BEFORE THE DEPARTMENT OF PUBLIC SERVICE REGULATION

OF THE STATE OF MONTANA

 

In the matter of the adoption of New Rules I and II and the amendment of ARM 38.5.1901, 38.5.1902, 38.5.1903, 38.5.1904, 38.5.1905, 38.5.1907, 38.5.1908, 38.5.1909, and 38.5.1910 pertaining to Public Utility Regulatory Policies Act (PURPA)

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

 

            1. On August 30, 2022, at 1:00 p.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 adoption and amendment of the above-stated rules.

 

2. The Department of Public Service Regulation will make reasonable accommodations for persons 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 August 12, 2022, to advise us of the nature of the accommodation that you need. Please contact the Department of Public Service Regulation, 1701 Prospect Avenue, P.O. Box 202601, Helena, Montana, 59620-2601; telephone (406) 444-6199; fax (406) 444-7618; or e-mail [email protected].

 

3. The rules as proposed to be adopted provide as follows:

 

NEW RULE I INCORPORATION OF FEDERAL RULES (1) The Commission adopts and incorporates by reference 18 CFR, Part 292, as effective August 5, 2022, which sets forth general requirements and criteria for cogeneration and small power production facilities which are eligible for consideration under section 201 and 210 of the federal Public Utility Regulatory Policies Act of 1978, Pub. L. 95-617. A copy of this incorporated material may be obtained from the Commission, 1701 Prospect Avenue, P.O. Box 202601, Helena, MT 59620-2601, or online at https://www.ecfr.gov/current/title-18/chapter-I/subchapter-K/part-292?toc=1.

 

AUTH: 69-3-103, 69-3-604, MCA

IMP: 69-3-102, 69-3-603, 69-3-604, MCA

 

            NEW RULE II VOLUNTARY MEDIATION (1)  Before the filing of a petition, a utility and qualifying facility may mutually agree to request voluntary mediation through a Commission-appointed mediator.  The utility and qualifying facility must equally share the cost of any contracted mediator.  Requests for mediation must be signed by authorized representatives of the utility and qualifying facility and filed pursuant to ARM 38.2.1203.

(2)  Upon receipt of a request for voluntary mediation, the Commission's presiding officer may appoint a mediator.

(3)  Requests for mediation must be served on the Montana Consumer Counsel.

(4)  Unless the parties and appointed mediator otherwise agree, the voluntary mediation will proceed as follows:

(a)  Within seven days of the filing of a request for voluntary mediation, each party must submit to the mediator an opening mediation statement, including a complete copy of each party's proposed power purchase agreement and a list identifying each disputed contract term.

(b)  Within seven days of the submission of an opening mediation statement, each party may submit to the mediator a response statement.

(c)  The parties and mediator will use reasonable efforts to schedule mediation within 60 days from the date of the request for voluntary mediation.

(5)  The filing of a request for voluntary mediation will not affect the formation of a legally enforceable obligation under ARM 38.5.1909.

 

AUTH: 69-3-103, 69-3-604, MCA

IMP: 69-3-102, 69-3-603, 69-3-604, MCA

 

REASON:  The Commission has incorporated by reference federal rules regarding the Public Utility Regulatory Policies Act (PURPA) in two of its existing rules.  To avoid inconsistencies and improve the organization of the Commission's PURPA rules, the Commission proposes to move the incorporation of federal rules into New Rule I.

 

New Rule II was originally proposed by representatives of the qualifying facility community as a potential tool to narrow the scope of contested issues presented in a petition to set terms and conditions under 69-3-604, MCA. In the Commission's experience, the range of contested issues in PURPA proceedings has expanded considerably over the years. The Commission therefore generally supports efforts to narrow the scope of issues in these cases. The voluntary mediation process in New Rule II could allow qualifying facilities and utilities to resolve disputes before petitioning the Commission to set disputed terms and conditions.

 

4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

 

            38.5.1901 DEFINITIONS (1) The commission hereby adopts and incorporates by reference 18 CFR, Part 292, which sets forth general requirements and criteria for cogeneration and small power production facilities which are eligible for consideration under sections 201 and 210 of the federal Public Utility Regulatory Policies Act of 1978, Pub. L. 95-617. A copy of this incorporated material may be obtained from the Commission, 1701 Prospect Avenue, P.O. Box 202601, Helena, Montana 59620-2601.

            (2) (1)  For purposes of these rules, the following definitions apply:

            (a) "Avoided costs" is defined as provided in 18 CFR 292.101(b)(6) means the incremental costs as determined by the commission to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.

            (b) "Cogeneration facility" is defined as provided in 18 CFR 292.202(c) means equipment used to produce electric energy and forms of useful thermal energy such as heat or steam, used for industrial, commercial, heating or cooling purposes, through the sequential use of energy.

            (c) "Commission" means the Montana Public Service Commission.

            (d) "FERC" means the Federal Energy Regulatory Commission.

            (d) (e)  "Interconnection costs" is defined as provided in 18 CFR 292.101(b)(7) means the reasonable costs of connection, switching, metering, transmission, distribution, safety provisions, and administrative costs incurred by the utility directly related to the installation and maintenance of the physical facilities necessary to permit interconnected operations with a qualifying facility, to the extent such costs are in excess of the corresponding interconnection costs which the electric utility would have incurred if it had not engaged in interconnected operations, but instead generated an equivalent amount of electric energy itself or purchased an equivalent amount of electric energy or capacity from other sources. Interconnection costs do not include any costs included in the calculation of avoided costs.

            (e) (f)  "Production profile" means the expected hourly generation output of a qualifying facility for a full year based an engineering analysis of the qualifying facility's power production capabilities and fuel use or availability.

