Appellate judges reject Exelon’s bid to force Texas wind sales

Source: Hannah Northey, E&E reporter • Posted: Wednesday, September 10, 2014

A split federal appeals court panel ruled yesterday that Exelon Corp. cannot force a Texas utility to buy power from its wind farms.

In a 2-1 vote, judges on the New Orleans-based 5th U.S. Circuit Court of Appeals ruled that several units of Chicago-based Exelon cannot force a subsidiary of Xcel Energy Inc. — Southwestern Public Service Co. — to buy wind power under a 1970s law aimed at bolstering renewables.

The case stems from Exelon’s assertion in 2005 and 2006 that Southwestern was required under the Public Utility Regulatory Policies Act of 1978 to buy power from its wind farms.

Exelon had demanded that Southwestern purchase wind for 3.5 cents per kilowatt-hour up to 9 cents per kWh for the first nine years of a 20-year contract. But Southwestern argued that, because of the variable nature of wind, Exelon’s units could not provide “firm power” and it refused the terms of Exelon’s agreement.

Exelon later filed a complaint with the Texas Public Utility Commission, which found Exelon had not provided firm power and was not entitled to such an arrangement under PURPA — while leaving the door open for other wind generators, noting that some wind mills could employ storage or other energy sources in the future for more consistent output.

Exelon fought back, appealing the decision to a Texas district court in Travis County — a court that sided with Exelon and dismissed the state regulator’s conclusion that the power wasn’t firm enough.

But Judges Jennifer Walker Elrod and Jerry Edwin Smith yesterday dismissed that finding.

Elrod and Smith reversed the district court’s ruling, saying the Texas Public Utility Commission made a “reasonable” decision and the subsidiary of Xcel is not obligated to buy the company’s wind power under long-term PURPA agreements.

Elrod and Smith said state regulators have the discretion to determine “specific parameters for when a wind farm can form” such legally enforceable obligations. The judges noted that the state regulatory body left open the possibility that other wind farms could provide more firm service.

“If Exelon is able to demonstrate that it can provide firm power, either through modification or through advances in technology, then it too may enter into Legally Enforceable Obligations,” they wrote.

Judge Edward Prado disagreed with the majority’s decision regarding such critical federal programs aimed at promoting renewables.

“The majority rejects the considered view of the federal agency that authored the regulation in question and that enforces the program, based on nothing more than the state regulatory authority’s say-so,” Prado wrote. “In doing so, the majority contravenes established principles of interpretation and administrative law and disrupts the scheme that Congress intended.”