Update on Oregon: Pilot Solar FIT Hits Some Speedbumps

OREGON – As required by a July 2009 bill (HB 3039), the Public Utility Commission of Oregon initiated a rulemaking (AR 538) and issued draft rules in November 2009 for the implementation of a Volumetric Incentive Rate Pilot Program (i.e. a pilot feed-in tariff).  The legislation mandated that this program would offer 15-year standard contracts to utility customers with solar generation facilities, in which solar owners would sell their renewable energy credits (RECs) to their utility. System owners could not accept incentives from the Energy Trust of Oregon or Oregon state residential or business tax credits in keeping with contract terms.  Legislation also required that the aggregate capacity of the qualifying systems enrolled in all of the pilot programs may not exceed 25 MW. In December 2009, however, PUC Staff requested a delay in the rulemaking due to a conflict with the Federal Power Act, which confers jurisdiction to FERC rather than states, in setting wholesale electric rates.  In essence, the PUC staff noted that it did not have the legal authority to set rates above avoided cost, as the legislature had asked them to do. As a result of this came several competing proposals that are currently under consideration at the OPUC. 

On February 17, 2010, PUC Staff submitted a proposal that would essentially provide a net-metering-like option for systems sized 0-10 kW and 10-100 kW.  Instead of receiving a retail rate, these customers would receive an incentive payment for 100% of the kWhs produced, up to their monthly onsite usage.  Excess kilowatt-hours would be rolled over and banked for future usage.  Different rates would be paid for the two tiers of system sizes.  The proposal includes a bid process for systems sized 100-500 kW that would pay a volumetric incentive, up to a set price ceiling. Staff’s proposal also includes a MW allotment for different system sizes: 12 MW of the 25 should be reserved for small systems, 8 MW for medium and 5 MW for large scale systems.  This option, among other proposals on the table, diffuses the FERC-preemption issue by splitting up the incentive into an avoided-cost payment and a REC purchase.

Another proposal, put forth by solar developers, suggests both a bid and net-metering option for systems over 10 kW, while systems under that size would be offered only the net-metering option. Yet another removes the net-metering option entirely and would require the premium REC payment for 100% of electric generation from all systems.  While most proposals require the utility to directly contract with the utility customer for these contracts, one of these proposals suggests that the utility should also be able to contract directly with third-party providers.

The PUC was legislatively required to establish incentive rates by April 1, 2010 but due to the complexity surrounding the FERC issue, the new deadline for establishing rates has been moved to July 1, 2010.  Much more information is available on the OPUC’s Docket UM 1452 page.


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