            (f) (g)  "Purchase" is defined as provided in 18 CFR 292.101(b)(2) means the purchase of electric energy or capacity or both from a qualifying facility by an electric utility.

            (g) (h)  "Qualifying facility" or "facility" means:

            (i) A a cogeneration facility or small power production facility that which meets the criteria operating, efficiency, and ownership standards established by FERC regulations, in 18 CFR, Part 292, the requirements of 69-3-601, MCA, and has self-certified or been certified by FERC. as incorporated in ARM 38.5.1901(1); or

            (ii) A small power production facility which meets the production capacity, energy source, and ownership criteria established by FERC regulations, 18 CFR, Part 292, as incorporated in ARM 38.5.1901(1).

            (h) (i)  "Rate" is defined as provided in 18 CFR 292.101(b)(5) means any price, rate, charge, or classification made, demanded, observed or received with respect to the sale or purchase of electric energy or capacity, or any rule, regulation, or practice respecting any such rate, charge, or classification and any contract pertaining to the sale or purchase of electric energy or capacity.

            (j) "Resource plan" means the utility's integrated least cost resource plan, developed through the process described in Commission rules.

            (i) (k)  "Sale" is defined as provided in 18 CFR 292.101(b)(3) means the sale of electric energy or capacity or both by an electric utility to a qualifying facility.

            (j) (l)  "Small power production facility" is defined as provided in 18 CFR 292.204 means a facility with a power production capacity which, together with any other facilities located at the same site, does not exceed 50 megawatts of electricity, and which depends upon biomass, waste, or renewable resources for its primary source of energy. At least 50 percent of the equity interest in a small power production facility must be owned by a person not primarily engaged in the generation or sale of electric energy. The provisions of FERC regulations, 18 CFR, Part 292, as incorporated in ARM 38.5.1901(1), respecting site location and primary energy sources are incorporated by reference in this definition.

            (k) (m)  "Standard rates" means those rates for qualifying facilities with a nameplate generating capacity of 3 megawatts or less established in a Commission-approved tariff that calculated by a means approved by the commission which:

            (i) in the case of purchases, are based on avoided costs to the utility, and are applicable to all contracts with qualifying facilities that do not choose to negotiate a different rate; computed annually by the utility and made available to the public, are reviewed by the commission, and are applicable to all contracts with qualifying facilities which do not choose to negotiate a different rate; or

            (ii) in the case of sales by a utility to a qualifying facility, are the utility's tariff schedules in effect for members of the same class as the qualifying facility.

            (l) (n)  "System emergency" is defined as provided in 18 CFR 292.101(b)(4) means a condition on a utility's system which is likely to result in imminent significant disruption of service to customers or is imminently likely to endanger life or property.

            (m) (o)  "Utility" means any public utility, as defined in 69-3-101, MCA, which provides electric service subject to the jurisdiction of the Montana Public Service Commission.

            (2) The federal regulations referred to in this rule can be reviewed at the Commission's office or online at https://www.ecfr.gov/current/title-18/chapter-I/subchapter-K/part-292?toc=1.

 

AUTH: 69-3-103, MCA

IMP: 69-3-102, MCA

 

            38.5.1902 GENERAL PROVISIONS (1) The commission hereby adopts and incorporates by reference 18 CFR, Part 292, which sets forth general requirements and criteria for cogeneration and small power production facilities which are eligible for consideration under sections 201 and 210 of the federal Public Utility Regulatory Policies Act of 1978, Pub. L. 95-617. A copy of this incorporated material may be obtained from the commission, 1701 Prospect Avenue, P.O. Box 202601, Helena, Montana 59620-2601.

            (2) Any cogeneration or small power production facility in Montana, which is a qualifying facility under the criteria for size, fuel-use, and ownership established by FERC regulations, 18 CFR, Part 292, as incorporated in ARM 38.5.1901(1), is a qualifying facility eligible to participate, under these rules, in arrangements for purchases and sales of electric power with electric utilities regulated by the commission.

            (1)  Any qualifying facility is eligible to participate, under these rules, in arrangements for purchases and sales of electric power with electric utilities regulated by the Commission.

            (3) (2)  Any qualifying facility in Montana which that produces electric energy or capacity, or both, available for purchase by any public utility regulated by the Commission, shall not be considered a public utility within the meaning of 69-3-101, MCA, and shall be exempt from regulation by the Commission as a public utility, except insofar as these rules or any other Commission order, tariff, requirement, or rule governing the activities of public utilities may affect the facility in its dealings with such regulated utilities. Nothing in these rules is to be construed to limit the full powers of regulation, supervision, and control of public utilities vested by law in the Commission.

            (4) (3)  Nothing in these rules shall exempt any qualifying facility from the applicable licensing or permit requirements which may be imposed on facilities by Montana laws and regulations governing water use, land use, community development and planning, zoning, air quality, environmental protection, or any other existing pertinent law or regulation administered by state agencies other than the Commission.

            (5) (4)  All purchases and sales of electric power between a utility and a qualifying facility that is not eligible for standard offer rates shall be accomplished according to the terms of a written contract negotiated between the parties and/or terms set by the Commission pursuant to a petition under 69-3-603, MCA.  The utility shall compute the avoided costs for a qualifying facility that is not eligible for standard offer rates at the time the qualifying facility requests a contract. Only qualifying facilities having a nameplate capacity not greater than 3 MW are eligible for standard offer rates. All purchases and sales of electric power between a utility and a qualifying facility that is eligible for standard offer rates shall be accomplished according to the terms of a written contract between the parties or in accordance with the applicable standard tariff provisions as approved by the commission. The utility shall recompute short-term and long-term avoided costs for standard offer 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. The utility and the qualifying facility must attempt to negotiate an agreement, and if no agreement can be reached, either the utility or the qualifying facility may file a petition with the Commission pursuant to 69-3-603, MCA, to set the terms and conditions of the contract.

