Petition Requests FERC Clarify State Treatment of Battery Storage QFs Under PURPA

In a December 14, 2017 filing (“Petition”),[i] developers of several battery storage projects in southern Idaho (“Franklin Storage Facilities”) seek a declaratory order and enforcement action from the Federal Energy Regulatory Commission (“FERC”) against the Idaho Public Utilities Commission (“Idaho PUC”) pursuant to the Public Utility Regulatory Policies Act of 1978 (“PURPA”).  These battery storage facilities are initially designed to use solar modules as the ultimate energy source to charge the battery storage facilities.  Because the developers chose to submit to FERC self-certifications for status as qualifying small power production facilities (“QFs”) rather than seeking a FERC determination of QF status, FERC has not addressed the status of the Franklin Storage Facilities as QFs.  The self-certifications for these battery storage facilities identify “other renewable resource” – not solar – as the primary energy source for these QFs.  However, in a 2017 state proceeding, the Idaho PUC identified the facilities as solar QFs based on the initial design of the facilities to use solar energy to charge the batteries.[ii]  The “type” of QF is important in this case because QFs identified as either solar QFs or wind QFs in Idaho are not eligible for standard offer PURPA contracts with published rates and 20 year license terms and may instead negotiate for contracts only up to two years in duration.[iii]  At issue in the Petition is whether the Idaho PUC is precluded under PURPA from classifying these battery storage facilities as solar QFs for purposes of applying state PURPA contract conditions.  FERC may also use this case as an opportunity to more broadly discuss battery storage facilities as QFs under PURPA.

Primary Energy Source and Fuel Use Requirements Under PURPA:  PURPA generally imposes a mandatory obligation on any “electric utility,” such as the interconnecting utility, to purchase the delivered energy and capacity from a QF.[iv]  The primary energy source of qualifying small power production QFs must be renewable resources (hydro, wind or solar), biomass, waste or geothermal resources, and at least 75 percent of the total energy input to such facilities must be from these sources.[v]  FERC has addressed aspects of QF determinations of battery storage facilities previously in its 1990 Luz decision.[vi]  In that decision FERC rejected the view that battery storage facilities are per se eligible for QF status without considering the ultimate energy source that charges the battery storage facilities.[vii]  However, FERC also specifically found that “battery system[s] … are a renewable resource for purposes of QF certification” and battery storage facilities may be certified a QFs, subject to meeting PURPA’s fuel use requirements.[viii]    

Request for Declaratory Order and Enforcement:  Relying on their self-certifications that identify “other renewable resource” as the primary energy source, the developers of the Franklin Storage Facilities filed the Petition with FERC after the Idaho PUC classified the Franklin Storage Facilities as solar QFs.[ix]  The Idaho PUC’s classification of the Franklin Storage Facilities as solar QFs means that these facilities are eligible only for negotiated (non-standard) avoided cost rates and two-year contracts.[x]  The Petition seeks a declaratory order from FERC that the Franklin Storage Facilities are energy storage QFs in their own right, entitled to the same contract terms and conditions in Idaho as any other non-solar and non-wind QF.[xi]  The Petition also includes a request pursuant to Section 210(h)(2)(B) of PURPA for FERC to initiate an enforcement proceeding against the Idaho PUC for its failure to properly implement PURPA by reclassifying the Franklin Storage Facilities as solar QFs, which petitioners claim violates FERC’s exclusive authority over QF determinations.[xii]

Both the developers and the Idaho PUC recognize the requirement in Luz to consider the source of energy used as input for battery storage facilities seeking QF status, but they interpret differently the significance of that requirement.  For the developers, the purpose of reviewing a facility’s ultimate source of energy is not to determine the “type” or status of QF, which they argue is subject to FERC’s exclusive authority, but is instead to ensure that PURPA’s fuel use requirements for qualifying small power production facilities are met, i.e., that 75 percent or more of the total energy input to the storage facilities comes from one of the eligible renewable, biomass, waste or geothermal resources.[xiii]  Thus, the developers of the Franklin Storage Facilities explain in the self-certifications that the facilities “are designed to, and will, receive 100% of [their] energy input from a combination of renewable energy sources,” including their initial design for solar energy input.[xiv]  In contrast, the Idaho PUC believes it may consider battery storage facilities’ primary source of energy in order to determine the applicability of particular state PURPA contract provisions because under Luz battery storage facilities are not a per se category of eligible QF and a state has broad authority to implement PURPA rates and associated terms and conditions.[xv]  The Idaho PUC believes its classification of the Franklin Storage Facilities as solar QFs is a separate exercise from FERC’s determination of QF status for these facilities, which the Idaho PUC does not contest in this case.[xvi]

