FERC affirms and clarifies final rule that revised regulations implementing PURPA

by Paul Ciampoli
APPA News Director
November 23, 2020

The Federal Energy Regulatory Commission on Nov. 19 affirmed a final rule it approved this summer that revised its regulations implementing the Public Utility Regulatory Policies Act (PURPA).

In its action at its monthly open meeting, FERC dismissed or disagreed with most arguments raised on rehearing but offered clarification of the final rule itself.

Order No. 872 granted flexibility to state regulatory authorities in establishing avoided cost rates for qualifying facilities’ (QF) sales inside and outside of the organized electric markets.  The July 16 final rule also gave states the ability to require that energy rates, but not capacity rates, vary during the term of a QF contract. The flexibility for state regulatory authorities also extends to public power and electric cooperative regulators.

The final rule also modified the “one-mile rule” for determining whether generation facilities are considered to be at the same site for purposes of determining whether a facility meets the 80 MW limit on qualifying small power production facilities.

It also reduced the rebuttable presumption for nondiscriminatory access to power markets, from 20 megawatts to 5 megawatts, for small power production, but not cogeneration, facilities.  This change will make it easier for electric utilities (including public power utilities) in certain markets to seek relief from PURPA’s mandatory purchase requirement for smaller QFs under PURPA section 210(m).

For a QF to establish a legally enforceable obligation for an electric utility to purchase the QF’s output, the final rule required that the QF must demonstrate commercial viability and financial commitment to build under objective and reasonable state-determined criteria.

FERC’s Nov. 19 order provided clarifications related to:

• States’ use of variable energy rates in QF contracts and availability of utility avoided cost data;
• The role of independent entities overseeing competitive solicitations;
• The circumstances under which a small power production QF needs to recertify;
• Application of the rebuttable presumption of separate sites for the purpose of determining the power production capacity of small power production facilities under the one-mile rule; and
• The PURPA section 210(m) rebuttable presumption of nondiscriminatory access to markets.

APPA, LPPC supported FERC plans to reform PURPA

The final rule largely adopted proposals in a September 2019 FERC Notice of Proposed Rulemaking (NOPR).

In response to the NOPR, the American Public Power Association and the Large Public Power Council in December said that the development of competitive power markets and the dramatic growth of a renewable power sector now largely independent of the boost once provided by PURPA justify significant changes in PURPA regulations.