            (5) All purchases and sales of electric power between a utility and a qualifying facility that is eligible for standard rates shall be accomplished according to the terms of a written contract between the parties or in accordance with the applicable standard rate tariff provisions and any applicable standard power purchase agreement approved by the Commission.  The utility shall recompute avoided costs for standard rates following submission of its resource plan.

            (6)  The All contracts between utilities and qualifying facilities shall specify:

            (a) the nature of the purchases and sales;

            (b) the applicable rate schedule or negotiated rates for the purchases and sales or the Commission-determined rates pursuant to 69-3-603, MCA;

            (c) the amount and manner of payment of interconnection costs;

            (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 obligations 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; and

            (j) appropriate insurance indemnity and liability provisions.

            (6)(7) All purchases and sales of electric power between a utility and a qualifying facility shall be compatible with the goal of the Commission's integrated least-cost resource planning and acquisition act, 69-3-1201 through 69-3-1209, MCA. guidelines, ARM 38.5.2001 through 38.5.2012, and the commission's procurement plan guidelines, ARM 38.5.8201 through 38.5.8229.

            (7) An existing qualifying facility smaller than 10 MW whose contract with a utility expires prior to July 1, 2015 will not be subject to the 3 MW size limitation for the purpose of obtaining a new or extended contract under an existing standard rate option. 

 

AUTH: 69-3-103, 69-3-604, MCA

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

 

            38.5.1903 OBLIGATIONS OF UTILITIES TO QUALIFYING FACILITIES

            (1) Each utility shall purchase any energy and capacity made available by a qualifying facility, except that a utility is not obligated to make purchases from an interconnected qualifying facility:

            (i) (a)  during system emergencies as allowed in 18 CFR 292.307 if such purchase would contribute to the emergency;

            (ii) (b)  as stipulated agreed upon in the contract between the utility and the qualifying facility; or

            (iii) (c)  if, due to operational circumstances, purchases from a qualifying facility will result in costs greater than those which the utility would incur if it did not make such purchases. This provision is only applicable in the case of light loading periods in which the utility must cut back base load generation in order to purchase the qualifying facility's production followed by an immediate need to utilize less efficient generating capacity to meet a sudden high peak. Any utility seeking to invoke this exception must notify each affected qualifying facility and the commission one month prior to the time it intends to invoke this provision. Failure to properly notify the qualifying facilities and the commission or incorrect identification of such a period will result in reimbursement to the qualifying facility by the utility in an amount equal to that amount due had the qualifying facility's production been purchased. as allowed in 18 CFR 292.304(f), but only if the qualifying facility is selling its output on an as-available basis.

            (2) Except as provided in ARM 38.5.1903(1) this rule, each utility shall purchase any energy and capacity made available by a qualifying facility at the rate established under ARM 38.5.1905:.

            (a) At a standard rate for such purchases which is based on avoided costs to the utility as determined by the commission; or

            (b) If the qualifying facility agrees, at a rate which is a negotiated term of the contract between the utility and the facility and not to exceed avoided cost to the utility. However, the utility shall offer long-term contracts with qualifying facilities which permit a rate higher than avoided costs in the early years of the contract and a lower rate in the latter years.

            (3) Each utility shall sell to any qualifying facility all electricity requested by the facility.

            (4) Each utility shall make such interconnections with a qualifying facility in accordance with the provisions of ARM 38.5.1904.

            (5) Each electric utility shall offer to operate in parallel with a each qualifying facility provided that the qualifying facility complies with any applicable standards established by the Commission, as required by 18 CFR 292.303(e). the option of:

            (a)  operating in parallel with the utility grid, with a single meter monitoring only the net amount of electricity purchased or sold, or

            (b) operating in a simultaneous purchase and sale arrangement with separate meters whereby all power produced by the qualifying facility is sold to the utility at the standard or negotiated purchase rate and all power used by the facility is sold to the facility by the utility at the tariff rate; provided that the requirements of ARM 38.5.1907 are met by the qualifying facility.

            (6) Consistent with 18 CFR 292.303(d), Aany utility which is otherwise obligated to purchase energy or capacity from a qualifying facility may, if the affected qualifying facility agrees, transmit energy or capacity purchased from the facility to any other electric utility. Any electric utility subject to the Commission's jurisdiction that receives this energy or capacity shall be subject to the pricing provisions contained in these rules. The cost of transmission may be assigned to the qualifying facility. The rate for purchase by the electric utility to which such energy is transmitted shall be adjusted up or down to reflect line losses and shall not include any charges for transmission.

            (7) Each utility shall, if required by the Commission, include installation and performance incentive provisions in any contract with a qualifying facility. Such provisions shall offer a maximum dollar amount per kw per month for any month in which the facility's energy output meets or exceeds specified levels of performance.

            (8) Each utility shall, upon initial contact with a potential qualifying facility, provide the potential qualifying facility with one copy of:

            (a) these rules,;

            (b) the commission's if it appears the qualifying facility is eligible for the utility's Commission-approved standard provisions rate tariff, a copy of that tariff and any applicable Commission-approved power purchase agreement; and

            (c) if the utility's Commission-approved standard rate tariff is not provided under (8)(b): the commission's standard complaint procedure.

