In the United States Court of Appeals for the Ninth Circuit

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IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

WINDING CREEK SOLAR LLC, Case No. 17-17531

Plaintiff-Appellant, On Appeal from the United States v. District Court for the Northern District of California CARLA PETERMAN; MARTHA No. 3:13-cv-04934-JD GUZMAN ACEVES; LIANE Hon. James Donato RANDOLPH; CLIFFORD RECHTSCHAFFEN; MICHAEL PICKER, in their official capacities as Commissioners of the California Public Utilities Commission,

Defendants-Appellees. Case No. 17-17532 WINDING CREEK SOLAR LLC, On Appeal from the United States Plaintiff-Appellee, District Court for the Northern District v. of California No. 3:13-cv-04934-JD CARLA PETERMAN; MARTHA Hon. James Donato GUZMAN ACEVES; LIANE RANDOLPH; CLIFFORD RECHTSCHAFFEN; MICHAEL PICKER, in their official capacities as Commissioners of the California Public Utilities Commission,

Defendants-Appellants.

APPELLANT’S FIRST BRIEF ON CROSS-APPEAL

Thomas Melone ALLCO RENEWABLE ENERGY LTD. 1740 Broadway, 15th Floor New York, NY 10019 Telephone: (212) 681-1120 Email: [email protected] Attorneys for Appellant WINDING CREEK SOLAR LLC

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CORPORATE DISCLOSURE STATEMENT

Winding Creek Solar LLC is 100% owned by Allco Finance Limited,

which is a privately held company in the business of developing solar energy

projects. Allco Finance Limited has no parent companies, and no publicly held

company owns 10 percent or more of its stock.

/s/ Thomas Melone

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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ...... i TABLE OF AUTHORITIES ...... iv TABLE OF ACRONYMS ...... vii INTRODUCTION ...... 1 JURISDICTIONAL STATEMENT ...... 3 STATUTORY AND REGULATORY AUTHORITIES ...... 4 STATEMENT OF ISSUES ...... 4 STATEMENT OF THE CASE ...... 5 A. The Parties ...... 5 B. Federal Statutory and Regulatory Background ...... 5 C. State Implementation of PURPA ...... 10 D. PURPA’s Enforcement Mechanisms ...... 11 E. California’s Implementation of PURPA and the Re-MAT Program...... 12 1. California’s Implementation of PURPA ...... 12 2. The Re-MAT Program ...... 15 a. The Queue ...... 16 b. Quantity Caps ...... 16 c. Re-MAT Pricing ...... 18

F. Winding Creek’s Participation in the Re-MAT ...... 20 G. PURPA’s Key Role In Reducing Greenhouse Gas Emissions ...... 21 H. Proceedings Below ...... 23 SUMMARY OF ARGUMENT ...... 24 ARGUMENT ...... 25 I. Standard Of Review ...... 25 II. The District Court Correctly Invalidated the Caps and Pricing Adjustments of the Re-MAT ...... 26 A. The District Court Correctly Concluded That The Re-MAT Caps Flatly Violate PURPA’s Must-Take Obligation ...... 26 B. The District Court Correctly Concluded That Pricing ii

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Adjustments Under Re-MAT Are Not Based On A Utility’s “Avoided Costs” And Thus Are Void ...... 29

1. Avoided Costs For Purposes Of 18 C.F.R. §292.304(d)(2) Are The Costs A Utility Would Incur For Purchasing Energy And Capacity From A Non-QF Source ...... 29

2. The Re-MAT Pricing Adjustment Bears No Relation To Avoided Costs ...... 32

C. The District Court Correctly Held That The Standard Contract Program Does Not Comply With 18 C.F.R. §292.304(d)(2)(ii)) ...... 39

III. The District Court Has The Authority To Order, And Should Have Ordered, That Winding Creek Be Placed In The Position It Would Have Been In “But For” The Unlawful Re-MAT Bi-Monthly Cap ...... 50 A. The District Court Has The Power To Order Relief To Eliminate The Ongoing Irreparable Harm To Winding Creek ...... 51 B. The District Court’s Justification For Failing To Exercise Its Remedial Powers Do Not Withstand Scrutiny ...... 55 CONCLUSION ...... 59 STATEMENT OF RELATED CASES

CERTIFICATE OF COMPLIANCE

ADDENDUM

iii

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TABLE OF AUTHORITIES

CASES Allco Renewable Energy Ltd., v. MA Elec. Co., 875 F.3d 64 (1st Cir. 2017) ...... 50, 58, 59 Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402 (1983)...... 7, 8, 10, 32, 38 BCPeabody Constr. Servs., Inc. v. United States, 112 Fed. Cl. 502 (2013) ...... 53 City of Redding v. FERC, 693 F.3d 828 (9th Cir. 2012) ...... 11 Delta Data Sys. Corp. v. Webster, 744 F.2d 197 (D.C. Cir. 1984) ...... 52, 53 FERC v. Mississippi, 456 U.S. 742 (1982) ...... 6 Husain v. Olympic Airways, 316 F.3d 829 (9th Cir. 2002) aff’d 540 U.S. 644 (2004) ...... 25 Indep. Energy Prods. Ass’n v. Cal. Pub. Utils. Comm’n, 36 F.3d 848 (9th Cir. 1994) ...... 12, 13, 15, 32, 33, 38 Juliana v. United States, 217 F. Supp. 1224 (D. Ore. 2016) ...... 54 Leboeuf v. Abraham, 347 F.3d 315 (D.C. Cir. 2004) ...... 52, 53 Mid. Atl. Storage Sys. v. City of Milton, 903 F. Supp. 995 (S.D. W. Va. 1995) ...... 53 Nat'l Mall Tours of Wash., Inc. v. United States DOI, 862 F.3d 35 (D.C. Cir. 2017) ...... 52 Portland General Elec. Co. v. FERC, 854 F.3d 692 (D.C. Cir. 2017) ...... 57, 58 Semancik v. United Mine Workers, 466 F.2d 144 (3d Cir. 1972) ...... 54 Solutions for Utilities, Inc v. Cal. Pub. Util. Comm’n, No. CV 11-04975, 2016 U.S. Dist. LEXIS 17998, 2016 WL 7613906 (C.D. Cal. 2016) ...... 58 Szajer v. City of Los Angeles, 632 F.3d 607 (9th Cir. 2011) ...... 25 Ulstein Maritime, Ltd. v. United States, 833 F.2d 1052 (1st Cir. 1987) ...... 53 Wheelabrator Lisbon, Inc. v. Conn. DPUC, 53 F.3d 183 (2d Cir. 2008) ...... 10 STATUTES Public Utility Regulatory Policies Act, Pub. L. No. 95-617, 92 Stat. 3117 ...... 1 16 U.S.C. §791a ...... 3 16 U.S.C. §796(17)(C) (FPA Section 3(17)(C)) ...... 1 16 U.S.C. §824d (FPA Section 205) ...... 10 iv

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16 U.S.C. §824e (FPA Section 206) ...... 10 16 U.S.C. §824a-3 (PURPA Section 210) ...... 5, 6 16 U.S.C. §824a-3(a) (PURPA Section 210(a)) ...... 7, 10, 12 16 U.S.C. §824a-3(b) (PURPA Section 210(b)) ...... 7, 30 16 U.S.C. §824a-3(f)(1) (PURPA Section 210(f)) ...... 10, 11 16 U.S.C. §824a-3(g) (PURPA Section 210(g)) ...... 11, 55, 56, 58 16 U.S.C. §824a-3(h) (PURPA Section 210(h)) ...... 11, 55, 56 16 U.S.C. §824a-3(h)(2) (PURPA Section 210(h)(2)) ...... 3, 57 16 U.S.C. §824a-3(h)(2)(A) (PURPA Section 210(h)(2)(A)) ...... 3, 11, 58 16 U.S.C. §824a-3(h)(2)(B) (PURPA Section 210(h)(2)(B)) ...... 2,3, 51, 54, 55 16 U.S.C. §824a-3(m)(1) ...... 36 16 U.S.C. §824(f) ...... 11 16 U.S.C. §825m (FPA 314) ...... 3 16 U.S.C. §825m(b) (FPA 314(b)) ...... 57 16 U.S.C. §825o (FPA 316) ...... 57 16 U.S.C. §825p (FPA 317) ...... 3, 57 16 U.S.C. §2633 ...... 11 28 U.S.C. §1291 ...... 3 28 U.S.C. §1331 ...... 3 LEGISLATIVE MATERIALS H.R. Rep. No. 95-496(IV) (1978) ...... 6, 37 OTHER AUTHORITIES 18 C.F.R. §292.101(b)(6) ...... 30, 32, 34, 35 18 C.F.R. §292.203 ...... 1 18 C.F.R. §292.303(a)(1) ...... 7, 27, 28, 36 18 C.F.R. §292.304(b)(2) ...... 7, 30, 32, 35 18 C.F.R. §292.304(d)(1) ...... passim 18 C.F.R. §292.304(d)(2) ...... passim 18 C.F.R. §292.304(e) ...... 30 Am. Ref-Fuel Co., 107 FERC ¶61,016 (2004) ...... 30

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Decision Adopting Proposed Settlement, CPUC D.10-12-035 (2010) ...... 15 Decision Adopting The Renewable Auction Mechanism, CPUC D.10-12-048 (2010) ...... 33 Decision Revising Feed-In Tariff Program, CPUC D.12-05-035 (2012) ...... passim Decision Adopting Joint Standard Contract For Section 399.20 Feed-In Tariff Program, CPUC D.13-05-034 (2013) ...... 17, 18, 19, 26, 27 Ferrey, Steven et al., Fire and Ice: World Renewable Energy and Carbon Control Mechanisms Confront Constitutional Barriers, 20 Duke Envtl. L. & Pol’y F. 125 (2010) ...... 21 FLS Energy, Inc., 157 FERC ¶61,211 (2016) ...... 27, 28, 29, 41, 42 JD Wind 1 LLC, 130 FERC ¶61,127 (2010) ...... 7, 9, 27, 41, 42, 43 Hydrodynamics, Inc., 146 FERC ¶61,193 (2014) ...... 37, 41, 47 Order 69, Small Power Production and Cogeneration Facilities; Regulations Implementing Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12,214 (Feb. 25, 1980) ...... passim Order Modifying Decision (D.) 12-05-035, CPUC D.13-01-041 (2013) ...... 19, 37 The American Heritage Dictionary of the English Language 263 (5th ed. 2011) ...... 47 USGCRP, 2017: Climate Science Special Report: Fourth National Climate Assessment, Volume I [Wuebbles, D.J., D.W. Fahey, K.A. Hibbard, D.J. Dokken, B.C. Stewart, and T.K. Maycock (eds.)]. U.S. Global Change Research Program, Washington, DC, USA ...... 22 Windham Solar LLC, 157 FERC ¶61,134 (2016) ...... 37, 42, 47, 48 Winding Creek Solar LLC, 144 FERC ¶61,122 (2013) ...... 3 Winding Creek Solar LLC, 151 FERC ¶61,103 (2015) ...... 3 Winding Creek Solar LLC, 153 FERC ¶61,027 (2015) ...... 3

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TABLE OF ACRONYMS

CPUC California Public Utilities Commission

FERC Federal Energy Regulatory Commission

FPA Federal Power Act kW Kilowatts, a measure of generation capacity equal to one one-thousandth of a megawatt. kWh Kilowatt-hours, a measure of generator electric energy output. One kilowatt-hour is equal to one one-thousandth of a megawatt-hour.

MW Megawatts, a measure of generation capacity equal to 1,000 kilowatts.

MWh Megawatt-hours, a measure of the energy output of a generator. A generator operating at one MW of capacity for one hour produces one megawatt-hour of electricity.

PG&E Pacific Gas & Electric Company, the investor- owned utility that serves northern California, including the area around Lodi.

PURPA Public Utility Regulatory Policies Act, 16 U.S.C. §824a-3.

QFs Qualifying Facilities, cogeneration and small power production that are eligible to receive benefits under PURPA. See 18 C.F.R. §292.203.

Re-MAT Renewable Market Adjusting Tariff

vii

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INTRODUCTION

As the District Court concluded, “[d]espite the complex regulatory and factual background here, the key legal issues turned out to be straightforward, and

the scope of the parties’ actual dispute quite narrow.” See, ER13. The Public

Utility Regulatory Policies Act, Pub. L. No. 95-617, 92 Stat. 3117 (“PURPA”), see

16 U.S.C. §824a-3, requires a utility to purchase all energy offered by a QF.1 The

California Public Utilities Commission’s PURPA program, the Renewable Market

Adjusting Tariff (“Re-MAT”), violates this requirement because it imposes a cap

on PURPA purchases, and Winding Creek Solar LLC (“Winding Creek”) was

denied a PURPA contract solely because of the cap. As the District Court correctly

held, “[t]he plain meaning of [PURPA’s must-purchase obligation] is that utilities

must buy all of the energy and capacity offered by QFs. It does not require

significant legal analysis to conclude that CPUC’s imposition of caps in the Re-

MAT program violates the must-take obligation.” See, ER13.

The District Court was likewise correct when it concluded that Re-MAT’s

price adjustment mechanism, which automatically adjusts Re-MAT prices based

on arbitrary factors that are unrelated to a utility’s avoided costs, violates PURPA’s

1 “[Q]ualifying small power production facilit[ies]” under the statute and “Qualifying Facilities” or “QFs” under regulations of the Federal Energy Regulatory Commission (the “FERC”), see 16 U.S.C. §796(17)(C); 18 C.F.R. §292.203.

