United States: FERC Reaffirms MISO's Treatment Of QFs In Entergy's Service Territory

Last Updated: September 29 2016
Article by Adrienne Thompson and Jasmine C. Hites

On September 22, FERC denied a request to rehear an April 21, 2016 order involving a complaint from the Occidental Chemical Corporation ("Occidental") against the Midwest Independent Transmission System Operator, Inc. ("MISO"). In so doing, FERC reaffirmed its April 21 Order (see April 27, 2016 edition of the WER) and further explained its previous finding that MISO's treatment of qualifying facilities ("QFs") within the Entergy service territory neither violates the Public Utility Regulatory Policies Act of 1978 ("PURPA") nor the Federal Power Act ("FPA").

MISO's QF registration rules for QFs located within Entergy's service territory require QFs to elect one of two options: (1) a behind-the-meter option that only allows the QF to "put" unscheduled, as-available energy onto the QF's host utility, but does not allow the QF to also participate in the MISO market; or (2) a hybrid option whereby a QF may become a MISO market participant subsequent to Entergy's integration into MISO and sell up to its full net output in the MISO markets, although the hybrid option prohibits the QF from "putting" any energy onto the incumbent Entergy operating company's system. As FERC noted, MISO expects QFs to be paid the same under either option for real-time unscheduled energy, but they are restricted from utilizing both options simultaneously and switching between them more than once per quarter. Occidental's request for rehearing raised three main challenges to MISO's QF treatment and to FERC's analysis of those policies in its April 21 Order. FERC rejected each of these challenges in its September 22 order.

First, Occidental claimed that FERC failed to discuss whether MISO's integration plan unduly discriminates against "behind the meter" QFs by requiring a behind the meter QF to choose, on a quarterly basis, between continuing to engage in PURPA sales to the host utility or to become a hybrid QF that can participate in the MISO market. Occidental contended, among other issues, that the quarterly limitation would force QFs taking advantage of the market to lose their grandfathered PURPA contracts. This is of particular concern because such contracts are no longer available for larger QFs due to FERC's termination of Energy's PURPA purchase obligations for QFs 20 MW or larger. FERC disagreed, explaining that QFs joining MISO's markets under the hybrid option maintained their PURPA rights as they currently exist, and that "[n]othing in the MISO QF Integration Plan directly severs an existing, grandfathered PURPA agreement." FERC also noted that the termination of Entergy's PURPA purchase obligation was based on the finding that QFs larger than 20 MW have non-discriminatory access to MISO markets.

Occidental's second point of contention was that FERC's April 21 order improperly relied on a Louisiana Public Service Commission ("LPSC") order that allegedly violates PURPA and that is currently the subject of a recent federal district court challenge. In response, FERC noted that whether the LPSC order in question violates PURPA was irrelevant to the question of whether MISO's own QF policies are themselves lawful. FERC stated that it had declined Occidental's earlier request to initiate an enforcement action against LPSC, and that as a result, the challenged LPSC avoided cost rate remains in effect pending the outcome of the ongoing district court challenge.

Finally, Occidental argued that FERC's April 21 order allows MISO to impose unlawful obligations on QFs to maintain their curtailment priority and otherwise requires QFs to commit to sales in a manner that "eviscerates" their right to make unscheduled, as available sales. FERC summarily rejected this argument and reiterated its conclusion that MISO's integration plan imposes reasonable curtailment protocols and otherwise "allows QFs to make unscheduled, as-available sales at avoided cost rates consistent with PURPA and FERC's regulations implementing PURPA."

A copy of FERC's order denying rehearing can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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