            (i) a list of all information required to provide an initial calculation of avoided costs pursuant to ARM 38.5.1910; and

            (ii) upon the request of the qualifying facility and the receipt of all required information, an initial calculation of avoided costs pursuant to ARM 38.5.1910;

            (d) the Commission's standard complaint procedure; and

            (e) the utility's Commission-approved standard power purchase agreement, as applicable.

 

AUTH: 69-3-103, MCA

IMP: 69-3-102, MCA

 

            38.5.1904 OBLIGATIONS OF QUALIFYING FACILITIES TO UTILITIES

            (1) A qualifying facility shall specify in its contract with a utility the nature of the purchases undertaken in the contract, including:

            (a) The technology used in the production of energy or capacity by the qualifying facility;

            (b) The qualifying facility's best estimate of the facility's energy and/or capacity supply characteristics, including its dispatchability and availability during utility system daily and seasonal peak periods and during system emergencies.

            (2) A qualifying facility that sells all of its generation to the interconnecting utility shall be fully responsible for interconnection costs and shall:

            (a) Submit, for written approval prior to actual installation equipment specifications and detailed plans to the utility for the installation of its interconnection facilities, control and protective devices, and facilities to accommodate utility meter(s).

            (b) Provide and install necessary meter socket and enclosure equipment at or near the point of interconnection, unless the utility has agreed to install the equipment and the facility has agreed to pay for this service; and

            (c) Fund or Rreimburse the utility for special or additional interconnection facilities, including control or protective devices, time of delivery metering, and reinforcement of the utility's system to receive or continue to receive the power delivered under the contract interconnection costs, as defined in 18 CFR 292.101(b)(7). Such reimbursement may be accomplished by means of amortization over a reasonable period of time within the term of the contract and such costs must be reasonable according to industry standards.

            (3) Interconnection costs undertaken by the utility shall be reimbursed by the qualifying facility on a nondiscriminatory basis with respect to other customers with similar load characteristics.

            (4) A qualifying facility shall be required to provide power to a utility during a system emergency only to the extent specified in the contract between the facility and the utility, unless the qualifying facility is able to supply additional power and agrees to do so.

 

AUTH: 69-3-103, MCA

IMP: 69-3-102, MCA

 

            38.5.1905 RATES FOR PURCHASES (1) Each utility shall submit to the commission within 30 days of the filing of its integrated least cost resource plan, or an update to that plan, as required by ARM 38.5.2001 - 38.5.2012, the following cost data for use by the commission in determining avoided costs and standard rates therefrom.

            (a) The estimated avoided cost on the electric utility's system, solely with respect to the energy component, for various levels of purchases from qualifying facilities. Such levels of purchases shall be stated in blocks of 10 megawatts and in blocks of 100 megawatts for systems with peak demand of 1000 megawatts or more, and in blocks of 10 megawatts and in blocks equivalent to 10 percent of the system peak demand for systems of less than 1000 megawatts. The avoided costs shall be stated on a cents per kilowatt-hour basis, during daily and seasonal peak and off-peak periods, by year, for the current calendar year and each of the next five years;

            (b) The electric utility's integrated least cost resource plan, developed with reference to the commission's guidelines in ARM 38.5.2001 - 38.5.2012, for the addition of capacity by amount and type, for purchases of firm energy and capacity, and for capacity retirements for each year during the succeeding ten years; and

            (c) The estimated capacity costs at completion of the planned capacity additions and planned capacity firm purchases, on the basis of dollars per kilowatt, and the associated energy costs of each unit, expressed in cents per kilowatt hour. These costs shall be expressed in terms of individual generating units and of individual planned firm purchases and shall represent the avoidable resources in the utility's integrated least cost resource plan developed according to the commission's guidelines, ARM 38.5.2001 - 38.5.2012.

            (2) (1)  Each utility shall purchase available power from any qualifying facility at: either the standard rate determined by the commission to be appropriate for the utility, or at a rate which is a negotiated term of the contract between the utility and the qualifying facility.

            (a) the standard rate determined by the Commission to be appropriate for the utility;

            (b) the rate determined following a petition pursuant to 69-3-603, MCA; or

            (c) at the rate which is a negotiated term of the contract between the utility and the qualifying facility.

            (3) (2)  The rate paid by the utility for any purchase shall not exceed the utility's avoided costs. to the utility, calculated:  Avoided costs will be calculated as provided in this rule, unless the utility and the qualifying facility agree upon a different rate.

            (i)  At the time of delivery of the facility's energy or capacity, for "as available" purchases; or

            (ii) At either the time of delivery or the time the obligation is incurred, at the facility's option, for purchases of firm power over the term of the contract.

            (a)  For as-available purchases, the avoided cost of energy and capacity will be calculated at the time of delivery of the facility's energy or capacity.

            (b)  For purchases subject to an established legally enforceable obligation, the avoided cost of capacity will be calculated at the time the legally enforceable obligation was formed, and the avoided cost of energy will be calculated at the time of delivery of the facility's energy.

            (3) When required by FERC regulation and to the extent practicable, the Commission's determination of avoided costs will take into account the factors described in 18 CFR 292.304(e).

            (4) The standard rate for purchases from a qualifying facility shall be that rate calculated on the basis of avoided costs to the utility which is determined by the commission to be appropriate for the particular utility after consideration, to the extent practicable, of the avoided cost data submitted to the commission by the utility and other interested persons.

            (5) Assignment of a particular qualifying facility to the appropriate standard rate schedule for purchases by the utility should consider:

            (a) The availability of capacity and energy from the qualifying facility during system daily and seasonal peak periods;

            (b) The expected or demonstrated reliability of the qualifying facility;

            (c) The relationship of the availability of energy or capacity from the qualifying facility to the ability of the utility to avoid cost;

            (d) The contractual obligations the owner or operator of the qualifying facility is willing to undertake.

