The Idaho Public Utilities Commission reversed an earlier decision and approved three of five wind projects after the Federal Energy Regulatory Commission ruled the denial inconsistent with the law.

After settlement talks between developers and Rocky Mountain Power, the Idaho Public Utilities Commission approved the deal, which may move the projects from their original Bingham County location to the Meadow Creek wind farm location in Bonneville County. And a second company, Ridgeline Energy, which holds the Meadow Creek site, may get the power purchase agreements.

That would allow Cedar Creek, the original company, to move up its scheduled operation date to Dec. 31, 2012, so it the projects can qualify for Department of Treasury grants and other tax incentives before they expire.

The order resolves a dispute that had raised questions about Idaho’s attitude toward renewable energy. FERC ruled in September that the PUC decision denying approval of the projects violated regulations and rules governing projects under what is known as PURPA, the Public Utility Regulatory Policies Act.

The federal panel did not take an enforcement action. Instead, it left it to Cedar Creek to bring its own legal action to seek state approval. In October, Cedar Creek and the Idaho PUC asked the Idaho Supreme Court to suspend Cedar Creek’s ongoing appeal of the PUC decision to give the wind company and Rocky Mountain — an Eastern Idaho subsidiary of PacifiCorp — a chance to seek a settlement.

This unusual action gave Cedar Creek the leverage it needed to negotiate the deal.

The state commission regulates utilities that have a monopoly over necessities such as electricity, natural gas, telephone service and municipal water, and are given wide deference over how they do it. But Congress passed PURPA in 1978 to open up the electricity market to small producers.

The law requires utilities to purchase the power at a cost equal to what it would cost the utility to build a plant to supply that power. That rate is called the “avoided cost.”

That avoided cost rate and the regulations for administering PURPA are placed in the state regulatory commission’s hands.

The IPUC had set Dec. 14, 2010 for developers to get contracts for project in to get the avoided cost rate. While Cedar Creek and other developers met the deadline, the utility did not so the PUC denied them.

Commission staff, PacifiCorp and Cedar Creek negotiated the agreement that included Cedar Creek’s commitment to dismiss its state Supreme Court appeal.

The power capacity from the three approved wind projects will be the same as the initial five projects would have: an annual nameplate capacity not to exceed 133.4 megawatts with annual output not to exceed 50 average megawatts per month.

Ridgeline’s Meadow Creek site is smaller but has more wind capacity than the Cedar Creek location, the PUC said in its press release. But Ridgeline’s site has only 80 megawatts of transmission capacity and will need to acquire another 40 MW of capacity to accommodate the former Cedar Creek projects.

If it can’t do that, then part of the projects may go back to the Bingham County site.

The IPUC said it protected the utility and its ratepayers because it approved no more power than initially obligated to buy under PURPA. And Rocky Mountain convinced Cedar Creek to hand over its renewable exchange credits, which it can sell for thousands of dollars.

The agreement should set the path for the developers of the other 17 rejected wind projects to use FERC’s arguments and decision. But it’s still not clear how it will turn out since the developers already have lost access to an Idaho sales tax rebate that ended in June.

A federal production tax credit for renewable projects that covers as much as 30 percent of costs requires developers to start work before the end of this year.

We haven’t heard the last of this.

You might remember that Bonneville and Bingham County residents came to the Legislature last year pushing a moratorium on wind farm development. Those folks won’t be happy with this deal and may find a way to weigh in again.