FERC Reaffirms High Bar for Terminating PURPA Purchase Obligation for QFs under 20 MW

On October 17, 2013, the Federal Energy Regulatory Commission (“FERC”) ruled on an application from PPL Electric Utilities Corp. to relieve the utility of its mandatory purchase obligation, under Section 210(m) of the Public Utility Regulatory Policies Act (“PURPA”), with respect to IPS Power Engineer Inc.’s qualifying facility (“QF”). IPS Power’s QF, called the Souderton QF, is an 18.1 MW cogenerator. Because PPL Electric is in PJM Interconnection territory, FERC terminated its mandatory purchase obligation for QFs over 20 MW in 2009 under Section 210(m) of PURPA. This has been FERC’s general practice for utilities located in ISOs or RTOs, but not for utilities located outside ISOs and RTOs.

When terminating the purchase obligation for QFs over 20 MW, FERC continues to apply the purchase obligation to energy from QFs of 20 MW or less because FERC presumes those smaller QFs do not have adequate access to markets. With this order, FERC continues to hold strictly to the high bar it set for rebutting that presumption. FERC explained in the order that the utility requesting relief “may not simply show that market rules permit small QF participation in the markets, [and] that there are no constraints or other barriers to a QF’s output reaching the markets.” Rather the utility must show “that the individual QF has access to the markets.” In this order, FERC concluded that PPL Electric’s application failed to demonstrate that the Souderton QF “has overcome the greater practical difficulty faced by small QFs in participating in power markets.”

PPL Electric Utilities Corp., 145 FERC ¶ 61,053 (2013).

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