            (e) The full range of resource attributes listed in the commission's integrated least cost resource planning and acquisition guidelines, ARM 38.5.2001 - 38.5.2012.

            (6) (4)  If a qualifying facility has provided in its contract with a utility that measurement of facility energy input to the utility system and measurement of facility load will be accomplished with one meter, the utility shall pay the purchase rate only for the qualifying facility shall be subject to a net billing system, whereby the utility shall pay the standard rate or the negotiated rate for purchases only for the facility's input to the system which is in excess of the facility's load.

            (7) (5)  If the qualifying facility has agreed in its contract with a utility that measurement of facility input to the utility system shall be accomplished by metering separate from that measuring the facility load, the qualifying facility may receive payment for all of the energy it supplies to the utility according to the applicable schedule of standard rates for purchases. Unless the qualifying facility has contracted for a different rate, the standard rate is applicable regardless of whether the qualifying facility is simultaneously served by the utility for the facility's load, and regardless of the rate charged by the utility for such simultaneous sales. 

 

AUTH: 69-3-103, MCA

IMP:  69-3-102, MCA

 

            38.5.1907 OPERATING SAFETY PROVISIONS (1)  The commission hereby adopts and incorporates by reference commission rule ARM 38.5.1010, which adopts the National Electrical Safety Code as the construction standard for utility lines and facilities.

            (2) (1)  Each qualifying facility shall, in the design, installation, interconnection, maintenance, and operation of the facility, comply with the requirements of the National Electrical Safety Code, as incorporated by reference in ARM 38.5.1010.

            (3) (2) Each qualifying facility seeking parallel operation with any utility shall provide such control and protective devices as required by the utility for such operation.

            (4) (3)  Each utility shall have the right:

            (a) To enter the premises of the qualifying facility at reasonable times and with reasonable notice for inspection of the facility's protective devices,; and

            (b) To disconnect without notice if a hazardous condition exists in the generation or other equipment of the qualifying facility, and such immediate action is necessary to protect persons, utility facilities or other customers' facilities from damage or interference imminently likely to result from the hazardous condition.

            (5) (4)  The Commission shall have the same power to investigate accidents occurring in the operation of any qualifying facility which result in death or serious injury to any person as it has under section 69-3-107, MCA, with respect to public utilities.

 

AUTH: 69-3-103, MCA

IMP: 69-3-102, MCA

 

            38.5.1908 INFORMATION TO BE PROVIDED TO THE COMMISSION

            (1) Pursuant to initial contact with a potential qualifying facility, each utility shall provide the Commission with one (1) electronic copy of the utility's initial written response.

            (2)  No later than July 1 of each even-numbered year, each utility shall file with the Commission the following cost data:

            (a)  the estimated avoided cost of energy as required by 18 CFR 292.302(b)(1);

            (b)  the electric utility's latest resource plan, including any supplements, as required by 18 CFR 292.302(b)(2); and

            (c)  the estimated capacity costs as required by 18 CFR 292.302(b)(3).  These costs shall represent the avoidable resources in the utility's resource plan.

 

AUTH: 69-3-103, MCA

IMP: 69-3-102, MCA

 

38.5.1909 CREATION OF A LEGALLY ENFORCEABLE OBLIGATION 

(1) A legally enforceable obligation is created when: a qualifying facility has demonstrated, based on objective and reasonable criteria, commercial viability and a financial commitment to construct its facility. A qualifying facility has demonstrated commercial viability and a financial commitment when:

(a)  a qualifying facility has unilaterally signed and tendered a power purchase agreement to the purchasing utility with a price term equal to either:

(i)  the existing standard offer rate in accordance with the applicable standard tariff provisions as approved by the commission for qualifying facilities eligible for standard offer rates; or

(ii) a price term consistent with the purchasing utility's avoided costs, calculated within 14 days of the date the power purchase agreement is tendered, with specified beginning and ending dates for delivery of energy, capacity, or both to be purchased by the utility and provisions committing the qualifying facility to reimburse the purchasing utility for interconnection costs, pursuant to ARM 38.5.1901(2)(d) and 38.5.1904(2) and (3) for qualifying facilities not eligible for standard offer rates;

(b) a qualifying facility has obtained and provided to the purchasing utility written documents confirming control of the site for the length of the asserted legally enforceable obligation and permission to construct the qualifying facility that establish, at a minimum:

(i) proof of control of the site for the duration of the term of the power purchase agreement such as a lease or ownership interest in the real property;

(ii) proof of all required land use approvals and environmental permits necessary to construct and operate the facility; and

(iii)  permission to construct the qualifying facility as defined in ARM 38.5.1901(2)(f);

(c) a qualifying facility has submitted a completed generator interconnection request that either requested study for network resource interconnection service (NRIS) for facilities larger than 20 megawatts or requested an optional study equivalent to NRIS for facilities 20 megawatts and smaller; and

(d) a qualifying facility has undertaken one of the following additional steps towards interconnection:

(i) the qualifying facility has executed and returned a signed System Impact Study Agreement, with any required deposit, to the interconnecting utility and all technical data necessary to complete the System Impact Study Agreement;

(ii) for qualifying facilities requesting to interconnect under the Small Generator Interconnection Procedures (SGIP), 53 days have elapsed since the qualifying facility submitted the interconnection request and all of the following conditions exist: the interconnecting utility did not provide the qualifying facility a System Impact Study Agreement within 38 days of the qualifying facility's interconnection request; the qualifying facility has not waived the tariffed SGIP timeline; and the qualifying facility has satisfied applicable interconnection customer deadlines in the tariffed SGIP;

