Canada's Supreme Court rules for Quebec utility over energy contract

Canada's highest court has ruled that Quebec's provincial utility Hydro-Quebec cannot be required to renegotiate a long-term contract to buy power from a Labrador hydroelectric plant at below-market rates, even though the deal has yielded about 14 times more profit for Hydro-Quebec than for the Labrador generator.

At issue is the Churchill Falls hydroelectric plant on the upper Churchill River in Labrador, and a 1969 agreement between Hydro-Quebec and Churchill Falls (Labrador) Corporation Limited -- a company jointly owned by Newfoundland and Labrador Hydro and Hydro-Quebec. The Churchill Falls plant can generate 5,428 megawatts of power, and is one of the world's largest hydroelectric power stations.

According to former Premier of Newfoundland and Labrador Brian Tobin, during pre-construction negotiations, Hydro-Quebec told Churchill Falls that it would not allow the Labrador generator to "wheel" project power through the Hydro-Quebec grid, nor to build its own power line through Quebec to reach U.S. markets. As a result, under the terms of the 1969 agreement, Hydro-Quebec agreed to buy most of the project's power at the fixed price of $2.50 per megawatt-hour, to guarantee construction cost overruns, and to build transmission lines connecting the generators to markets, enabling the Labrador generator to sell power and to use debt financing to construct the plant. The original contract was set to expire in 2016, but included a renewal clause allowing Hydro-Quebec to extend the contract for an additional 25 years at a fixed price of $2 per megawatt-hour through 2041.

After the contract was signed, changes in the electricity market -- including oil price shocks in the 1970s, a decline in public confidence in nuclear power after a 1979 accident, and the U.S. Federal Energy Regulatory Commission's 1996 decision to require open access to transmission systems -- meant the contract's purchase price is now well below market prices. Because Hydro-Quebec sells electricity from the plant to third parties at market prices, Hydro-Quebec reaps substantial profits from the deal. For example, Hydro-Quebec reports that the average retail price for residential customers in St. John's, Newfoundland in 2018 is $120.30 per megawatt-hour. Canada's National Energy Board says the 2017 average wholesale prices for electricity imports were over $24 per megawatt-hour, with exports priced even higher at $38.58 per megawatt-hour -- over 19 times higher than the price Hydro-Quebec now pays Churchill Falls during the extended contract term. According to CBC, the contract has yielded about $28 billion in profits to Quebec, but just $2 billion for Newfoundland and Labrador.

Citing legal theories including a general duty of good faith, Nalcor Energy subsidiary Churchill Falls asked Canadian courts to order that the contract be renegotiated and the benefits be reallocated. After lower courts sided with Hydro-Quebec, the generator appealed to the Supreme Court of Canada.

On November 2, the Supreme Court of Canada rendered its judgment in the matter of Churchill Falls (Labrador) v. Hydro-Quebec. The high court found, by a 7 to 1 decision, for Hydro-Quebec, noting that the parties "bound themselves knowing full well what they were doing" and that Hydro-Quebec could insist on adhering to the contract despite the "unforeseen" increase in the power's market value.

The one dissenting judge characterized the contract as "relational" in nature, and thus said that both parties are subject to a duty of cooperation which Hydro-Quebec breached by failing to renegotiate and to more fully share the benefits of higher-than-expected market prices. He said that because "a profit imbalance of this nature and magnitude is beyond what the parties intended when they concluded the agreement", the parties had an implied obligation to cooperate in establishing a mechanism for the allocation of "extraordinary profits."

New law eases some hydro licensing processes

A recently-enacted federal law will make it easier for hydroelectric project developers to secure a license for new hydroelectric facilities at existing non-powered dams.

U.S. rivers are home to thousands of dams, most of which impound water but don't generate electricity. A 2013 report suggested only 3% of the nation's 80,000 dams were used to produce hydroelectric power. In an effort to facilitate the development of hydroelectric facilities at some of these non-powered dams, Congress recently enacted the America's Water Infrastructure Act of 2018.

Title III of the Act relates to energy matters. One section of the Act extends the default term of preliminary permits for hydropower development from three to four years. The Act authorizes the Federal Energy Regulatory Commission to extend the period of a preliminary permit for up to four additional years, and to issue an additional permit under "extraordinary circumstances."

Another section of the Act speeds up the process through which the Commission evaluates proposals to develop "qualifying conduit hydropower facilities" and increases such a project's maximum installed capacity from 5 megawatts to 40 megawatts.

