Item E-3: Commissioner James Danly Dissent Regarding Broadview Solar, LLC

Commissioner James Danly Statement
March 18, 2021
Docket No. QF17-454-006
Order:  E-3

Today’s order (Order) finds that Broadview Solar, LLC’s (Broadview) proposed 160 MW solar power facility has a power production capacity of only 80 MW.  This counterintuitive finding is contrary to both the plain language and the structure of the Public Utility Regulatory Policies Act of 1978 (PURPA).[1]   It is also inconsistent with the instructions for calculating power production capacity in Form 556, which under our regulations is required for self-certifications and certifications of qualifying facilities (QFs) under PURPA.[2]  Nor does this holding find any support in the Commission’s regulations or precedent.  I am therefore compelled to dissent in full.

I. The Facility’s Power Production Capacity is Well Above 80 MW When Determined by the Method Established by the Commission for Calculating Power Production Capacity

Section 201 of PURPA and section 204(a)(1) of the Commission’s implementing regulations limit the size of small power production QFs to a “power production capacity” of 80 MW.[3]  Therefore, the issue raised by Broadview’s QF certification application (Application) is whether Broadview’s proposed facility (Facility), comprised of 160 MW of solar panels and other equipment, would have a power production capacity greater than 80 MW. 

Form No. 556 specifies how an applicant should ordinarily calculate and report the power production capacity of its facility.  A project sponsor must report maximum gross power production capacity “at the terminals of the individual generators under the most favorable anticipated design conditions” (line 7a).  The project sponsor may then subtract parasitic station power used at the facility (line 7b), electrical losses in interconnection transformers (line 7c), electrical losses in AC/DC conversion equipment (line 7d), and other interconnection losses (line 7e) to yield the facility’s maximum net power production capacity (line 7g).

In its Application, Broadview stated that “the Facility will be comprised of a direct current (“dc”) coupled array of solar PV panels with a gross capacity of 160 MW (dc).”[4]  Broadview also stated that parasitic station power is 1,245 kW,[5] transformer AC electrical losses are 800 kW,[6] AC/DC conversion losses are 1,978 kW,[7] and other interconnection losses are 503 kW.[8]  The total in deductions from the 160 MW gross power production capacity of the Facility is 4.526 MW, which results in a net power production capacity of approximately 155.5 MW.  This is 75.5 MW above the statutory maximum allowable power production capacity for a QF. The Facility does not meet the statutory requirement to be a QF. 

The fact that Form 556 calculations show a 160 MW facility to have a net power production capacity considerably greater than 80 MW is not surprising.  However, after stating that the gross power production capacity of its solar facility is 160 MW of direct current (DC) energy, Broadview goes on to assert that “the maximum gross output of the Facility at its inverters will be approximately 82.5 MW(ac).”[9]  The reason for using this much lower number as the gross output of the Facility, according to Broadview, is that “[a]t their terminals, the solar PV panels and BESS connect to twenty 4.127 MW(dc) to alternating current (“ac”) inverters.”[10]  In other words, the Facility employs inverters to convert the DC energy produced by the solar panels into alternating current (AC) that is delivered to the interconnection.  The Facility only employs a sufficient number of inverters to convert the 82.5 MW of the 160 MW of DC produced by the Facility into AC.  Surplus DC energy produced by the solar panels is diverted to the Facility’s battery storage equipment where it is stored for later conversion and delivery to the interconnection.

However, Line 7a of Form 556, the line on which the gross power production capacity is reported, requires that filers provide “[t]he maximum gross power production capacity at the terminals of the individual generator(s) under the most favorable anticipated design conditions.”  (Emphasis added).  Broadview affirmatively states in its Application that the inverters are connected to the solar panels “[a]t their terminals.”[11]  Therefore the gross capacity of the Facility at “the terminals of the individual generator(s)” is 160 MW, and the gross conversion capacity of the inverters reported by Broadview is downstream of those terminals.  Form 556, which requires Broadview to report the gross power production capacity of its solar panels at their terminals, does not permit Broadview to report power production capacity measured downstream of the solar panels’ terminals.

