanisms to help recover compliance costs associated with the
alternative and renewable energy portfolio standards and costs associated with electric
utility investments in new alternative and renewable energy resource facilities. 25 In an
order issued on November 5, 2010, the West Virginia Commission addressed the issue of
nonutility generators and found that a nonutility generator shall be considered a qualified
energy resource and thus awarded alternative and renewable energy resource credits
under sections 24-217-4(b)( 1 )-(3) of the West Virginia Act. 26
B. West Virginia Order
7.On February 23, 2011, Monongahela Power and Potomac Edison Company,
together doing business as Allegheny Power (Allegheny Power), filed a joint petition for
declaratory order and interim relief with the West Virginia Commission seeking a ruling
declaring, essentially, that Allegheny Power is entitled to own the RECs produced by
21 See Morgantown Energy Petition at 12.
22 W. VA. CODE R. § 150-34-5.5.2 (2012).
23 W. VA. CODE R. § 150-34-5.5.6.
24 W. VA. CODE R. § 150-34-4. Rule 150-34-4.4.2 provides that certain "types of
facilities may apply to be a qualified energy resource."
25 W VA. CODE ANN. § 24-2F-7.
26 the matter ofaproceeding to seek preliminary comments from interested
parties regarding the scope of a proposed rulemaking to establish a credit trading
program pursuant to West Virginia House Bill 103, effective July 1, 2009: Alternative
and Renewable Energy Portfolio Act, codified as W. Va. Code § 24-2F-1 et seq., General
Order No. 184.25, at 11-15 (W. Va. Pub. Serv. Comm'n Nov. 5,2010).
Docket Nos. ELI 2-3 6-000, et al. -5-
three facilities certified with the Commission as QFs under PURPA.27 Allegheny Power
sought interim relief in the form of a moratorium on the selling or transferring of any
RECs, or any commitment to do the same, by the QFs until the matter is adjudicated.
On April 19, 2011, the West Virginia Commission granted the interim relief. 29 Along
with granting interim relief, the West Virginia Commission named Morgantown Energy
as a party to the proceeding. 30
8.On November 22, 2011, the West Virginia Commission issued the West Virginia
Order at issue here, addressing two questions raised by Allegheny Power. The first
question asked whether the electric utilities own the RECs generated by the QFs under
PURPA avoided cost rate contracts between the QF5 and their respective electric utility
counterparties when these contracts are silent on RECs. The second question assumed
the electric utilities indeed own the RECs, and asked whether the West Virginia
Commission has the authority to order the QFs to certify themselves as qualified energy
resources or to deem the QFs certified. With respect to these two questions, the
West Virginia Commission held first that the electric utilities own the RECs, and, second
that the West Virginia Commission has the authority to deem the QFs to be qualified
energy resources under the West Virginia Act.
9.The West Virginia Commission provided the following reasons why it determined
the RECs are owned by the electric utility rather than the QF: (1) avoided cost rate
contracts under PTJRPA provide a substantial consideration to the QF, an amount of
consideration that generally is not available to merchant power generators, and "no
additional consideration is contemplated or needed" for the generation of RECs;3'
(2) given that RECs are used to show that an electric utility is using qualifying
generation, coupled with the fact that the electric utility is required to and does purchase
27 West Virginia Order at 1; see Morgantown Energy Petition at 14. The three
QFs at issue in the West Virginia Order proceeding are: the Hannibal project, a run-of-
river hydropower facility located at the Hannibal Locks and Dam on the Ohio River in
New Martinsville, West Virginia; the Grant Town project, a waste-coal generation
facility located in Grant Town, West Virginia; and the previously described Morgantown
Energy QF.
28 West Virginia Order at 7.
29 1d at 7. Morgantown Energy had been selling RECs into Pennsylvania prior to
the grant of interim relief.
