FERC Proposes Extensive Revisions to PURPA Regulations
The Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) seeking comments on proposed revisions to regulations that implement the Public Utility Regulatory Policies Act of 1978 (PURPA). The NOPR, issued September 19, 2019, would alter key provisions of PURPA regulations designed to encourage development of small power production facilities.
In most cases, PURPA currently imposes a mandatory obligation on an electric utility to purchase the energy and capacity delivered to it from a qualifying facility (QF) interconnected to its system. The existing regulations identify a number of factors that must be met for a facility to qualify as a QF. One factor is the size of a facility. A renewable facility must be 80 megawatts (AC) or less to be considered a QF. However, the facility must also satisfy what is known as the “one-mile rule,” which is used to calculate the size of a facility and to distinguish separate facilities from each other. This rule is an irrebuttable presumption that, for purposes of determining whether small power-production facilities seeking QF status are considered to be located “at the same site,” they:
- Are located within one mile of each other;
- Use the same energy resource (for example, solar); and
- Are owned by the same entity or their affiliates.
For the one-mile rule, FERC’s regulations require the distance between generating facilities be measured “from the electrical generating equipment of each facility.” QFs that are 20 megawatts (AC) and below enjoy certain other advantages under the existing regulations. Specifically, PURPA regulations include a rebuttable presumption that such smaller QFs do not have non-discriminatory access to any market. Therefore, FERC has maintained a mandatory purchase obligation on electric utilities with respect to these smaller QFs.
The NOPR proposes several changes to the existing framework.
FERC stated that it believes small power production facilities below 20 megawatts (AC) should now be able to participate in the competitive markets. Therefore, FERC proposes to reduce the net power production capacity level at which the presumption of non-discriminatory access to a market attaches for small power production facilities from 20 megawatts (AC) to 1 megawatt (AC). In other words, only QF facilities that are one megawatt (AC) and smaller will preserve the rebuttable presumption that they lack non-discriminatory access to the market.
Additionally, the NOPR proposes to alter the “one-mile rule” by allowing entities challenging a QF certification to rebut the presumption that affiliated facilities located more than one mile apart are considered to be separate QFs. Specifically, under the proposal, if two affiliated facilities are between one and 10 miles apart, there will be a rebuttable presumption that they are separate facilities at separate sites. (Facilities owned by affiliates and located one mile or less apart will be irrebuttably presumed to be a single facility at a single site, while facilities 10 miles or more apart will be irrebuttably presumed to be separate facilities at separate sites.) Instead of the existing “bright-line” test, FERC proposes a totality of the circumstances test, where no single factor would be dispositive in determining whether affiliated facilities between one and 10 miles apart are “separate.” FERC identifies multiple factors to rebut or defend against rebuttal. These factors include, but are not limited to:
- Physical characteristics, such as property ownership, interconnection facilities, points of interconnection, or off-take arrangements
- Ownership, including whether the facilities are owned or controlled by the same individual(s) or affiliate(s), operated and maintained by the same individual(s) or affiliate(s)
- Using common debt or equity financing
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