Broadview also affirmatively states in its Application that, “when there is more dc power available from the solar array than can [be] converted to ac power by the inverters, that power is stored in the [battery storage system].”[12]  In other words, even when the Facility is producing 82.5 gross MW of AC, which is the maximum quantity of DC energy that can be converted by the inverters, the Facility is capable of producing additional energy that is diverted to the Facility’s batteries for later delivery to the interconnection.  It simply is not possible to conclude that the “gross” power production capacity of the Facility is only 82.5 MW, when the Facility can produce additional energy at the same time that 82.5 MW AC is being delivered to the interconnection and when the additional energy can later be converted to AC and delivered to the interconnection.

That should be the end of the story, as the Commission found in its original order issued on September 1, 2020.[13]  However, today, the Commission reverses its holding on rehearing, finding that the 160 MW Facility satisfies PURPA’s 80 MW power production capacity limit.  The Commission does not appear to disagree that application of the Form 556 methodology to Broadview’s Application would result in a calculated power production capacity well in excess of 80 MW.  However, the Commission dismisses Form 556 as a mere “data collection tool” and notes that Form 556 allows an applicant to “indicate if it ‘has special circumstances . . . that make the demonstration of compliance via this form difficult or impossible.’”[14] 

After disavowing the calculation required by Form 556, the Commission applies a new standard for determining power production capacity, namely “the whole facility’s net output to the electric utility, taking into account all components necessary to produce and provide electric energy in a form useful to an interconnected entity.”[15]  Not a single word of this long sentence (which for convenience I refer to as the “for-delivery-to-the-utility” standard) appears in the statute.[16]  The Commission goes on to find that Broadview’s Facility meets this new standard.[17]

I do not agree that Form 556 is simply a data collection tool, given its very specific instructions for calculating power production capacity and the importance the result has for a generator’s status as a QF.  Rather, Form 556 requires a certain approach to perform the calculation of power production capacity but permits deviations from that approach based on the special circumstances of a particular proposed project.  Here, however, Broadview did not claim any special circumstances, and I do not know how it could, given the fact that solar panel technology is well established and specifically referenced in Form 556.  Thus, the Facility is unlike the fuel cell systems referenced by the Commission, which in fact are a new technology not contemplated by Form 556.[18] 

Nevertheless, I concede that a Form 556 calculation would not be dispositive if a different result were compelled by PURPA or our regulations or precedent.  No such deviation is required here.  The Commission’s new for-delivery-to-the-utility standard is inconsistent with PURPA and finds no support in our regulations or our precedent.

II. PURPA Requires Consideration of Power Production Capacity, Not Delivery Capacity

PURPA’s 80 MW power production capacity limit appears in the statutory definition of a small power production facility, which is defined as a solar, wind, waste, or geothermal facility that, among other things, “has a power production capacity which, together with any other facilities located at the same site (as determined by the Commission), is not greater than 80 megawatts.”[19]  Notably absent from this statutory limit on the size of a small power production facility is any language stating, or even implying, that the facility producing the power also must be physically capable of delivering the power it produces to the purchasing utility in a useful form. 

The Commission justifies its new interpretation of the statutory language by asserting that the term “power production capacity” is ambiguous.[20]  But this claim is merely a stratagem to permit the introduction of a new standard that is inconsistent with the statute’s language.  In fact, there is no material ambiguity as to what “power production capacity” could mean.  “Power” in this context means energy, and there is nothing in the statutory text to suggest that it means only AC energy and not DC energy.  Power “production” unambiguously means the production of power, not the delivery of power.  And the “capacity” of a generation facility is generally understood to mean its installed capacity[21] or its maximum power production output.[22] 

The Commission nevertheless claims that the statutory language is ambiguous because “PURPA . . . neither defines the terms “facility” and “power production capacity,” nor explains how the Commission is supposed to ascertain the “power production capacity” of any particular “facility.”[23]  Of course, the lack of a further definition of an unambiguous term does not somehow render the term ambiguous.  Nor does the fact that the statutory term does not specify how the term should be applied to a particular facility create ambiguity when the term unambiguously says that the 80 MW limit should be based on power production capacity.