A third section of the Act requires the Commission to, within 180 days, issue a rule establishing an expedited process for issuing and amending licenses for hydroelectric facilities meeting defined criteria. These criteria require the "qualifying facilities" to be associated with an existing dam or other barrier operated for the control, release, or distribution of water for agricultural, municipal, navigational, industrial, commercial, environmental, recreational, aesthetic, drinking water, or flood control purposes, which as of the date of the Act's enactment was not generating electricity with Commission-licensed or exempted hydropower generating works. The Act also requires that the operation of these facilities must not result in any material change to the storage, release, or flow operations of the associated qualifying nonpowered dam.

The Act also includes provisions creating an establishing an expedited process for issuing and amending licenses for closed-loop pumped storage projects, and prescribing the considerations for setting the terms of new licenses for existing projects through the relicensing process.

The Act, which was introduced in the Senate as S.3021, was signed by President Trump on October 23, 2018, and became law the same day. The Commission has until April 2019 to issue the rules required by the Act.

FERC solicits panel members to resolve hydropower licensing study disputes

U.S. hydropower regulators have asked for volunteers interested in serving as panel members to assist in resolving disputes related to the scope of studies required for hydropower licensing.

Under federal law, the Federal Energy Regulatory Commission is tasked with processing applications for licenses for most hydropower projects located in the U.S. To process any given application, the Commission typically uses one of three different licensing processes. Since 2005, the Commission's "Integrated Licensing Process" or ILP has been the default choice.

Under the ILP, the applicant seeking a license files a proposed study plan describing the studies it intends to conduct to inform the Commission's review of its application. Studies might cover the project's impact on a variety of types of resources and issues, such as aquatic, terrestrial, cultural, recreational, geological, land management, engineering and socioeconomic topics. After a 90-day period of consultation with stakeholders and Commission staff, the applicant may file a revised study plan for Commission approval. Ultimately, the director of the Commission's Office of Energy Projects will issue a study determination approving the study plan with any modifications based on the record. Whatever studies are required by the Commission-approved study plan must be conducted by the applicant or its consultants.

The nature and extent of the studies required can be controversial. Stakeholders have opportunities to comment on the applicant's original study plan, to participate in consultation, and to comment to the Commission on the revised study plan.

Under the ILP, certain federal or state agencies or tribes also have the ability to request that a study dispute be referred to a dispute resolution panel. The three-member panel would consist of FERC staff, the agency or tribal representative referring the dispute, and an independent third person selected by the other two panelists from a list of subject-matter experts. The panel members make a finding with respect to each disputed study request, on the extent to which each study criteria set forth in the regulations is or is not met, and why. The panel then makes a recommendation to the Director of the Office of Energy Projects based on its findings.

On October 22, 2018, the Commission issued a notice requesting applications from those interested in being listed as potential panel members. The Commission previously compiled lists in 2004, 2010, and 2015. For the latest round, the Commission has requested applications by January 31, 2019.

Tide Mill Institute 2018 symposium

Tide Mill Institute holds its 14th annual conference on November 10, 2018, in Beverly, Massachusetts. The symposium -- "Creating Tide Mills -- Then and Now", features educators, historians, environmentalists, archeologists and others interested in tidal power and its history.

Tide Mill Institute exists to advance the appreciation of tide mill history and technology by encouraging research, by promoting appropriate re-uses of former tide mill sites, and by fostering communication among tide mill enthusiasts. Since 2005, the Institute has held an annual symposium on the past, present, and future uses of tidal energy.

This year's conference topics focus on how humans historically extracted power from the tides, as well as on efforts to use this power again in the current era. Speakers and discussions will address topics including:

• Medieval vertical and horizontal millwheels and their diffusion from mainland Europe.
• Fresh-water tidal rice mills in South Carolina.
• An in-stream tidal device in New York’s East River supplying power to the grid.
• Proposed perpetual tidal power system for Salem Massachusetts.
• A tide mill at the heart of the 1775 Battle of Brooklyn.
• Winter storm surges damage historic tide mills in Massachusetts and New York.
• Recreating gearing features of two early North Shore tide mills.
• A new tidal energy canal for Boston?
• The structure of tide mill dams.

Tide Mill Institute's 2018 symposium will be held on Saturday, November 10, 2018, from 8:30 am to 4:00 pm, at the Cummings Center in Beverly, Massachusetts. Registration materials are available on Tide Mill Institute's website. Lunch is included; attendees are encouraged to register by November 1.