30 Id at 8; see Morgantown Energy Petition at 14.
31 West Virginia Order at 28.
Docket Nos. EL12-36-000, et al. -6-
the energy from a QF under a PPA, it is consistent with the West Virginia Act to award
ownership of the RECs to the electric utility rather than the QF; (3) "[t]o require the
[electric] utility and its customers to pay additional money for [renewable energy] credits
to 'verify' those purchases exposes the ratepayers to unreasonable additional expense and
would constitute a windfall" for the QFs;32 (4) an electric utility purchasing electric
energy from a QF under a PPA owns both the generation and the RECs associated with
that generation because the PPA requires the electric utility to purchase all the energy
generated by the QF; (5) it would be unreasonable and contrary to West Virginia law not
to consider RECs an integral and inseparable component of the electric energy purchased
under an avoided cost rate contract due to the West Virginia Commission's decision to
support the financial health of QFs; (6) based on proffered evidence showing that the
RECs associated with the QFs are worth approximately $50 million, it is unfair to
shoulder West Virginia ratepayers with the additional cost that would be incurred if the
RECs are not owned by the electric utilities; (7) assigning ownership of the RECs to the
electric utilities constitutes "an equitable solution that fulfills the purposes and intent of
the [West Virginia Act] and ensures the fair and reasonable future rates for the utility
customers;"33 and (8) given that under the PPA the electric utility owns the electric
energy generated by the QF, and that RECs are created simultaneously with electric
energy, the West Virginia Commission properly concluded that the "purchaser and owner
of the electricity at the time the electricity is generated owns the credits as well."34
10. The West Virginia Commission also found that it is within its authority to deem
Morgantown Energy to be a qualified energy resource under the West Virginia Act. 35
The West Virginia Commission first reasoned that:
Given the favorable regulatory treatment afforded
[Morgantown Energy] and the actions taken by Companies
and the [West Virginia Commission] to support the viability
and financial success of the facility coupled with the
[West Virginia Commission's] determination that the
Companies own the [RECs], the [West Virginia Commission]
finds the refusal of [Morgantown Energy] in this case to
32 Id. at 30.
33 1d at 34.
34 1d. at 36.
35 1d. at 42.
Docket Nos. EL 12-36-000, et al. -7-
certify the facility [as a qualified energy resource] to be
unreasonable. [361
11.The West Virginia Commission then explained:
Assuming that the [West Virginia] Commission will receive
sufficient information [from the electric utilities] concerning
the [Morgantown Energy] generation attributes, the
[West Virginia] Commission has jurisdiction and authority
over the Morgantown project to deem the facility certified to
generate credits under the [West Virginia] Commission
Portfolio Standard Rules based on the jurisdiction and
authority provided in the Portfolio Act and in Chapter 24 of
the West Virginia Code to resolve the issue of credit
ownership and to enable [the Companies] to meet the
compliance requirements of the Act based on our decision in
this case. [371
12.On December 22, 2011, Morgantown Energy filed an appeal of the West Virginia
Order with the Supreme Court of Appeals of West Virginia. Also on December 22, 2011,
New Martinsville filed an appeal of the West Virginia Order with the Supreme Court of
Appeals of West Virginia.
C. Morgantown Energy's Petition for Enforcement
13.Concurrent with Morgantown Energy's appeal to the Supreme Court of Appeals of
West Virginia, Morgantown Energy filed a petition for enforcement with the Commission
on February 24, 2012 pursuant to section 2 10(h) of PUIRPA and the Commission's
regulations implementing PUIRPA. Morgantown Energy alleges that the West Virginia
Order violated PUIRPA in three ways: (1) the West Virginia Order incorrectly held that
the avoided cost rate paid by Allegheny Power to Morgantown Energy is sufficient to
transfer RECs, together with energy and capacity, generated by Morgantown Energy to
Allegheny Power; (2) the West Virginia Order incorrectly held that the West Virginia
Commission has the authority to find Morgantown Energy certified, or deem
West Virginia Order at 41.
37 1d. at 42.
38 See Morgantown Energy Associates v. Public Service Commission, Docket
No. 11-1739; City of New Martinsville v. Public Service Commission, Docket
No. 11-1738.
Docket Nos. EL12-36-000, et al. -8-
Morgantown Energy certified, as a qualified energy resource able to produce RECs; and
(3) the West Virginia Order discriminates against Morgantown Energy with respect to its
QF status.
