By: Michael Phillis |
The Federal Energy Regulatory Commission has said a recently enacted New Hampshire law forcing utilities to purchase power from waste and biomass generators at a set rate infringes on its exclusive authority over wholesale electricity sales.
In its monthly meeting Thursday, FERC agreed with a petition by the New England Ratepayers Association that said an obligation on utilities to purchase wholesale power from certain waste and biomass power producers violated the Federal Power Act and the Public Utility Regulatory Policy Act. New Hampshire’s law mandated that utilities purchase power from the waste generators at 80% of a retail rate.
Under SB 365, which was passed last year over the New Hampshire governor’s veto, utilities could use a service charge from customers to recoup the difference between that rate and a lower amount they’d pay for power in the wholesale electricity market, according to FERC. The commission granted the request by the New England Ratepayers Association, which asked FERC to declare that the state’s law violated federal law.
“SB 365 requires utilities to offer to purchase the net output of eligible biomass and waste facilities at a state-established rate,” the order said, adding that the law was preempted by the Federal Power Act, which gave FERC the authority to establish “a rate for wholesale sales of electric energy.”
FERC said its finding was supported by the 2016 U.S. Supreme Court case Hughes v. Talen Energy Mktg, which threw out Maryland’s power plant construction subsidies, deciding they were preempted by FERC’s authority.
“Although the facts differ from Hughes, we conclude that the result is the same because SB 365 does explicitly what the Maryland program in Hughes did implicitly,” the order said, explaining that SB 365 “directly establishes a predetermined rate and requires utilities within the state to purchase electricity at that specific state-established rate.”
The FERC said the cost structure also runs into issues with provisions of the Public Utility Regulatory Polices Act.
Ari Peskoe, the director of Electricity Law Initiatives at Harvard Law School, told Law360 it is rare a state so blatantly sets a wholesale rate.
“Here, the state didn’t even pretend there was any sort of value they were getting from these plants. They just wanted them to be paid higher rates for their energ,y and that’s something states can’t do directly in this manner,” Peskoe said. “Usually states are more clever than this. It reinforces the existing law here that states can’t do this.”
New Hampshire had argued that the law doesn’t force generators to sell their power, nor does it “make any proclamations regarding commission jurisdiction over any agreement if eligible facilities do sell to electric utilities.” Plus, state regulators hadn’t had a chance to actually review any agreements under the law, meaning “no controversy or conflict” exists, according to the state.
A statement from the New England Ratepayers Association praised the FERC order, saying, “This order clearly limits the legislature’s authority to use the electricity markets to provide special interest support to favored generators.”
The order does not have the power of a federal court order to block the law, but it could be cited as a kind of advisory opinion if SB 365 is challenged in court, according to Peskoe.
Representatives for New Hampshire did not immediately return a request for comment.