The Commission also suggests ambiguity in the statutory language because “the Commission could, as it has for nearly forty years, look to the maximum output that the facility can produce for the electric utility after accounting for all the constituent parts that make up the facility, which in this case includes the inverters.”[24]  As I explain below, the Commission’s attempt to fit its new for-delivery-to-the-utility standard into its past precedent strains that precedent beyond recognition.  But in any event, the Commission cannot create ambiguity as to the intent of Congress when it enacted in PURPA in 1978 based on the Commission’s desire to extend its past precedent to establish a new standard in 2021.

  Next, the Commission cites to my statement above that “the term ‘capacity’ is generally equated to ‘output.’”[25]  From this, the Commission asserts:

As applied to just the facility’s solar panels in this instance, output could be read to refer to the raw quantity of electricity generated.  But when applied to the facility as a whole, as PURPA requires, power sent from the solar panels to other internal components, rather than to the grid, cannot properly be considered the output of the facility.[26]

This assertion might carry some force if one were only to consider the word “output” in isolation, and if that word actually was in the statute (the statutory term is “capacity”).  But the Supreme Court has counseled against relying on the “hypertechnical reading” of a statutory provisions by reading them in isolation, and has held instead that statutory provisions should be read as a whole.[27]  Here, PURPA does not contain an 80 MW “capacity” limit, but an 80 MW “power production capacity” limit.  When the fact that Congress modified the word “capacity” by the words “power production” is considered, it is clear that the statute refers to the capacity of the facility to produce power, not to deliver power to the interconnection.  The Commission’s interpretation, derived from its hypertechnical focus on a single word that is not even present in the statute, is, as the Supreme Court held in Davis, “implausible at best.”[28]  This is not a case in which the Commission is grappling with an ambiguity, it is one where the ambiguity is (unconvincingly) manufactured in order to circumvent the plain language of the statute.

Having claimed that “power production capacity” is ambiguous, the Commission goes on to say that its interpretation “is further confirmed when we consider the terms ‘facility’ and ‘power production capacity’ in light of ‘their context and with a view to their place in the overall statutory scheme.’”[29]  For this proposition the Commission relies on the Supreme Court’s statement in Davis that “statutory language cannot be construed in a vacuum.  It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.”[30] 

Far be it for me to disagree with the Supreme Court’s declaration of a fundamental canon of statutory construction.  But as I explain above, in Davis, the Court was addressing a “hypertechnical reading” of a statutory provision that it found was “not inconsistent with the language of that provision examined in isolation.”[31]  When the Court considered the language in the statutory provision as a whole, it determined that the hypertechnical interpretation being advanced by the State of Michigan “would be implausible at best.”[32] 

Thus, the fundamental canon of statutory construction referenced by the Supreme Court prohibits taking isolated phrases of statutes out of context in order to reach hypertechnical interpretations that are implausible when read in conjunction with the remainder of the statute.  It does not permit the use of conjecture to avoid the plain meaning of a complete statutory provision.  Here, the September 2020 Order did not take the term “power production capacity” of out context.  Interpreting that term to mean the capacity to produce power, as opposed to deliver power, is not hypertechnical at all.  Instead it affords that term its ordinary meaning.  Nor does the Commission cite to any other statutory language in PURPA that renders this plain reading implausible. 

