FERC's decision in Broadview Solar, LLC (discussed here) couldn't even make it to its first birthday before FERC said "never mind," that such decision was a mistake. Reversing the reasoning of its earlier order, FERC held in its order addressing arguments on rehearing that a 160 MW solar facility with a 50 MW battery could qualify as a small power production qualifying facility (SPP QF), so long as the facility's "net output to the electric utility (i.e., at the point of interconnection), taking into account all components necessary to produce electric energy in a form useful to an interconnected entity," was 80 MW or less. The Commission's rationale largely mirrored the arguments put forth in dissent to the original order by then-Commissioner, now-Chairman, Glick. But the rehearing order still did not address important considerations in evaluating compliance with PURPA's 80 MW limit, and (like the original order) drew a dissent. It is doubtful that the new order will be the last we hear on this issue, although any load serving entity challenging the new order (or the policy, if and when applied to them in an analogous order), will need an appellate panel of strict statutory constructionists.
In FERC's original order, it denied a certification request submitted by Broadview, finding that Broadview could not meet PURPA's statutory 80 MW limit "by relying on inverters as a limiting element on a QF's output." In its ruling, the Commission overturned its statement from a much earlier case, Occidental, that the power production capacity of a facility is the maximum net output of the facility that is "sent out" by the facility, finding that this 40-year-old precedent was not consistent with the 80 MW "power production capacity" limit expressly specified by the statute and regulations. Because FERC found that the solar array alone exceeded PURPA's statutory size threshold, it declined to address the impact of the 50 MW battery on its analysis. The initial order was dissented from by then-Commissioner Glick, who expressed concern in the Commission overturning prior precedent, and explaining his view that "Broadview's inverters prevent the facility from ever providing more than 80 MW of electricity to the grid and focusing on that figure – i.e., the potential output of the facility as a whole, not its sub-components – is far more consistent with the PURPA's text, purpose, and legislative history."
On rehearing, this view carried the day. Finding that the PURPA statute was "ambiguous as to how the Commission is to measure a facility's power production capacity"—almost certainly in an attempt to invoke Chevron deference in any judicial review of its order—the Commission painstakingly explained why it believes a facility's power production capacity is limited to "the amount of power that a facility is capable of safely and reliably sending to the interconnecting utility." The Commission reinforced its earlier ruling in Occidental, and largely focused its analysis on the notion that the term "facility" should encompass all of the generator's individual parts, including any inverters or other limiting devices. Ultimately, the Commission concluded that Broadview would qualify as a SPP QF, noting that "the presence of a 200-MWh battery energy storage system and a 160-MW solar array, are [not] material for the purposes of determining whether Broadview's 'facility' has a 'power production capacity' of no more than 80 MW. Although Broadview's configuration allows it to more consistently deliver a higher share of the 80 MW power production capacity, that configuration does not change the fact that the Broadview facility is not actually capable of providing more than 80 MW at any one point in time at its point of interconnection."
In so ruling, the Commission provided no real analysis of the battery question, much like the earlier order. The upshot of the Commission's decision is that the battery doesn't count at all, because no matter how large or small it is, the facility will qualify so long as no more than 80 MW of energy can go out to the grid at any one time. But the Commission never explained why the battery should not count. In the dissent to the original order, then-Commissioner Glick seemed to endorse the view that the battery would not count towards a facility's total because it doesn't produce any energy, but that reasoning was not applied or discussed the rehearing order.
Ultimately, it is likely that this will not be the last we hear of this dispute. It seems somewhat likely that there will be another rehearing request, and if this rehearing is denied (which seems likely) the load serving entity may choose to take its fight to the Court of Appeals. If the impacted load-serving entity chooses not to seek judicial review, another such entity may do so, perhaps when the policy is applied to a similar QF seeking to sell to it. Whether a Court of Appeals panel would agree that PURPA is ambiguous, and afford FERC any deference in its interpretation likely would depend on the individual panel.
For further information on this topic please contact Shaun Boedicker or Jennifer L Key at Steptoe & Johnson LLP by telephone (+1 202 429 3000) or email ([email protected] or [email protected]). The Steptoe & Johnson LLP website can be accessed at www.steptoe.com.
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