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requirement that avoided cost rates must be set based on the utility’s avoided costs, not a QF’s cost of production.

In light of these obvious violations, Winding Creek asked the District Court to restore it to where it would have been but for the illegal cap and order the

Defendant Commissioners of the California Public Utilities Commission

(collectively, the “CPUC”) to provide to Winding Creek the contract Winding

Creek should have received in 2013, the standard remedy in a situation like this.

Although the plain language of PURPA empowers the District Court “to require

[the CPUC] to comply with [PURPA’s] requirements” and to “issue such

injunctive or other relief as may be appropriate,” 16 U.S.C. §824a-3(h)(2)(B), the

District Court refused, incorrectly concluding that it lacked power to order an

effective remedy. If Winding Creek cannot obtain the contract that it was legally

entitled to in 2013 in a timely manner, PURPA becomes an empty shell, defeating

the entire purpose of the law.

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JURISDICTIONAL STATEMENT

Plaintiff-Appellant Winding Creek brought an enforcement action against

the CPUC under section 210(h)(2)(B) of PURPA. 16 U.S.C. §824a-3(h)(2)(B).

The District Court had jurisdiction under 16 U.S.C. §824a-3(h)(2) of PURPA, 28

U.S.C. §1331, and sections 314 and 317 of the Federal Power Act (“FPA”), 16

U.S.C. §791a et seq. 2

Following a bench trial, the District Court granted summary judgment for

Winding Creek against the CPUC [ER1], but the District Court refused to provide an effective remedy.3 Final judgment was entered on December 7, 2017 [ER23].

Winding Creek timely filed a notice of appeal on December 22, 2017 [ER21]. The

CPUC timely filed a cross-appeal on December 22, 2017. This Court has

jurisdiction over the appeal under 28 U.S.C. §1291.

2 Winding Creek satisfied the administrative exhaustion requirement of 16 U.S.C. §824a-3(h)(2)(A). See, ER169, ¶13; Winding Creek Solar LLC, 144 FERC ¶61,122 (2013); ER169, ¶15; Winding Creek Solar LLC, 151 FERC ¶61,103 (2015); Winding Creek Solar LLC, 153 FERC ¶61,027 (2015).

3 “ER” cites to Excerpts of Record. 3

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STATUTORY AND REGULATORY AUTHORITIES

All relevant statutory and regulatory authorities appear in the Addendum to this brief.

STATEMENT OF ISSUES

1. Whether the District Court correctly concluded that California’s Re-

MAT program violates PURPA because:

(a) Re-MAT’s quantitative caps violate PURPA’s must-purchase

requirement because they allow utilities to refuse purchases of any QF

output above the cap,

(b) whether Re-MAT’s price adjustment scheme, which relies on

arbitrary reduction unrelated to utility avoided cost, violates PURPA’s

requirement that rates for QF sales be set at the utility’s avoided cost.

for PURPA compliance even though it lacks a rate that is set at the

time of contracting, as PURPA requires.

2. Whether the District Court had the statutory authority to provide, and

should have provided, full relief to Winding Creek by putting Winding

Creek in the position it would have enjoyed but for the unlawful features of

the Re-MAT program.

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STATEMENT OF THE CASE

A. The Parties.

Cross-Appellant/Appellee Winding Creek is a developer of solar generating facilities. It is currently seeking to develop a 1 MW solar generating facility in

Lodi, California (“the Lodi facility”). ER11, ¶30. The Lodi facility is a QF pursuant to FERC’s regulations. ER2.

Appellees/Cross-Appellants are the Commissioners of the California Public

Utilities Commission, a California state agency. Under PURPA, it is the agency charged with implementing PURPA in the State of California. The CPUC’s Re-

MAT program, which it promulgated to carry out its enforcement obligations under PURPA, is at issue in this appeal.

Pacific Gas & Electric Company (“PG&E”) is the electric utility serving the area around Lodi. It is not a party to this case. It would purchase Winding Creek’s output if the Lodi facility is built.

B. Federal Statutory and Regulatory Background.

In 1978, as part of a package of legislation intended to address the energy crises of the 1970s, Congress enacted PURPA. Section 210 of PURPA, the provision relevant here, was intended to “accelerate the development of renewable and inexhaustible energy sources and convert the national economy to alternative fuel resources in order to protect this country from the problems that would

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otherwise occur.” H.R. Rep. No. 95-496(IV), at 14 (1977), reprinted in 1978

U.S.C.C.A.N. 8454, 8466. To achieve this goal, section 210 created a class of

“Qualifying Facilities” also known as “QFs” — small, renewable power production and cogeneration facilities – and conferred several specific benefits on

those facilities, including reducing regulatory barriers to their entry into the energy

markets and imposing a “must-purchase” obligation to overcome the reluctance of

vertically integrated monopoly utilities to purchase power from alternative

suppliers. See FERC v. Mississippi, 456 U.S. 742, 750 (1982).

The must-purchase obligation arises when a QF establishes a “legally

enforceable obligation” to sell its output, which is created when “the qualifying

facility has agreed to obligate itself to deliver at a future date energy and capacity

to the electric utility.” Order No. 69, 45 Fed. Reg. 12,214, 12,224.4 The must- purchase obligation has three key attributes.

First, under PURPA, electric utilities must purchase any electricity produced by QFs. Congress directed that “[FERC] shall prescribe . . . such rules as it determines necessary to encourage … small power production . . . which rules require electric utilities to offer to – … (2) purchase electric energy from

4 See Order 69, Small Power Production and Cogeneration Facilities; Regulations Implementing Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12,214 (Feb. 25, 1980) (“Order 69” or “PURPA Rulemaking”). Available at http://www.ferc.gov/industries/electric/gen-info/qual-fac/orders/order- 69-and-erratum.pdf.

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[qualifying] facilities.” 16 U.S.C. §824a-3(a) (emphasis added). FERC subsequently adopted rules providing that “[e]ach electric utility shall purchase

. . . any energy and capacity which is made available from a qualifying facility . . .

[d]irectly to the electric utility.” 18 C.F.R. §292.303(a)(1) (emphasis added). This regulation creates a “legally enforceable obligation” on the utility to purchase the electricity generated by a QF, typically through a contract. See 18 C.F.R.

§292.304(d)(2); JD Wind 1 LLC, 130 FERC ¶61,127, at ¶7 (2010).

Second, Congress specified that the rate that utilities are required to pay QFs shall not “exceed[] the incremental cost to the electric utility of alternative electric energy.” 16 U.S.C. §824a-3(b). FERC subsequently adopted rules providing that, for facilities constructed after PURPA’s passage, the rate for purchases from QFs must “equal[] the avoided costs” of the utility. 18 C.F.R. §292.304(b)(2)

(emphasis added); see also Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp.,

461 U.S. 402, 417 (1983) (upholding FERC regulation requiring PURPA rates to

be set at the “maximum rate authorized by PURPA”—a utility’s full avoided cost).

As FERC explained in Order No. 69, where it promulgated its PURPA rules,

“avoided costs [are] the costs to an electric utility of energy or capacity or both which, but for the purchase from a qualifying facility, the electric utility would generate or construct itself or purchase from another source.” Order No. 69, 45

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Fed. Reg. at 12,216.5 Recognizing that requiring a utility to pay its full avoided costs “would not directly provide any rate savings to electric utility consumers,”

FERC nevertheless “deemed it more important … [to] ‘provide a significant incentive for a higher growth rate’” of QF power production, because “the nation as a whole will benefit from the decreased reliance on scarce fossil fuels … and the

more efficient use of energy.” Am. Paper Inst., 461 U.S. at 415 (quoting 45 Fed.

Reg. at 12,222).

Third, FERC adopted a rule allowing QFs to choose different ways of

calculating a utility’s avoided costs. See 18 C.F.R. §292.304(d). As relevant here,

when a QF is selling to a utility under a legally enforceable obligation for a

specified term, FERC provided that “the rates for such purchases shall, at the

option of the qualifying facility exercised prior to the beginning of the specified

term, be based on either: (i) The avoided costs calculated at the time of delivery; or

(ii) The avoided costs calculated at the time the [QF’s] obligation [to sell] is

incurred.” 18 C.F.R. §292.304(d)(2) (emphasis added).

In other words, a QF can elect to have the utility’s avoided costs (and thus

its rate) determined on an ongoing basis, calculated when electricity is physically

5 “Energy costs are the variable costs associated with the production of electric energy,” e.g., “the cost of fuel, and some operating and maintenance expenses. Capacity costs are … associated with providing the capability to deliver energy,” e.g., “the capital costs of facilities.” Order No. 69, 45 Fed. Reg. at 12,216.

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delivered to the utility; or the QF can instead elect to have the utility’s avoided costs calculated when the contract is entered, so that it can “establish a fixed contract price for its energy and capacity at the outset of its obligation.” Order No.

69, 45 Fed. Reg. at 12,224. FERC understood that “in order to be able to evaluate the financial feasibility of a [QF], an investor needs to be able to estimate, with reasonable certainty, the expected return on a potential investment before construction of a facility.” Id. at 12,218. “Avoided costs calculated at the time the obligation is incurred,” 18 C.F.R. §292.304(d)(2)(ii), provides this reasonable certainty. FERC recognized that the utility’s avoided costs calculated at the time the obligation is incurred may turn out to be quite different than the utility’s

avoided costs at the time the power is actually delivered. Order No. 69, 45 Fed.

Reg. at 12,224. But FERC believed that “in the long run, ‘overestimations’ and

‘underestimations’ of avoided costs will balance out,” and it emphasized “the need for certainty with regard to return on investment in new technologies.” Id.

(emphasis added.); see also JD Wind, 130 FERC ¶61,127, at ¶23 (“[FERC] has … consistently affirmed the right of QFs to long-term avoided cost contracts … with rates determined at the time the obligation is incurred, even if the avoided costs at the time of delivery ultimately differ from those calculated at the time the obligation is originally incurred.”). Thus, if a QF is able to sell at a profit because its costs are less than the utility’s avoided cost, that furthers the purpose of the

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statute: it creates economic incentives for further investment in renewable energy, while leaving ratepayers no worse off. See Am. Paper Inst., 461 U.S. at 417

(affirming FERC’s decision to require utilities to pay a rate equal to their avoided

costs, which provides the “maximum incentive for the development of

cogeneration and small power production”); Order No. 69, 45 Fed. Reg. at 12,222.

C. State Implementation of PURPA.

PURPA directed state regulatory agencies, such as the CPUC, to implement the FERC’s regulations governing sales to QFs (a retail transaction—section

210(a)(1)) and purchases from QFs (a wholesale transaction—section 210(a)(2)).

See 16 U.S.C. §824a-3(f)(1); see also Order No. 69, 45 Fed. Reg. at 12,216 (“each

State regulatory authority … must implement these rules.”).

Under PURPA, the FERC still maintains the ultimate authority to regulate wholesale rates. See FPA §§205, 206, see also, Wheelabrator Lisbon, Inc. v.

Conn. DPUC, 53 F.3d 183, 188 (2d Cir. 2008) (“under the PURPA regulatory regime, FERC—and not state agencies—[are] responsible for regulating the rates charged by qualifying facilities in power purchase agreements.”) But States have the authority, subject to FERC’s review, to calculate avoided costs in accordance with FERC’s rules, including compelling the entry into long-term contracts. In these respects, PURPA reflects a limited exception to FERC’s otherwise exclusive authority over wholesale electricity sales.

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D. PURPA’s Enforcement Mechanisms.

PURPA QF purchase obligations are enforced primarily, though not exclusively, through sections 210(g) and (h). See 16 U.S.C. §824a-3(g) and (h).

Section 210(g) provides for actions against electric utilities 6 “to enforce any requirement established by a State regulatory authority or nonregulated electric utility pursuant to [section 210(f)].” Jurisdiction for those suits is allocated between state and federal courts under 16 U.S.C. §2633. Important to this case is the fact that section 210(h)(1) specifically excludes from section 210(g) jurisdiction such “operations of an electric utility …or a qualifying small power production facility as are subject to the jurisdiction of the” FERC under part II of the FPA. Winding Creek’s wholesale electric sales are subject to the FERC’s jurisdiction under part II of the FPA.

Section 210(h) provides for actions against state regulatory authorities like the CPUC to enforce PURPA’s requirements.7 This case is an action under section

210(h). In a section 210(h) action, (i) the requirements of section 210(f) are treated as a rule enforceable under the FPA, see section 210(h)(2)(A), (ii) a State

6 FERC regulates “public utilities,” which are, in fact, private, investor-owned utilities like PG&E. City of Redding v. FERC, 693 F.3d 828, 831 n.5 (9th Cir. 2012).

7 Section 210(h) also provides for actions against non-regulated electric utilities, such as municipally-owned utilities or rural electric cooperatives. See 16 U.S.C. § 824(f) (generally exempting governmental and cooperative utilities from FERC regulation). 11

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regulatory authority is treated as a person under the FPA, see id., and (iii) the

FERC’s PURPA regulations under section 210(a) are treated as rules under the

FPA to the extent they relate to “any operations of an electric utility …or a qualifying small power production facility” subject to FPA part II jurisdiction.

Winding Creek’s proposed wholesale electric sales from the Lodi Facility are subject to Part II jurisdiction..

