The Public Utility Regulatory Policies Act of 1978 (“PURPA”) imposes a must-purchase obligation on regulated utilities to buy electric energy from qualifying facilities, as defined under the act. In 2005, Congress enacted an exception to the purchase obligation under Section 210(m) of PURPA. Section 210(m) grants the Federal Energy Regulatory Commission (“FERC”) the authority to exempt an electric utility from its must-purchase obligation if QFs in the utilities territory have “nondiscriminatory access” to at least one of the following 1) an independently administered auction based wholesale electricity market and wholesale markets for long term electricity sales; or 2) interconnection and transmission service provided by a regional transmission entity and wholesale competitive markets with buyers other than the interconnected utility: or 3) a market that is demonstrably the same as options 1 or 2.
Only utilities that are located within a Regional Transmission Organization (RTO) or Independent System Operator (ISO) have been able to obtain a 210(m) exemption. However, the Public Service Company of New Mexico (“PNM”) has a pending petition before FERC for just such an exemption. See Application of Public Service Company of New Mexico for Relief from Mandatory Purchase Obligation, FERC Docket No. QM12-4-000 (June 15, 2012). PNM adjoins CAISO but is not itself within an RTO or an ISO. PNM argues that QFs located within its service territory have nondiscriinatory access to wholesale competitive markets because QFs interconnected to PNM have access to the Four Corners hub, a collection of transmission facilities where several utilities buy and sell power, including utilities within the CAISO. PNM argues that access to the Four Corners hub is the equivalent of access to an RTO, ISO, or independent wholesale electricity market.
In response, a New Mexico QF, has intervened and protested PNM’s application arguing that the Four Corners hub fails to meet the requirement of providing QFs access to nondiscriminatory wholesale markets. See Motion for Leave to Intervene and Protest of Western Water and Production Limited, LLC (“WWP”), FERC Docket No. QM12-4-000 (July 13, 2012). WWP argues that the Four Corners hub is a “minor market of limited liquidity.” Furthermore, access to the larger markets such as CAISO are limited from the Four Corners hub because of limited transmission access. Id.
FERC’s decision could be important. Thus far, even large QFs have been able to sell under the PURPA must-buy obligation in regions lacking RTOs or ISOs. If PNM succeeds in its application, large QFs located in other parts of the country will be put on notice that their PURPA rights may be in jeopardy. FERC has not yet granted a 210(m) exemption with respect to QFs with a capacity of 20 MW or less.