FERC just released new guidance (Order No. 2023-405) on utility rights to terminate PURPA contracts when renewable generators fail to meet commercial operation deadlines. This could affect hundreds of small hydro, biomass, and solar projects across the country. Pacific Power here in Oregon has already sent termination notices to 12 projects that missed their COD by more than 18 months. The new rules give utilities much more flexibility to cancel contracts, even if delays were caused by permitting or interconnection issues beyond the developer's control. Anyone seeing similar activity in their regions?
PURPA Contract Terminations - New FERC Guidance
Idaho Power terminated 8 small hydro contracts last month using the new FERC guidance. These were all projects under 5MW that had been in development for 3-5 years. The utility claimed the contracts were signed at above-market rates and the delays proved the projects weren't viable. But the real reason is avoided cost rates have dropped 60% since these contracts were signed in 2019-2020. It's basically a way for utilities to get out of expensive long-term commitments.
Xcel Energy in Colorado has been much more reasonable about this. They're offering contract amendments to extend COD deadlines by 12-24 months in exchange for rate adjustments to current avoided cost levels. It's not ideal for developers, but at least the projects can move forward. The key is showing good faith efforts to achieve commercial operation despite external delays.
Avista is taking an aggressive approach here in Washington. They're arguing that any project more than 12 months behind schedule should be terminated regardless of the reason for delay. They sent termination notices to 6 projects last week, including a 3MW solar farm that's been waiting 18 months for interconnection approval from BPA. The Washington UTC needs to step in and provide clearer guidance on what constitutes "reasonable delay."
Wisconsin Electric has been surprisingly fair about this issue. They're evaluating each project individually and considering factors like interconnection queue delays, permit appeals, and supply chain problems. Two biomass projects got 18-month extensions because wood fuel supply contracts fell through during COVID. The key is documenting that delays were truly beyond the developer's control.
Georgia Power is using the new FERC rules to clean house on their PURPA portfolio. They've terminated contracts for 15 projects totaling 75MW, claiming the delays prove these projects weren't commercially viable. But most of these were small solar and biomass projects that got caught up in the state's net metering battles and PSC policy changes. It feels more like political retaliation than legitimate contract enforcement.
Alaska Electric Light & Power doesn't have many PURPA projects, but they terminated the one small hydro contract we had using the new guidance. The project was delayed because of federal permitting issues with fish habitat protection - completely beyond the developer's control. But AEIP claimed the 30-month delay proved the project wasn't viable. The avoided cost rate had dropped from $0.18/kWh to $0.09/kWh, so they had strong financial incentive to terminate.
Otter Tail Power is being more selective. They terminated 2 wind projects that were clearly never going to get built, but they're working with 3 solar developers to extend deadlines. The key factor seems to be whether the developer has actually spent significant money on development and construction. Paper projects with no real investment are getting terminated immediately.
PPL in Pennsylvania is waiting to see how other utilities handle the legal challenges before taking action. Three developers have already filed complaints with FERC claiming the terminations violate the original contract terms. The commission will probably need to issue clarifying guidance on what constitutes valid grounds for termination under force majeure provisions.
Dominion Energy in Virginia has been very aggressive about this. They terminated 9 solar contracts last month, including several projects that were delayed by their own interconnection study process. The State Corporation Commission should review these terminations because it seems like Dominion is using bureaucratic delays they created as justification to cancel contracts they no longer want.
CenterPoint Energy in Texas is taking a middle ground approach. They're offering to renegotiate contracts at current market rates rather than terminate them outright. It's not great for developers who locked in higher rates, but at least the projects can move forward. The challenge is Texas avoided costs are so low now ($0.02-0.04/kWh) that most small renewable projects aren't economically viable.
Update on Pacific Power: Two of the developers whose contracts were terminated have filed for rehearing with the Oregon PUC. They're arguing that interconnection delays caused by the utility should toll the commercial operation deadline. This could set an important precedent for how the new FERC guidance gets implemented at the state level. We should know the outcome by September.
ComEd in Illinois hasn't terminated any PURPA contracts yet, but they've sent "cure notices" to 5 projects giving them 60 days to demonstrate substantial progress toward commercial operation. The Illinois Commerce Commission has been supportive of renewable development, so ComEd is being more cautious about outright terminations. But if these projects can't show real construction progress, they'll probably get canceled too.
Just heard that FERC is considering issuing additional clarification on the termination guidance after receiving 40+ complaints from developers. The commission seems concerned that utilities are using the new rules to escape contracts for economic reasons rather than legitimate performance issues. They might require utilities to demonstrate good faith efforts to accommodate reasonable delays before allowing terminations.