14.Morgantown Energy argues that prior Commission orders support its position that
considering an avoided cost rate to be compensation for energy, capacity, and RECs is a
violation of PURPA. Morgantown Energy cites the Commission's finding in
American Ref-Fuel Company,39 where, Morgantown Energy states, the Commission
declared that avoided cost rates paid by electric utilities to QFs pursuant to PURPA
contracts do not convey the RECs produced by the QFs. In support of its argument,
Morgantown Energy further cites to a more recent Commission order, California Public
Utilities Commission (CPUC),40 which it states reaffirms the Commission's finding in
American Ref-Fuel Company. In CPUC, Morgantown Energy states, the Commission
held that the avoided cost rate must represent the actual energy and capacity costs
avoided, nevertheless, PURPA does not prohibit the payment of other compensation not
affiliated with the avoided cost rate as compensation for RECs.41 Morgantown Energy
argues that, if a PURPA avoided cost rate is the just and reasonable level of
compensation paid to a QF, then by including RECs along with energy and capacity the
same avoided cost rate is effectively reduced.
15.Morgantown Energy asserts that the West Virginia Order is littered with
conclusory statements, the most egregious being the West Virginia Commission's finding
that, because electric energy and RECs are created simultaneously, whoever owns the
electric energy also owns the RECs. Morgantown Energy argues that using that same
logic leads to the conclusion that Allegheny Power would also own the steam generated
by Morgantown Energy, an unrealistic result. 42
16.Morgantown Energy also states that the West Virginia Commission in the
West Virginia Order mischaracterized the holding of Wheelabrator Lisbon, Inc. v.
Connecticut Department ofPublic Utility Control (Wheelabrator).43 Morgantown
105 FERCJ61,004,atP 18 (2003), reh'g denied, 107FERCJ61,016,atP 16
(2004), appeal dismissed sub nom. Xcel Energy Serv, Inc., 407 F.3d 1242 (D.C. Cir.
2005) (American Ref-Fuel).
40133 FERC61,059 (2010), reh'g denied, 134FERCJ61,044 (2011).
41 CPUC, 133 FERC ¶ 61,059 at 31.
42 Morgantown Energy Petition at 24.
531 F.3d 183 (2d Cir. 2008).
Docket Nos. EL12-36-000, et al. -9-
Energy argues that Wheelabrator is distinguishable and unsupportive of the
West Virginia Order because the PPA in Wheelabrator differs from the Morgantown
PPA with respect to the following: the Wheelabrator PPA expressly transferred all of
Wheelabrator' s net electrical output to the purchasing utility, which differs from the
Morgantown PPA in which Morgantown Energy agreed to transfer energy and capacity;
Connecticut's RECs are contractually linked to Wheelabrator' s electrical output; and
Wheelabrator' s electrical output was within Connecticut's definition of renewable
energy. Another difference, Morgantown Energy explains, resides in the fact that
Wheelabrator's PPA contained a dispute resolution clause assigning adjudicatory
authority to the relevant state commission, whereas the Morgantown PPA is silent.
17.Morgantown Energy claims that the West Virginia Commission violated PURPA
by transferring the RECs along with the energy and capacity generated to the electric
utility because such a change effectively lowers the avoided cost rate received by the QF
thus constituting a modification to the Morgantown PPA. Morgantown Energy cites to
FreehokP for the proposition that a state agency cannot reconsider or modify a PPA
after it has approved the agreement.
18.Morgantown Energy also argues that the West Virginia Commission's transfer of
RECs without any compensation other than the avoided cost rate was inconsistent with
the West Virginia Commission's rules providing for a cost recovery and rate incentive
mechanism to account for costs incurred by electric utilities complying with the
West Virginia Act.
19.Morgantown Energy further asserts that the West Virginia Commission violated
the PURPA exemption provisions applicable to QFs when, in the West Virginia Order, it
found that it has the authority to compel Morgantown Energy to certify itself as a
qualified energy resource, including the authority to deem Morgantown Energy as such a
resource, for the purpose of generating RECs. Morgantown Energy notes that
section 210(e) of PURPA exempts QFs from state laws and regulations affecting
rates, financial regulation, and organizational regulation, therefore arguing that the
West Virginia Commission lacks the authority necessary to issue such an order.
