On October 17, 2013, FERC issued an order denying PPL Electric Utilities Corporation’s (“PPL Electric”) request to be relieved of its mandatory obligation under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) to purchase the output of Sounderton LLC’s (“Sounderton”) cogeneration facility, which is a small Qualifying Facility (“QF”) with an output of less than 20 MW. 

Within the PURPA framework, an electric utility may be relieved of its obligation to purchase QF output if it satisfies certain requirements.  For QFs larger than 20 MW, FERC will allow the termination of the requirement to purchase the QF output if FERC finds that the QF has nondiscriminatory access to competitive or independently administered markets, whereby it can meaningfully participate and sell its capacity and electric energy output.  In relation to this, FERC has codified a rebuttable presumption that the QF has nondiscriminatory access to the market if it is eligible for service under Commission approved interconnection rules and a Commission approved open access transmission tariff.

For QFs with an output of 20 MW or below, however, FERC has codified a rebuttable presumption that such QFs do not have the nondiscriminatory access to markets that would merit termination of a utility’s PURPA purchase obligation.  To overcome this presumption, the requesting utility must prove with sufficient documentation, on a QF-by-QF basis, that the project has nondiscriminatory access to the market in which the utility is a member.  It is not sufficient for a utility to rely on the fact that small QFs generally have access to or have participated in that market.  Instead, the utility must illustrate how the specific QF at issue has nondiscriminatory access to that market.

In a prior proceeding, FERC terminated PPL Electric’s mandatory PURPA purchase obligation with regard to QFs with output larger than 20 MW, concluding that the QFs within PPL Electric’s service territory have nondiscriminatory access to the PJM Interconnection, LLC markets.  However, applying the more stringent rebuttable presumption applicable to smaller QFs in this proceeding, the Commission rejected PPL Electric’s request to be relieved of its mandatory obligation to purchase the output of Sounderton’s facility.

In rejecting PPL Electric’s current request, FERC explained that PPL Electric had neglected to provide sufficient documentation.  Specifically, FERC found unpersuasive PPL Electric’s statement that it is not aware of any problematic operational characteristics, transmission constraints, or congestion, as PPL Electric did not provided specifically-tailored documentation of this information, such as an interconnection study for the QF.  Similarly, the Commission found that PPL Electric’s belief that the QF’s design should allow it to sell net capacity into the PJM market is premature, as PPL Electric does not know that the project will be built according to plan.

Commissioners Clark and Moeller concurred with the order, stating that the decision generally comports with FERC precedent on the matter.  However, the Commissioners urged FERC to provide more guidance to utilities that seek to be relieved of PURPA obligations for QFs with net output of 20 MW and below.  The Commissioners’ concurrence continues that “[i]t’s important that FERC’s standard for rebutting the presumption not be so high as to preclude a utility from successfully making a showing before the QF is fully operational and the utility is obligated to purchase.  Such a circular result would not be a reasonable interpretation of the statute or our own regulations.”

To view the order, click here.