FERC OPENS DOOR FOR F-I-T

Federal Regulator Blasts Open Door to Differentiated Feed-in Tariffs in USA; FERC Decision Clears the Way for Multi-Tiered State FITs
Paul Gipe, October 22, 2010 (Wind-Works)

"In a ruling 21 October 2010, the Federal Energy Regulatory Commission (FERC) effectively cleared the way for multi-tiered feed-in tariffs for various renewable energy technologies…FERC's ruling "clarified" an earlier decision that had roiled proposed feed-in tariff policies at the state level…that order utilities to pay for a certain percentage of generation from a particular technology, in this specific case, the state of California's policy on Combined Heat and Power.

"FERC's action should put to rest claims by feed-in tariff opponents, such as Vote Solar, that differentiated feed-in tariffs based on the cost of generation, as found in Germany, France, Switzerland and a host of other countries, are prohibited for much of the continental US…[It] casts doubt on the justification for the much-hyped Renewable Auction Mechanism proposed in California. The auction--or bidding system--is predicated on the necessity of complying with federal law. Bidding systems for developing renewable energy have been widely abandoned in Europe in favor of feed-in tariffs in part to better control costs and the pace of development."

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"…Opponents of feed-in tariffs [FiTs] had charged that the federal government "pre-empted" states from setting feed-in tariffs other than one rate based on the "avoided cost" of conventional generation. If true, states could not set tariffs that varied from one technology to another or from one application to another.

"The 'pre-emption' claim arises from the 1978 National Energy Act in the Jimmy Carter-era and one of its provisions: PURPA (The Public Utility Regulatory Policies Act). PURPA was extensively litigated in the 1980s and 1990s by utilities opposed to developing renewable energy and especially to opening their markets to independent power producers…PURPA, and the subsequent legal decisions, limits what state regulatory commissions can order utilities to pay for renewable energy to the "avoided cost", that is, the cost of generation the utility would have otherwise avoided but for the renewable generation…"

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"Proponents of feed-in tariffs have sometimes characterized them as "PURPA on steroids" because…[some] specify tariffs that are based on the cost of generation from each technology in each of several different sizes and sometimes in different applications…Feed-in tariff advocates had speculated that PURPA may permit states to order utilities to buy generation from specified renewable technologies and, thus, the "avoided cost" is the renewable generation that the utility would have "avoided" purchasing itself. However, until FERC's order clarifying its July 15th 2010 decision in the CPUC case, such an approach was mere conjecture.

"The California Public Utility Commission (CPUC) had gone to FERC to clarify the earlier decision and ask FERC specifically how to meet federal requirements…Though expressed in the awkward legal language of the federal bureaucracy… the order says, in effect, is that states can order utilities to buy a certain amount of renewable energy from each of several specific technologies. Thus, [with] a feed-in tariff program under this ruling…the amount of generation will also have to be specified….[Both California’s FIT Coalition and its Solar Energy Industries Association consider the ruling a victory]…"