By Arizona Corporation Commission
Commissioners on Tuesday finalized tariffs that include contract term lengths for Qualifying Facilities (QF) and their host utility companies, ending a period of uncertainty where contract terms were not defined. This decision allows capital investment into Arizona to build and scale QF generation. This decision paves the way for solar and other renewable projects to come into the state.
Commissioners Sandra Kennedy and Lea Marquez Peterson and offered a joint amendment, and fellow Commissioners voted to adopt, a contract term of 18 years. This decision also stipulates that utility companies must make regular reports as part of their Integrated Resource Planning process to the Commission outlining QF activity in their territories.
The Public Utility Regulatory Policies Act of 1978 (PURPA) defines a QF as a small power production facility or co-generation facility that has the right to be served by and sell to its host electric utility at the host utility’s avoided cost rate. A small power production facility is a generating facility of 80 MW or less whose primary source of energy is renewable. A co-generation facility is a generating facility that sequentially produces electricity and another form of useful thermal energy, such as heat or steam, in a way that is more efficient than the separate production of both forms; a co-generation facility typically uses oil, coal, or natural gas as a primary energy source.
Under the current PURPA Policy in Arizona, the contract term length is not defined in policy. Operators of Qualifying Facilities desired a 15-year fixed price contract with host utilities, arguing that longer term contracts allow for QF’s to attract and retain capital investments which take time, and that extended contract terms allow more stability. Arizona Public Service Company, Tucson Electric Power Company, and UNS Electric, Inc. all argued for 2-year contract terms, stating that shorter contracts are in the public interest as they can be reviewed more frequently to ensure accuracy and relevancy. Commissioners today approved 18-year contract terms.
All documents related to this agenda item can be found in the Corporation Commission’s online docket at https://edocket.azcc.gov and entering docket numbers E-01345A-16-0272 (APS), E-01933A-17-0360 (TEP), and E-04204A-18-0087 (UNS).