Moreover, Morgantown Energy states that the West Virginia Commission's
determination that not requiring Morgantown Energy to certify itself as a qualifying
energy facility would harm ratepayers and impose unusual difficulty on the electric
utility, rendering Morgantown Energy's refusal unreasonable, is a rejection of applicable
laws and regulations because the West Virginia Commission lacks jurisdiction over
Morgantown Energy's wholesale rates under PURPA.
44 Freehold Cogeneration Assocs., L.P. v. Bd. of Regulatory Comm 'rs of the
State ofN.J., 44 F.3d 1178 (3d Cir. 1995) (Freehold).
Docket Nos. EL 12-36-000, et al. -10-
20.Finally, Morgantown Energy alleges that the West Virginia Commission has
discriminated against Morgantown Energy with respect to other generators that may be
capable of generating RECs due to its status as a QF, or because of Morgantown's PPA
with Monongahela Power. Morgantown Energy argues that the West Virginia Order's
finding that a QF's RECs are automatically conveyed to the electric utility violates
section 210(b) of PUIRPA, which prohibits discrimination against QFs, because a
generator that may be capable of certifying itself as a qualified energy resource, but is not
a QF, is not subject to the same automatic conveyance of its RECs.
D. New Martinsville's Comments and Petition for Enforcement
21.On March 14, 2012, New Martinsville filed a motion to intervene and comments
in support of Morgantown Energy's petition, stating that it agrees with Morgantown
Energy that the West Virginia Order is inconsistent with PTJRPA, and urging the
Commission to grant the petition.
22.In addition to its comments, New Martinsville filed its own petition for
enforcement with the Commission on March 15, 2012, pursuant to section 2 10(h) of
PURPA and the Commission's regulations implementing PURPA.45 New Martinsville
states that the facts and events relevant to its petition were summarized in Morgantown
Energy's petition.46 New Martinsville states that, like Morgantown Energy, it disagrees
with the West Virginia Order's outcome and asserts that QFs should own the RECs
associated with the electric energy they generate. New Martinsville explains that its
status is different than Morgantown Energy because, as a municipal electric utility, it
sought certification as a qualified energy resource to generate RECs to satisfy its
own renewable energy portfolio standards obligation under the West Virginia Act.
New Martinsville further explains that it filed its petition out of concern that, if the
Commission takes action based on only Morgantown Energy's circumstances,
New Martinsville may be left without relief and remain compelled to transfer RECs to the
electric utility purchasing energy and capacity pursuant to its avoided cost rate contract.
23.New Martinsville also requests that the Commission consider its petition together
with Morgantown Energy's petition due to the commonality of the relevant facts and
issues.
New Martinsville Petition at 1-2. The Commission docketed
New Martinsville's petition under EL 12-48-000 and QF85-54 1 -00 1.
46 1d at 2.
Docket Nos. EL12-36-000, et al. - 11 -
II. Notice of Filings and Responsive Pleadings
A. Notice of Morgantown Energy's Petition
24. Notice of Morgantown Energy's filing was published in the Federal Register,
77 Fed. Reg. 13,120 (2012), with interventions and protests due on or before
March 16, 2012. Exelon Corporation, Electric Power Supply Association, and the
North Carolina Electric Membership Corporation filed timely motions to intervene.
New Martinsville filed a timely motion to intervene and comments supporting
Morgantown Energy's petition. The West Virginia Commission filed a notice of
intervention and a protest. Allegheny Power filed a motion to intervene and a protest.
Allegheny Power filed a motion to consolidate the proceedings under Docket Nos. EL 12-
36-000 and EL 12-48-000. On March 30, 2012, Morgantown Energy filed a motion for
leave to answer and answer in response to the protests.
B. Notice of New Martinsville's Petition
25. Notice of New Martinsville's filing was published in the Federal Register, 77 Fed.
Reg. 16,544 (2012), with interventions and protests due on or before March 29, 2012.