Instead, the Commission uses the holding in Davis as a jumping off point for an unconvincing speculation as to a possible alternative meaning untethered to any particular statutory provision:

[W]hen a facility meets the QF requirements, the benefits of that status—e.g., the right to interconnect with the relevant electric utility and sell the facility’s output to that utility at an avoided-cost rate —accrue to the facility as a whole.  Given that statutory structure, and the importance of the rights at the point of interconnection, we find that the best interpretation of the 80-MW limit on a facility’s power production capacity is as a limit on the whole facility’s net output to the electric utility (i.e., at the point of interconnection), taking into account all components necessary to produce electric energy in a form useful to an interconnected entity.[33]

It is not apparent how this explanation puts the statutory language in context or shows its place in the overall statutory scheme.  Why does the fact that a QF has the right to interconnect with and sell its output to a utility at avoided cost rates lead to the conclusion that the “best interpretation” of the statute is that the 80 MW power production limit should be read as a limit on the facility’s ability to produce electric energy in a form useful to an interconnected entity?  The two points are wholly unrelated. 

The only possible connection could be if there was a provision in PURPA that limited a small power production facility’s interconnection and sales rights to 80 MW.  But that is not the case.  PURPA simply requires the Commission to promulgate rules obligating utilities to purchase electricity from QFs (without distinguishing between small power production facilities and cogeneration facilities) at avoided costs without any mention of limiting either interconnection or sales rights.[34]  Indeed, there are many qualifying cogeneration facilities with capacities of 300 MW, 500 MW, and more.[35]  Whatever the reason for the 80 MW power production capacity limit, it cannot be that Congress was concerned about the consequences of allowing small power production facilities larger than 80 MW to require utilities to interconnect with them and purchase their electricity at avoided cost rates.  There is no logical reason why Congress would try to provide utilities with such protections against small power producers delivering more than 80 MW but at the same allowed cogenerators to interconnect and deliver electricity in unlimited quantities.[36]

The Commission also asserts that the statutory term “facility” is ambiguous.[37]  It relies on this purported ambiguity to support its claim that power production capacity applies to the “whole” facility, including the inverters and their limited capacity to convert DC into AC.  I completely agree that nothing in PURPA suggests that inverters cannot be deemed part of a small power production facility.  However, the limited ability of Broadview’s Facility to convert DC energy into AC for delivery is irrelevant to ascertaining the maximum power production capacity of the Facility, which is the only attribute at issue in determining whether the Facility qualifies as a QF.

In sum, the majority’s justification for deviating from the plain language of PURPA is not credible.  Recall that not a single word of the Commission’s new 29-word for-delivery-to-the-utility standard appears in the statute.  We are asked to believe that the Commission’s fidelity to the intent of Congress is best achieved by establishing new tests supported by elaborately confected arguments and “structural” interpretations of PURPA when instead the Commission could simply read the unambiguous terms of the statute as Congress authored it.  

III. The Commission’s New For-Delivery-to-the-Utility Standard is Not Supported by its Regulations or Precedent

I have explained why the new for-delivery-to-the-utility standard is inconsistent with the statutory language of PURPA.  The Commission’s regulations and precedent offer no better support for its new test than does the statute.

First, the Commission does not cite to anything in its regulations to support the conclusion that power production capacity means the ability to deliver energy to the purchasing utility.  This is not surprising because the only regulation addressing how to determine power production capacity is Form 556, and a Form 556 calculation leads to the conclusion that the Facility has a power production capacity well in excess of the 80 MW threshold, as we have seen.

The Commission does cite to its precedent, but the cited precedent likewise fails to support its new for-delivery-to-the-utility standard.  The Commission concedes that “Broadview’s facility is distinct in certain respects from the facilities that the Commission considered when it first established and initially applied the “send out” test.”[38]  That is an understatement.  In fact, Broadview’s Facility is distinct from every facility in every case in which the Commission has ever addressed the question of how power production capacity should be calculated.  In none of the cases cited in the Order did the Commission hold that a facility capable of continuously producing more than 80 MW of power nevertheless satisfies PURPA’s 80 MW power production capacity limit because a facility’s ability to deliver energy to a utility is a limiting factor defining the power production capacity of the facility.