(iii)  for qualifying facilities requesting to interconnect under the Large Generator Interconnection Procedures (LGIP), 90 days have elapsed since the qualifying facility submitted a completed interconnection request with the interconnecting utility, and all of the following conditions exist: the qualifying facility has not been provided a System Impact Study Agreement within 60 days of the initial interconnection request; the qualifying facility has not waived the timeline associated with the work of the interconnecting utility associated with the LGIP process; and the qualifying facility has timely met its deadlines established in the LGIP; or

(iv) for qualifying facilities that have waived the deadlines pertaining to the work of the interconnecting utility associated either with the SGIP or LGIP process, the mutually agreed upon time period after which the qualifying facility was scheduled to execute and return a signed System Impact Study Agreement, with any required deposit, to the interconnecting utility and all technical data necessary to complete the System Impact Study, has elapsed.

            (a) It has obtained qualifying facility status from FERC pursuant to the certification procedures in 18 CFR part 292;

            (b)  It has provided to the utility the following:

            (i)  a description of the location of the project;

            (ii) an estimate of the energy production for the project, produced through industry-accepted engineering methods, that includes the kilowatt-hours or megawatt-hours to be produced by the qualifying facility for each month and year of the entire term of the qualifying facility's anticipated power purchase agreement;

            (iii) an interconnection application, including any application fees;

            (iv) a power purchase agreement executed by the qualifying facility; and

            (v) a deposit, paid in full, to cover the estimated costs for a system impact or facilities study;

            (c) It has taken meaningful steps to obtain site control adequate to commence construction of the project at the proposed location and operate the facility, throughout the term of the contract;

            (d) It has submitted applications, including filing fees, to obtain all necessary permits, licenses, and approvals necessary to construct and operate the facility, and has provided copies of the same to the utility; and

            (e) If the qualifying facility seeks payment for an avoided cost of capacity, it has requested to be studied for interconnection as a network resource.

 

AUTH: 69-3-103, 69-3-604(5), MCA

IMP: 69-3-102, 69-3-604(5), MCA

 

38.5.1910 QUALIFYING FACILITY ACCESS TO AVOIDED COST DATA AND MODELING DATA  (1)  Upon a request from a qualifying facility, a utility shall provide reasonably transparent data concerning the utility's avoided cost. the information required by ARM 38.5.1908(2).

(2)  The utility must provide an initial avoided cost calculation within 21 days of receipt of a qualifying facility's resource information, including generating technology, size, location, and production profile, at no cost to the qualifying facility. In providing an initial avoided cost calculation to the qualifying facility, the utility must use the methodologies most recently approved by the commission for that utility and must provide the qualifying facility with all assumptions and inputs used to make the avoided cost calculation.

(3) If a utility uses a proprietary modeling software to calculate its avoided cost, the utility must allow a qualifying facility, upon request, to conduct one avoided cost calculation using the utility modeling software with the qualifying facility's own assumptions and inputs at no cost to the qualifying facility.  The utility must make dashboard access to its modeling software accessible to the qualifying facility within 21 days of the qualifying facility's request to conduct an alternative avoided cost calculation. The qualifying facility must have access to the modeling software for 21 days after the utility makes it available to the qualifying facility to conduct an alternative avoided cost calculation.  A utility must accommodate reasonable requests by a qualifying facility to conduct additional avoided cost calculations using the utility's modeling software and may charge the qualifying facility a reasonable price for use of the modeling software beyond the single avoided cost calculation identified in this subsection.

(4) Pursuant to 69-3-206 and 69-3-209, MCA, a qualifying facility may petition the commission for fines against a utility for failure to adhere to this rule.

(3) Upon a request from a qualifying facility, the utility must provide all data, inputs, and assumptions it will use to calculate avoided costs. The utility must provide additional data and information that the qualifying facility may reasonably request to calculate avoided costs with the qualifying facility's preferred methodology.

(4) If any party uses a proprietary model to calculate avoided costs, the following rules apply:

(a) Each party may request one calculation using another party's model with customized inputs and assumptions, at no cost to the requesting party. The responding party must make the results accessible to the requesting party within 21 days of the request. The requesting party must have adequate access to the model to verify that the customized inputs and assumptions were used. Such access must be provided for at least 21 days.

(b) Each party must accommodate reasonable requests to conduct additional avoided cost calculations using the party's proprietary model and may charge the requesting party a reasonable price for the use of the model beyond the single avoided cost calculation identified in (4)(a).

(c) Nothing in this rule shall require a party that uses proprietary modeling software to provide copies of proprietary modeling software or source code to the requesting party.

(5)  Any party may seek sanctions for failure to adhere to this rule, including fines pursuant to 69-3-206 and 69-3-209, MCA, as applicable.

 

AUTH: 69-3-103, 69-3-604(5), MCA

IMP: 69-3-102, 69-3-604(5), MCA

 

REASON:  Consistent with its obligations under 2-4-314, MCA, the Commission has reviewed its existing rules implementing PURPA, determined that they are out of date in several ways, and proposes to update and modernize those rules with the revisions shown above.  Further, the Commission has an obligation under PURPA to incorporate rules adopted by the Federal Energy Regulatory Commission (FERC), and several of the Commission's rules do not reflect current FERC rules.

