posted on Tuesday, January 24, 2006 2:31 PM by Andrea Robinson

Proposed Rule Would End PURPA “Put” in Some Power Markets

Acting on a directive from the Energy Policy Act of 2005 (EPAct 2005), FERC has proposed new regulations that automatically would relieve some utilities of their nearly 30-year old obligation to purchase qualifying facility (QF) power. [New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities, 114 FERC ¶ 61,043 (2006)].  Enacted as a provision of the Public Utility Regulatory Policies Act of 1978, the purchase obligation is known as the “PURPA put” because it enabled QFs — both cogenerators and small power producers — to put their output to traditional utilities operating in the vicinity.   EPAct 2005 directed FERC to end the PURPA put in “sufficiently competitive” markets that provide QFs with the ability to deliver their generation to buyers.  To be considered by the agency, public comments on the proposed regulations must be submitted by approximately the end of February. 

FERC would end the QF-purchase mandate generically for utilities operating in the organized markets that have so-called Day 2 markets — MISO, ISO-New England, PJM, and NYISO — because they offer transparent spot markets into which all generators can sell.  Utilities operating in the CAISO or SPP, as well as utilities operating outside of organized markets will have to establish their eligibility on a case-by-case basis.  To ease this burden somewhat, FERC suggests establishing a rebuttable presumption of eligibility for utilities providing nondiscriminatory open-access transmission under an Order No. 888 tariff or a reciprocity tariff.   

In a nod to wind energy advocates and others who harbor concerns that the proposed rule would disadvantage numerous small wind facilities that do not have meaningful market access, the proposed rule seeks comment on whether certain types of QFs should be exempted from the rule and retain their ability to force a sale of their power. 

Outside of Day 2 markets, what rises to the level of "sufficiently competitive" is likely to be contentious.  FERC plainly hopes that relief from the PURPA put will induce utilities to join organized markets rather than risk being found insufficiently competitive and becoming a magnet for future QF development.  Within Day 2 markets such as MISO, however, the eventual Final Rule should eliminate QF obligations for utilities such as Alliant Energy Corp., whose earlier request for relief FERC denied on a technicality.  [See Alliant Becomes First to Try for EPAct Waiver QF Purchase Requirement and FERC Shoots Down First Public Utility to Seek Waiver of QF Purchase Requirement]