The Commission cites to the Occidental decision,[39] which is the leading send-out case and was the first case in which the Commission was required to define the “power production facility” of a QF.  That case’s definition is as follows:

The Commission will consider the “power production capacity” of a facility to be the maximum net output of the facility which can be safely and reliably achieved under the most favorable operating conditions likely to occur over a period of several years. The net output of the facility is its send out after subtraction of the power used to operate auxiliary equipment in the facility necessary for power generation (such as pumps, blowers, fuel preparation machinery, and exciters) and for other essential electricity uses in the facility from the gross generator output.[40]

As this definition makes clear, “send out” means nothing more than that the power production capacity of a facility is not the gross power production capacity of the facility, but rather is its net power production capacity after “essential electricity uses” in the facility are subtracted.  The question of the facility’s ability to deliver the power produced by the facility to the purchasing utility was not even mentioned, much less factored into Commission’s analysis.  Nothing in Occidental suggests that the Commission would have found that a facility with a 160 MW DC energy gross power production capacity has only an 80 MW net power production capacity merely because only 80 MW of the 160 MW of DC energy produced could be converted to AC for delivery.

The Commission cites to part of the discussion in Occidental explaining that it would not determine a facility’s power production capacity based on the maximum capability of any particular component of the generating equipment, but instead would look to the overall capability of the facility.[41] This is true, but it also is true that in Occidental the Commission focused on the components of the facility’s “generating equipment”[42] and did not suggest that a limitation on delivery capability was relevant.  And the Commission did not establish a definition of power production capacity that bears the slightest resemblance to the new for-delivery-to-the-utility standard but instead, as noted above, used a definition based on maximum output less station use.  

The Commission also asserts that “[b]ecause the Commission explicitly focused on the overall facility capabilities, Occidental supports the proposition that power production capacity means output in a form useful to an interconnected entity.”[43]  This is a non sequitur.  The “overall facility capabilities” the Commission focused on in Occidental involved a facility consisting of different pieces of standard commercially available power generation equipment that were somewhat mismatched in their power production capabilities.  Nothing in Occidental even suggests that the Commission considered that the power production capacity of a facility could be limited by deliberately installing only enough inverters to convert half of the power produced by a facility from DC into AC.

Next, the Commission cites to the Malacha decision.[44]  This was the first case that applied the definition of net power production capacity in Occidental to a facility that also owned interconnection facilities.  The Commission asserts that this case stands for the proposition “that ‘power production capacity’ is determined from the whole facility’s net output after taking into account all components necessary to produce electric energy in a form useful to an interconnected entity.”[45]  That is a rather broad reading of this decision, in which the Commission found that:

The Occidental decision . . . suggests that: 1) interconnection equipment could be included as “auxiliary equipment in the facility necessary for power generation;” and 2) the resistive and reactive losses associated with interconnection equipment’s operation could be considered as subsumed in the QF’s “other essential electricity uses.”[46] 

Read in this context, it is clear that Malacha simply expands the Occidental definition of “other essential electricity uses” that are to be subtracted from the maximum output of the facility.  In addition to station power, it also is necessary to subtract out the losses incurred in transmitting electricity from the generation equipment to the point of interconnection with the purchasing utility.  Malacha did not use the term “electric energy in a form useful to an interconnected entity.”  Nor did it address the question of whether a limited ability to deliver could itself be deemed a limitation on the power production capacity of the facility.  Nothing in the Malacha decision supports the Commission’s position that less than all of a facility’s gross power production capacity should be counted if only a portion of it can be converted to AC.

