Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF PUBLIC SERVICE REGULATION

OF THE STATE OF MONTANA

In the matter of the amendment of ARM 38.5.1902 pertaining to Cogeneration and Small Power Production

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

TO: All Concerned Persons

1. On November 3, 2015, at 10:00 a.m., the Department of Public Service Regulation will hold a public hearing in the Bollinger Room, 1701 Prospect Avenue, Helena, Montana, to consider the proposed amendment of the above-stated rule.

2. The Department of Public Service Regulation will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Public Service Regulation no later than 5:00 p.m. on October 27, 2015, to advise us of the nature of the accommodation that you need. Please contact Aleisha Solem, Department of Public Service Regulation, 1701 Prospect Avenue, Helena, Montana, 59620-2601; telephone (406) 444-6170; fax (406) 444-7618; TDD/Montana Relay Service (406) 444-4212; or e-mail [email protected].

3. The commission proposes to amend the rule in one of three ways. The rule as proposed to be amended provides as follows, new matter underlined, deleted matter interlined:

Version A

38.5.1902 GENERAL PROVISIONS (1) through (4) remain the same.

(5) All purchases and sales of electric power between a utility and a qualifying facility shall be accomplished according to the terms of a written contract between the parties or in accordance with the standard tariff provisions as approved by the commission. A long-term contract for purchases and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be contingent upon selection of the qualifying facility by a utility through an all-source competitive solicitation conducted in accordance with the provisions of ARM 38.5.2001 through 38.5.2012. Between competitive solicitations, purchases, and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be accomplished in accordance with negotiation of a short-term written contract. The utility shall recompute the short-term and long-term standard tariffed avoided cost rates following submission of its least cost plan filing, ARM 38.5.2001 through 38.5.2012, or procurement plan filing, ARM 38.5.8201 through 38.5.8229. If the qualifying facility is not selected, or does not participate, in the first available competitive solicitation, purchases and sales of energy and capacity shall continue only according to the terms of a newly negotiated short-term written contract. Long-term contracts for purchases and sales of energy and capacity between a utility and a qualifying facility 3 MW or less may be accomplished according to standard tariffed rates as approved by the commission. The contract shall specify:

(a) the nature of the purchases and sales;

(b) the applicable rate schedule or negotiated rates for the purchases and sales;

(d) the means for measurement of the energy or capacity purchased or sold by the utility;

(e) the method of payment by the utility for purchases, and the method of payment by the facility for utility sales;

(f) any installation and performance incentives to be provided by the utility to the qualifying facility;

(g) the services to be provided or discontinued by either party during system emergencies;

(h) the term of the contract;

(i) applicable operating safety and reliability standards with which the qualifying facility must comply;

(j) appropriate insurance indemnity and liability provisions.

(6) and (7) remain the same.

AUTH: 69-3-103, 69-3-604, MCA

IMP: 69-3-102, 69-3-602, 69-3-603, MCA

REASON: Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA), the commission must require utilities to purchase electricity from qualifying facilities. 69-3-603, MCA. Last year, the Federal Energy Regulatory Commission issued a Notice of Intent Not to Act and Declaratory Order in which it found ARM 38.5.1902(5) "inconsistent with PURPA . . . to the extent that it offers the competitive solicitation process as the only means" for large QFs to obtain long-term avoided cost rates. Hydrodynamics, Inc., 146 F.E.R.C. 61,193 (Mar. 20, 2014). On August 17, 2015, Greycliff Wind Prime, LLC filed a Petition to Amend or Repeal ARM 38.5.1902(5) in Docket D2015.8.63. Version A strikes the competitive solicitation requirement from the rule.

Version B

38.5.1902 GENERAL PROVISIONS (1) through (4) remain the same.

(5) All purchases and sales of electric power between a utility and a qualifying facility shall be accomplished according to the terms of a ~~written~~ negotiated contract between the parties or in accordance with the applicable standard tariff provisions as approved by the commission. A long-term contract for purchases and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be contingent upon selection of the qualifying facility by a utility through an all-source competitive solicitation conducted in accordance with the provisions of ARM 38.5.2001 through 38.5.2012. Between competitive solicitations, purchases, and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be accomplished in accordance with negotiation of a short-term written contract. The utility shall recompute ~~the~~ short-term and long-term ~~standard tariffed~~ avoided costs ~~rates~~ following submission of its least cost plan filing, ARM 38.5.2001 through 38.5.2012, or procurement plan filing, ARM 38.5.8201 through 38.5.8229. If the qualifying facility is not selected, or does not participate, in the first available competitive solicitation, purchases and sales of energy and capacity shall continue only according to the terms of a newly negotiated short-term written contract. Long-term contracts for purchases and sales of energy and capacity between a utility and a qualifying facility 3 MW or less may be accomplished according to standard tariffed rates as approved by the commission. Long-term contracts for purchases and sales of energy and capacity between a utility and a qualifying facility larger than 3 MW may be accomplished at a rate which is a negotiated term of the contract between the utility and the qualifying facility. The contract shall specify:

(a) the nature of the purchases and sales;

(b) the applicable rate schedule or negotiated rates for the purchases and sales;

(d) the means for measurement of the energy or capacity purchased or sold by the utility;

(e) the method of payment by the utility for purchases, and the method of payment by the facility for utility sales;

(f) any installation and performance incentives to be provided by the utility to the qualifying facility;

(g) the services to be provided or discontinued by either party during system emergencies;

(h) the term of the contract;

(i) applicable operating safety and reliability standards with which the qualifying facility must comply;

(j) appropriate insurance indemnity and liability provisions.