E. California’s Implementation of PURPA and the Re-MAT Program.

1. California’s Implementation of PURPA.

In order to implement PURPA, the CPUC in the early 1980s developed various “Standard Offer” contracts to be offered by utilities to QFs. Indep. Energy

Prods. Ass’n v. Cal. Pub. Utils. Comm’n, 36 F.3d 848, 852 (9th Cir. 1994). Such

contracts contained terms and conditions pre-approved by the CPUC, and utilities

were required to make them available to all QFs. ER143, Lesser Decl. ¶18. “In

accordance with federal regulations, the standard offer contracts provide[d] the

QFs a choice to receive avoided cost rates which are calculated at the time of

energy delivery or which are fixed at the time the contract is signed.” Indep.

Energy Prods., 36 F.3d at 852. Some of these contracts had durations as long as

30 years. ER143, Lesser Decl. ¶18.

When PURPA was enacted, utilities generally built and owned their own

generating plants or procured power through contracts with other utilities. Thus, in

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determining an avoided cost rate to be fixed at the time a PURPA contract was

signed, utilities developed long-term forecasting models that predicted the costs

they would incur in building new generation plants or procuring electricity from

another utility, but for the electricity provided by QFs. ER143-4, Lesser Decl. ¶19;

Indep. Energy Prods., 36 F.3d at 852 (“In projecting future avoided costs at the

time the contracts were executed, the CPUC had considered the anticipated cost to

the utility of its own fuel sources.”). As FERC explained in Order No. 69, 45 Fed.

Reg. at 12,216: “If, by purchasing electric energy from a [QF], a utility can reduce

its energy costs or can avoid purchasing energy from another utility, the rate for a

purchase from a [QF] is to be based on those energy costs which the utility can

thereby avoid.”

Beginning in 1992, competitive wholesale power markets began to emerge,

in which power producers independent of utilities compete to sell their electricity

to utilities. ER 144, Lesser Decl. ¶22. The development of competitive wholesale

power markets—and, in particular, the development of a real-time spot market for

electricity—changed the way utilities determined their avoided costs. As Winding

Creek’s expert economist Dr. Jonathan Lesser explained at trial, in a competitive

market, the avoided cost at any given moment is the market price of electricity at

that moment. ER144-5, Lesser Decl. ¶¶23-24. Such real-time calculation of

avoided costs is appropriate for a QF that has chosen to have its rate based on the

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utility’s avoided costs “calculated at the time of delivery.” 18 C.F.R.

§292.304(d)(2)(i). However, for a QF that chooses to have its rate based on the utility’s avoided costs “calculated at the time the obligation is incurred,” id.

§292.304(d)(2)(ii), it is necessary to forecast future market prices for electricity.

To do so, utilities generally rely on published long-term forward prices for competitive wholesale markets, together with computer models that determine the break-even price point for a hypothetical new power plant. ER145-6, Lesser Decl.

¶¶24-27.

For example, in 2004, using these techniques, the CPUC developed an approach called the “Market Price Referent”—based on the break-even price point for a hypothetical new natural gas-fired power plant—to determine a utility’s avoided costs over 10, 15, and 20 years. ER147-8, Lesser Decl. ¶¶31-32; ER129,

CPUC D.12-05-035 (May 24, 2012) (“CPUC May 2012 Order”) at 7 (“The

[Market Price Referent] was designed by the Commission to reflect the long-term

ownership, operating, and fixed-price fuel costs for a new 500 MW natural gas-

fired combined cycle gas turbine.”). In 2011, the Market Price Referent would

have paid a generator that intended to come on-line in 2013 a base price of

$93.75/MWh for 20 years. ER180, CPUC May 2012 Order at 8.

The CPUC subsequently replaced the Market Price Referent approach with

Re-MAT. ER186, CPUC May 2012 Order at 33. The CPUC also discontinued the

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availability of the Standard Offer contracts that it had originally approved in the

1980s (though already-existing contracts remained in effect). Indep. Energy

Prods., 36 F.3d at 852. Today, the only Standard Offer contract available for QFs

of 20 MW or less was approved in 2010. CPUC Decision D.10-12-035 (Dec. 16,

2010). That Standard Offer contract, discussed further infra at II.C, pays an

avoided cost rate based on a complex pricing formula. Crucially, the formula includes variables whose values cannot be determined in advance of the actual delivery of electricity, such as the price of natural gas when the QF’s electricity is delivered.8 See ER159-60, Lesser Decl. ¶¶63-65.

2. The Re-MAT Program.

In 2012, the CPUC created the Re-MAT program as part of its

implementation of PURPA and as a replacement of the long-term contracting

program that was previously available to certain QFs. ER174, CPUC May 2012

Order at 2. The CPUC recognized that the Re-MAT program needed to comply

with PURPA, ER184, id. at 12, and that PURPA required that the rate for

purchases be “an avoided cost for utilities’ wholesale purchases from Qualifying

Facilities.” ER183, id. at 11; ER187, id. at 39. Eligibility to participate in the Re-

MAT program is limited to certain QFs. ER184, id. at 12; ER226, id. at 105. The

8 Generators fired with natural gas often set the market-clearing price for electricity in California. Electricity price forecast models therefore often incorporate natural gas prices as an important variable. 15

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Re-MAT program is structured as follows:

a. The Queue.

In order for a QF to participate in the Re-MAT program, it must submit an application demonstrating that it meets certain project viability criteria, including that it will commit to being online within 24 months of the contract date (with the possibility of one six-month extension). ER194, CPUC May 2012 Order at 46;

ER213, id. at 72. A QF whose application is accepted is then assigned to a queue established “on a first-come-first-served basis….” ER194, id. at 46. Every two months, the utility “will offer generators a … contract at that two-month Re-MAT price in order of the Re-MAT queue. A generator can accept or reject the price. If a generator accepts the price, [and if the program is not yet oversubscribed, as described below,] it enters into a … contract. The price is fixed for the term of contract. If the generator declines a contract at that price, it maintains its position in the queue until the next two-month period.” Id.

b. Quantity Caps.

Utilities are obligated to contract for only a certain limited quantity of QF

generation under the Re-MAT program. State-wide, “the program cap [is] 750

MW.” ER217, CPUC May 2012 Order at 76; ER8, ¶14. That 750 MW total is

allocated among the state’s investor-owned utilities proportionate to their

customers’ share of state-wide peak electricity demand. ER220, id. at 79; ER9,

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¶15. The obligation of PG&E, the electric utility that serves the territory in which

Winding Creek is located, is limited to 218.8 MW. ER220-1, id. at 79-80; ER9,

¶16. Further, the utilities subtract from their obligation the amount of any generation already under contract under a prior CPUC program. In the case of

PG&E, that subtraction leaves the utility with the obligation to purchase 149.8

MW under Re-MAT. ER243.

Each utility’s remaining obligation is then divided into three equal categories: one for “baseload” generation, such as biogas and geothermal facilities; one for “peaking, as-available” generation, such as solar photovoltaic facilities; and one for “non-peaking, as-available” generation, such as wind facilities.

ER191-2, CPUC May 2012 Order at 43-44, ER9, ¶16. Thus, PG&E is obligated to purchase only one-third of 149.8 MW total Re-MAT obligation – that is, 49.9 MW

– from solar facilities. ER243; ER9, ¶16. PG&E’s remaining capacity as of the last reporting period is 38.869 MW.9

Finally, the Re-MAT program further limits the utility’s obligation to purchase from QFs at any given time. Specifically, in any two-month program period, PG&E is obligated to purchase only up to 5 MW from each of the three categories of facilities, no matter how many QFs are willing to sell at the offer price for that program period. ER232, CPUC D.13-05-034 (May 23, 2013)

9 https://pge.accionpower.com/ReMAT/home.asp. 17

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(“CPUC May 2013 Order”) at 12; ER9, ¶17. Thus, when PG&E makes offers in order of the queue every two months, it stops once it has contracted for 5 MW.

Indeed, PG&E may stop even before it has contracted for 5 MW. If the capacity of the next project in the queue is greater than the remaining available capacity (for example, if the next project is 1.5 MW, but PG&E has already contracted for 3.75

MW during that program period), no contract will be offered to the next project in the queue, and the 5 MW allocation will be deemed fully subscribed. ER240-1, id. at 20-21.

c. Re-MAT Pricing.

The CPUC set a starting offer price for the Re-MAT program at

$89.23/MWh. ER8, ¶12. The price adjusts upwards or downwards every two months based on the willingness of QFs to accept the previous offer price. If QFs are unwilling to supply at least 1 MW to PG&E at the offer price, and there are at least 5 unaffiliated bidders in the queue, then the offer price will adjust upward for the next procurement, to be held two months later. ER233, CPUC May 2013

Order at 13; ER195, CPUC May 2012 Order at 47. If QFs are willing to supply at least 5 MW to PG&E at the offer price, then the offer price will adjust downward for the next 5 MW procurement. ER233, CPUC May 2013 Order at 13. If QFs are willing to supply at least 1 MW but fewer than 5 MW to PG&E at the offer price, or if there are fewer than 5 unaffiliated bidders in the queue, then the offer price

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will remain the same for the next 5 MW procurement. Id.; ER195-7, CPUC May

2012 Order at 47. The price adjustments are made according to a CPUC-directed formula. ER195-7, CPUC May 2012 Order at 47-49; ER195, CPUC May 2013

Order at 13.

The CPUC’s rationale for its price-adjustment mechanism was to identify

the lowest price at which QFs would be willing to supply the desired quantity of

electricity to the utilities, based on the costs faced by the QFs. The CPUC

elaborated: “[T]he rationale for a market-based price is that all of the generator's

costs are included in the price because a generator would not bid something lower

than its costs. In a market-based process, the seller determines the price it wishes to

seek based on its understanding of the underlying project costs, and changes in

those costs.” ER228, CPUC D.13-01-041 (Jan. 24, 2013) (“CPUC January 2013

Order”) at 6.

The Re-MAT’s initial starting price of $89.23/MWh. ER254, CPUC

Answer ¶58. Solar QFs were willing to supply more than the 5 MW cap at that

price, so the 5 MW allocation was deemed to be fully subscribed. Thus, the price

for “peaking, as-available” facilities, such as solar facilities, adjusted downward to

$85.23/MWh for the next program period. ER253-4, ¶¶57, 59. During that next

program period, beginning January 1, 2014, solar QFs were again willing to supply

more than 5 MW, and the allocation was deemed fully subscribed. Thus, the offer

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price adjusted downward again, to $77.23/MWh for the next program period.

ER253-4; ¶¶57, 60. During that program period, beginning March 1, 2014, solar

QFs were again willing to supply more than 5 MW, and the allocation was deemed fully subscribed. Accordingly, the offer price adjusted downward yet again, to

$65.23/MWh, for the next program period. ER253-4, ¶¶57, 61. The latest offer price is $61.23/MWh.10 The other two categories, “baseload” and “non-peaking, as available” have remained at $89.23/MWh.11

F. Winding Creek’s Participation in the Re-MAT Program.

On October 4, 2013, Winding Creek submitted a Re-MAT application. That application was accepted on November 12, 2013, and Winding Creek’s 1 MW

Lodi solar facility was placed in PG&E’s queue for peaking, as-available resources. ER168, ¶7. Winding Creek accepted the Re-MAT terms for the Lodi facility at a rate of $89.23/MWh with the then existing PG&E time-of-use

(“TOU”) factors, which was the initial price for the program offered in the two- month period beginning November 1, 2013. ER168, ¶8. However, because of the

5 MW cap for each program period and Winding Creek’s randomly assigned place in the queue, Winding Creek was never given a contract at $89.23/MWh. ER168,

¶9; ER11, ¶31.

10 https://pge.accionpower.com/ReMAT/home.asp.

11 Id. 20

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By the time PG&E reached Winding Creek’s place in the queue, which was

the program period beginning March 1, 2014, the Re-MAT price had fallen to

$77.23/MWh. ER11, ¶32. Subsequently, Winding Creek has received offers from

PG&E at prices of $65.23/MWh and lower. ER168, ¶10. These rates are too low

to allow Winding Creek to move forward with development, so Winding Creek

refused these offers and retained its place in the queue. Id.; see also, ER11, ¶32.

The Lodi facility currently occupies the top spot in PG&E’s queue for peaking, as-

available facilities. ER168, ¶11, ER11, ¶32.

G. PURPA’s Key Role In Reducing Greenhouse Gas Emissions.

PURPA is still the only federal law mandating that utilities purchase renewable energy. Hence, PURPA “was and remains a primary incentive for renewable power development.” Steven Ferrey et al., Fire and Ice: World

Renewable Energy and Carbon Control Mechanisms Confront Constitutional

Barriers, 20 Duke Envtl. L. & Pol’y F. 125, 140 (2010). PURPA is therefore a

critical tool for reducing greenhouse gas emissions and the need for action is

urgent.