Morgantown Energy filed a timely motion to intervene and comments supporting
New Martinsville's petition. Allegheny Power filed a timely motion to intervene, a
protest, and a motion to consolidate the proceedings under Docket Nos. EL 12-36-000 and
EL 12-48-000. The West Virginia Commission filed a notice of intervention and a
protest.
C. Responsive Pleadings - Morgantown Energy's Petition
1. West Virginia Commission's Protest
26. The West Virginia Commission argues that Morgantown Energy should not have
brought this proceeding to the Commission. The West Virginia Commission argues that
Morgantown Energy is alleging that the West Virginia Order violates provisions of
PURPA and the West Virginia Commission's implementation of PURPA "as applied" to
Morgantown. The West Virginia Commission argues that an "as applied" dispute is
reserved to state courts pursuant to section 210(g) of PURPA.47 The West Virginia
Commission argues that only an "implementation" of PURPA may be challenged by the
filing of an enforcement petition pursuant to section 210(h) of PURPA.
47 West Virginia Protest to Morgantown Energy at P 24-25.
Docket Nos. EL 12-36-000, et al. -12 -
27.The West Virginia Commission denies the three PURPA violations alleged by
Morgantown Energy, and argues that Morgantown Energy incorrectly frames its
arguments in terms of prior Commission orders, rather than West Virginia Commission
rules implementing PURPA. The West Virginia Commission asserts that Morgantown
Energy's argument erroneously assumes that a QF owns RECs in the first instance.
28.The West Virginia Commission also disputes Morgantown Energy's claim that the
determination in the West Virginia Order that it has the authority to make a finding as to
whether Morgantown Energy may be certified as a qualified energy resource is a
violation of PURPA is insignificant and "involves nothing more than state verification
that particular generation qualifies for credits under the [West Virginia] Portfolio Act."
Further, it disagrees that the West Virginia Order treats QFs differently and argues that
the West Virginia Order is limited to the underlying factual circumstances presented in
the petition, therefore issues involving contracts with other types of generation facilities
were not affected.
2. Allegheny Power's Protest
29.Allegheny Power claims the West Virginia Order findings do not violate PURPA
and are consistent with American Ref-Fuel because the West Virginia Order relies on
West Virginia state law for its findings concerning the transfer and ownership of RECs.
Allegheny Power argues that Morgantown Energy's reliance on American Ref-Fuel is
irrelevant because the [West Virginia Order's] determination
that the Companies own the RECs attributable to generation
of electricity by the Facility was based on Mon Power's
ownership of such electricity at the time it is produced—not
on the premise that Mon Power must pay, or has already paid,
[Morgantown Energy] to acquire the RECs.481
30.Allegheny Power also argues that Morgantown Energy's allegation that
Wheelabrator is distinguishable and does not support the West Virginia Order is
unsupported by Morgantown Energy because it did not cite to any provision of PURPA
or the Commission's regulations that would prevent the West Virginia Commission's
reliance on that case. Allegheny Power further argues that Morgantown Energy's
petition improperly asks the Commission to review various state law determinations
unrelated to PURPA.49 Allegheny Power also argues that the West Virginia Commission
properly exercised its authority when it determined that it may issue a finding certifying
48 Allegheny Power Protest to Morgantown Energy at 15.
49 1d. at 19.
Docket Nos. EL 12-36-000, et al. - 13 -
Morgantown Energy as a qualified energy resource based on the West Virginia
Commission's "unquestioned authority under the Portfolio Act to award credits based on
electricity generated or purchased from an alternative energy resource facility."50 Last,
Allegheny Power contends that Morgantown Energy's claim that the West Virginia Order
discriminates against QFs is unfounded because the prohibition on discrimination found
in section 2 10(b) of PTJRPA applies to rates for energy and capacity, not to ownership of
RECs. Allegheny Power also asserts that a discrimination analysis is required only at the
initial establishment of an avoided cost rate, and does not apply here to a determination
regarding ownership of RECs.
