On March 31, 2011, FERC issued a Notice of Intent Not to Act against the California Public Utilities Commission (“CPUC”) for not complying with the Public Utilities Regulatory Policies Act of 1978 (“PURPA”).  The CPUC has previously ruled in several orders that the investor owned utilities Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas & Electric Company (collectively the “IOUs”) must offer to buy power from combined heat and power (“CHP”) units that are 20 MW or less if those units meet certain environmental requirements.   

California adopted feed-in tariffs by passing the California Waste Heat and Carbon Reduction Act (“AB 1613”).  AB 1613 amended the CPUC code to require investor-owned utilities to buy power at a set CPUC price if it is generated by particular CHP generators and sent to the grid, and the CPUC set price should allow for recovery of costs used to implement AB 1613 environmental standards.  In October 2010, FERC clarified that states can implement feed-in tariffs through a “multi-tiered approach” for avoided costs and still be compliant with PURPA’s avoided cost requirement. (See October 22, 2010 edition of the WER).  However, the Commission did not determine the CPUC’s rate structure was compliant with PURPA due to insufficient information.

In January 2011, the IOUs submitted a Petition for Enforcement to the Commission, stating that the PURPA requirements must be enforced against the CPUC.  The IOUs argued the CPUC: 1) did not set just and reasonable rates and the rates set “exceeds the incremental cost to the electric utility of alternative electric energy;” 2) did not require purchases from qualifying facilities (“QFs”) to be just and reasonable; 3) failed to require utilities pay no more than the avoided costs; and 4) failed to enumerate factors that will affect rates from QFs.  In announcing not to act on the enforcement petition, FERC stated the IOUs can seek action in the appropriate court arguing the CPUC failed to comply with PURPA.

The Notice of Intent to Not Act is available here.