As CPUC acknowledges, “we are at a tipping point to address anthropogenic climate change.” ECF 165 at 23, and delay in deploying renewable energy generation from facilities such as Winding Creek’s causes Californians irreparable harm. Id. (“Ultimately, those suffering the most irreversible harm would be

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Californians and the broader public.”) Climate impacts from global warming are already being felt in California through increased fires, floods, severe storms and heat waves, and will only become more frequent and more costly. Recently, the

U.S. Administration released a dire report on the prospects for the climate. See

USGCRP, 2017: Climate Science Special Report: Fourth National Climate

Assessment, Volume I [Wuebbles, D.J., D.W. Fahey, K.A. Hibbard, D.J. Dokken,

B.C. Stewart, and T.K. Maycock (eds.)]. U.S. Global Change Research Program,

Washington, DC, USA, 470 pp, doi: 10.7930/J0J964J6.12 The report concludes that

“[s]ea level rise will be higher than the global average on the East and Gulf Coasts of the United States.” Id. Stronger storms will be more frequent raising the costs to recover from such storms. The east coast in particular will see more frequent and stronger storms and hurricanes. Id. at Chapter 9.13 See also, id. at Fig. 9.2.

In contrast to California’s robust efforts to reduce greenhouse gases, many other states have done little or nothing. Many states now have laws mandating that utilities purchase at least some renewable energy, although generally far below

California standards, while other states have no such laws, or have only a voluntary program. Thus, for much of the country, PURPA remains the nation’s most important weapon to battle climate change. CPUC’s actions here undermine

12 https://science2017.globalchange.gov/chapter/executive-summary/.

13https://science2017.globalchange.gov/chapter/9/. 22

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PURPA by attempting to change the core understanding of “avoided cost” and by severely constraining the effectiveness of remedies for PURPA violations. Despite

California’s otherwise laudable efforts to reduce greenhouse gas emissions, a

“win” for CPUC here would really be loss because it would limit the effectiveness of greenhouse gas reduction efforts across the rest of the nation, ultimately undermining California’s own efforts in this area.

H. Proceedings Below.

The District Court held a bench trial to resolve disputed issues of fact. Then, on December 6, 2017, the District Court issued summary judgment in Winding

Creek’s favor, concluding that the Re-MAT program does not comply with

PURPA because the program caps are inconsistent with PURPA’s must-purchase obligation and because the “arbitrary rules” governing Re-MAT’s price adjustment mechanism “stray[] too far from basing prices on a utility’s but-for cost, which the statutes and regulations require.” ER14. But the Court refused to order the CPUC to award Winding Creek the contract it would have had in the absence of these violations. ER20. This appeal followed.

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SUMMARY OF THE ARGUMENT

The District Court correctly invalidated the unlawful bi-monthly cap in the

Re-MAT. Because it prevents QFs which are ready and willing to sell their power from obtaining a PURPA contract, the cap flatly violates PURPA’s must-purchase requirement. Re-MAT’s price adjustment mechanism is also invalid because it adjusts QF rates based on factors having nothing to do with utility avoided costs, and the District Court therefore properly concluded that the price adjustment mechanism violates PURPA.

The District Court also correctly rejected the CPUC’s claim that its Standard

Contract program creates an option for Winding Creek that is permissible under

PURPA. The Standard Contract contains pricing variables, particularly highly volatile natural gas spot market prices, that cannot be predicted at the outset of the contract, and the Standard Contract program therefore plainly violates the requirement that Winding Creek have the option of entering into a QF contract with avoided cost rates fixed at the time of contracting.

The invalid pricing cap was the sole reason Winding Creek did not receive a

PURPA contract in 2013. Winding Creek asked the District Court to put it in the position it would have occupied “but for” the illegal cap, which has long been accepted as the standard remedy for bidders who were denied a contract award because of an improper process.

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Ignoring PURPA’s plain language empowering it to “issue such injunctive

or other relief as may be appropriate,” the District Court found that Winding Creek

must file yet another lawsuit, this one in state court, to obtain relief from CPUC’s

violations. The Court’s conclusion is contrary to the plain language of the statute and relies on cases which have no application here. This Court should therefore order the District Court to require the CPUC to apply the Re-MAT without the unlawful caps and pricing adjustment. The result would be that Winding Creek will receive the contract it should have received in 2013, and which it was denied

solely because of Re-MAT’s illegal bi-monthly quantity cap.

ARGUMENT

I. Standard Of Review.

This Court reviews de novo orders granting summary judgment. See Szajer v. City of Los Angeles, 632 F.3d 607, 610 (9th Cir. 2011). However, the District

Court’s findings of fact following the bench trial are subject to the clearly erroneous standard of review. Husain v. Olympic Airways, 316 F.3d 829, 835 (9th

Cir. 2002) aff’d 540 U.S. 644 (2004) (“if the district court's findings are plausible in light of the record viewed in its entirety, the appellate court cannot reverse even if it is convinced it would have found differently.”)

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II. The District Court Correctly Invalidated The Caps And Pricing Adjustments of the Re-MAT.

A. The District Court Correctly Concluded That The Re-MAT Caps Flatly Violate PURPA’s Must-Take Obligation.

As the District Court reasoned, “[t]he plain meaning of [the must-take] requirement is that utilities must buy all of the energy and capacity offered by

QFs. It does not require significant legal analysis to conclude that CPUC’s

imposition of caps in the Re-MAT program violates the must-take obligation.”

ER13.

Re-MAT arbitrarily imposes a 5 MW monthly limit on the obligation for

PG&E (and other utilities participating in the program). See ER232, 240, CPUC

May 2013 Order at 12, 20; ER130-1 Lee Report ¶¶8-9, 29-31. Specifically, CPUC

“directed PG&E . . . to offer 5MW for each of the three product types for each bimonthly program period until the available megawatts for that product type falls below 5MW.” ER232, CPUC May 2013 Order at 12; see also ER240, id. at 20

(“Today, we adopt a limit on the amount of megawatts available in a product type during a bi-monthly period.”). Indeed, the bimonthly cap can, in practice, be even lower than 5 MW. This is because PG&E is not required to contract for more than

5 MW, and thus if the next project in the queue would push PG&E over the 5 MW

limit (say, for example if it had already contracted for 2.1 MW and the next project

is 3.0 MW), then no further contracts will be offered and PG&E will deem the 5

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MW allocation fully subscribed. See ER240, CPUC May 2013 Order at 20. Even the CPUC’s expert witness testimony makes clear that the 5 MW cap is a concrete limitation on the ability of QFs to sell to utilities in any one program period: “Q.

Now, if more than five megawatts of solar QFs want to sell to PG&E in any particular program period at the Re-MAT price for that period, they can’t all sell, right? A. Correct.” ER73, Trial Tr. at 175: 7-10.

This cap flatly violates FERC’s must-take rule, adopted under PURPA, that

“[e]ach electric utility shall purchase . . . any energy and capacity which is made

available from a qualifying facility . . . [d]irectly to the electric utility.” 18 C.F.R.

§292.303(a)(1) (emphasis added). FERC has emphasized that this requirement

means that if a QF wants to sell to a utility at the utility’s avoided cost rate, the

utility must purchase from the QF. A utility may not delay that purchase, nor may

a state create a scheme that places hurdles in the path of a QF that desires to sell

electricity to a utility. See FLS Energy, Inc., 157 FERC ¶61,211 at P.24 (“The

Commission has explained that the term ‘legally enforceable obligation; is broader

than simply a contract between an electric utility and a QF, and that a state may not

limit the methods through which a legally enforceable obligation may be created to

only a fully executed contract. . . The Commission explained in JD Wind 1 LLC

[cited above] that the establishment of a legally enforceable obligation turns on

the QF’s commitment, and not the utility’s actions.” (emphasis added) (footnote

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omitted)).

The Re-MAT’s cap plainly violates the must-take rule set forth in 18 C.F.R.

§292.303(a). If a QF “makes available” energy and capacity to PG&E, but PG&E has already been deemed to satisfy the 5 MW of generation from QFs within a two-month period, the Re-MAT cap means that PG&E is not obligated to purchase the QF’s available energy and capacity. And this limitation is not theoretical:

Winding Creek’s injury in this case arises directly from the fact that it was randomly placed behind more than 5MW of QFs in the first program period, despite having timely applied prior to the inception of the Re-MAT program.

ER168; ER73-4, Trial Tr. 175:23-176:4. Because of this random placement,

Winding Creek was not allowed to obtain a contract at the $89.23 per MWh price offered to the first group of QFs. ER168, ¶¶8, 9. By the time Winding Creek was offered a contract, for the period beginning on March 1, 2014, the Re-MAT price

had fallen to $77.23 per MWh, a rate insufficient for Winding Creek to move

forward with development. ER168, ¶9. That violates FERC’s rule, under which

“the establishment of a legally enforceable obligations turns on the QF’s commitment, and not the utility’s actions.” FLS Energy, Inc., 157 FERC ¶61,211 at P.24. Because the Re-MAT program imposes a 5 MW bi-monthly cap on

PG&E’s procurement obligation, Winding Creek was unable to sell energy and capacity it had available and wished to commit for the posted avoided-cost rate of

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$89.23 per MWh.

Compounding this illegality, the Re-MAT program uses the 5 MW caps to drive the arbitrary Re-MAT price adjustment mechanism. FERC has made clear, in this exact context, that “the use of the term ‘legally enforceable obligation’ is intended to prevent the utility from delaying the signing of a contract, so that a later and lower avoided cost is applicable.” FLS Energy, Inc., et al., 157 FERC ¶

61,211 at P25. Yet, by imposing an illegal cap and using that cap to force price

reductions, that is precisely what CPUC has done here.

B. The District Court Correctly Concluded That Pricing Adjustments Under Re-MAT Are Not Based On A Utility’s “Avoided Costs,” And Thus Are Void.

After the first Re-MAT program period, the Re-MAT price in the solar

category dropped by $4/MWh. By the time Winding Creek was offered a contract

by PG&E the price had adjusted to $77.23/MWh, a price too low for Winding

Creek to build its facility. The District Court correctly held that the pricing

adjustments under Re-MAT, which continued to prevent Winding Creek from

obtaining the contract to which it was entitled, are not based on a utility’s “avoided

costs,” and thus void.

1. Avoided Costs For Purposes Of 18 C.F.R. §292.304(d)(2) Are The Costs A Utility Would Incur For Purchasing Energy And Capacity From A Non-QF Source.

In PURPA, Congress specified that the rate utilities are required to pay QFs

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shall not “exceed[] the incremental cost to the electric utility of alternative electric energy.” 16 U.S.C. §824a-3(b). Implementing that directive, FERC adopted a rule providing that the required rate for a utility’s purchase of electricity from a QF must “equal the avoided costs” of the utility. 18 C.F.R. §292.304(b)(2). As FERC has held, “‘[a]voided costs’ is defined as ‘the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.’” Am. Ref-Fuel Co., 107 FERC ¶61,016, P13

(2004) (quoting 18 C.F.R. §292.101(b)(6) (2003)); see also Order No. 69, 45 Fed.

Reg. at 12,216 (avoided costs are “the costs to an electric utility of energy or

capacity or both which, but for the purchase from a qualifying facility, the electric

utility would generate or construct itself or purchase from another source”). As Dr.

Lesser testified at trial: “An avoided cost is defined as a cost that the utility would

otherwise incur if it had to buy power from a non-QF source.” ER38, Trial Tr. at

33:6-7; see ER143, Lesser Direct ¶17 (“Thus, an avoided cost is a but for price: but

for purchasing electricity from QFs, an electric utility would be required to pay to

obtain that electricity from another source.”); ER38, Trial Tr. 33:6-7.

Provided that a calculation is consistent with the above definition, there are

multiple ways an avoided cost can be determined. 18 C.F.R. §292.304(e) lists

various factors that “to the extent practicable” should be taken into account when

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determining a utility’s avoided cost. And, as Dr. Lesser explains, the actual

methodology of calculating an avoided cost can vary. One way of calculating an

avoided cost “is to ask what the utility would have paid to buy the same quantity of

electricity on the spot market. Under this approach, if the price of electricity

during the three o’clock hour of the afternoon is $100 per megawatt-hour

(‘$/MWh’), that is the utility’s avoided cost in that hour.” ER145 ¶24. Another

approach might be to use a formula, like the SRAC rate (i.e., short-run avoided

cost rate) in the Standard Contract, that uses variables whose values are

contemporaneous with delivery and thus result in a weekly or monthly as-delivered

price. Both of these would be permissible methods of calculating avoided costs

under subsection 292.304(d)(2)(i). Yet another approach would be to use

forecasting methods “to ask what the utility would need to pay to enter a long-term

contract of similar length with a non-QF resource or to build such a resource

itself.” ER145 ¶¶24, 25. This is the approach described in subsection

292.304(d)(2)(ii).

The key point here, however, is that whatever methodology a state uses,

PURPA requires that QFs be paid based on the utility’s avoided costs. For all the

reasons stated herein, after the first program period, the Re-MAT program fails to

provide such a rate.

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2. The Re-MAT Pricing Adjustment Bears No Relation To Avoided Costs.

Subsequent to passage of PURPA, FERC promulgated 18 C.F.R.

§292.304(b)(2), providing that the required rate for purchase of energy and

capacity from QFs must “equal[] the avoided costs” of the utility. See also Am.

Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 417 (1983)

(upholding FERC regulation requiring utilities to purchase electricity from

qualifying facilities at the “maximum rate authorized by PURPA,” namely a

utility’s full avoided cost). FERC defined “[a]voided costs” to mean “the

incremental costs to an electric utility of electric energy or capacity or both which,

but for the purchase from the qualifying facility or qualifying facilities, such utility

would generate itself or purchase from another source.” 18 C.F.R. §292.101(b)(6)

(emphasis added). The Re-MAT program does not comply with PURPA, because,

as explained below, the price it offers is not based on the costs the utility would

incur but for its purchase from QFs. Instead, the Re-MAT price is based on the

price at which QFs are willing to sell. PURPA explicitly rejects this approach. As

FERC has stated, “the basis for the determination of rates for purchases should be

the utility’s avoided costs and should not vary on the basis of the costs of the

particular qualifying facility.” Order No. 69, 45 Fed. Reg. at 12,222; Indep.

