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FERC Issues Notice of Proposed Rulemaking to Revise PURPA Regulations for Qualifying Facility Rates and Requirements

On September 19, 2019, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) proposing to revise its regulations implementing sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) for qualifying small power production facilities and qualifying cogeneration facilities (collectively, Qualifying Facilities or QFs). The NOPR proposes to change FERC’s PURPA regulations in six key areas: (1) rate-setting approaches; (2) proximity requirements; (3) protest procedures; (4) non-discriminatory access thresholds; (5) minimum standards for legally enforceable obligations; and (6) reduced purchase obligations for certain electric utilities.

The NOPR’s most significant feature is a set of proposed rules that would allow states to set rates for purchases of electric energy from qualifying small power production facilities that vary over the term of a contract in accordance with changes in the purchasing utility’s avoided costs at the time the energy is delivered. FERC proposes several approaches to set “as available” energy prices that vary throughout the life of the contract, including the use of locational marginal prices (LMPs). States and non-jurisdictional utilities would retain the ability, but not the obligation, to offer fixed-priced contracts with prices established when a legally enforceable obligation is incurred. To the extent that rates are not set through LMPs or a competitive method, FERC also proposes factors that states should consider in establishing rates for sales from PURPA-qualified sellers.

The proposed revisions would also reform the so-called one-mile rule (used for determining whether a facility is a qualifying small power production facility) under which affiliated QFs that use the same energy resource are conclusively presumed to not be at the same site so long as they are at least one mile apart. In place of the one-mile rule, FERC proposes to create a rebuttable presumption that affiliated facilities using the same resource within one to ten miles of one another are not at the same site. Affiliated facilities beyond ten miles from one another would be conclusively presumed to be located at different sites, and facilities separated by less than a mile would be conclusively presumed to be at the same site.

FERC’s proposed revisions would also, among other things:

  • Create a process for rebutting the “different sites” presumption, as well as generally ease the burden of protesting QF certification filings;
  • Reduce from 20 MW to 1 MW the amount of capacity necessary to establish a rebuttable presumption that a small power production facility has non-discriminatory access to electric markets within a regional transmission organization or independent system operator;
  • Require states to establish objective and reasonable criteria to determine a QF’s commercial viability and financial commitment to construction before a QF is entitled to a contract or legally enforceable obligation;
  • Reduce the obligation to purchase from a QF with nondiscriminatory access to certain markets, e.g., for any electric utilities whose supply obligations decline as a result of state-implemented choice programs.

In a separate, partial dissent, Commissioner Richard Glick stated that the NOPR “would effectively gut” PURPA. Moreover, he expressed concern that FERC would usurp Congress’ role by implementing such sweeping changes, some of which he claims are inconsistent with statutory obligations. In particular, Commissioner Glick takes issue with the proposed removal of the requirement to offer fixed-price contracts, which, he argued, will negatively affect the ability of small power producers to finance their projects.

Comments in response to the NOPR are due to FERC on December 3, 2019.