Solar panels (Credit: Shutterstock.com)

In a potentially significant win for green energy production projects in California and the Western U.S., a federal appeals court has found that a California Public Utilities Commission program for determining when to award electric power contracts to alternative generators is preempted by federal law.

A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit on Monday found that the CPUC's program was preempted by the federal Public Utility Regulatory Policies Act of 1978, which requires that electric utilities buy all power produced by alternative energy generators known as Qualifying Cogeneration Facilities, or QFs.

The Ninth Circuit panel agreed with a decision by U.S. District Judge James Donato of the Northern District of California, who found after a one-day bench trial in 2017 that the CPUC's program capped the amount of energy the state's utilities must purchase from alternative energy generators and set a market-based rate rather than one based on the utilities' avoided cost as required under federal law.

“Like the district court, we believe the conclusion to be drawn from this web of regulations is not complicated: California's Re-MAT program violates, and is therefore preempted by, PURPA,” wrote Judge M. Margaret McKeown in Monday's opinion.

Representatives of the CPUC didn't immediately respond to a request for comment Monday. Christine Jun Hammond, an in-house lawyer at the commission, argued the matter at the Ninth Circuit for the CPUC.

The decision is a win for Winding Creek Solar LLC, a company attempting to develop a one-megawatt solar generating facility in Lodi, California, which was represented by Eric Lee Christensen of Beveridge & Diamond. The Ninth Circuit decision, however, did leave standing Donato's ruling to not force Pacific Gas & Electric, a nonparty to the lawsuit, to enter into a contract with Winding Creek under the same CPUC program he'd found preempted.

“In what's otherwise an excellent opinion, it does defer the remedy once again,” said Christensen in a phone interview Monday. That decision, Christensen said, put it back in the hands of the CPUC to develop a program or a standard contract that would comply with PURPA and offer renewable energy projects a consistent, stable market price for their electricity, something needed to secure funding for projects.

“One way or the other, the program is going to look pretty significantly different from what the CPUC tried to defend in the Ninth Circuit,” Christensen said.

He added that although the win is significant for alternative providers in California, it could prove even more important in other Ninth Circuit venues outside the state. California, he noted, already has significant programs aimed at supporting alternative energy and explicit goals to cut back on carbon emissions.

“PURPA remains the really critical path for renewable energy projects” in other Ninth Circuit states, he said.