On February 14, 2023, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) upheld FERC’s March 2021 order granting Broadview Solar, LLC’s (“Broadview”) hybrid solar and battery project qualifying facility (“QF”) status (see March 25, 2021 edition of the WER) based on FERC’s interpretation of the Public Utility Regulatory Policies Act of 1978 (“PURPA”). Specifically, the D.C. Circuit determined, among other things, that FERC’s interpretation that a QF owner can use the MW net output at the point of interconnection in determining whether a facility meets the 80 MW statutory maximum for small power production facility QF status under PURPA was reasonable.

In September 2019, Broadview applied for QF status and asked FERC to find that its hybrid 160 MW solar array and 50 MW battery storage facility (both MW amounts are in DC) qualified as a QF because the DC-to-AC inverters will result in a maximum net AC power production capacity to the point of interconnection of 80 MW, which is the maximum size a small power production facility can be to qualify as a QF under PURPA. In a September 2020 order, FERC denied Broadview’s QF application, finding that the relevant “capacity” for determining whether Broadview’s facility was under the 80 MW maximum amount was the solar array’s nameplate capacity (see September 10, 2020 edition of the WER). In doing so, FERC acknowledged it was departing from its long-standing precedent determining QF eligibility by the facility’s “send out” to the point of interconnection. In March 2021, FERC issued an order setting aside the September 2020 order, explaining that it had erred by departing from and overturning its longstanding precedent and that, while PURPA is ambiguous as to how FERC is to measure “power production capacity,” the term “facility” is best read to include all components rather than any of its individual parts (see March 25, 2021 edition of the WER). Accordingly, FERC determined that “the best interpretation of the 80-MW limit on a small power production facility’s power production capacity is as a limit on the facility’s net output to the electric utility (i.e., at the point of interconnection), taking into account all components necessary to produce electric energy in a form useful to an interconnected entity.”

After certain parties petitioned the D.C. Circuit for review, the D.C. Circuit agreed with FERC that the statute is ambiguous as to the proper measure of a facility’s “power production capacity” and that FERC’s interpretation, focusing on the “send out” to the grid, is reasonable. The D.C. Circuit determined that because PURPA does not define “facility” or “power production capacity,” and because Congress has not spoken to the issue, PURPA is ambiguous, and the D.C. Circuit must afford FERC deference on its interpretation if that interpretation is reasonable under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. (“Chevron”). In finding that FERC’s interpretation is reasonable, the D.C. Circuit relied on (1) the text of PURPA, noting that the only grid-usable “power” that Broadview produces is AC power; (2) the structure and purpose of PURPA, which was enacted to encourage the development of small power production facilities and promote the use of alternative energy sources, such as solar; and (3) the legislative history of PURPA.

Moreover, the D.C. Circuit dismissed arguments that FERC acted arbitrarily and capriciously by granting Broadview’s application because it ignored errors on Broadview’s Form 556 and by treating the solar array and battery as a single facility. The D.C. Circuit held that the Form 556 is a tool meant to aid FERC in determining whether a facility is eligible to be a QF, and that FERC’s decision to treat the Form 556 submissions as helpful for determining, but not dispositive of, the Broadview facility’s eligibility was not arbitrary and capricious. The D.C. Circuit further determined that because the battery on its own cannot deliver usable power to the grid, it is not a separate facility, but is part of the solar array and inverters, which work together to deliver grid-usable AC power.

Judge Justin R. Walker issued a separate concurrence in part and dissent in part, explaining that he concurs with the majority’s decision that the central issue is the meaning of the terms “facility” and “power production capacity” and that PURPA is ambiguous with respect to these meanings. However, Judge Walker disagreed with the majority that Congress has not spoken on the issue and that the D.C. Circuit must defer to any reasonable agency interpretation. Judge Walker determined that PURPA did not invite FERC to fill a policy gap and applied recent Supreme Court Chevron case law to determine that Broadview is not a small facility under PURPA. Judge Walker used the plain meaning of “facility” and “power production capacity” to conclude that Broadview has the capacity to produce 130 MW of power because it produces 80 MW of inverted AC power that is delivered to the grid while producing 50 MW of not-yet-inverted DC power to charge its battery, thus it does not qualify as a small power production facility within the meaning of PURPA.

The full opinion can be found here.