FERC Rules That RSA 362-H is Preempted by Federal Law

The Federal Energy Regulatory Commission (“FERC”) recently ruled that a statute requiring New Hampshire electric distribution companies to solicit power purchase proposals from certain wood-burning generating facilities is preempted by federal law.   RSA 362-H was enacted in 2018 after the legislature overrode Governor Sununu’s veto of Senate Bill 365.  The statute requires New Hampshire electric distribution utilities to offer to purchase power from certain biomass and waste facilities at the rate of 80% of the retail default energy rate.  The facilities’ responses to the purchase offers must conform to statutory requirements such as a proposed schedule of hourly net output amounts and other information as needed by the electric distribution company for evaluating the sellers’ bids.  The electric distribution companies must submit contracts with eligible facilities to the New Hampshire Public Utilities Commission (“PUC”) for review.

In December of 2018, Eversource sought PUC review of proposals from five wood-fired generating plants for energy purchases under RSA 362-H.  However, Eversource did not enter into formal agreements with the facilities.  Eversource said it would not make the purchases under RSA 362-H unless ordered to do so by the PUC, arguing that the facilities should not be paid the “80% of retail” rate set by RSA 362-H.  Eversource asserted that the retail-based rate set by RSA 362-H conflicted with federal law which set the rate for Eversource’s wholesale purchases from the eligible facilities at Eversource’s “avoided cost”, i.e. the cost that Eversource would otherwise avoid by generating or purchasing power itself.   The PUC declined to order Eversource to purchase power from the wood-fired generators citing, among other things, the lack of signed agreements between Eversource and the generators.  The PUC also abstained from ruling on the federal preemption issue which was pending at FERC.

The wood-fired generators appealed the PUC’s decision to the New Hampshire Supreme Court but withdrew their appeal shortly after FERC ruled that RSA 362-H is preempted by the Federal Power Act (“FPA”) and the Public Utility Regulatory Policies Act of 1978 (“PURPA”).  FERC’s ruling was issued in response to a petition filed by the New England Ratepayers Association (“NERA”) which was supported by the New Hampshire Office of Consumer Advocate and Electric Power Supply Association.  The State of New Hampshire and New Hampshire Generator Group (comprised of the five wood-fired generators that submitted proposals to Eversource under RSA 362-H) filed comments with FERC opposing NERA’s petition.

Because the generators have previously characterized FERC’s declaratory rulings as “advisory”, it is possible that the generators could pursue enforcement of RSA 362-H at the PUC or in the courts, or seek legislation that does not conflict with federal law.

About the Author: Susan Geiger

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