3 Morgantown Energy's Answer
31.Morgantown Energy disputes protesters' assertions that Morgantown Energy
wrongly assumes that it owns RECs prior to their transfer to an electric utility and argues
that, even though protesters' arguments are founded in state law, the Commission retains
the authority to review it. Morgantown Energy asserts that protesters' characterizations
of avoided cost rates as sufficient compensation are inconsistent with the plain language
of PURPA and therefore have no merit
32.Morgantown Energy explains that Monongahela Power, in a brief to the
West Virginia Commission, acknowledged that RECs need to be formally conveyed and
transferred from the QF to the purchasing electric utility, which is contrary to the
West Virginia Order finding that the RECs are owned at the outset by the purchasing
utility. Morgantown Energy in this regard points out that a directive of the West Virginia
Order requiring Allegheny Power to secure Morgantown Energy's RECs contained in its
PJM Generation Attribute Tracking System account demonstrates that the West Virginia
Commission has acknowledged that RECs must be formally transferred from the QF to
the purchasing utility. Morgantown Energy also asserts that the requirement that
facilities must be certified as qualified energy resources before they can generate RECs
indicates that such qualified facilities are awarded the RECs in the first instance,
implying that a formal transfer must occur to allow entities that have an obligation to
purchase RECs to actually obtain them.
D. ResDonsive P1eadins - New Martinsville's Petition
1. West Virginia Commission's Protest
33.According to the West Virginia Commission, New Martinsville's petition alleges
the West Virginia Order violates PUIRPA in two ways: first, it effectively reduces the
avoided cost established for the PPA by determining Monongahela Power owns RECs
50 1d at 22-23
Docket Nos. EL 12-36-000, et al. -14-
associated with the New Martinsville QF without additional compensation; and second,
the West Virginia Order discriminates against New Martinsville as the owner of a QF.
The West Virginia Commission contends both assertions lack merit.
34. The West Virginia Commission denies that it discriminated against QFs "vis-a-vis
other independent non-utility generators" arguing that it based its decision solely on the
facts before it in accordance with West Virginia law. 51 The West Virginia Commission
states that it did not address non-QF generators, or contracts originating after the
West Virginia Act The West Virginia Commission further cites to its past rulings
favoring New Martinsville and Morgantown Energy in matters involving their PPAs with
Monongahela Power.
35 Additionally, the West Virginia Commission rejects New Martmsville's allegation
that the West Virginia Commission conveyed RECs as part of the avoided cost rate from
New Martmsville's QF to the purchasing utility .
52 According to the West Virginia
Commission, in order to grant New Martmsville's petition, the Commission would be
required to agree with New Martinsville that the RECs belonged to New Martinsville "m
the first mstance The West Virginia Commission argues, however, that the RECs are
created only as the electric energy is generated and thereby belong to the utility
purchasing the electric energy. The West Virginia Commission also argues that the
Commission has previously found that REC ownership is outside the scope of PURPA
and is a matter of state law. The West Virginia Commission states that it acted in
accordance with Commission precedent and made its determinations in accordance with
West Virginia state law.
36 The West Virginia Commission also asserts that New Martinsville's petition is an
"as applied" challenge of the West Virginia Order's findings The West Virginia
Commission argues that such a challenge differs from a challenge of a state's
implementation of PURPA The West Virginia Commission explains that as-applied
challenges are reserved for consideration by state courts only, therefore New Martinsville
improperly brought its challenge with the Commission and it should be denied.
51 West Virginia Protest to New Martinsville at P 15.
52 1d P 13.
53 1d PP 10, 13.
Docket Nos. EL 12-36-000, et al. -15 -
2. Allegheny Power's Protest
37.Allegheny Power claims that the New Martinsville petition is similar to that filed
by Morgantown Energy and presents the same issue, namely, ownership of RECs in the
context of an avoided cost rate contract. Allegheny Power also claims that both petitions
demonstrate a misunderstanding of the Commission's precedent stating that REC
ownership is a matter of state law, not P1IJRPA. While Allegheny Power states that there
is no basis to New Martinsville's petition, Allegheny Power requests that the
Commission provide a statement regarding the validity of the West Virginia Order to
eliminate any confusion with respect to the findings in American Ref-Fuel.