 

The Commission proposes to update the definitions in ARM 38.5.1901 to reflect the current definitions provided in the PURPA rules adopted by the FERC.  Several of the Commission's current definitions do not match FERC's definitions, and revisions are required to comply with PURPA.  To simplify future revisions that may be required to match FERC's definitions, the Commission proposes to refer directly to the relevant FERC regulation, rather than repeating FERC's definition.  The Commission proposes to add a definition of "resource plan" to clarify references to such plans in other PURPA rules.  The Commission proposes to incorporate the 3-megawatt size limit for standard rates in the definition of standard rates, so the size limit does not need to be repeated when standard rates are discussed in other rules.  The Commission further proposes to include a new (2) to refer readers to the cited federal regulations online.

 

The Commission proposes to amend ARM 38.5.1902 to move the incorporation of federal rules to its own rule, New Rule I, for clarity and ease of incorporating future amendments.  Section (1) of the current rule is therefore redundant and is deleted.  Section (2) of the current rule needlessly repeats the standards for certification of a qualifying facility, which are already established in federal regulations.  The Commission proposes to simplify the language in (2) of the current rule with the new, proposed (1).  The renumbered (4) of the proposed rule is revised to specifically address standard rates for larger qualifying facilities that do not qualify for standard rates, as that term is defined in the proposed revisions to ARM 38.5.1901.  The proposal requires qualifying facilities and utilities to attempt to negotiate an agreement before petitioning the Commission, which conforms with 69-3-603, MCA.  This change is also responsive to requests from qualifying facilities for a clearer negotiation requirement in Commission rules.  With the revisions that refocus (4) on larger qualifying facilities, the new (5) is necessary to provide guidance for small qualifying facilities, which are not permitted to petition the Commission for rates different from the Commission-approved standard rate under 69-3-603(3), MCA.  New (5) of the proposed rule also incorporates a request from qualifying facilities for a Commission-approved standard form power purchase agreement as a means of limiting potential issues that may arise in negotiations between small qualifying facilities and utilities. The Commission anticipates that there may need to be multiple versions of any standard form agreement to accommodate differences in technology.  The renumbered (6) of the proposed rule has been updated for clarity.  The renumbered (7) is updated to refer to the currently effective resource planning statutes, which the Legislature adopted in 2019.  Based on informal discussions with stakeholders, the Commission understands that the grandfather clause for existing qualifying facilities whose contracts expired prior to July 1, 2015, is no longer necessary, and is therefore deleted.

 

The Commission proposes to amend several sections of ARM 38.5.1903 to refer directly to federal regulations, as opposed to repeating the substance of those regulations in Commission rules.  The deletion in the renumbered (1)(c) repeats language from a federal regulation, and is replaced by a reference to that regulation.  The additional language "but only if the qualifying facility is selling its output on an as-available basis" mirrors FERC's interpretation of the federal regulation, as explained in Pioneer Wind I, LLC, 145 FERC ¶ 61,215 (Dec. 15, 2013).  The Commission interprets this rule and the Pioneer Wind I, LLC decision to apply to situations when a utility may curtail a qualifying facility without compensation, and not to situations of compensated curtailment. Revisions to (2) are proposed to move all requirements relating to the rate for purchases to a standalone rule, ARM 38.5.1905.  This revision improves organization and clarity, and will simplify any future changes to the standards for purchase rates.  Section (5) is revised to refer to the relevant federal regulation, rather than repeating its terms.  Section (6) is revised to reflect current federal regulation.  Qualifying facilities have requested that this standard remain in the Commission's rules, even though it also exists in the cited federal rule.  Recognizing that the information needs of a qualifying facility may vary depending on its size and technical configuration, the Commission proposes to revise (8) to provide greater clarity about the information that must be shared between the utility and the qualifying facility upon initial contact. The new requirements are tailored first to the size of the qualifying facility, and then to the qualifying facilities' generation characteristics.  The Commission intends for this rule to avoid early conflicts regarding information disclosure.

 

The Commission proposes to amend ARM 38.5.1904 for clarity and to incorporate.  Revisions to (1)(b) are necessary to reflect developments in storage technology that make dispatchability of a qualifying facility an important consideration in calculating avoided costs.  Revisions to (2) are necessary to limit the scope of the part to only those qualifying facilities that sell all of their generation to the interconnecting utility, and therefore fall within the Commission's jurisdiction.  Subsection (2)(c) is revised to refer directly to FERC's definition of interconnection costs that can be allocated to qualifying facilities pursuant to 18 CFR 292.306. This change recognizes the recent Montana Supreme Court opinion in CED Wheatland Wind, LLC v. Mont. Dep't of Pub. Serv. Regul., 2022 MT 87, 408 Mont. 268, 509 P.3d 19, which interpreted the definition of interconnection costs.  To the extent the current language of (2)(c) could be read to conflict with CED Wheatland Wind, it is necessary to revise the rule. The Commission proposes to avoid conflict with FERC's definition of interconnection costs by referring to it directly.

 

