On February 7, 2011, less than two weeks after hearing oral arguments on the issue, the Idaho Public Utilities Commission (“IPUC”) issued Order No. 32176 (the "Order"), temporarily reducing the published avoided cost rate eligibility cap for wind and solar qualifying facilities (“QF”) from 10 aMW to 100 kW. The reduction applies to wind and solar projects only, and was given a retroactive effective date of December 14, 2010.

The Order is the latest in the Joint Petition docket filed by Idaho Power, Avista Corporation and PacifiCorp d/b/a Rocky Mountain Power (the “Utilities”), whereby the Utilities petitioned the IPUC “to investigate and address various avoided cost and other related issues” regarding QFs under the Public Utilities Regulatory Policies Act of 1978 (“PURPA”). Joint Petition at 1. In particular, the Utilities requested a reduction in the eligibility cap from 10 aMW to 100 kW for all resources, “to be effective immediately.” Joint Petition at 7. The Utilities focused specifically on the need to address the “excessive” number of wind QFs currently requesting contracts under the published 10 aMW avoided cost rate, and the disaggregation of wind resources (i.e., dividing large wind projects into multiple 10 aMW projects to qualify for the avoided cost rate), arguing that the Utilities’ ability to continue to accept the QF energy without negatively impacting the electric system and their customer’s is at risk.

In the Order, the IPUC found that “a convincing case has been made to temporarily reduce the eligibility cap . . . for wind and solar only,” but the IPUC maintained the current 10 aMW cap for other QF projects including biomass, small hydro, cogeneration, geothermal, and waste-to-energy facilities. Order at 9.

The IPUC was careful to note that it is “supportive of all small power producers contemplated by PURPA, including wind and solar, and it is not the Commission’s intent to push small wind and solar QF projects out of the market.” Order at 11. The IPUC is instituting additional proceedings specifically to investigate an avoided-cost rate structure that “(1) allows small wind and solar QFs to avail themselves of published rates for projects producing 10 aMW or less; and (2) prevents large QFs from disaggregating in order to obtain a published avoided cost rate that exceeds the utility’s avoided cost.” Order at 11. During the temporary eligibility cap reduction, the Utilities are still required to purchase power produced by wind and solar QFs, but projects larger than 100 kW must individually negotiate avoided cost rates.

So, now what?

As an initial matter, we don’t know how long the eligibility cap reduction will be in effect. The Order hints at the IPUC’s willingness (if not desire) to raise the eligibility cap for wind and solar back to 10 aMW sooner rather than later. Before that happens, however, it will have to decide how to handle the disaggregation issue which is arguably at the heart of the Utilities’ Joint Petition. Right now, it’s unclear how the IPUC will address disaggregation. On one hand, it could choose a solution like Oregon has adopted, and increase the minimum separation between QFs to five miles rather than one. Or, it could choose a solution similar to that proposed by the Renewable Northwest Project and the Idaho Conservation League, and adopt a set of rules that more narrowly define individual QFs in such a way that increasing the minimum separation between them would be unnecessary.

Next, both the Utilities and intervenors have raised numerous other avoided-cost-related issues, including system reliability, renewable energy credit ownership, wind integration, the lack of a standard contract, and the efficacy of the integrated resource planning (“IRP”) methodology for calculating avoided costs for QFs above 100 kW. The IPUC has left these issues for another day, stating that they will be resolved after a determination regarding disaggregation.

Finally, there is an open question about how the IPUC’s actions in the Joint Petition docket will affect another docket that was put on hold. Last year, in Docket No. GNR-E-09-03, the IPUC Staff floated a straw man proposal for a surrogate avoided resource (“SAR”) methodology that would be used to calculate wind-specific published avoided cost rates. After a workshop on the proposal on November 3, 2010, the IPUC vacated the docket’s scheduling, noting that “the parties were in agreement that continued discussions should occur on some level [but] it was agreed that there was no appetite or desire for further discussion of Staff’s straw man proposal.” The Utilities’ Joint Petition was based, in part, on the outcome of that November 3 workshop. Right now, it’s unclear whether the straw man proposal will eventually resurface in this docket; and, since the wind-specific SAR docket was never closed, whether the IPUC’s actions on the Joint Petition will spill over into that docket.

In the spirit of the IPUC, we’ll leave any discussion comparing the wind-specific SAR to the resource-specific avoided cost rate for combined-heat and power in California for another day.