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Order No. 872] 172 FERC ¶ 61,041 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION 18 CFR Parts 292 and 375 [Docket Nos. RM19-15-000 and AD16-16-000; Order No. 872] Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978 (Issued July 16, 2020) AGENCY: Federal Energy Regulatory Commission. ACTION: Final rule. SUMMARY: In this Order, the Federal Energy Regulatory Commission issues its final rule approving certain revisions to its regulations implementing sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA). These changes will enable the Commission to continue to fulfill its statutory obligations under sections 201 and 210 of PURPA. DATES: This rule will become effective [INSERT DATE 120 DAYS AFTER THE DATE OF PUBLICATION IN THE FEDERAL REGISTER]. FOR FURTHER INFORMATION CONTACT: Lawrence R. Greenfield (Legal Information) Office of the General Counsel Federal Energy Regulatory Commission 888 First Street, NE Washington, DC 20426 (202) 502-6415 [email protected] Docket Nos. RM12-1-000 and RM13-9-000 - 2 - Helen Shepherd (Technical Information) Office of Energy Market Regulation Federal Energy Regulatory Commission 888 First Street, NE Washington, DC 20426 (202) 502-6176 [email protected] Thomas Dautel (Technical Information) Office of Energy Policy and Innovation Federal Energy Regulatory Commission 888 First Street, NE Washington, DC 20426 (202) 502-6196 [email protected] SUPPLEMENTARY INFORMATION: 172 FERC ¶ 61,041 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Neil Chatterjee, Chairman; Richard Glick, Bernard L. McNamee, and James P. Danly. Qualifying Facility Rates and Requirements Docket Nos. RM19-15-000 Implementation Issues Under the Public Utility AD16-16-000 Regulatory Policies Act of 1978 Order No. 872 FINAL RULE (Issued July 16, 2020) TABLE OF CONTENTS Paragraph Numbers I. Introduction ..................................................................................................................... 1. II. Overview ........................................................................................................................ 5. A. The Commission’s PURPA Regulations, as revised by this Final Rule, Continue to Encourage the Development of QFs within the Requirements of PURPA’s Statutory Limitations ..................................................................................................................... 6. 1. Avoided Cost Cap on QF Rates ........................................................................... 13. 2. Limitation on Small Power Production Facilities Located at the Same “Site” ... 17. 3. Termination of Purchase Obligation for QFs With Nondiscriminatory Access to Certain Competitive Markets ................................................................................... 18. 4. Final Rule’s Updating of the PURPA Regulations ............................................. 20. B. The Final Rule Ensures that the Commission’s Implementation of PURPA Continues to Benefit QFs, Purchasing Electric Utilities, and Electric Consumers ..... 28. C. The Commission is Not Eliminating Fixed Rate Pricing for QFs, But Rather is Giving States the Flexibility to Require the Same Variable Energy Rate/Fixed Capacity Rate Construct that Applies Throughout the Electric Industry .................................... 35. D. The Rate Changes Implemented by this Final Rule Put QF Rates on the Same Footing as Electric Utility Rates and Are Not Discriminatory .................................... 39. E. The PURPA Compliance Issues Raised by Some Commenters Are Outside the Scope of this Rulemaking Proceeding ......................................................................... 42. Docket Nos. RM19-15-000 and AD16-16-000 - 2 - III. Background ................................................................................................................. 47. A. Passage of PURPA in 1978 and the Commission’s Promulgation of its PURPA Regulations in 1980 ...................................................................................................... 47. B. Circumstances Leading to the Commission’s Re-evaluation of the PURPA Regulations and the Issuance of the NOPR ................................................................. 51. C. Summary of Changes to the PURPA Regulations Implemented by this final rule . 56. IV. Discussion .................................................................................................................. 67. A. General Legal Standards Under PURPA ................................................................ 67. 1. Encouragement of QFs ........................................................................................ 68. a. Comments ........................................................................................................ 68. b. Commission Determination ............................................................................ 70. 2. Discrimination ..................................................................................................... 79. a. Comments ........................................................................................................ 79. b. Commission Determination ............................................................................ 82. 3. Unlawful Delegation and the Role of Nonregulated Electric Utilities ................ 89. a. Comments ........................................................................................................ 89. b. Commission Determination ............................................................................ 93. B. QF Rates .................................................................................................................. 96. 1. Overview .............................................................................................................. 96. 2. Use of Competitive Market Prices to Set As-Available Avoided Cost Rates ... 103. a. NOPR Proposal ............................................................................................. 104. b. Comments ...................................................................................................... 107. c. Commission Determination ........................................................................... 114. 3. LMP as a Permissible Rate for Certain As-Available Avoided Cost Rates ...... 124. a. NOPR Proposal ............................................................................................. 124. b. Comments ...................................................................................................... 129. i. Comments in Opposition ........................................................................... 129. (a) Utilizing Western EIM to Establish Avoided Costs ........................... 137. ii. Comments in Support ............................................................................... 138. (a) Utilizing Western EIM to Establish Avoided Costs ........................... 145. iii. Comments in Support with Requested Modifications/Clarifications ...... 146. c. Commission Determination ........................................................................... 151. i. Arguments Against the NOPR Proposal ................................................... 155. ii. Requests for Modification or Clarification of the NOPR ......................... 173. iii. Western EIM ........................................................................................... 177. 4. Use of Market Hub Prices as a Permissible Rate for Certain As-Available QF Energy Sales .......................................................................................................... 180. a. NOPR Proposal ............................................................................................. 180. b. Comments ...................................................................................................... 182. i. Comments in Support ................................................................................ 182. ii. Comments in Opposition .......................................................................... 184. iii. Commission Determination ..................................................................... 189. Docket Nos. RM19-15-000 and AD16-16-000 - 3 - c. Proposed Modifications ................................................................................. 195. i. Comments .................................................................................................. 195. ii. Commission Determination ...................................................................... 200. 5. Use of Formulas Based on Natural Gas Prices to Establish a Permissible Rate for Certain As-Available QF Energy Sales ................................................................. 203. a. NOPR Proposal ............................................................................................. 203. b. Comments ...................................................................................................... 206. c. Commission Determination ........................................................................... 211. 6. Permitting the Energy Rate Component of a Contract to be Fixed at the Time of the LEO Using Forecasted Values of the Estimated Stream of Market Revenues 217. a. Comments ...................................................................................................... 219. b. Commission Determination .........................................................................
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