Energy Prods., 36 F.3d at 857 (“[FERC’s] regulations are clear that the rate to be

paid by utilities for electric energy be determined according to the avoided cost to 32

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the utility of generating that energy or purchasing it elsewhere, and not according to the QF’s efficiency”).

The pricing under Re-MAT is best understood in two parts: the initial price offered under the program at its inception, and subsequent price adjustments that have occurred since that time. The initial Re-MAT price, for the first two-month

“program period” beginning on November 1, 2013, was $89.23 per MWh. ER254,

CPUC Answer ¶58. That price was based on the result of a competitive solicitation for renewable power held in 2011 under CPUC’s auspices. ER192-3,

CPUC May 2012 Order at 44-45. That competitive solicitation – known as the

Renewable Auction Mechanism – was open to all renewable generators of less than 20 MW, regardless of whether they were QFs. Id.; CPUC Decision D.10-12-

048 at 73 (Dec. 16, 2010) (“[The Renewable Auction Mechanism] is not a QF program…. A project may certify as a QF if it wants, but it need not do so to be eligible...”).14 Winding Creek does not dispute that this initial rate was a proper

avoided cost rate, for among other reasons, because that resulting rate was close to the Market Price Referent.

However, the subsequent price adjustments that have occurred since the initial $89.23 per MWh rate have absolutely nothing to do with the costs that the

14 http://docs.cpuc.ca.gov/PublishedDocs/WORD_PDF/FINAL_DECISION/128432. PDF. 33

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utility would incur “but for the purchase from the qualifying facility or qualifying facilities.” 18 C.F.R. §292.101(b)(6). ER8, ¶10. Thus, they do not reflect “avoided

costs.” As explained in CPUC’s May 2012 Order establishing the Re-MAT program, after the initial program period the price in the next period can adjust either up or down by $4 increments depending on the extent to which QFs in the queue accept the price offered in the first period. ER195, CPUC May 2012 Order at 47.

As CPUC’s expert witness Ms. Cheryl Lee testified under questioning from the District Court, those administratively set $4 per MWh increments were

“arbitrarily selected,” and have absolutely nothing to do with changes in utilities’ avoided costs. ER77, Trial Tr. 179:20-25. That testimony is confirmed by the text of the relevant CPUC decisions, in which CPUC explains that the rationale for the price-adjustment mechanism was to identify the lowest price at which a QF would be willing to supply the desired quantity of electricity to utilities based on the costs faced by the QF generators: “[Re-MAT] allows generators to set the market price through the bidding process, which theoretically will ensure the price is neither too high nor too low but, instead, will be reasonable to cover the generator’s costs and

encourage broad participation in the market. ER211, CPUC May 2012 Decision

at 63 (emphasis added); see also ER77, Trial Tr. at 179:13-19 (noting that the basis for a $4 adjustment was the knowledge of what QF generators were willing to

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accept as a price in the previous program period). But a rate adjustment mechanism based on a QF’s willingness to accept a certain price based on its own

costs says nothing about the costs a utility would avoid by purchasing electricity

from a generator other than a QF. It is undisputed that the Re-MAT program does

not even attempt to model the costs the utility would incur but for its purchase

from QFs. For that simple reason, pricing adjustments under Re-MAT are not

based on avoided costs as required by 18 C.F.R. §§292.304(b)(2) and

292.304(d)(2).

It is no answer for CPUC to claim that the Re-MAT price reflects the costs

that a utility avoids by purchasing from one QF instead of another QF. That is so

for two reasons. First, FERC has defined “avoided costs” to mean the costs the

utility would incur “but for the purchase from the qualifying facility or qualifying

facilities.” 18 C.F.R. §292.101(b)(6) (emphasis added). That “but for” price is the costs of buying from a non-QF. And as the FERC explained in its PURPA

Rulemaking, it is the highest marginal cost that the QF displaces, whether existing or in the future. See Order No. 69, 45 Fed. Reg. at 12,216 :

The Commission has added the term ‘incremental’ to modify the costs which an electric utility would avoid as a result of making a purchase from a qualifying facility. Under the principles of economic dispatch, utilities generally turn on last and turn off first their generating units with the highest running cost. At any given time, an economically dispatched utility can avoid operating its highest-cost units as a result of making a purchase from a qualifying facility. The utility’s avoided incremental costs (and 35

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not average system costs) should be used to calculate avoided costs.

Second, a utility is not permitted to avoid purchasing electricity from a QF.

FERC’s rules direct that “[e]ach electric utility shall purchase . . . any energy and capacity which is made available from a qualifying facility . . . [d]irectly to the electric utility.” 18 C.F.R. §292.303(a)(1) (emphasis added). This regulation – the

“must take” requirement – requires the utility to purchase all electricity generated by a QF.15 It makes no sense to define the utility’s avoided costs in reference to

the costs of purchasing electricity from another QF, when the utility is required to

purchase from that QF too. See ER49, Trial Tr. at 55:18-21.

CPUC has not attempted to hide the reason it designed the Re-MAT

program in the way that it did. In CPUC Decision 12-05-035, which promulgated

the Re-MAT program, CPUC stated that it adopted a “market-based approach” –

by which it meant an approach that required one QF to bid against another –

because such an approach was “in the best interest of California electricity

customers” by identifying the lowest price at which QFs were willing to sell.

ER210-11, CPUC May 2012 Order at 62-63. CPUC’s rationale for its adjusting

price mechanism is to have the price vary on the basis of the costs of the particular

15 FERC may permit states to suspend the must-take obligation under 16 U.S.C. §824a-3(m)(1), but, as Mr. Colvin testified, the must-take obligation in California has not been suspended for QFs of 20 megawatts or less. See ER72, Trial Tr. 131:4-6, ER116-7, Colvin Dep. 13:23-14:1.

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QFs that participate—“In a market-based process, the seller determines the price it wishes to seek based on its understanding of the underlying project costs, and changes in those costs.” ER228, CPUC January 2013 Order at 6; see also id.

(“[B]ecause the Re-MAT is a market-based price, it should include all of the

generator’s costs…”).

The CPUC’s policy goal—getting QF power at the lowest possible rate

through a competitive process—may be laudable, but Congress chose a different

policy goal when it enacted PURPA: to “accelerate the development of renewable

… energy sources and convert the national economy to alternative fuel

resources…”. H.R. Rep. No. 95-496(IV), at 14 (1977), reprinted in 1978

U.S.C.C.A.N. 8454, 8466. Indeed, FERC has specifically held that “requiring a

QF to win a competitive solicitation as a condition to obtaining a long-term

contract imposes an unreasonable obstacle to obtaining a legally enforceable

obligation.” Hydrodynamics Inc., 146 FERC ¶61,193, P.32 (2014); see also

Windham Solar LLC, 156 FERC ¶61,042, P.5 (2016) (“The Commission likewise

has determined a state regulation to be inconsistent with PURPA and the

Commission’s PURPA regulations to the extent that it offers the competitive

solicitation process as the only means by which a QF . . . can obtain long-term

avoided cost rates” (internal quotation marks omitted)). Yet the Re-MAT program

is, unabashedly, exactly that.

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Congress and FERC have instructed states to take a different route. FERC

believes that “the basis for the determination of rates for purchases should be the

utility’s avoided costs and should not vary on the basis of the costs of the particular

qualifying facility.” PURPA Rulemaking, 45 Fed. Reg. at 12,222; Indep. Energy

Prods., 36 F.3d at 857 (“[FERC’s] regulations are clear that the rate to be paid by

utilities for electric energy be determined according to the avoided cost to the

utility of generating that energy or purchasing it elsewhere, and not according to

the QF’s efficiency.”). This approach leaves ratepayers indifferent between buying

from QFs and non-QFs—so they are no worse off than they otherwise would have

been—while simultaneously providing strong incentives for QF generators to enter

the market. See Am. Paper Inst., 461 U.S. at 417 (affirming FERC’s decision to

require utilities to pay a rate equal to their avoided costs, which provides the

“maximum incentive for the development of cogeneration and small power

production”); Order No. 69, 45 Fed. Reg. at 12,222 (“[I]n most instances, if part of

the savings from cogeneration and small power production were allocated among the utilities’ ratepayers, any rate reductions will be insignificant for any individual consumer. On the other hand, if these savings are allocated to the relatively small class of qualifying cogenerators and small power producers, they may provide a significant incentive for a higher growth rate of these technologies.”). Here, CPUC has wrongly elevated its goal of saving ratepayers money – despite Congress’s

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clear instruction that ratepayers should merely be kept indifferent as to the source of generation – and in the process has frustrated Congress’s clear intention to provide strong financial incentives for small renewable generators.

Because the Re-MAT price adjusting mechanism is not based on the costs a utility would incur but for its purchase from QFs, the resulting price is not an avoided cost rate under PURPA. The adjusting mechanism is therefore void.

C. The District Court Correctly Held That The Standard Contract Program Does Not Comply With 18 C.F.R. §292.304(d)(2)(ii).

The CPUC attempted to rescue Re-MAT by pointing to its remaining

Standard Contract program as a PURPA-compliant alternative Winding Creek

could pursue. The District Court properly rejected CPUC’s claim because the

Standard Contract does not contain a rate that can be determined at the time a QF

contract is consummated, and therefore fails to provide for the fixed avoided cost

rate option required by PURPA.

Under the plain language of 18 C.F.R. §292.304(d)(2), the QF has two

choices when it decides to sell its output to a utility: it may sell on an as-delivered

basis, receiving whatever the utility’s avoided cost may be at the time of delivery,

or it may sell over a specified term at an avoided cost rate that is fixed at the time

the QF enters into a legally enforceable obligation (such as a contract) to sell its

output:

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Purchases “as available” or pursuant to a legally enforceable obligation. Each qualifying facility shall have the option either: … (2) To provide energy or capacity pursuant to a legally enforceable obligation for the delivery of energy or capacity over a specified term, in which case the rates for such purchases shall, at the option of the qualifying facility exercised prior to the beginning of the specified term, be based on either:

(i) The avoided costs calculated at the time of delivery; or

(ii) The avoided costs calculated at the time the obligation is incurred.

18 C.F.R. §292.304(d)(2) (emphasis added). As the regulatory text makes clear,

FERC understood these to be two separate and distinct methods of calculating avoided costs. A rate under (d)(2)(i) is calculated based on the utility’s avoided costs at the time the QF actually delivers the electricity to the utility. For example, a (d)(2)(i) rate might be equal to the spot market price for electricity at a given moment; or, it might be a formula (like the Standard Contract formula) that uses inputs such as the prevailing gas price at the time of delivery to calculate the utility’s avoided cost. Meanwhile, a rate under (d)(2)(ii) is calculated based on the

utility’s avoided costs calculated at the time the QF and the utility enter a contract.

As Dr. Lesser explains, a (d)(2)(ii) rate will typically involve a projection or

forecast of the costs that the utility will avoid over the contract term by purchasing

from the QF. See ER87 (Lesser Direct) at 4:17-23.

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FERC understood that these two methods may well yield different results, because a projection of the utility’s avoided costs, made at the time the contract is entered, may (and indeed almost certainly will) differ from what the utility’s avoided costs actually turn out to be when electricity is delivered. For example, when the contract is entered, the utility may anticipate that gas prices will remain low for the duration of the contract term, and its calculation of avoided costs under

(d)(2)(ii) will reflect that expectation. But it may turn out over the life of the

contract that gas prices rise. A rate under (d)(2)(i) would reflect that increase, because it is based on the avoided costs calculated at the time of delivery.

FERC has emphasized, consistent with the plain language of its regulations,

that a QF gets to choose which of these two methods are used in calculating its rate. See JD Wind, 130 FERC ¶61,127, P23 (2010) (“[FERC] has … consistently affirmed the right of QFs to … rates determined at the time the obligation is incurred, even if the avoided costs at the time of delivery ultimately differ from those calculated at the time the obligation is originally incurred.”);

Hydrodynamics, Inc., 146 FERC ¶61,193, P31 (2014) (“Under section 292.304(d)

of the Commission’s regulations, a QF also has the unconditional right to choose

whether to sell its power … at a forecasted avoided cost rate.”); FLS Energy, Inc.,

157 FERC ¶61,211, P.21 (2016) (“Under section 292.304(d) of the Commission’s

regulations, a QF also has the unconditional right to choose whether to sell its

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power ‘as available’ or pursuant to a legally enforceable obligation at a forecasted avoided cost rate determined, at the QF’s option, either at the time of delivery or at the time that the obligation is incurred.” (emphasis added)); Windham Solar LLC,

157 FERC ¶61,134, P4 (2016) (noting that 18 C.F.R. §292.304(d)(2) “provides (at the QF’s option) for pricing based on either avoided costs calculated at the time of delivery or at the time the obligation is incurred. Thus, regardless of whether a QF can provide firm output, that QF has the option to sell its output pursuant to a legally enforceable obligation with a forecasted avoided cost rate.” (emphasis added) (footnote omitted)).

