Idaho regulators limit small-scale renewable energy contracts to 2 years
The Idaho Public Utilities Commission gave all three of the state’s three major electric utilities everything they had asked for in limiting the length of contracts for renewable energy from independent developers last week.
The commission reduced the length of the contracts to two years from 20 years, nearly ensuring no new contracts under the Public Utility Regulatory Policies Act of 1978 will be signed any time soon.
PURPA, as the law is called, requires regulated utilities to buy energy from qualifying renewable generation projects at rates aimed to be the same as the utility would pay to generate the power or buy it from somewhere else. This is called the “avoided cost.”
The commission found the previous 20-year contract length resulted in utilities and their customers paying unreasonable costs for renewable generation. The long-term contracts overestimate future avoided cost, resulting in higher costs to utilities and their ratepayers, the PUC ruled, which it said is contrary to PURPA’s avoided-cost principle.
This was a major victory for Idaho Power Co., which asked in February to reduce the rate because it said it had a flood of solar project applications that would force it to buy energy it did not need, drive up rates and threaten the utility’s ability to reliably deliver energy. At the time, the commission had already approved 13 Idaho Power agreements with developers for 400 megawatts of solar energy.
Later, even with the 20-year contract length and federal tax credits, developers dropped four of the projects totaling 141 megawatts. In response, the commission temporarily reduced the contract period to five years, largely drying up the 1,326 megawatts of solar power projects Idaho Power said was flooding its system.