Vermont’s Standard Offer (feed-in-tariff) Program survived a recent challenge brought against it before the Federal Energy Regulatory Commission (FERC) by Otter Creek Solar, LLC, a Qualifying Facility (QF) owned by Allco Renewable Energy Limited.  Allco also controls Ecos Energy, LLC—the entity that was awarded the right to develop two of the three solar projects selected  by the Public Service Board under the Standard Offer Program’s new annual RFP process.  See related blog posts.

In declining to initiate an enforcement action against Vermont under PURPA and the Federal Power Act, FERC agreed with the position put forth by the Vermont Department of Public Service:

The standard offer SPEED program is an optional program available to certain small renewable QFs. QFs also may participate in the Vermont Commission’s longstanding Rule 4.100 program. The Vermont Commission’s Rule 4.100 program is the Vermont Commission’s implementation of PURPA and Rule 4.100 has been found by the Commission to be consistent with PURPA. In Vermont, QFs thus still have the option to participate in a program that has been found consistent with PURPA. Those Vermont QFs that choose to participate in the SPEED program are agreeing to the rates that result from that program. Nothing in the Commission’s regulations limits the authority of either an electric utility or a QF to agree to rates for any purchases or terms or conditions relating to any purchases which differ from the rates or terms or conditions which would otherwise be required by the Commission’s regulations.

Under federal law, FERC’s decision not to initiate an enforcement action leaves Otter Creek with the option of seeking an enforcement action against the Vermont Public Service in federal court.

For more information on this topic, read the FERC decision here.

The U.S. Treasury made the following announcement last week to implement the sequestration cuts required by the Balanced Budget and Emergency Deficit Control Act of 1985, as amended.

 [P]ayments issued under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 for specified energy property in lieu of tax credits, are subject to sequestration.  This means that every award* made to a Section 1603 applicant on or after March 1, 2013 through September 30, 2013 will be reduced by 8.7 percent, irrespective of when the application was received by Treasury.

 In this context “award” means the final decision by Treasury to pay a claim as evidenced by the “Section 1603 Award Letter” and effective the date of the letter.

 Awards made prior to March 1, 2013 will not be affected. The sequestration reduction rate will be applied until the end of the fiscal year (September 30, 2013), at which time the sequestration rate is subject to change.

 Treasury will continue to review applications and make determinations in accordance with current practice. Applicants are reminded that the amount of their Section 1603 claim must be calculated in accordance with the Section 1603 Program Guidance and the laws applicable to calculating basis for federal tax purposes. Applicants may not adjust claims to account for the impact of sequestration.

 Given the time and effort it takes to work through the 1603 process and provide the necessary documentation to Treasury in order to obtain a final awards letter, it seems likely that some Vermont renewable projects that were placed into service by December 31, 2013 and thus eligible for a 1603 grant may be subject to the 8.7% cut.

Entities that may be impacted by this change should consult with their tax counsel and advisers.