The Federal Energy Regulatory Commission (FERC) has issued another order making it clear that states can move forward with strong renewable energy policies. California Public Utilities Commission, order denying rehearing, 134 FERC 61,044 (January 20, 2011)

By Dirk Ingo Franke (via Wikimedia Commons)

On October 21, 2010, FERC issued an order making it clear that states have the authority to implement a strong feed-in tariff (FIT) by setting rates for renewable energy purchases under the Public Utility Regulatory Policies Act (PURPA).  (Read our previous blog post). California’s investor-owned utilities challenged that order, asking FERC to clarify or reconsider its decision.  FERC denied the request and issued an Order that should remove any doubt.  In its Order, FERC recognizes the changing landscape of electricity regulation and notes that “[p]reviously, states did not mandate particular purchases, e.g., from renewables, and so there was no need to differentiate among generation sources and no need for tiering [rates]; all generation sources were essentially fungible . . . . That is increasingly not the case; states are now looking to draw distinctions in what they will allow.  The orders issued to date in this proceeding, and this order, reflect this change in circumstances.” Id. at fn. 66.

“[W]here a state requires a utility to procure energy from generators with certain characteristics,” the state may set the wholesale rate (known as ‘avoided cost’) for that specific type of energy.  Id. at para. 30. Therefore, a state can require utilities to purchase electricity generated from differentiated technologies (wind, solar, wave, etc.) and set the rate for purchases from each of these generators.

This should be FERC’s final word on this issue for now.  The order could be challenged in federal court, but let’s hope we’re done with this discussion and states can move forward boldly!

Jen Gleason
Staff Attorney