The National Law Review
On July 16, 2020, the Federal Energy Regulatory Commission (FERC or the Commission) approved a Final Rule revising the Commission’s regulations implementing the Public Utility Regulatory Policies Act of 1978 (PURPA) (See a prior GT Alert for more details on PURPA and FERC’s overhaul). The Final Rule will take effect 120 days after its publication in the Federal Register.
While Congress enacted PURPA to reduce U.S. dependence on oil and natural gas, and encourage the development of alternative energy generation, including cogeneration and small-scale renewable generation, FERC has long discussed updating its regulations under PURPA because it believes that the energy industry has undergone many significant changes since FERC first implemented PURPA in 1980.
When FERC released the Notice of Proposed Rulemaking (NOPR) in September 2019, it said that the proposed changes were intended to continue encouraging development of Qualifying Facilities (QFs), described further below, while addressing concerns regarding how the current regulations work in today’s competitive wholesale power markets. The NOPR proposed to revise the Commission’s regulations implementing sections 201 and 210 of PURPA and incorporated the record of a FERC 2016 technical conference addressing issues involving PURPA’s implementation.
PURPA, among other things, requires electric utilities – private and public – to purchase power from certain cogeneration facilities and small power producers that are QFs under the statute. The rates for the power purchased are not supposed to exceed the cost that the utility would have incurred for the power if obtained from another source. Such charges are referred to by FERC as “avoided costs” and the resultant rate for power purchased from QFs as a given utility’s “avoided cost rate.” State commissions generally have authority to determine these avoided costs, although public power utilities and electric cooperatives that do not have state-regulated rates can usually set their own avoided cost rates for QF purchases.