On May 19, the Federal Energy Regulatory Commission ("FERC") issued an order in Idaho Wind Partners I, LLC, a docket in which wind farm owners in Idaho petitioned FERC for approval of a unique transaction that would both provide eligible Renewable Energy Credits ("RECs") to a utility in California and leave the wind farm owners in a position to make a Qualifying Facility ("QF") "put" sale at avoided cost rates on the interconnecting utility. The transaction made use of an "inside-the-fence" sale of QF power and RECs to a third party, an instantaneous buy-back of the power component (but not the RECs, which had to be sold as a bundled product per California's then-current Renewable Portfolio Standard ("RPS")), and then the subsequent QF put sale to Idaho Power Company. In December 2010, the Idaho wind farms sought a declaration from FERC that, among other things, the power component remains QF power after the "inside-the-fence" transaction with the third party, and therefore the Idaho wind farms would retain the ability to put the power on the interconnecting utility.
In March 2011, FERC cited precedent that allows a QF to purchase and then subsequently resell at avoided cost rates the power that was produced by another QF. Thus, if the sale and buy-back transaction is with another QF, and there is no co-mingling with non-QF power, the power would remain QF power and thus could be sold to an electric utility at avoided cost rates. The Idaho wind farms sought clarification, asking whether (i) the size, affiliation, or relative location of the third-party QF affected FERC's conclusion, and (ii) it is irrelevant if the initial third party power purchaser is a QF.
On clarification, FERC confirmed that so long as the third party is a QF, the size, affiliation, or relative physical location of the third party has no effect on the QF status of the power being sold and repurchased. Consequently, any power that the Idaho wind farms sell to a QF and then buy back may subsequently be sold to an electric utility at avoided cost rates. However, FERC restated its refusal to answer the question about whether the third party's QF status is relevant. Accordingly, the Idaho wind farms' proposal to sell a bundled product for purposes of meeting California's then-current RPS is assured of working only if the wind farms can find a third-party QF offtaker.
Idaho Wind Partners I, LLC, 135 FERC ¶ 61,154 (2011).