ELR Citation: 44 ELR 20202
No(s). 12-51228 (5th Cir. Sep 8, 2014)

The Fifth Circuit upheld a Texas Public Utilities Commission (PUC) rule that effectively prohibits a wind energy company from forming "legally enforceable obligations" when selling power to public utilities. The Public Utilities Regulatory Policies Act of 1978 (PURPA) seeks to promote the purchase of energy from renewable energy providers such as wind and solar generators. These energy providers are known as qualifying facilities. The PUC rule at issue only allows qualifying facilities that generate “firm power” to enter into mandatory long-term contracts, known as "legally enforceable obligations," with a utility. Consequently, only those qualifying facilities able to forecast when they will deliver energy to the utility—and capable of delivering the specified amount of energy at the scheduled time—may enter legally enforceable obligations. The company challenged the rule, claiming that PURPA and FERC regulations mandate that all qualifying facilities be able to create legally enforceable obligations at any time. But the court disagreed. PURPA gives states discretion in determining when a legally enforceable obligation is created, and PUC's rule therefore is entitled to deference. Here, PUC reasonably distinguished between qualifying facilities that can, and cannot, provide firm power. PURPA, among other things, requires that the rates utilities pay be "just and reasonable." Because mandatory long-term contracts between generators and utilities can burden customers by imposing prices well above the actual market prices, PUC made a reasonable decision that only those qualifying facilities capable of providing reliable and predictable power may enter into such arrangements.