38.Allegheny Power asserts that it interprets the West Virginia Order to suggest that
New Martinsville never owned RECs, and thus there is no reason to provide
compensation. Allegheny Power also asserts that, because the West Virginia Order does
not change the avoided cost rate for capacity and energy in the New Martinsville PPA, no
price adjustment occurred that would contravene PIJRPA.
39.Allegheny Power argues that the West Virginia Order is consistent with the
Commission's findings in American Ref-Fuel, because, according to Allegheny Power,
"as a matter of state law, RECs are owned at inception by the utility that purchases the
electricity."54 Allegheny Power explains that the West Virginia Order unambiguously
states that REC ownership is a matter of state law, deriving authority from the
West Virginia Act. Allegheny Power claims that New Martinsville's reading of
American Ref-Fuel is mistaken, and that "because the RECs are owned by [Allegheny
Power] as they are created, the [West Virginia Order] did not result in a transfer of RECs
from New Martinsville to [Allegheny Power] .,,55 Allegheny Power also argues that New
Martinsville failed to explain how the Commission has jurisdiction to determine
ownership of RECs created under state law.
40.Allegheny Power further asserts that New Martinsville mischaracterizes PURPA
and the West Virginia Order when it claims that it is owed compensation for RECs
because New Martinsville failed to explain why it is entitled to compensation for RECs in
the first instance. Allegheny Power explains that the mischaracterization originates from
New Martinsville's failure to recognize that RECs are owned by Allegheny Power, not
the QF, as they are created.
Allegheny Power Protest to New Martinsville at 12.
55 1d. at 14.
Docket Nos. EL 12-36-000, et al. -16-
41. Allegheny Power argues that New Martinsville's claim that the West Virginia
Order results in undue discrimination against QFs is unsupported for two reasons. First,
Allegheny Power explains that PURPA relates only to the rates paid by electric utilities
for capacity and energy, and does not contemplate the existence of RECs. Second,
Allegheny Power states that the discrimination analysis required under PURPA pertains
only to the initial calculation of the avoided cost rate and does not encompass REC
ownership.56
M. Discussion
A. Procedural Matters
42. Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure,
18 C.F.R. § 385.2 14 (2011), the notices of intervention and timely, unopposed motions to
intervene serve to make the entities that filed them parties to the proceedings in which
they sought to intervene. Rule 213(a)(2) of the Commission's Rules of Practice and
Procedure, 18 C.F.R. § 385.2 13(a)(2) (2011), prohibits an answer to a protest or answer
unless otherwise ordered by the decisional authority. We will accept Morgantown
Energy's answer to the West Virginia and Allegheny Power protests because they
provided information that assisted us inour decision-making process.
B. Commission Determination
43. Morgantown Energy alleges that the West Virginia Commission, through the
West Virginia Order, violated PURPA in holding that: (1) the avoided cost rate paid by
Monongahela Power to Morgantown Energy is sufficient to transfer RECs, together with
energy and capacity, generated by Morgantown Energy to Monongahela Power; and
(2) the West Virginia Commission has the authority to find Morgantown Energy
certified, or to deem Morgantown Energy certified, as a qualified energy resource thus
able to produce RECs. Morgantown Energy also argues the West Virginia Order
discriminates against Morgantown Energy given its QF status. New Martinsville's
petition for enforcement closely follows the relief requested by Morgantown Energy.
44. Section 210(h)(2)(B) of PUIRPA 57 permits any electric utility, qualifying
cogenerator, or qualifying small T8 producer to petition the Commission to act under
section 21 0(h)(2)(A) of PURPA 8 to enforce the requirement that a state commission
Id at 21-22.
16 U.S.C. § 824a-3(h)(2)(B) (2006).
58 16 U.S.C. § 824a-3(h)(2)(A) (2006).
