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Delta wind farm case goes to court Argument over fair price of wind energy goes to the heart of long-standing debate over the economics grid access for renewables ALAN BAILEY Petroleum News
A Regulatory Commission of Alaska case involving the pricing of electricity from a Delta Junction wind farm has gone to state Superior Court for resolution. The case, involving complex issues around fair pricing for power from independent renewable energy sources, has significance for future efforts to connect new renewable energy supplies to Alaska’s Railbelt transmission grid.
A tariff challenge The Delta Junction wind farm is already connected to Golden Valley Electric Association’s sector of the transmission grid in the Fairbanks region. However, Alaska Environmental Power LLC, the company that owns and operates the wind power facility, is challenging the RCA approval of a GVEA tariff that sets the utility’s rules for accepting renewable energy on its system. AEP says that the terms of the tariff are unfair and that they do not comply with federal or state law. Some in the renewable energy community have accused Railbelt utilities of discouraging renewable energy development by setting conditions that render such developments uneconomic.
In the RCA hearing which is now being challenged in court, GVEA said that it is proud of its efforts to include renewable energy resources in its electrical system and claimed that AEP had misunderstood the procedures whereby the utility would determine the pricing of power from a renewable source. And during the course of the RCA hearing commission staff recommended the approval of the GVEA tariff, saying that they disagreed with AEP’s objections and that they viewed GVEA’s method of power pricing to be fair and reasonable.
Much of the case revolves around provisions of the Public Utilities Regulatory Policies Act of 1978, a federal act commonly referred to as PURPA. Under PURPA, a piece of legislation designed, among other things, to promote the use of renewable energy sources, electric utilities are required to purchase power under reasonable terms from qualifying, independent renewable power producers. However, the federal government has allowed individual states to determine exactly how they will implement the PURPA requirements, with a state that has not complied with PURPA regulations having to publish its reasons for not doing so.
The RCA has adopted PURPA regulations in Alaska, including the mandate that utilities must accept power from a qualifying renewable source. The price that the utility pays for the renewable power is based on what is referred to as the “avoided cost,” the cost of the power displaced by the power from the qualifying source.
Regulations also require the utility to calculate both the cost of integrating a varying renewable source into its system and the benefit gained from the use of the renewable power. Integration costs arise because wind or solar power, being inherently variable, has to be counterbalanced by some other power supply that can be fluctuated as necessary. If the cost exceeds the benefit, the utility can charge an integration fee to the renewable energy provider, while if the benefit exceeds the cost the utility must make integration payments to the provider.
New RCA regulations In the Alaska Railbelt, the calculation of the avoided cost for the purposes of renewable power became a bone of contention over the years, with utilities arguing for the avoided cost being their average cost of power. Renewable energy providers, on the other hand, argued for the higher price that would arise from an incremental approach, with a utility first cutting out its most expensive generation facilities. In March RCA brought in new regulations mandating the incremental approach and thus bringing its regulations into line with federal rules.
Subsequently, GVEA filed a new tariff complying with RCA’s revised regulations. It is this new tariff that is the subject of a Superior Court appeal.
In a majority decision, and following some tariff revisions, the RCA commissioners approved the new tariff in July. But EAP is challenging that decision, claiming that the purchase power rate method specified in the tariff does not comply with federal or state regulations.
EAP objections Among its list of objections to the tariff, the wind farm company says that the tariff is worded in a manner that discriminates against facilities that GVEA deems to be non-schedulable. Non-schedulable power consists of power from sources such as wind farms and solar power systems, which, because of their variable nature, cannot be scheduled in advance. The tariff precludes non-schedulable power sources from being paid for the utility’s saved capacity costs, the capital cost of providing power supply capability, EAP claims. Moreover, the tariff does not identify integration costs or quantify integration benefits associated with the connection of a renewable energy source, EAP says. And the tariff does not provide evidence in support of the methods to be used for avoided cost determinations, the wind farm company says.
In July, in the course of the RCA hearing, GVEA told AEP that its new tariff provides a fair and reasonable rate for the utility’s members and is not an attempt to usurp a qualifying power facility’s rights under federal or state laws.
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