CED Wheatland Wind, LLC v. Mont. Dep't of Pub. Serv. Regulation

Decision Date10 May 2022
Docket NumberDA 21-0250
Citation408 Mont. 268,509 P.3d 19
Parties CED WHEATLAND WIND, LLC, Petitioner and Appellant, v. The MONTANA DEPARTMENT OF PUBLIC SERVICE REGULATION, Montana Public Service Commission and NorthWestern Corporation d/b/a NorthWestern Energy, Respondents and Appellees. CED Teton County Wind, LLC, and CED Pondera Wind, LLC, Petitioners and Appellants, v. The Montana Department of Public Service Regulation, Montana Public Service Commission and NorthWestern Corporation d/b/a NorthWestern Energy, Respondent and Appellees, and The Montana Consumer Counsel, Respondent-Intervenor and Appellee.
CourtMontana Supreme Court

For Appellants: Michael J. Uda, Anna M. Kecskes, Colson R. Williams, Lowell J. Chandler, Uda Law Firm, P.C., Helena, Montana

For Appellees: Benjamin J. Alke, Crist, Krogh, Alke & Nord, PLLC, Billings, Montana (for NorthWestern Energy) Sarah N. Norcott, NorthWestern Energy, Helena, Montana, Clark Robert Hensley, NorthWestern Energy, Missoula, Montana, Jason Brown, Montana Consumer Counsel, Helena, Montana, Ben W. Reed, Lucas R. Hamilton, Aimee Hawkaluk, Public Service Commission, Helena, Montana

Justice Laurie McKinnon delivered the Opinion of the Court.

¶1 CED Wheatland Wind, CED Teton County Wind, and CED Pondera Wind—three wholly owned subsidiaries of Consolidated Edison Development ("CED")—appeal the April 19, 2021, Order on Petitions for Judicial Review issued by the First Judicial District Court, Lewis and Clark County, which partially affirmed and partially reversed two earlier Orders on Reconsideration issued by the Montana Public Service Commission ("The Commission"). The Commission's orders set the terms and conditions for three CED wind farm projects that were to be undertaken with NorthWestern Energy Corporation ("NorthWestern"). On appeal, CED raises four issues, which we restate as follows:

1. Whether the District Court erred in upholding the Commission's determination that CED's three qualifying facilities were responsible for bearing the network upgrade costs required to upgrade NorthWestern's transmission system for each of the three QFs.
2. Whether the District Court properly upheld the Commission's decision to calculate avoided energy costs using a proxy model.
3. Whether the District Court properly upheld the Commission's decision to calculate ancillary service deductions based on NorthWestern's proposed rates.
4. Whether the District Court properly upheld the Commission's determination that 15-year contract lengths were appropriate for all three of CED's projects.

¶2 We affirm in part, reverse in part, and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 Under the Public Utility Regulatory Policies Act of 1978 ("PURPA"), public utility companies are required by federal law to purchase electricity generated by "qualifying ... facilit[ies]." 16 U.S.C. § 824a-3(a). NorthWestern, is a public utility company subject to 16 U.S.C. § 824a-3(a). CED Wheatland Wind, LLC, CED Teton County Wind, LLC, and CED Pondera Wind, LLC are self-certified qualifying facilities ("QFs") under PURPA, which grants them the right to sell energy and capacity to a public utility such as NorthWestern. In the absence of a formal contract between a public utility and a QF, the Federal Energy Regulatory Commission ("FERC") has stated—under its PURPA authority—that a QF can still sell power to a public utility in the event that a "Legally Enforceable Obligation" ("LEO") is found to exist between the parties. 18 C.F.R. § 292.304(d)(2).

¶4 Authority to enforce PURPA is also delegated, in part, to state regulatory agencies like the Commission, due to their localized knowledge and expertise. As a result, shortly after PURPA's passage, Montana enacted its own "Mini-PURPA" law, which provides that if a utility provider and a QF cannot agree on contractual terms, "[t]he [Montana Public Service] Commission shall determine the rates and conditions of the contract upon petition" from either party. Section 69-3-603(2)(a), MCA. CED filed petitions asking the Commission to determine its contract terms with NorthWestern for three projects: a proposed 75-megawatt ("MW") wind farm to be located in Wheatland County, Montana ("Wheatland facility"), a 19-MW wind farm to be located in Teton County, Montana ("Teton facility"), and a 20-MW wind farm to be located in Pondera County, Montana ("Pondera facility").1