FERC Action on the Petition:  Although FERC has discretion to initiate enforcement actions brought by QFs in court under PURPA, FERC typically declines to initiate enforcement actions requested by QFs.  Instead, if FERC believes such petitions merit discussion, FERC’s practice is to issue a notice of intent not to act and a declaratory order setting forth its position on the issues raised in the petition.[xvii]  FERC has explained that its declaratory orders may assist a court in instances where the QF petitioner decides to pursue an enforcement action.[xviii]  Pursuant to the statute, if FERC declines to bring an enforcement action within 60 days of the filing of the Petition, the developers of the Franklin Storage Facilities may directly pursue their own enforcement action against the Idaho PUC in the appropriate court.[xix]

 

[i]               Franklin Energy Storage One, LLC et al., Docket No. EL18-50-000 et al., Petition for Declaratory Order and Petition for Enforcement (Dec. 14, 2017) (“Petition”).

[ii]               IPUC Order No. 33785, 338 P.U.R.4th 157 (2017).

[iii]              See Idaho PUC Order Nos. 33357 and 33419; see also, Idaho PUC Order No. 32697 at p. 3.

[iv]              See 18 C.F.R. § 292.303(a).  FERC has granted relief from PURPA’s mandatory purchase obligation in cases where FERC has found QFs have access to sufficiently competitive markets, including QFs above 20 MW selling in markets operated by Regional Transmission Organizations or Independent System Operators.

[v]               See 18 C.F.R. § 292.204(b)(1)(i).  PURPA’s fuel use requirements limit any fossil fuel-fired input to no more than 25 percent of the total energy input to the qualifying small power production facility.  Id. at § 292.204(b)(2). 

[vi]              See Luz Development and Finance Corp., 51 FERC ¶ 61,078 (1990) (“Luz”).

[vii]             See Luz at 61,171 (explaining that “the primary energy source of the battery system is not the electro-chemical reaction.  Rather, it is the electric energy which is utilized to initiate that reaction, for without that energy, the storage facility could not store or produce the electric energy which is to be delivered at some later time. Since this energy is the primary energy source of the facility, it is necessary to look to the source of this energy as the ultimate primary energy source of the facility”).

[viii]             Id. at 61,172 (concluding that “energy storage facilities such as … battery system[s] are a renewable resource for purposes of QF certification. However, such facilities are subject to the requirement that the energy input to the facility is itself biomass, waste, a renewable resource, a geothermal resource, or any combination thereof or a demonstration that any fossil fuel-fired input constitutes no more than 25 percent of the total energy input to the facility …”).

[ix]              See Form No. 556, Franklin Energy Storage One, LLC et al., Docket Nos. QF17-581, QF17-582, QF17-583, and QF17-584 at 9, 19.  See also, IPUC Order No. 33785, 338 P.U.R.4th 157 (2017).

[x]               IPUC Order No. 33785 at 11, 338 P.U.R.4th 157 (2017) (citing Luz at 61,171). 

[xi]              Petition at 10.

[xii]              Petition at 8, 10 (citing Indep. Energy Producers Ass 'n, Inc. v. Cal. Pub. Utilities Comm 'n, 36 F.3d 848, 853-54 (9th Cir. 1994) (“The structure of PURPA and [FERC’s] regulations, reflect Congress’s express intent that [FERC] exercise exclusive authority over QF status determinations” and “[n]owhere do these regulations contemplate a role for the state in setting QF standards or determining QF status”).

[xiii]             Id. at 7-8. 

[xiv]             See Form No. 556, Franklin Energy Storage One, LLC et al., Docket Nos. QF17-581, QF17-582, QF17-583, and QF17-584 at 9, 19.

[xv]              Idaho PUC Protest at 2, 5, 9-12.

[xvi]             Id. at 9-12.

[xvii]            See, e.g., FLS Energy, Inc., 157 FERC ¶ 61,211 (2016) at P 18.

[xviii]            See id. at P 19.

[xix]             16 U.S.C. § 824a-3(h)(2)(B).