Docket Nos. EL 12-36-000, et al. -17-
implement the Commission's regulations. The Commission's enforcement authority
under section 210(h)(2)(A) of PURPA is discretionary. As the Commission pointed out
in its 1983 Policy Statement, "the Commission is not required to undertake enforcement
action."59 If the Commission does not undertake an enforcement action within 60 days of
the filing of a petition, under section 21 0(h)(2)(A) of P[JRPA, the petitioner then may
bring its own enforcement action directly against the state regulatory authority or
non-regulated, electric utility in the appropriate United States district court. 60
45.In this order, we give notice that we do not intend to go to court to enforce
PURPA on behalf of Morgantown Energy or New Martinsville; 61 either petitioner thus
may bring its own enforcement action against the West Virginia Commission in the
appropriate United States district court. Notwithstanding our decision not to go to court
to enforce PURPA on behalf of the petitioners, we find that certain statements in the
West Virginia Order are inconsistent with PURPA.
46.The Commission has recognized that PURPA does not address the ownership of
RECs and that states have the authority to determine ownership of RECs in the initial
instance, as well as how they are transferred from one entity to another.62 In
American Ref-Fuel, the Commission stated that "[C]ontracts for the sale of QF capacity
and energy entered into pursuant to PIJRPA do not convey RECs to the purchasing utility
(absent express provision in a contract to the contrary). While a state may decide that a
sale of power at wholesale automatically transfers the ownership of the state-created
RECs, that requirement must find its authority in state law, not PURPA."63
59 Policy Statement Regarding the Commission's Enforcement Role Under
Section 210 of the Public Utilities Act of 1978, 23 FERC ¶ 61,304, at 61,645 (1983)
(1983 Policy Statement).
60 16 U.S.C. § 824a-3(h)(2)(B) (2006). The Commission may intervene in such a
district court proceeding as a matter of right. Id.
61 Our decision not to go to court effectively moots the West Virginia
Commission's claim that the petition for enforcement was not appropriately before us in
the first instance.
62 Ref-Fuel, 105 FERC 161,004 at P 23.
63 1d P3; accord id. P18.
Docket Nos. EL 12-36-000, et al. -18 -
47. In making this statement, the Commission reasoned that, under PURPA and the
Commission's regulations, electric utilities must purchase energy and capacity made
available by QFS,64 and that rates for these purchases must be just and reasonable to the
electric customer of the electric utility and in the public interest, and not discriminate
against QFs.65 Additionally, an electric utility is not required to pay the QF more than
the avoided costs of generating the power itself or of purchasing from another source.66
The Commission stated that these avoided cost rates, "in short, are not intended to
compensate the QF for more than capacity and energy."67 To the extent that the West
Virginia Order finds that avoided-cost rates under PURPA also compensate for RECs,68
the West Virginia Order is inconsistent with PURPA.
The Commission orders:
(A) Notice is hereby given that the Commission declines to initiate an
enforcement action under section 21 0(h)(2)(A) of PURPA.
64 Ref-Fuel, 105 FERC ¶ 61,004 at P 20; see also 18 C.F.R.
§ 292.303(a) (2011).
65 Ref-Fuel, 105 FERC 161,004 at P 20; see also 18 C.F.R.
§ 292.304(a)(1) (2011).
66 Ref-Fuel, 105 FERC ¶ 61,004 at P 20; see also 18 C.F.R. American
§§ 292.304(a)(2), .101 (b)(6) (2001).
67 Id. P22.
68 The West Virginia Order relies primarily on the avoided cost rate in the
contracts between Morgantown Energy and Monongahela Power and between the City of
New Martinsville and Monongahela Power as justification for finding that the RECs
produced by the QFs are owned by the purchasing utility in the first instance. See, e.g.,
West Virginia Order at 28-31. For example, the West Virginia Order states that avoided
cost rate contracts under PURPA provide a substantial consideration to the QF sufficient
to compensate not only for the energy and capacity contemplated in those contracts, but
also for the RECs produced by the QFs. See West Virginia Order at 28.
Docket Nos. EL 12-36-000, et al. -19 -
(B) The Commission finds that the West Virginia Order is inconsistent with
PTJRPA and the Commission's regulations as discussed in the body of the order.
By the Commission.
(SEAL)
Nathaniel J. Davis, Sr.,
Deputy Secretary.