Defense of California Feed-in-Tariff Program

In 2009, a California Administrative Law Judge sought the California Attorney General’s view on California’s authority to institute a feed-in tariff. In their basic form, feed-in tariffs operate by providing a guaranteed price for renewable generators to add their electricity to the grid. California’s Attorney General filed a brief arguing that California had ample authority to set a feed-in tariff under the 1978 Public Utility Regulatory Policies Act (PURPA), or, alternatively, a feed-in tariff could be shoehorned into California’s tradable Renewable Energy Credit (REC) scheme.

In response to a request for comment by the California Public Utility Commission, the Federal Energy Regulatory Commission (FERC) issued two separate Orders attempting to clarify California’s authority to set a feed-in tariff. FERC determined that the scheme California had proposed would undermine FERC’s authority to regulate wholesale rates under the Federal Power Act. However, FERC agreed that states could conceivably establish a feed-in tariff scheme under PURPA if: (1) the seller meets PURPA’s definition of a “qualifying facility” (16 U.S.C. § 824a-3), and (2) the feed-in tariff price cannot exceed the utility’s avoided cost. FERC later clarified that “avoided cost” could be set at the cost of another renewable generator. According to some commentators, this scheme currently allows only limited use of feed-in tariffs and does not fully harness their capability. These interpretations, however, are administrative in nature and subject to revision.

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