Solar advocates challenge Public Service Commission decision on power price

Solar energy advocates are asking a state court to overturn a decision by the Montana Public Service Commission that reduced the price for electricity generated at small renewable energy power plants.

The petition for judicial review was filed in state court in Cascade County by the Helena-based Montana Environmental Information Center, an environmental group, along with Cypress Creek Renewables, a solar developer that’s developed one solar project in Cascade County, and Vote Solar, a national group that advocates for solar.

They argue the PSC decision cutting the rates paid for electricity produced by small renewable projects will make it impossible for small solar projects to get completed, with millions in economic investment and tax revenue for local governments at stake.

“There were dozens of solar projects being proposed for Montana prior to the commission creating uncertainty about what contract terms would be,” said Brian Fadie, MEIC’s clean energy program director. “And now, developers are saying these projects are going to be unworkable.”

The PSC says it set a fair price for the solar power that balances the interest of consumers and developers.

“These lawsuits should be understood in the context of developers of power plants seeking to shift ordinary business risk to a captive set of customers,” said Chris Puyear, a PSC spokesman.

NorthWestern Energy, the state’s largest investor-owned utility, is required to buy power from small renewable energy projects at rates set by the PSC.

In 2016, interest in developing solar power in Montana took off.

The cost of solar equipment had dropped, and the state’s $66 per megawatt-hour price was attractive.

NorthWestern asked that the PSC suspend that rate.

In their request, NorthWestern submitted testimony that small solar projects, at the $66 per megawatt-hour rate, could create over $215 million in additional costs for its customers over the next 25 years. 

In June 2016, the PSC suspended the $66 per megawatt-hour rate.

In November of this year, PSC members voted to establish a $31 per megawatt-hour price instead, and also established a 15-year contract length. The decision pertained to solar, wind and hydroelectric projects 3 megawatts or less.

The petition for judicial review was filed in Cascade County because Cypress Creek Renewables has four solar projects planned here.

Cypress Creek Renewables is a solar energy company with major offices in Santa Monica, Durham, N.C., Asheville, N.C., Gilbert, Ariz. and San Francisco.

The lawsuit says the PSC decision cutting the power price and contract lengths stalled small solar in Montana.

If allowed to stand, the decision will all but kill solar development in Montana, squashing economic investment, construction jobs, tax revenues for local governments along with the clean power, Fadie said.

“What our argument is, is that the federal and state law requires the commission to set contract terms that encourage the feasibility of these projects,” Fadie said. “And the combination of contract length reduction with greater than 50 percent reduction in compensation rate makes these project uneconomical.”

The Public Utilities Regulatory Act of 1978, also known as PERPA, encourages cleaner and more efficient energy projects.

It established a new class of generating facility known as a “qualifying facility” that would receive special rate and regulatory treatment.

The PSC sets rates for qualifying facilities that produce less than 3 megawatts.

The PSC decision to lower the rates and contract length violates that law, the lawsuit says.

Faide noted that Montana just conducted a special session where programs were cut because of a lack of tax revenue.

“Meanwhile, the solar industry is practically knocking down the state’s door trying to create new jobs and revenue while also cleaning up our electric grid,” he said.

Rates for small qualifying facilities had not been updated since 2012, and did not reflect an oversupply of electricity and low prices in the West, the PSC’s Puyear said.

The commission’s decision balanced the interest of consumers and developers, said Puyear, noting that the PSC decision was backed by the Montana Consumer Counsel, the agency charged with protecting ratepayers.

It also created a level playing field for independent power producers and NorthWestsern Energy to compete for the opportunity to serve consumers, Puyear said.

Cypress Creek Renewables already has developed one solar project in Cascade County on 35 acres at 101 Black Eagle Road. The $1 million project features more than 10,000 solar panels.

Cypress Creek Renewables sold that project to Enerparc Solar.