(6) and (7) remain the same.

AUTH: 69-3-103, 69-3-604, MCA

IMP: 69-3-102, 69-3-602, 69-3-603, MCA

REASON: Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA), the commission must require utilities to purchase electricity from qualifying facilities. 69-3-603, MCA. Last year, the Federal Energy Regulatory Commission issued a Notice of Intent Not to Act and Declaratory Order in which it found ARM 38.5.1902(5) "inconsistent with PURPA . . . to the extent that it offers the competitive solicitation process as the only means" for large QFs to obtain long-term avoided cost rates. Hydrodynamics, Inc., 146 F.E.R.C. 61,193 (Mar. 20, 2014). On August 17, 2015, Greycliff Wind Prime, LLC filed a Petition to Amend or Repeal ARM 38.5.1902(5) in Docket D2015.8.63. Version B strikes the competitive solicitation requirement from the rule and clarifies the obligation to negotiate and to calculate avoided costs. See e.g. ARM 38.5.1903(2).

Version C

38.5.1902 GENERAL PROVISIONS (1) through (4) remain the same.

(5) All purchases and sales of electric power between a utility and a qualifying facility shall be accomplished according to the terms of a written contract between the parties or in accordance with the standard tariff provisions as approved by the commission. A long-term contract for purchases and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be contingent upon selection of the qualifying facility by a utility through an all-source competitive solicitation conducted in accordance with the provisions of ARM 38.5.2001 through 38.5.2012. Between competitive solicitations, purchases, and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be accomplished in accordance with negotiation of a short-term written contract accomplished by negotiation between the utility and the qualifying facility. The utility and the qualifying facility shall negotiate in good faith, and if no agreement can be reached through negotiations, either the utility or the qualifying facility may file a petition with the commission pursuant to 69-3-603, MCA, to resolve the dispute. A failure to negotiate in good faith, on the part of either party, may result in summary ruling against the party who failed to negotiate in good faith. The utility shall recompute the short-term and long-term standard tariffed avoided cost rates following submission of its least cost plan filing, ARM 38.5.2001 through 38.5.2012, or procurement plan filing, ARM 38.5.8201 through 38.5.8229. If the qualifying facility is not selected, or does not participate, in the first available competitive solicitation, purchases and sales of energy and capacity shall continue only according to the terms of a newly negotiated short-term written contract. Long-term contracts for purchases and sales of energy and capacity between a utility and a qualifying facility 3 MW or less may be accomplished according to standard tariffed rates as approved by the commission. The contract shall specify:

(a) the nature of the purchases and sales;

(b) the applicable rate schedule or negotiated rates for the purchases and sales;

(d) the means for measurement of the energy or capacity purchased or sold by the utility;

(e) the method of payment by the utility for purchases, and the method of payment by the facility for utility sales;

(f) any installation and performance incentives to be provided by the utility to the qualifying facility;

(g) the services to be provided or discontinued by either party during system emergencies;

(h) the term of the contract;

(i) applicable operating safety and reliability standards with which the qualifying facility must comply;

(j) appropriate insurance indemnity and liability provisions.

(6) and (7) remain the same.

AUTH: 69-3-103, 69-3-604, MCA

IMP: 69-3-102, 69-3-602, 69-3-603, MCA

REASON: Pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA), the commission must require utilities to purchase electricity from qualifying facilities. 69-3-603, MCA. Last year, the Federal Energy Regulatory Commission issued a Notice of Intent Not to Act and Declaratory Order in which it found ARM 38.5.1902(5) "inconsistent with PURPA . . . to the extent that it offers the competitive solicitation process as the only means" for large QFs to obtain long-term avoided cost rates. Hydrodynamics, Inc., 146 F.E.R.C. 61,193 (Mar. 20, 2014). On August 17, 2015, Greycliff Wind Prime, LLC filed a Petition to Amend or Repeal ARM 38.5.1902(5) in Docket D2015.8.63. Version C strikes the competitive solicitation requirement from the rule, clarifies the obligation to negotiate, and establishes a summary ruling process.

4. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Aleisha Solem, Department of Public Service Regulation, 1701 Prospect Avenue, Helena, Montana, 59620-2601; telephone (406) 444-6170; fax (406) 444-7618; or e-mail [email protected], and must be received no later than 5:00 p.m., November 6, 2015.

5. The commission, a commissioner, or a duly appointed presiding officer may preside over and conduct the hearing.

6. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in paragraph 4 above or may be made by completing a request form at any rules hearing held by the department.

7. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

9. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rule will significantly and directly impact small businesses.

/s/ JUSTIN KRASKE /s/ BRAD JOHNSON

Justin Kraske Brad Johnson

Rule Reviewer Chairman

Department of Public Service Regulation

Certified to the Secretary of State September 14, 2015.