FERC Revises PURPA Regulations

On July 16, 2020, the Federal Energy Regulatory Commission (FERC) revised its regulations governing small producers and cogenerators known as qualifying facilities (QFs) under the Public Utility Regulatory Policies Act of 1978 (PURPA). PURPA was enacted to promote efficient alternative energy and create a market for independent non-utility energy sources. The regulatory revisions are meant to address significant changes in the nation's energy markets since the rules first took effect in 1980.

“I am extremely pleased that we are issuing today’s final rule to modernize the Commission’s implementation of PURPA,” FERC Chairman Neil Chatterjee said. “While PURPA laid the foundation for the competitive wholesale power markets that we have today, the energy landscape in this country has changed drastically since the Commission implemented these regulations four decades ago.”

Commissioner Richard Glick issued a dissent stating that the final rule effectively guts the Commission’s implementation of PURPA. He said the final rule does not satisfy the Commission’s three basic responsibilities under PURPA:  (1) to encourage the development of QFs; (2) to prevent discrimination against QFs by incumbent utilities; and (3) to ensure that the resulting rates paid by electricity customers remain just and reasonable, in the public interest, and do not exceed the incremental costs to the utility of alternative energy.  Commissioner Glick's statement said that the final rule does little to encourage QF development.

Key elements of the final rule:

• Grants additional flexibility to state regulatory authorities in establishing avoided cost rates for QF sales inside and outside of the organized electric markets
• Grants states the ability to require energy rates (but not capacity rates) to vary during the life of a QF contract
• Modifies the “one-mile rule” and reduced the rebuttable presumption for nondiscriminatory access to power markets, from 20 megawatts to 5 megawatts, for small power production, but not cogeneration, facilities
• Requires QFs to demonstrate commercial viability and financial commitment to build under objective and reasonable state-determined criteria for a QF to establish a legally enforceable obligation

The final rule takes effect 120 days after publication in the Federal Register.