FERC has explained that allowing a QF to choose between these two different methods for calculating its avoided-cost rate is important to achieving

Congress’s goal of encouraging renewable generation. A rate under (d)(2)(ii) enables a QF developer to “establish a fixed contract price for its energy and capacity at the outset of its obligation.” Order No. 69, 45 Fed. Reg. at 12,224. A potential investor in a QF can thereby determine the “financial feasibility” of a project before beginning construction and can have “reasonable certainty [of] the expected return on a potential investment before the construction of a facility.” Id. at 12,218; see also JD Wind 1 LLC, 130 FERC ¶61,127, P23 (“[F]rom the beginning, [FERC’s regulations] have given QFs the option to choose to have rates calculated at the time the obligation is incurred,” because “‘an investor needs to be

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able to estimate, with reasonable certainty, the expected return on a potential investment before construction of a facility.’” (quoting 45 Fed. Reg. at 12,218)

(emphasis added))).

In the PURPA Rulemaking, FERC explained its view that, over the long run, ratepayers should be indifferent between the two distinct methods of calculating avoided costs, because,“in the long run, ‘overestimations’ and ‘underestimations’ of avoided costs will balance out.” 45 Fed. Reg. at 12,224.

Under the Re-MAT program, CPUC calculated the 20-year rate effective in

November 2013 for Winding Creek’s facility at $89.23 per MWh with the then

TOU factors. That is the rate which Winding Creek accepted, resulting in its legally enforceable obligation.

The CPUC argued that it was entitled to cap participation in the Re-MAT as it saw fit because QFs had an alternative option, called the Standard Contract program, which was uncapped and, according to the CPUC, provided to QFs the full range of options required by the FERC’s PURPA regulations. The CPUC’s

argument suffers from two fatal flaws. First, once the CPUC determined, as it did,

that the $89.23 per MWh rate with the TOU adjustments was the long-term

forecasted avoided cost rate for 20 years from solar facilities, Winding Creek was

entitled to choose that rate. Second, as the District Court correctly found after a

bench trial, the Standard Offer contract does not provide the forecasted fixed rate

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required by §292.304(d)(2)(ii). During trial, CPUC’s expert witness Michael

Colvin conceded that the Standard Contract does not offer QFs a choice between two different rates:

THE COURT: Okay. So in your mind, in your view, there is no meaningful difference between (d)(2)(i) and (d)(2)(ii) in the way that the price paid to the QF would be calculated, is that right?

THE WITNESS: Correct. For the purposes of this contract.

ER62, Trial Tr. 121:10-15. That concession conclusively establishes that the

Standard Contract violates 18 C.F.R. §292.304(d)(2).

The Standard Contract likewise does not comply with §292.304(d)(2)(ii), which is the type of rate elected by Winding Creek. Under the Standard Contract, the rate at which a QF is paid for the electricity it sells to a utility is based on the utility’s “avoided costs calculated at the time of delivery” – i.e., it is a rate under

(d)(2)(i) – and not on the utility’s “avoided costs calculated at the time the obligation is incurred,” as required by (d)(2)(ii).

The Standard Contract rate for energy is the Short Run Avoided Cost rate or

SRAC. See ER51, Trial Tr. 66:17-20. That is the only rate contained in the

Standard Contract for the price of energy supplied by a QF to a utility. See id.

The SRAC formula is as follows:

Energy Price = ((Market Heat Rate x Gas Price) + Variable Operations & Maintenance) x Time of Use Factors + Greenhouse Gas Compliance Costs + Location Adjustment Factors 44

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ER112, Colvin Direct ¶45.

It is undisputed that three of the elements of the SRAC formula are variable

and cannot be calculated at the time the contract is entered, ER110-2, Colvin

Direct ¶44, ER90, Lesser Direct at 7:7-8:4:

 The market heat rate, which is a measure of the efficiency of the

marginal natural gas generator operating at any particular moment,

varies monthly and that input to the SRAC formula is updated on the

5th business day of each month. ER110, Colvin Direct ¶44(A), ER90,

Lesser Direct at 7:4-5.

 The burner tip gas price, which is the monthly market-based price for

natural gas, varies monthly and that input to the SRAC formula is

updated on the first business day of each month. ER111, Colvin

Direct ¶44(B), ER90, Lesser Direct at 7:7-8.

 The location adjustment factor, which is a site-specific factor that

varies to reflect the fact that the costs of energy from a particular

location varies due to changes in the local energy markets, varies

monthly and is identified 30 days after generation occurs and is then

applied to the prior month’s SRAC payment. ER112, Colvin Direct

¶44(F), ER91, Lesser Direct at 8:2-4.

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These three elements change month by month, and are calculated each

month to yield an avoided cost rate that is applied to electricity delivered during

that month. ER120-22, Colvin Dep. 62:24-63:5, 66:22-67:3; see also Colvin Dep.

66:22-67:1 (“Qualifying facilities are paid for the gas price on the month that they

have just experienced. So you are not paid for your energy until the end of the

month. So you will know what the March 2017 short run avoided cost payment is at the end of March 2017.”). Thus, the rate under the Standard Contract cannot be calculated “at the time the obligation is incurred,” as required by

§292.304(d)(2)(ii). Instead, it is a rate calculated at the time the energy is delivered. Indeed, CPUC’s expert Mr. Colvin conceded that the SRAC rate is a

(d)(2)(i) rate (based on avoided costs calculated at the time of delivery):

I think it is correct to say that the commission has determined that the short run avoided costs, the costs that the qualifying facility would be paid, should be best represented by what the individual generator unit would have been paid that a utility would have procured but for the QF at the time that the energy is delivered.

ER120-1, Colvin Dep. 62:24-63:5 (emphasis added); ER122, id. at 66:22-67:3

(“Qualifying facilities are paid for the gas price on the month that they have just experienced. So you are not paid for your energy until the end of the month. So you will know what the March 2017 short run avoided cost payment is at the end of March 2017. Q[uestion:] And not before that? A[nswer:] Correct.”).

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As the District Court correctly held, the CPUC cannot argue that the SRAC

rate complies with (d)(2)(ii), even though the rate changes from month to month,

on the theory that the formula nevertheless provides sufficient certainty to qualify

as a (d)(2)(ii) rate, and there is voluminous record evidence supporting this finding.

For one thing, the plain language of the regulation makes clear that a (d)(2)(ii)

must be “calculated” at the time the contract is entered. A formula containing

variables whose values cannot be known does not comply with the plain meaning

of the regulation, because the rate cannot be ascertained. See The American

Heritage Dictionary of the English Language 263 (5th ed. 2011) (defining the term

“to calculate” to mean “[t]o ascertain by computation”). For another, while

FERC’s intention in giving QFs the option of a (d)(2)(ii) rate was to ensure that

they have reasonable certainty of their return before commencing construction, a

rate still must satisfy the express terms of (d)(2)(ii). And FERC interprets

(d)(2)(ii) as requiring a forecasted rate—i.e., one that is known at the time the

contract is entered, not a formula with variables that fluctuate and that can be

known only at the time of delivery. Hydrodynamics, Inc., 146 FERC ¶61,193, P31

(2014) (“Under section 292.304(d) of the Commission’s regulations, a QF also has

the unconditional right to choose whether to sell its power … at a forecasted

avoided cost rate.”); Windham Solar LLC, 157 FERC ¶61,134, P4 (2016) (noting

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that a “QF has the option to sell its output pursuant to a legally enforceable obligation with a forecasted avoided cost rate.” (emphasis added)).

In any event, there is no evidence in the record that remotely supports the

proposition that that the SRAC formula provides “reasonable certainty” to a

developer regarding the rate it will receive over the term of its contract. Mr.

Colvin agreed that “the PUC cannot say what price will be at any given time in [a]

12-year [contract] period until those variables are filled in by actual market data.”

ER57, Trial Tr. 116:13-17. And, as demonstrated in the below graph, the actual

historic data confirm that natural gas prices, and thus SRAC prices, are highly

volatile and vary widely over time without any discernible pattern.

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Source: ER82-3, Trial Ex. 3 at WC000512-3 (Jan. 2010 – March 2017 rates); https://www.pge.com/pge_global/common/pdfs/for-our-business-partners/energy- supply/prices-for-qualifying-facilities-and-eligible-combined-heat-and-power- facilities/20170509-Historical-SRAC.pdf (April 2017 rate).

Indeed, there is not even any seasonal predictability in the SRAC rate. For example, in January 2010, the SRAC rate for electricity was 6.0048 cents/kWh, a figure that dropped by almost 50% to 3.0456 cents/kWh in January 2016.

Likewise, in March 2012, the SRAC rate was 2.9614 cents/kWh, by March 2014 the rate had almost doubled to 5.9938 cents/kWh. See ER82-3, Trial Ex. 3 at

WC000512-3. These examples, and others like them, led Winding Creek’s expert

Dr. Lesser to conclude in something of an understatement that the SRAC price contained a “high degree of volatility.” ER32, Trial Tr. 27:23-25, ER36, Trial Tr.

31:21. It should therefore not be surprising that, in the seven years since the

Standard Contract was promulgated, not a single solar new solar QF in the PG&E service territory has been constructed under the Standard Contract rate. ER109,

Colvin Direct ¶38.

In short, the Standard Contract rate does not satisfy (d)(2)(ii). It is not a rate

based on avoided costs “calculated at the time the obligation is incurred.” That conclusion accords not only with the plain language of the regulation as applied to the facts of this case, but also with the decision of the District Court of

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Massachusetts in Allco Renewable Energy Ltd. v. Massachusetts Electric Co., 208

F. Supp. 3d 390 (D. Mass. 2016), aff’d 875 F.3d 64 (1st Cir. 2017). In that case,

the court invalidated a state procurement program under PURPA for precisely the

same reason that Winding Creek argues that the Standard Contract is illegal,

namely that the program only provided QFs with an as-delivered rate – under

(d)(2)(i) – and not an “as incurred” rate under (d)(2)(ii). See id. at 398 (“[U]nder

FERC’s regulations, if a QF chooses to provide electric energy pursuant to a

‘legally enforceable obligation,’ the QF must have the option to receive the

avoided costs ‘calculated at the time of delivery’ or ‘calculated at the time the

obligation is incurred.’ The [Massachusetts] rule, by providing only the spot

market rate, eliminates the QF’s ability to choose the latter pricing option. As

such, the [Massachusetts] rule fails to properly implement FERC’s regulations, as

mandated by PURPA section 210(f)(1).”).

The District Court’s conclusion that the Re-MAT’s arbitrary caps and price

adjustment mechanisms are inconsistent with PURPA is fully supported by both

the applicable law and reams of record evidence. There is no reason for the Court

to overturn that decision.

III. The District Court Has The Authority To Order, And Should Have Ordered, That Winding Creek Be Placed In The Position It Would Have Been in “But For” The Unlawful Re-MAT Bi-Monthly Cap.

Once the District Court enjoined the Re-MAT caps and pricing adjustment

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mechanism, the District Court had the jurisdiction to, and should have, ordered the

CPUC to process Winding Creek’s Re-MAT application stripped of the illegal caps and pricing adjustment mechanism. The District Court was plainly empowered to grant this relief under PURPA, which authorizes District Courts to “require . . .

State regulatory authorit[ies]” like CPUC “to comply” with the FERC’s PURPA rules, and, in doing to, to “issue such injunctive or other relief as may be appropriate.” PURPA section 210(h)(2)(B), 16 U.S.C. §824a-3(h)(2)(B). In light of this language, the District Court’s conclusion that Winding Creek’s request for relief “does not belong in this forum” is clear legal error. And, without the relief it seeks, Winding Creek suffers irreparable harm from the CPUC’s illegal actions properly identified by the District Court.

A. The District Court Has The Power To Order Relief To Eliminate The Ongoing Irreparable Harm To Winding Creek.

Under PURPA section 210(h)(2)(B), Congress expressly authorized the

District Court to order the CPUC to “comply with” FERC’s regulations, and to

“issue such injunctive or other relief as may be appropriate.” 16 U.S.C. §824a-

3(h)(2)(B). To restore Winding Creek to the position it would have occupied but for the CPUC’s violations, the District Court needed only to order the CPUC to process Winding Creek’s Re-MAT application as of the date it applied, stripped of the caps and pricing adjustment mechanism. But, rather than exercising this power, the District Court directed Winding Creek to file yet another lawsuit, this 51

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one in a state forum, to obtain relief for the CPUC’s violations. The District

Court’s conclusion cannot be squared with the plain language of the statute. Nor

can it be squared with PURPA’s core purpose of promoting renewable energy

generation.

Almost four months after the District Court’s order invalidating the CPUC’s

caps, and five years after the contract should have been awarded by the CPUC in

2013, the CPUC has taken no action to place Winding Creek in the position it

would have been in but for the Re-MAT’s illegal provisions. Winding Creek

continues to suffer irreparable harm, and its investment in its solar project, which is

nearing $1 million, remains stranded.

There was nothing exotic in Winding Creek’s request for relief. On the

contrary, putting Winding Creek in the position it would have occupied “but for”

the CPUC’s violations is a standard remedy. “A ‘disappointed bidder’ has the right

to ‘a legally valid procurement process,’ the deprivation of which constitutes a

cognizable injury.” Nat'l Mall Tours of Wash., Inc. v. United States DOI, 862 F.3d

35, 44 (D.C. Cir. 2017). As then Judge (later Justice) Scalia explained, a plaintiff

could obtain its “original expectations” in the form of injunctive relief: “the

disappointed bidder [should be put] in the economic position it would have

occupied but for the error.” Delta Data Sys. Corp. v. Webster, 744 F.2d 197, 206-

07 (D.C. Cir. 1984). See also, Leboeuf v. Abraham, 347 F.3d 315, 325 (D.C. Cir.

