On November 3, 2010, FERC denied Florida Power & Light Company’s (“FPL”) petition to reverse previous orders on FERC’s jurisdiction over interconnection agreements between a utility and a qualifying facility (“QF”). FERC upheld Commission precedent on QF interconnection agreements as being consistent with the Federal Power Act (“FPA”), the Public Utility Regulatory Policies Act of 1978 (“PURPA”), and the FERC policies. FERC also clarified jurisdiction over QF interconnection agreements.
FERC released two related orders in 2007 and 2008 (collectively the “Niagara Mohawk orders”), and those orders explained the Commission’s jurisdiction over interconnection agreements between cogeneration QFs, and in those proceedings the host utility of a transmission system was subject to time-value refunds due to the agreements being filed out-of-time. The Niagara Mohawk orders stated FERC has jurisdiction over the agreements from the time of consummation when a host utility is released from its obligation to buy a QF’s entire output and the QF is expressly allowed to sell to third parties. FPL asked that FERC reverse the Niagara Mohawk orders because they were incorrectly decided and conflict with a previous order, Western Massachusetts, and Order No. 2003, Standardization of Generator Interconnection Agreements and Procedures. Western Massachusetts and Order No. 2003 state if any capacity from a QF is not committed to be sold to the host utility, then the interconnection agreement falls under FERC jurisdiction, regardless of whether a third party sale is involved. FPL wanted to limit FERC authority to only QF interconnection agreements where actual sales of output are occurring, and FPL wanted the Commission to apply jurisdiction over QF facilities prospectively from 2007 forward.
FERC disagreed with FPL and found the Niagara Mohawk orders to be consistent with both Western Massachusetts and Order No. 2003. FERC concluded that the right to sell “any” output to a third party will trigger Commission jurisdiction. The Commission explained that Niagara Mohawk found that when an agreement releases the interconnecting utility from the obligation of buying all of the QF’s output and allows the QF to sell power in interstate commerce, all interconnection agreements pertaining to that sale fall under FERC’s jurisdiction. However, FERC did agree with FPL that termination of firm offer contract does not release a utility from having to buy a QF’s output. FERC reiterated that the decision in Niagara Mohawk is premised on the “explicit affirmation of the QF’s right to make sales to third parties,” but if the power purchase agreement or interconnection agreement is silent on the issue, FERC will not assume to have authority. FERC will only require a filing of an interconnection agreement when a QF explicitly states that it plans to sell output to a third party.
FERC also clarified that for QF sales on an “as available” basis, when a host utility has no notice of a third-party sale, the Commission will assume all QF output is being made to the host utility. In such instances, FERC has no authority over those transactions.