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Fracking and Alternative Energy

Troutman Sanders: FERC Approves Novel NOA Amendment To Address Network Upgrades Required Solely To Accommodate QFs Siting In Constrained Areas

In an order issued May 21, 2015, FERC approved an amendment to PacifiCorp’s Network Operating Agreement (“NOA”) between PacifiCorp and its merchant function, PacifiCorp Energy, allowing for a new planning redispatch protocol. The amendment prevents the need for PacifiCorp to build network upgrades that are driven solely by qualifying facility (“QF”) requests to site in a constrained area, and that are not otherwise needed for economic or reliability reasons.

Under the Public Utility Regulatory Policies Act of 1978 (“PURPA”), utilities have a mandatory obligation to purchase QF output, as well as to make firm transmission arrangements to deliver that QF power. In making its requested NOA amendment, PacifiCorp explained that PacifiCorp Energy has historically designated QF power purchase agreements (“PPA”) as network resources in order to provide the requisite firm transmission service. However, when a QF chooses to site its project in a constrained area, there may not be sufficient available transfer capability (“ATC”).

As PacifiCorp further explained, FERC open access policies and precedent prevent a transmission provider from granting new designated network resource (“DNR”) applications unless there is sufficient ATC to accommodate the request. Further, if system constraints cannot be relieved by using planning redispatch, then network upgrades must be constructed in order to accommodate the transmission request.

In its petition, PacifiCorp expressed concern that its PURPA mandatory purchase obligation and FERC’s policies regarding the designation of network resources, when taken together, appear to require PacifiCorp to construct network upgrades that are driven solely by QF requests to site in a constrained area, and that are not otherwise needed for economic or reliability reasons.

To address this concern, PacifiCorp proposed to amend the NOA between PacifiCorp Transmission and PacifiCorp Energy to allow additional DNR applications to be granted in order to enable firm delivery of QF power, even if there is no ATC. In these instances, in lieu of PacifiCorp Transmission building network upgrades to accommodate the QF requests, PacifiCorp Energy, as the network customer, would operate its DNRs in the affected area within its system reliability limits and curtail QF power last, even if that is out of economic merit order.

FERC found PacifiCorp’s proposal to be consistent with PURPA and to be a justified departure from previous FERC precedent on network resource designations. First, FERC stated that PacifiCorp’s amendment complies with the requirement that a utility deliver QF power on a firm basis and curtail QFs under only two very narrow circumstances by obligating PacifiCorp Energy to curtail the schedules of non-QFs before the schedules of QFs. FERC continued that the proposal would allow PacifiCorp’s customers to avoid paying for network upgrades when the network upgrades are not justified by economic or reliability needs, and that it appropriately limits the impact of the additional network resource designations on other customers by requiring PacifiCorp Energy to operate within its network rights and transmission system limits. Finally, FERC noted that the proposed amendment does not affect the transmission capacity reserved for any other existing PacifiCorp transmission customer or any other network customer’s network allocation, and that all network loads will continue to be served on a firm basis.

To view the order, click here.

 About Troutman Sanders

Troutman Sanders is an international law firm with offices in North America, Europe and Asia. Founded in 1897, the firm’s heritage of extensive experience, exceptional responsiveness and an unwavering commitment to service has garnered strong, long-standing relationships with clients across the globe. These clients range from multinational corporations to individual entrepreneurs, federal and state agencies to foreign governments, and non-profit organizations to businesses representing virtually every sector and industry.

Troutman Sanders lawyers provide counsel and advice in practically every aspect of civil and commercial law related to the firm’s core practice areas: Corporate, Finance, Litigation, Public Law and Real Estate. With more than 50 practice groups focused on specific aspects of these areas, the firm is defined by its considerable knowledge base and proactive approach to addressing legal and business challenges.

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