NECA Fuels Conference 2018

Northeast Energy and Commerce Association holds its 2018 Fuels Conference on September 27, 2018, in Marlborough, Massachusetts.

NECA is New England's oldest and most broadly-based, non-profit trade association serving the competitive electric power industry.

The program for NECA's 2018 Fuels Conference features diverse perspectives on fuels including natural gas (pipeline and LNG), biogas, oil, and other fuels, and in their uses such as electric power generation, heating, and transportation. Speakers will share their outlook for U.S. and New England natural gas markets, address the trend towards electrification of sectors like heating and transportation, explain the portfolio of fuels used to heat and power the region, and discuss what consumers can expect from lawmakers, regulators, and energy providers.

Registration is available through NECA's website.

FERC rules on Saguaro QF

U.S. energy regulators have denied a petition by a Nevada electric utility that would have rejected a regulatory filing by a local power plant. The ruling preserves the power plant's ability to sell electricity to its host utility.

The case centers on Saguaro Power Company, owner and operator of a 105 megawatt topping-cycle cogeneration facility in Henderson, Nevada. The plant sells electricity to Nevada Power Company under a power purchase agreement. Under that PPA, the energy and capacity rates paid by Nevada Power to Saguaro would be reduced by 20 percent if Saguaro loses its status as a "qualifying facility" or QF under federal law.

Since 1978, qualifying facilities have been entitled to receive certain benefits under the federal law called PURPA, but the process and requirements for becoming a QF have changed over time. Prior to August 8, 2005, in order to be a QF, a cogeneration facility was required to “produce electric energy and forms of useful thermal output (such as heat or steam), used for industrial, commercial, heating, or cooling purposes, through the sequential use of energy” and meet the applicable operating and efficiency standards. Since then, EPAct 2005 and Order No. 671 have provided that any “new” cogeneration facilities, i.e., a cogeneration facility that was either not certified as a QF on or before August 8, 2005 or had not filed a notice of self-certification or Commission application for certification prior to February 2, 2006, must also demonstrate that the “thermal energy output... is used in a productive and beneficial manner.”

In December 2017, Saguaro filed a Form No. 556 recertifying its facility as an existing cogeneration QF. That filing identified new thermal hosts who will receive thermal energy in the form of distilled water from the facility’s low pressure steam output, replacing thermal hosts previously identified in a prior self-recertification filing.

But Nevada Power Company filed a petition for declaratory order with the Federal Energy Regulatory Commission, asserting that Saguaro's self-recertification filing was deficient. Specifically, the utility argued that Saguaro failed to demonstrate its compliance with the operating and efficiency standards -- and also that the facility should be treated as "new" and thus be subject to additional standards under the Energy Policy Act of 2005 and the Commission's Order No. 671, such as whether the facility is being used in a productive and beneficial manner.

The Commission has rejected Nevada Power's petition. In its order denying Nevada Power's petition, the Commission noted that its Order No. 671 establishes a rebuttable presumption that an existing QF does not become a "new cogeneration facility" merely because it files for recertification, and that Saguaro represented having made no changes to its facility. The Commission concluded that filing for recertification to identify new replacement thermal hosts did not make the Saguaro facility "new."

US EPA proposes Affordable Clean Energy rule

The U.S. Environmental Protection Agency has proposed a new rule addressing greenhouse gas emissions from existing coal-fired electric utility generating units and power plants. EPA's proposed "Affordable Clean Energy Rule" is designed to replace the Clean Power Plan regulations adopted in 2015.

On August 21, 2018, EPA announced the Affordable Clean Energy or ACE Rule. As described by the agency, the rule encompasses four main actions to reduce greenhouse gas emissions:

• Defining the “best system of emission reduction” (BSER) for existing power plants as on-site, heat-rate efficiency improvements;
• Providing states a list of “candidate technologies” that can be used to establish standards of performance and be incorporated into their state plans;
• Updating the New Source Review (NSR) permitting program to further encourage efficiency improvements at existing power plants; and
• Aligning regulations under Clean Air Act section 111(d) to give states adequate time and flexibility to develop their state plans. 

According to EPA's regulatory impact analysis, replacing the Clean Power Plan with the ACE Rule would reduce CO2 emissions from their current level, and "could provide $400 million in annual net benefits," largely in the form of reduced compliance burden on covered power plants. While EPA adopted the Clean Power Plan in 2015, in 2016 the Supreme Court granted opponents stay of the regulations, and they never took full effect.

EPA will take comment on the ACE Rule proposal for 60 days after publication in the Federal Register and will hold a public hearing.