¶5 Negotiations between CED and NorthWestern regarding power purchase agreements (PPAs) for each of the three facilities began in July 2018, September 2018, and May 2019 for the Teton, Wheatland, and Pondera facilities, respectively. As part of the negotiation process, CED requested that NorthWestern complete a Large Generation System Impact Study ("LGSIS") analyzing the potential impact of each facility on NorthWestern's system. Relating specifically to the Wheatland facility, NorthWestern studied the project as both Network Resource Interconnection Service ("NRIS") and Energy Resource Interconnection Service ("ERIS"). The LGSIS identified "no additional upgrades beyond the [point of interconnection]" necessary to interconnect through ERIS. However, under NRIS, the LGSIS indicated the Wheatland facility would cause overloads to NorthWestern's system and identified the corresponding need for a new 230 kilovolt (kV) transmission line to accommodate the increased generation. The LGSIS provided interconnection cost estimates of approximately $6 million for ERIS and $128 million for NRIS, subject to change. CED elected to interconnect through NRIS. The record indicates CED was aware of the estimated costs for ERIS and NRIS and apparently did not dispute the initial estimates or its responsibility for some of those costs.

¶6 In mid-2019, PPA negotiations for all three facilities stalled. On September 16, 2019, CED filed two separate "Petition[s] to Set Terms and Conditions for a Qualifying Small Power Production Facility Pursuant to [ ] § 69-3-603[, MCA,]" before the Commission for CED's Teton and Pondera facilities. Later, on October 4, 2019, CED filed a third petition with the Commission to set the terms for CED's Wheatland facility ("Wheatland matter"). On October 25, 2019, the Commission consolidated CED's Teton petition and Pondera petition into a single case before the agency ("Teton-Pondera matter"). The Intervenor in the present matter—the Montana Consumer Counsel (MCC)2 —first intervened in both the Teton-Pondera and Wheatland matters before the Commission.

¶7 The Commission held evidentiary hearings in the Teton-Pondera matter from January 22-24, 2020, and entered a Final Order on March 23, 2020 ("Teton-Pondera Final Order"). Both CED and NorthWestern filed motions with the Commission for reconsideration of this decision. On July 9, 2020, the Commission issued its Order on Reconsideration in the Teton-Pondera matter ("Teton-Pondera Reconsideration Order"), which affirmed most aspects of the original Teton-Pondera Final Order.

¶8 The Commission held evidentiary hearings in the Wheatland matter from February 10-11, 2020. The Commission issued a Final Order in this matter on April 22, 2020 ("Wheatland Final Order"). Once again, both CED and NorthWestern filed motions with the Commission for reconsideration of this decision. On July 13, 2020, the Commission issued its Order on Reconsideration in the Wheatland matter ("Wheatland Reconsideration Order"), which also affirmed most aspects of the original Wheatland Final Order.

¶9 CED's petitions before the Commission in the Teton-Pondera matter and the Wheatland matter both presented eight identical issues for review. The following four issues are pertinent to CED's appeal: whether CED or NorthWestern should financially bear the network upgrade costs for each of the three wind facility projects (Issue I); whether the proper methodology was used for calculating the avoided energy costs for each facility3 (Issue II); whether the proper methodology was used for calculating ancillary services deductions4 —which are deducted from the avoided energy costs for each facility (Issue III); and whether the contract length awarded for each facility was appropriate (Issue IV).

¶10 Under § 2-4-702, MCA (the provision of the Montana Administrative Procedure Act ("MAPA") permitting judicial review of agency decisions), CED petitioned the District Court for review of the Commission's Teton-Pondera Reconsideration Order and the Commission's Wheatland Reconsideration Order. CED's petitions requested the District Court's review of the Commission's decisions on all eight issues presented to the Commission. The District Court consolidated CED's two petitions into a single appeal and heard oral argument on the matter. On April 19, 2021, the District Court issued its "Order on [the] Petitions for Judicial Review" (District Court's Order). The District Court affirmed the Commission's decisions on six of the eight issues raised, including the Commission's decisions on Issues I through IV. CED appeals the District Court's Order upholding the Commission's rulings on Issues I through IV.

¶11 Additional facts are set forth within the relevant issues as necessary.

STANDARDS OF REVIEW

¶12 MAPA provides the standards of review governing appeals of administrative agency decisions in a contested case. Section 2-4-704, MCA. In administrative appeals, this Court applies the same standards of review as a district court. McGree Corp. v. Mont. Pub. Serv. Comm. , 2019 MT 75, ¶ 6, 395 Mont. 229, 438 P.3d 326 (citing NorthWestern Corp. v. Mont. Dep't of Pub. Serv. , 2016 MT 239, ¶ 25, 385 Mont. 33, 380 P.3d 787 ). This Court reviews an administrative decision in a contested case to determine whether the agency's findings of fact are clearly erroneous and whether its interpretation of law is correct. MTSUN , ¶ 51 (citing Whitehall Wind, LLC v. Mont. Pub. Serv. Comm. , 2010 MT 2, ¶ 15, 355 Mont. 15, 223 P.3d 907 ). Our review "must be confined to the record." Section...

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