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2004); BCPeabody Constr. Servs., Inc. v. United States, 112 Fed. Cl. 502, 514

(2013) (ordering agency to restore disappointed bidder to place it would have

occupied); See also, Ulstein Maritime, Ltd. v. United States, 833 F.2d 1052, 1058

(1st Cir. 1987) (a contract should be awarded to the disappointed bidder when it is clear that, but for the improper behavior, “the contract would have been awarded to the party asking the court to order the award.”); Mid. Atl. Storage Sys. v. City of

Milton, 903 F. Supp. 995, 998 (S.D. W. Va. 1995) (“the Court in this case believes that the proper remedy is to put [the disappointed bidder] in the same economic position it would have occupied but for the [] error.”)

Further, even when alternative relief is considered, it takes the form of a nunc pro tunc reselection. See, Leboeuf v. Abraham, 347 F.3d at 325 (explaining that in lieu of a direct contract award, because considerable time had passed

“alternative relief may be appropriate, such as that suggested in Delta Systems, 744

F.2d at 198, namely, affording [plaintiff] the right to require the Department to make a nunc pro tunc reselection.”) In this case, that remedy would also result in

Winding Creek receiving the contract it should have received in 2013.

Here it is guaranteed that Winding Creek would have received the contract in 2013 but for the unlawful cap. It is also clear that Winding Creek was entitled to that avoided cost contract under PURPA. The District Court erred by not acting to limit the ongoing irreparable harm suffered by Winding Creek, and relying on

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the slim possibility that the CPUC or state courts might provide some future prophylactic relief. Semancik v. United Mine Workers, 466 F.2d 144, 156-7 (3d

Cir. 1972). (“[W]hen there is proof of present irreparable harm, the court [should] act promptly rather than rely on the possibility of future prophylactic measures.”); see also, Juliana v. United States, 217 F. Supp. 1224, 1262 (D. Ore. 2016)

(“Federal courts too often have been cautious and overly deferential in the arena of

environmental law, and the world has suffered for it.”)

It is also easy to see how the failure to either provide a direct award or order

a nunc pro tunc re-selection, hinders, rather than furthers, the purposes of the

statute. It has already been nearly 5 years since the unlawful caps were imposed,

resulting in no ability for Winding Creek to obtain the long-term contract to which

is entitled under federal law. A QF, such as Winding Creek, would have little

incentive in the future to enforce the provisions of PURPA if at the end of the

federal court process it receives a hollow victory. PURPA remains the nation’s bare minimum renewable energy mandate. But if the judiciary is unwilling to provide a remedy that Congress authorized it to provide, PURPA is merely an empty shell.

Section 210(h)(2)(B) expressed authorizes the District Court to impose these standard remedies on the CPUC. Had it done so, Winding Creek’s ongoing irreparable harm would have been alleviated. The District Court’s refusal to take

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action limiting the irreparable harm to Winding Creek was clear legal error and

hindered, rather than furthered, the purposes of the statute.

B. The District Court’s Justifications For Failing To Exercise Its Remedial Powers Do Not Withstand Scrutiny. The District Court concluded that Winding Creek’s request for an effective

remedy “goes too far” because it should have been brought as an “as-applied

challenge” in state court rather than as “implementation claim” in federal court.

But “as-applied” and “implementation” are merely loose labels courts have

developed over time to distinguish between claims against regulated utilities if they

do not properly apply state-mandated PURPA requirements, which are brought

under PURPA section 210(g), and claims against state regulatory agencies for

improperly implementing PURPA and FERC’s rules, which are brought under

section 210(h). By relying on these labels rather than the actual statutory language,

the District Court simply overlooked the plain language in section 210(h)(2)(B)

authorizing it to impose the remedy requested by Winding Creek on the CPUC.

Further, the “as-applied” and “implementation” labels elide statutory language

making clear that the course selected by the District Court – an “as-applied”

challenge under Section 210(g) -- does not apply in the circumstances of this case.

By its plain terms, section 210(g) is limited to two circumstances: (1) judicial

review of a “proceeding conducted by a State agency” to implement FERC’s

PURPA rules, section 210(g)(1), 16 U.S.C. §824a-3(g)(1); and, (2) an action

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against a “electric utility” to “enforce any requirement established by a State regulatory authority” under PURPA. Section 210(g)(2), 16 U.S.C. §824a-3(g)(2).

Neither circumstance applies here. The remedy Winding Creek seeks simply applies the Re-MAT program to place Winding Creek in the position it would have occupied if the illegal cap and price adjustments are eliminated. No CPUC

“proceeding” is necessary to achieve this result. Nor is there any need to seek enforcement of the CPUC’s rules against a regulated utility. Hence, an “as- applied” action under section 210(g) would not apply.

In addition, the District Court ignores language making clear that certain challenges to private utility action – those involving wholesale power sales and interstate transmission subject to FERC’s FPA jurisdiction – are excluded from the

“as-applied” mechanism of section 210(g). Specifically, PURPA section 210(h)(1) provides that “[n]othing in” Section 210(g) “shall apply to so much of the operations of an electric utility” like PG&E or a “qualifying small power production facility” like Winding Creek “as are subject to” FERC’s jurisdiction under Part II of the FPA. FERC’s exclusive jurisdiction under that statute extends to interstate transmission and to wholesale electric sales, like Winding Creek’s wholesale sale of electricity to PG&E at issue here.

Further, section 210(h)(1) mandates that the operations of regulated utilities and QFs that are subject to FERC’s FPA jurisdiction are to be “treated as a rule”

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under the FPA. Similarly, in a PURPA section 210(h)(2) enforcement action such as this one, the CPUC is a person under the FPA and PURPA’s rules are FPA rules. 16 U.S.C. § 824a-3(h)(2). And the FPA provides the District Court with jurisdiction to correct violations of FERC’s rules. Section 317 of the FPA, provides the district courts with “exclusive jurisdiction” over violations of “this

Act or the rules, regulations, and orders thereunder” and authorizes the district courts to “enforce any liability or duty created by, or to enjoin any violation of, this

Act or any rule, regulation, or order thereunder.” 16 U.S.C. §825p. FPA section

314(b) also expressly provides the District Court with jurisdiction to command

“any person to comply with the provision of this Act or any rule, regulation, or

order of the Commission thereunder,” see 16 U.S.C. §825m(b). The District Court

also may assess a fine against the CPUC up to $1,000,000, see FPA section 316.

The jurisdiction of the District Court to order the relief requested by Winding

Creek is simply without doubt.

The District Court’s reliance on the “as applied” and “implementation”

labels, rather than on the statutory language, is clear error because it cannot be

squared with this statutory language providing that a challenge involving wholesale electric rates cannot be brought as an “as applied” challenge and clearly conferring on the District Court the authority to implement the relief requested by

Winding Creek. See Portland General Elec. Co. v. FERC, 854 F.3d 692, 698-701

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(D.C. Cir. 2017). Nor can it be squared with the incorporation of the FERC’s

PURPA rules as FPA rules through section 210(h)(2)(A), and making them expressly enforceable against the CPUC.

In reaching its erroneous conclusion, the District Court relied on two cases, both of which are inapposite. The passage the Court cited in Solutions for Utilities,

Inc v. Cal. Pub. Util. Comm’n, No. CV 11-04975, 2016 U.S. Dist. LEXIS 17998,

2016 WL 7613906, at *15 (C.D. Cal. Dec. 28, 2016) (“SUI”), which is on appeal

to this Court in docket 17-55297, repeats the “as-applied” and “implementation”

labels with little elaboration. But the opinion makes clear that the plaintiffs there

could assert an “as-applied” challenge under section 210(g) against PG&E only if

it is “separate and apart from regulations implemented by the CPUC.” 2016 WL at

*15. But Winding Creek’s challenges in this case are not “separate and apart”

from CPUC’s implementation regulations, but a direct challenge to those

regulations. Full relief can be provided by ordering the CPUC to follow its own

Re-MAT regulations stripped of the illegal cap and price adjustment mechanisms.

PG&E is not a party to this case and has no involvement in the requested remedy other than the fact that it would have to comply with any resulting CPUC order.

Allco Renewable Energy Ltd. v. Mass. Elec. Co., 208 F. Supp. 3d 390, 397

(D. Mass. 2016) aff’d 875 F.3d 64 (1st Cir. 2017) (“Allco”), is also inapposite. In that case, the state regulatory agency had not set an avoided cost rate and the First

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Circuit therefore concluded that granting relief would require the District Court

“itself [to] undertak[e] calculating” the utility’s “avoided cost rate.” 875 F.3d at 74.

In this case, however, CPUC has already established the applicable avoided cost

Winding Creek was entitled to absent CPUC’s errors — $89.23 per MWh.

Accordingly, awarding this relief to Winding Creek does not call on the District

Court to “engage in fact-finding to determine the proper avoided cost” and

Winding Creek can be granted full relief without requiring CPUC to engage in a

“new rulemaking” to establish the avoided cost rate Winding Creek is entitled to.

Id.

For these reasons, the District Court erred in refusing to provide Winding

Creek with an effective remedy. This Court should therefore reverse the District

Court’s findings in this regard and order it to provide what Winding Creek would have been entitled to absent CPUC’s errors – a Re-MAT contract award with an avoided cost rate of $89.23 per MWh with the TOU adjustments in effect at that time.

CONCLUSION

For the foregoing reasons, this Court should order the District Court to act to limit the ongoing irreparable harm to Winding Creek by either directing a contract be provided to Winding Creek, or ordering the CPUC to process Winding Creek’s

Re-MAT application and the applications of others similarly situated as of the date

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those QFs applied, stripped of the caps and pricing adjustment mechanism. In all other respects, the District Court should be affirmed.

Respectfully submitted this 2nd day of April 2018.

/s/ Thomas Melone Thomas Melone Allco Renewable Energy Limited 1740 Broadway, 15th floor New York, New York 10019 (212) 681-1120 [email protected]

ATTORNEY FOR WINDING CREEK SOLAR LLC

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STATEMENT OF RELATED CASES

The case of CALIFORNIANS FOR RENEWABLE ENERGY, INC., et al. v. CALIFORNIA PUBLIC UTILITIES COMMISSION, et al., No. 17-55297, is a related case pending in the Ninth Circuit because that case raises closely related issues as it addresses the CPUC’s Standard Contract and its relationship to

PURPA.

Date: April 2, 2018 /s/ Thomas Melone Thomas Melone

ATTORNEY FOR WINDING CREEK SOLAR LLC

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CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32, I hereby certify that this brief complies with the type-volume limitations set forth in Fed. R. App. P. 32(a)(7)(B)(i) because this brief contains 13,918 words, as counted by Microsoft Word, excluding the items that may be excluded under Federal Rule 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) because this brief has been prepared in 14-point, Times New Roman font

using Microsoft Word.

/s/ Thomas Melone Thomas Melone

ATTORNEY FOR WINDING CREEK SOLAR LLC

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IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

WINDING CREEK SOLAR LLC, Case No. 17-17531

Defendants-Appellants.

ADDENDUM TO APPELLANT’S FIRST BRIEF ON CROSS-APPEAL

Thomas Melone ALLCO RENEWABLE ENERGY LTD. 1740 Broadway, 15th Floor New York, NY 10019 Telephone: (212) 681-1120 Email: [email protected] Attorneys for Appellant WINDING CREEK SOLAR LLC

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ADDENDUM TO APPELLANT’S FIRST BRIEF ON CROSS-APPEAL

17-17531 and 17-17532

TABLE OF CONTENTS

AD. Page

Statutory and Regulatory Provisions ...... AD1

Section 210 of the Public Utility Regulatory Policies Act ...... AD 1

Excerpts of 18 C.F.R. §292.101: Definitions ...... AD 10

18 C.F.R. §292.303: Electric utility obligations under this subpart ...... AD 11

18 C.F.R. §292.304: Rates for purchases ...... AD 12

18 C.F.R. §292.601: Exemption to qualifying facilities from the Federal Power Act ...... AD 15

Small Power Production and Cogeneration Facilities; Regulations Implementing Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12,214 (Feb. 25, 1980) (“Order 69” or “PURPA Rulemaking”) ...... AD 16

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=14UZlt Fod .... Rexlsl .. I Vol. '5o No. 311