I recognize that, in our September 2020 Order, we held that we would no longer apply the send-out test established in Occidental and subsequent cases.[47]  Upon further consideration, I now conclude that this holding went too far.  Rather, I believe we should have upheld those cases, but clarified that they mean what they say, i.e. that it is appropriate to reduce the gross maximum production capability of a facility by station power and line losses, consistent with the calculation methodology set forth in Form 556.  But I do not believe that the send-out cases hold, and should not be read to hold, that a facility whose generation equipment is capable of generating more than 80 MW can satisfy the statutory 80 MW limit simply because the facility is configured so as to convert no more than 80 MW of the output into AC energy for delivery.  Any such reading of those cases would stretch the Commission’s precedent beyond its breaking point. 

When considering our precedent, it is important to keep in mind that none of it was issued in a vacuum.  Instead, the Commission’s rulings were governed by the statutory provision that limits the power production capacity of small power production facilities to 80 MW.  It is clear that the Commission was aware of this standard when it issued its prior orders because all of them are couched in terms of what sources of power consumption could be subtracted from the “maximum output” of the generation equipment, as permitted in Occidental.  None of these cases suggest that the power production capacity of a facility’s power generation equipment could be limited by a facility’s ability to deliver power to the interconnection, which is not surprising because delivery capability is not mentioned in the statute.  I disagree with the Commission that Broadview’s Application presents “new facts” that obligate us to expand our precedent,[48] given that solar panels and inverters have been around for a long time.  But even if the facts of Broadview’s Application were new, we cannot extend our past precedent beyond our statutory authority, no matter how logical the Commission might think such extension would be.

IV. Broadview’s Facility is Capable of Delivering More than 80 MW of the Energy Produced by the Facility to the Purchasing Utility

Finally, Broadview does not qualify as a QF even under the Commission’s new test.  It is not correct that the Facility’s net output to the electric utility is only 80 MW, even when taking into account all components necessary to produce electric energy in a form useful to an interconnected utility.  Broadview does not discharge the surplus electricity into the ground or the air.  Instead, “when there is more dc power available from the solar array than can converted to ac power by the inverters, that power is stored in the [battery storage system].”[49]  The battery storage system is capable of storing up to 200 MWh of power.[50]  Later, the electricity stored in the battery storage system is discharged, converted by inverters, and delivered to the purchasing utility.[51]  Therefore, the Facility is capable of delivering the entire 160 MWh generated by the solar panels to the purchasing utility.  The Commission does not contest this fact, acknowledging that Broadview’s configuration allows it to deliver more power over time to NorthWestern than a facility with only 80 MW of solar panels.[52]

The Commission attempts to discount the significance of its concession by noting that the Facility can deliver only 80 MW of the 160 MW generated by the solar panels to the utility at any particular time.[53]  This fact would be relevant if the Commission were correct that the provisions of PURPA governing interconnection and avoided cost sales provided that such rights were not conferred on small power production facilities with power production capacities in excess of 80 MW.  But as I have pointed out, PURPA contains no limit on the size of QF interconnections or the amount of energy that can be sold to utilities.  And so we are left with a strained interpretation of the statutory language which allows facilities to produce and deliver to utilities 160 MW of electricity and still satisfy the statutory 80 MW power production capacity limit for small power production facilities.  That interpretation finds no support in the statutory language, the Commission’s regulations, or applicable precedent.

It is unclear, but it appears that the Commission may also justify its statutory interpretation on the grounds that, by finding the Facility is a QF, it is doing nothing more than enabling an increase in the capacity factor of the Facility.[54]  If so, that justification is misplaced.  The Facility’s capacity factor is completely unaffected by the Commission’s ruling, but rather is determined by the amount of sunlight that reaches the Facility’s solar panels and the proportion of time the solar panels are out of service.  The purported “increase” in capacity factor is entirely illusory and is achieved only by pretending that the Facility can produce no more than 80 MW, when in fact it is capable of producing and delivering 160 MW.  The only real change effectuated by today’s Order is that some of the 160 MW of power produced by the Facility is delivered at a different time than if all 160 MW were delivered as it was produced.

For these reasons, I respectfully dissent.