RM19-15 & AD16-16, Staff Presentation on final rule

FERC Open Commission Meeting July 16, 2020
Staff Presentation Item E-1
Good morning Mr. Chairman and Commissioners.
Item E-1 is a draft final rule that revises the Commission’s regulations implementing sections 201 and
210 of the Public Utility Regulatory Policies Act of 1978 (PURPA). With some modifications, which I will
describe later, this draft final rule largely adopts the proposals in the September 2019 Notice of
Proposed Rulemaking (NOPR) issued in Docket Nos. RM19-15-000 and the AD16-16-000.
PURPA was enacted as part of a legislative package intended to reduce the country’s dependence on
conventional fossil fuels to generate electricity by encouraging the development of alternative
generation, that is, qualifying facilities or “QFs.” While PURPA provided encouragement to QFs, PURPA
also imposed limits. For example, the mandatory purchase rates for QF output cannot exceed the
purchasing utility’s avoided cost, even if the QF’s costs of producing electricity might be higher. Another
example is that small power production QFs cannot exceed 80 MWs power production capacity.
This draft final rule implements changes that continue to encourage the development of QFs but also
ensure that the Commission’s PURPA regulations are consistent with PURPA.
This draft final rule’s changes to the Commission’s regulations implementing PURPA include:
First, this draft final rule grants state regulatory authorities and nonregulated electric utilities (together,
states) the flexibility to require that energy rates (but not capacity rates) in QF power sales contracts
and other legally enforceable obligations vary in accordance with changes in the purchasing electric
utility’s as-available avoided costs at the time the energy is delivered.
Second, this draft final rule grants states flexibility to allow QFs to have a fixed energy rate, and to
provide that such state-authorized fixed energy rate can be based on projected energy prices during the
term of a QF’s contract based on the anticipated dates of delivery.
Third, this draft final rule grants states flexibility to set “as-available” QF energy rates based on the
locational marginal price (LMP) established in organized electric markets. However, the NOPR proposed
that LMP per se represents the as-available avoided costs of the electric utilities located in these
markets, but the draft final rule changes that to establish a rebuttable presumption that LMP represents
the purchasing utility’s avoided costs.
With respect to QFs selling to electric utilities located outside of the organized electric markets, this
draft final rule provides states the option to set as-available energy avoided cost rates either at
competitive prices from liquid market hubs or calculated from a formula based on natural gas price
indices and specified heat rates, provided that the states first determine that such prices represent the
purchasing electric utilities’ avoided costs.
The draft final rule makes clear that the states have the flexibility to choose to adopt one or more of
these options – LMP, liquid market hubs, or formula rates based on natural gas price indices and
specified heat rates -- or to continue setting QF rates under the standards long established in the
Commission’s regulations implementing PURPA.

-2Fourth, this draft final rule provides states the flexibility to set energy and capacity rates pursuant to a
competitive solicitation process conducted pursuant to transparent and non-discriminatory procedures.
Fifth, this draft final rule modifies the Commission’s “one-mile rule” for determining whether affiliated
small power production facilities are considered to be at the same site for purposes of determining
whether a small power production facility meets the statutory 80 MW limit. Under the draft final rule, a
facility one mile or less from an affiliated small power production QF would be deemed to be at the
same site as its affiliate. A facility located more than one mile but less than ten miles from an affiliated
small power production QF would be rebuttably presumed to be at a different site from its affiliate. And
a facility more than 10 miles from an affiliated small power production QF would be deemed to be at a
separate site from its affiliate.
Sixth, the draft final rule allows electric utilities, state regulatory authorities, and other interested
parties to challenge an initial self-certification or self-recertification by filing a protest and not having to
file a petition for declaratory order and to pay the associated filing fee. This draft final rule clarifies that
protests may be made to new certifications (both self-certifications and applications for Commission
certification), but in change from the NOPR limits protests to self-recertifications and applications for
Commission recertifications that make a substantive change to the existing certification.
Seventh, the draft final rule revises the Commission’s regulations implementing PURPA section 210(m),
which provide for the termination of an electric utility’s obligation to purchase from a QF with
nondiscriminatory access to certain markets. The draft final rule updates the threshold for the
rebuttable presumption for small power production facilities (but not cogeneration facilities). As a
modification to the NOPR, this draft final rule changes the rebuttable presumption from 20 MW to 5
MW (compared to 1 MW as proposed in the NOPR) and revises the Commission’s regulations
implementing PURPA to include examples of factors which, among others, QFs may argue show that
they lack nondiscriminatory access to such markets.
Finally, this draft final rule clarifies that a QF must demonstrate commercial viability and a financial
commitment to construct its facility pursuant to objective and reasonable state-determined criteria
before the QF is entitled to a contract or legally enforceable obligation. In a change from the NOPR, the
draft final rule states that a QF need only show that it has applied for all required permits and paid all
applicable fees, and not that the QF has obtained such permits.
The changes in this draft final rule will be effective 120 days after publication in the Federal Register and
are effective prospectively for new contracts or legally enforceable obligations and for new facility
certifications and recertifications filed on or after the effective date of this final rule; this draft final rule
does not permit disturbance of existing contracts or LEOs or existing facility certifications.
We are happy to answer any questions. Thank you.