Federal energy regulators have denied a complaint by a Newport, Rhode Island city councilor against state regulators' approval of a power purchase agreement for an offshore wind project off Block Island.
At issue is Deepwater Wind Block Island, LLC's small-scale 30-megawatt offshore wind project located near Rhode Island's Block Island. The project sells its output to utility Narragansett Electric Company, Inc. d/b/a National Grid (National Grid), pursuant to a power purchase agreement approved by the Rhode Island Public Utilities Commission on August 16, 2010.
On June 7, 2018, Ms. Kathryn E. Leonard filed a complaint to the Federal Energy Regulatory Commission, alleging that the implementation of the power purchase agreement violated various federal laws, including the Federal Power Act, Public Utility Regulatory Policies Act of 1978 (PURPA), and the Supremacy and Interstate Commerce Clauses of the U.S. Constitution.
On April 24, 2019, the Commission issued its order denying Ms. Leonard's complaint. In the seventeen-page order, the Commission noted that the complainant provided no evidence in support of her assertion that the power purchase agreement was entered into pursuant to Rhode Island's implementation of PURPA. Instead, the Commission found that the Rhode Island Public Utilities Commission's approval of the contract was pursuant to state law, not pursuant to its PURPA regulations -- but that even if it were pursuant to PURPA, federal regulations governing sales by qualifying facilities to electric utilities explicitly permit negotiated rates.
The Commission similarly found that the complainant failed to show that the contract or its pricing was unjust and unreasonable under the Federal Power Act, and to provide sufficient support for its constitutional claims. The Commission also distinguished the Block Island PPA from contracts it previously invalidated in another case, Hughes v. Talen, which involved contracts for differences and an explicit requirement of participation in the capacity market. For these reasons, the Commission denied the complaint.
The Block Island project is the first commercially-operating offshore wind project in the United States. A number of other projects are currently under development, and several states in the Northeast have enacted laws requiring utility procurement of offshore wind energy. According to a 2016 analysis by the U.S. Department of Energy, U.S. offshore wind has a technical resource potential of more than 2,000
gigawatts of capacity, or 7,200 terawatt-hours of generation per year -- nearly twice the nation’s current electricity use.
Energy powers society; society's choices shape energy policy. A blog about our energy resources and the choices they present for society.
Showing posts with label Hughes. Show all posts
Showing posts with label Hughes. Show all posts
Supreme Court rules on state energy incentives
Tuesday, April 19, 2016
The U.S. Supreme Court has released its ruling on a case affecting how states may provide incentives for electric power generation. In Hughes v. Talen Energy Marketing, LLC, the Court upheld a lower court's ruling invalidating a Maryland program to subsidize construction of new power plants. The ruling provides important insight into how the Court views the boundary between federal and state jurisdiction over energy matters.
The Hughes case involved a new Maryland program to encourage in-state generation capacity, and its relationship to federally blessed capacity market. Under the Federal Power Act, the Federal Energy Regulatory Commission has exclusive jurisdiction over wholesale sales of electricity in the interstate market, while States regulate retail electricity sales.
For years, Mid-Atlantic regional grid operator PJM Interconnection has held capacity auctions to identify need for new generation and compensate generators for development. PJM's auctions have been approved by the Federal Energy Regulatory Commission under the Federal Power Act. But due to concern that the PJM auction was failing to encourage development of sufficient new in-state generation, Maryland enacted its own regulatory program. Under that state program, Maryland held a competitive process to select a developer for a new power plant, and required load-serving entities to enter into a 20-year pricing contract (called a "contract for differences") with the developer. The developer would still sell its capacity to PJM, but would receive extra money under the state program to make up the difference between the PJM market price and the contract price.
But incumbent generators challenged the new Maryland program; a federal district court issued a declaratory judgment holding that Maryland's program improperly sets the rate the developer receives for interstate wholesale capacity sales to PJM. On appeal, the Fourth Circuit affirmed, finding that Maryland's program was preempted because it impermissibly conflicts with FERC policies. The case then came to the Supreme Court of the United States.
The Supreme Court's April 19, 2016 decision affirms the lower courts' rulings. The Court agreed with the Fourth Circuit's judgment "that Maryland's program sets an interstate wholesale rate, contravening the FPA's division of authority between state and federal regulators." In the majority opinion's words, "States may not seek to achieve ends, however legitimate, through regulatory means that intrude on FERC's authority over interstate wholesale rates, as Maryland has done here."
The Hughes ruling sheds light on how the Court might view other state programs to incentivize new or clean generation. That said, the Court emphasized that its holding in Hughes is limited -- that it rejected Maryland's program "only because it disregards an interstate wholesale rate required by FERC." The Court explicitly said it would not address "the permissibility of various other measures States might employ to encourage development of new or clean generation," such as tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector.
The majority opinion concludes with a reminder that "[s]o long as a State does not condition payment of funds on capacity clearing the auction, the State's program would not suffer from the fatal defect that renders Maryland's program unacceptable." This suggests one potential path for permissible state incentives for electric power generation.
 |
| The Supreme Court of the United States. |
The Hughes case involved a new Maryland program to encourage in-state generation capacity, and its relationship to federally blessed capacity market. Under the Federal Power Act, the Federal Energy Regulatory Commission has exclusive jurisdiction over wholesale sales of electricity in the interstate market, while States regulate retail electricity sales.
For years, Mid-Atlantic regional grid operator PJM Interconnection has held capacity auctions to identify need for new generation and compensate generators for development. PJM's auctions have been approved by the Federal Energy Regulatory Commission under the Federal Power Act. But due to concern that the PJM auction was failing to encourage development of sufficient new in-state generation, Maryland enacted its own regulatory program. Under that state program, Maryland held a competitive process to select a developer for a new power plant, and required load-serving entities to enter into a 20-year pricing contract (called a "contract for differences") with the developer. The developer would still sell its capacity to PJM, but would receive extra money under the state program to make up the difference between the PJM market price and the contract price.
But incumbent generators challenged the new Maryland program; a federal district court issued a declaratory judgment holding that Maryland's program improperly sets the rate the developer receives for interstate wholesale capacity sales to PJM. On appeal, the Fourth Circuit affirmed, finding that Maryland's program was preempted because it impermissibly conflicts with FERC policies. The case then came to the Supreme Court of the United States.
The Supreme Court's April 19, 2016 decision affirms the lower courts' rulings. The Court agreed with the Fourth Circuit's judgment "that Maryland's program sets an interstate wholesale rate, contravening the FPA's division of authority between state and federal regulators." In the majority opinion's words, "States may not seek to achieve ends, however legitimate, through regulatory means that intrude on FERC's authority over interstate wholesale rates, as Maryland has done here."
The Hughes ruling sheds light on how the Court might view other state programs to incentivize new or clean generation. That said, the Court emphasized that its holding in Hughes is limited -- that it rejected Maryland's program "only because it disregards an interstate wholesale rate required by FERC." The Court explicitly said it would not address "the permissibility of various other measures States might employ to encourage development of new or clean generation," such as tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector.
The majority opinion concludes with a reminder that "[s]o long as a State does not condition payment of funds on capacity clearing the auction, the State's program would not suffer from the fatal defect that renders Maryland's program unacceptable." This suggests one potential path for permissible state incentives for electric power generation.
Subscribe to:
Posts (Atom)