The Commission proposes to amend ARM 38.5.1905 to move each utility's obligation to provide avoided cost estimates to ARM 38.5.1908, which discusses information that must be provided to the Commission.  This revision improves organization and provides greater clarity regarding reporting requirements. With the Commission's proposed revisions to ARM 38.5.1905, (1) of the current rule is redundant and can be deleted.  The remainder of ARM 38.5.1905 focuses on the purchase rate for qualifying facilities' power. The proposed new (1) outlines the three ways in which the purchase rate may be set.  Section (2) of the proposed rule is divided into two subsections, the first of which addresses circumstances in which the qualifying facility agrees to provide energy and capacity on an "as available" basis.  Subsection (2)(b) of the proposed rule implements recent revisions to 18 CFR 292.304, which allows rates to be based on either the avoided costs calculated at the time of delivery or the time the obligation is incurred. FERC has given states the flexibility to require variable energy rates in long-term contracts or other legally enforceable obligations. As FERC explained in its order allowing variable energy rates, the practice of forecasting prices has produced prices that are inaccurate.  In some cases, forecasting error led to overpayments from utility customers to qualifying facilities. Additionally, FERC found that independent power development no longer relies on a fixed energy price to obtain financial backing from investors and lenders. Because forecasting error in either direction creates rates that fail to reflect the utility's avoided costs, and because variable energy prices are becoming increasingly common in the energy industry, the Commission proposes to eliminate forecasting from the calculation of avoided energy costs.  Instead, avoided energy costs would be calculated at the time a qualifying facility's energy is delivered. This proposal has the added benefit of eliminating a significant number of contested issues associated with avoided energy forecasts, which should encourage development by substantially simplifying contested case proceedings. Section (3) of the proposed rule implements FERC's revisions to the factors states must consider when setting rates, which are outlined in 18 CFR 292.304.  Because the proposed rule refers directly to those factors in the federal regulation, they no longer need to be repeated in (4) and (5) of the current rule.  The renumbered (4) of the proposed rule is revised to simplify the concept billing based on a single meter that displays net input into the utility's system.

 

The Commission proposes to amend ARM 38.5.1907 to remove the current rule's incorporation of the National Electrical Safety Code by reference.  The Commission has a separate rule that incorporates the National Electrical Safety Code.  The Commission proposes to refer to that rule instead of incorporating the material in two places.

 

The Commission proposes to amend ARM 38.5.1908 to clarify that utilities may provide copies of their initial responses to qualifying facilities in an electronic format.  This is consistent with other Commission rules that have moved to electronic filing. The Commission proposes to consolidate informational filing requirements that appeared in other rules under ARM 38.5.1908, as shown in the proposed new (2).  Rather than repeating the filing requirements set in federal regulations, the Commission proposes to refer directly to the requirements as they appear in federal regulations.  The second sentence in (2)(c) clarifies that the estimated capacity costs filed under the rule will be considered the avoidable resources in the utility's resource plan. The Commission intends for this clarification to reduce disputes over identifying the utility's avoided capacity resources.

 

The Commission proposes to amend ARM 38.5.1909 to reflect both recent Montana Supreme Court decisions concerning legally enforceable obligations (LEOs) under PURPA and revisions to FERC's rules.  FERC has explained that LEO formation requires a qualifying facility to demonstrate commercial viability and a financial commitment.  FERC has further explained that the factors for evaluating viability and commitment should be within the control of the qualifying facility and should not be dependent upon a third-party's actions. The Commission's proposed rule focuses on the qualifying facility's actions alone.  The factors outlined in the Commission's proposed rule include several of FERC's examples of acceptable criteria for evaluating LEO formation.  Other factors are based on the Commission's existing LEO factors, but have been redesigned to depend on the qualifying facility's actions alone. The new factor in (1)(e) recognizes that network resources have firm transmission rights, which allow the parties and the Commission to calculate an avoided cost of capacity. If, however, the qualifying facility chooses to forgo a capacity payment, it will not need to be designated as a network resource, and (1)(e) will not apply.

 

The Commission proposes to amend ARM 38.5.1910 to remove ambiguity about what constitutes "reasonably transparent data" concerning avoided cost calculations.  The proposed revisions require utilities to provide qualifying facilities with all information the utility must to file with the Commission under ARM 38.5.1908.  Under the proposed (3), utilities must also provide all data, inputs, and assumptions they will use in calculating avoided costs in responding to the qualifying facility. The Commission anticipates that these requirements will provide complete information to qualifying facilities; however, if a qualifying facility reasonably requires additional information to calculate avoided costs with a different method, (3) requires utilities to make additional data and information available. The proposed (4) extends the existing rule regarding the use of proprietary models to apply to any party that proposes to use a proprietary model. As currently drafted, ARM 38.5.1910 only addresses a utility's use of proprietary modeling. The Commission anticipates that other parties may propose to use different proprietary models in the future. Finally, to address issues with trade secrets and confidentiality, the proposed rule expressly does not require the production of software or source code. Without this limitation, the Commission is concerned that the use of proprietary models would become too burdensome or impractical. The Commission notes, however, that its rule does not alter parties' rights and responsibilities under the Montana Rules of Evidence.  The Commission may order a party to disclose or produce information beyond what is required by this rule in response to an appropriate motion.

 

5.  Interested 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:  Department of Public Service Regulation, 1701 Prospect Avenue, P.O. Box 202601, Helena, Montana  59620-2601; telephone (406) 444-6199; fax (406) 444-7618; or e-mail [email protected].  Comments must be received no later than 5:00 p.m., September 2, 2022.

 

6. The Montana Consumer Counsel, 111 North Last Chance Gulch, Suite 1B, Helena, MT 59620-1703, telephone (406) 444-2771, is available and may be contacted to represent consumer interests in this matter.

 

7. The Commission, a commissioner, or a duly appointed presiding officer will preside over and conduct the hearing.

 

8. 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 5 above or may be made by completing a request form at any rules hearing held by the department.

 

9. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sosmt.gov/ARM/Register.  

 

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

 

11. With regard to the requirements of 2-4-111, MCA, the department has determined that the adoption and amendment of the above-referenced rules will not significantly and directly impact small businesses.

 

 

 

/s/ LUCAS HAMILTON                               /s/ JAMES BROWN                       

Lucas Hamilton                                           President James Brown

Rule Reviewer                                             Montana Public Service Commission

                                                                     Department of Public Service Regulation

           

Certified to the Secretary of State July 26, 2022.