Monday.Mond.y. FebruaryfebN.ry 2525,. 1980\980

DEPAATMEHTD£PARTUEHT OF ENERGY(HEAGY

FederalFeet.,... En.,vyEnltVY RegulatoryRegul~tory COl'nl'Tlla.wnComml • .ww. "tI CFReFR PIr1Part 292 10000e.IDoca.c NoNo.. RM7t-55AMn--.!i5.. Order No.No.n Itll SmansINn PowerPow., Producllon and Cogeneration Facilities;Facllltl.. ; RRegulationsegulillions ImplementingImplementIng SectionS.cUon 210012100' the PPububliclic UlllltyUtility RegulatoryRegulalory Policies AclAct of 1978 AOINCY:! federalFederal EnergyEnersY ResulatoReauluIO'',l'r)' CommCommission.ission. ACTION: Fln.lrultFlnat rule. SUSUMMA"'f':MM .. "\,: The FederlllPederilill EnerayEnergy ReBut,RelulllOry tory CommisCommlusiolon hhereb),ereby iJdopt.ildOPIS regulregul.,.tlolon.ns Ihallth.llmplemenlmplemenl sectionseclian' 21021n oorf the PubPubliclic UllinyUtl lil)' Re8ulfllloryRelulatory PoliciesPolicfes Act oofr 1mt97a (PURPA). ThThee rulruleses rrequireequire electric.Iectric utilitutllltle.ies 10 ppurchaseurchase eleclricelectric power fromrrom and leUJeU el«lricelectric power 10to quallfyl".quam)'ln, costnetaUoncogeneration .ndand smaIm.1lll power producllonction f,facilitiescilllle •.• •and nd proprovidevide froror Ihethe uempUonexemption ator qUIllf)qualifyinB; ", (.cilitfacilities (nnnrrom «rtacert.lnin feder.1fedenl .ndand StileStale '.r.,ut'lion8uI8,ion. ImplementationImplementation ofof thIheell! •• rulesruletls Is reservfl!reserved 10to Siale51.141 regul.toryrqullllol), .uthoritluauthorit," and nonrerut.'ednonreaul.ted electriceleclric ulllitiesuillities 1I'l"IECfIVIlR'leTJVI DATI.:n: March 20.20, 1980. "Oft'0" FU'''tfE''"U"rtU" ',..'O"MATIONIN'OAMATION CONTACTCON'fA~: RoRoM ... AlnAln.. ornelOffic. or thu..e CenCenet,1euII CCoun,cl.ou llsel. Fede,.1nll £nefl)'EnefJ)' Re,ul'loryRqul.tol'l' CommCommllnio"ion,n, usW NonhNorth C.pllolC.pll~ StreetSireef,. N.E.£... W .." tth linllOllnllftll . D.C. 20Ue.204Ze. 20%-351-84';82OZ...J".....fM-Ia. )1,111"J llhn O0 ·'Sullivan.511111VII\, OHic.Ornell orof Ihethe Cen~raCtn ~ f1Ill Counnl,Counlel. fedPedttcn. 1l EEn ne"trllYlY ReaulalReaul" oor,),:t CommCorrunihioiulQn.n..l2.S au NorthNGrUl c:..pilolCapitol Slrt~1.SlIe1lt1. N..E.. W.shJnl1QI\,-shInll'lon. D..C. zo.t:6.zo.c.ft. .:o:-:.,:O:-.1S ..;- ~;;~;-; , "d"dim.m WWennrrenner., OmOffieece oorr lb.Ihl CenC t'nIllT~enl1 Counseu.l. fFeder.1ederal Ene'1)'E/'Ie'1)' Recul.loryRelUI.tol'l' CornlllColl'Ltll llnlon.l%!tn lon. 1Z5 NorlhNorth CC.pliol. pilol Slrul'"SI~o:I. N E.. wW.....Mli"lto '"l tOft.n. D.,C. 20426,204:e. 2OZ--l:l7...acJ33.2OZ- l57-a0:J3.

AD 16 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 89 of 111

Federal RegislerRegI,ter I Vol. 45,45. No.No. 38 I Monday, February 25, 1980 I Rules ond Regulation. 12215

Beman! Clew, orne.omca orDr Plectric Powar .ectlonlectlon 210 10to ofTerorrer to purchasepurchaae Reque.alRequesl (orfor Further Comments.' the Repletion.RepJ.tion. Fede,al Energy Regulator)' available electric energy from CommlCommJllion ..lon reque.tedrequelted further public Comrnlulon, W North Capitol Street, NE.. cogeneration and .mallamall power commentcommenl on both propoaedpropo.ed rulelrules, and on W .. h1naton, D ..C.C, 204Z6,204Z8, 2OW16-82&4.. production facilltie. whlchwh1ch obtain the findingl .et rorth Inin the prelimJnary ...... auPPLlMENTA,II'VMENTA"y lH'O"MA,11OM:lH'OftMA11OH: IItlued.. ued February IG1,ISI8O.IG1, ISI8O. qualifying .talUI under .ectlonaectlon 201 o(of EAEA.. In order to obtainoblalD the data.data, view.,view•• PVRPA. Por .uch purchasea, electric and argumentlargument. of intete.tedmlere.ted partlel, the Section %10 ofo( the Public Utility PURPA. For .ueb purchasea. electric Reaulatory PollclelPolicies Act of 1918 {PURPAJ(PURPA) utili tie. are required 10 pay rate. which CommissionComm1a810n Staff held public bearingl requirelrequires the Federal Energy Regulatory areaMI 'uel'u81 and teuonablereuonable to the lD SealtleSeattle on November 19, 1979,19'19, InID New CommilslonCommilalon (Commlaslon)(Commlulon) to prelcribe ralepayera orof the uUlltyutility., inIn the pubUcpubtJc York on November 28, 1979, inlD Denver ruJelruJes al ththee CommillionCommilliOD detennineldetennlnel Interest.lntereat. and which do not di.criminaladi.criminate on November 30. 1979,1979. and in necellaryneC2l1ary 10to encourage cogeneration againstagalnat coseneratoracogeneratora or .maUImall power Wathlngton.Washington. D.C. on December f and 55,, and Imall powerpow!!r production.producllon, lnc1udlngincluding produceraproducer•. . Section 210 alao require.requires 1979. The CommlaslonCommlllloD ,laoalao received rulel requirina electric ulilitieutilitiels to electric utllitluUlItielel 10to provide el~ctrlc written commenLCODlDleDL After conllderationconsideration of the comments, purchaaepurchue electric power from and leU .ervicetervlce 10 qualifying facilltiearacilltie. atal rate. the Comml.eionCommlaaion StafTStarr made availableavaUable a electric power to cogeneration and smallImall which are Ju.tJu.t and teBlonable,teaeonable, In the final draltdraII rule on January 2929,, 1980. SlateState power production (acilities.facilities. public lnte.re.I,lnteresl. and whIchwhich do not diacrimlnalediscriminate agalna! cogeneratora and public utility com.mJllllionencommlaaionen WHeweJ'e Additionally.AddltionaUy. seclionlection 210 of PURPA invited to comment on the draft at a authorizelauthorizea the Commlulon 10 exempt .maUsmall power producers. Section 21O{e) o(of public meeting held on February 5, 1980. qualifying facilitiel(acilitiel from certain Federal PURPA provideaprovidel thai the CommillionCommiaaion RepreaenlaUveaRepreuntaUvea o(of electric utllilieautilltiea were and SteleState law and regulatiqD.regulatiQD, can exempt qualifying faclliUe.facllJtie. from StaleState reauJationreauiation regardinB utility rate.ratel invited 10to comment at 8a public meeting UnderUnder .ectlonlectlon 201 of PURPA. beld on February 8.B. 1980. The cogeneration (acilitiesfacilitiel andend small power and financial oraanizatJon,organization. fromFrom Federal' Comml.aiooCommJ"lon Staff alaoallo made it.elfItself production (acilitie.(acilities which meet certaincertain regulation under the Federal Power Act avaUableevaUable to any other intereatedinterested partieapartie. .tandard..Iandard. and which ereare notnol owned by (other than IIcenaingIicen8ing under Part 1]. and who wishedwi.hed to commentcomment.. All of the perBonspenona primarily engaged Inin the from the Public Utility Holding Company Act. commenta were considered in the generation or saletale of electric power can formulation ofofthia this finalnnal rule. become qualifying facilities,facllities, and thusthu9 I. Proc:eduralProcedural Hillery In the Staff DiacuuDi.cuaa!lon Paper and the become eligible for the ratearatel and It On JuneJune 28. 1979.1979, in Docket No. RM~RM7~ RequestRequea, (orfor Further Comment.,Comment •. It waa exemptlonaexempllona aet forth under .ectionaection 210 .tatedatated that any environmenlalenvironmental effecta of PURPA. 64.64, I the Commi88ionCommiaaion iaauedissued propo.ed rulearule. to detennine which cogeneration altributable 10 thia program would resull CogCogenerationeneration fafacilitiescilities .lmultaneou8lysimultaneously from the combined effecterfecl .of theee two produce Iwo fonn.fonna of useful energy. and small power productionproducllon facilities may become "qualifying" cogecogenerationneration rulemakingrulemak.ing proceeding8proceedings. AllA. DOtednoted auch .aaa electric powerpower and ateam. prevloully.prevloualy. Ihethe CommiuiOIlCommiuion intends to Cogeneration facilitiesfa cilities use .ignificantly or small power production facilitie. under aectionlection 201 PURPA. Such il8ueissue final tulrule.es in Docket No. RM79-54RM79-S4 leasIe .. fuel 10to produce electricity and in the near future. At that time, the Iteam (or other formaform. ofof energy) than qualifyqualifyinging facilitie.facil iUea are entitled to avail themselveathemaelvea of the fatelate and exemption Commls.lonCommlaalon will al.oalao make available iteits would be needneededed 10 produce the two final Environmental AssesamentAlII8easment. separately. Thus. by using fuelsfuell more provillonaprovialon. under .ecUonsection 210 ofPURPA;orpURPA; erficiently,erficiently. cogeneration facilitiesfacilitiea caDcan and qualifying cogeneration facilitie.facilltie. ILS_ItS...... ". make 8a significantlignificant contribution 10 the are eligible for exemption from The.eTheil! rule.rules provide thatthai electric Natlon'aNation', elforllo conserve II. energy IncreIncrementamentall pricing under Title 0 of ththee ulilitialutili tiel muat purchaaepurcha.e electric energy resourcelreaourcea. Natural Ga.Gaa Policy Act of 1978.'Tbe1978.'The and capacity made available by SmaU power production facilitiesfa cilities uaeuse CommiaaionCommiasion will loon lasueIssue a rmalrlOai rule qualifying cogeneratorscogeneratora and .mall power biomaas,biomaaa, waste, orIII renewable resourresourcesces,, In Docket NoNQ. RM79-54.RM79-54. producer.producerl at •a relerale reflecting the costcosl includingincludin8 wind.wind, .olaraolar amd water, to AaAs part of the rulemaldng processproce.s in thatthai the purchaatnspurchaaing utility can avoid aa a produce electric pllwpower. Reliance on this docket. the CommiaslonCommission '"ued'.8ued a relult of obtaining energy and capacity these sources of energy can reduce the SlaftDisculsionSlaffDiaculSion Paper' on June 27.1979.27, 1979. from these aourcl!S,eoutCllts, rather than need to consume traditional fossil fuels addres.lngl.suesaddresalnglaauea arisingariaing under .ectionsection generating an equivalent amount of to generate electric power. 2l00fPURPA.2.l00fPURPA. energy It.elfItself or pUN:hll.lngpurehllslng the energyeneray or PrIor to the enactment of PURPA. a PubliPublicc hearings on RM79-54 and the capacity fromFrom other suppliers.auppliera. To enable cogenerator or small power producer Staff DlscuucUBS ion Paper (RM'79-55) were potential cogeneralorscogeneralora and .mallsmall power seeking to establish interconnected held in San FranciacoFranci.co on July 23, 1979, producers 10 be able to estimate Ihese operaoperationtion with a utility faced three Chicago on July 27., 1979. and avoided coata,coata. the tulesrulea require electric major obstacles. Fir.t..Firs\., a utility waswaa not Wa.hingtonWashington., D.C. on July 30,30. 19191979. utili tiel to furnishfurnl8h data concerning s:enerallyBenerally required to purchaaepun::ha.e the Written commenta were also received. preaenlpreaent and (uturefuture CO.tlcoata of energy and electric output. at an appropriate rate. On OctoberlB.1979October 18, 1979., the CommiaalonCommiaslon capacity on their .ystema'y.tems.. Secondly.Secondly .• aomeome utiliutilities tie. charged luuedillued a NoliceNotice of ProposedPropoeed Rulemaking TheseThe.e rulea al80also provide that electric di.criminatorllydiacriminalorlly hlBhhigh ratesrates for back-up under Section 210 o(of PlTRPA In Docket utllitieautililiea mustmUll furnishfumisb electric enerayenergy to10 .ervice to cogenerator. and amall power No., RM79-55.· On October 19.1979.19, 1979. the qualifying facilHiesfacilHie. on a producera. Thirdly, a cogenerator or CommlaslonComml ..lon made availableavailable itaits nondiacriminelorynondiacriml.nalory beale.al8. and at a faterate small'mall power producer whichwhich provided preliminary Environmental AueasmentAaaessment that i.ie JuslandJusl and reasonable and in the electricity to 8 uUlity'l grid ran the risk (EA) of the propo.edpropoaed rule.rules In DoDocketcket public interestintereat; and Ihatthat they must of being con.isidereddered an eleelectricctric utility Nos. RM79-54 and RM79-55. In a provide certaincertain types of servaervlceice which .IndoInd thuathus being .ubjectedaubjected to StatStatee and may be requested by qualifying facililiesfacilities Federal regulation 8881 an electric utilityutility.. I ... FR S&II?3$&II?3. hlly 3. tm. to lupplemenl or back up those Section.Sectiona 201 and 210 ofor PURPA are ' ... FR 857... . November t5. 1117i. (acilities'(acHitlea' own 8eneraliongeneration., de.lgned to remove theae obltacleob.taclea. •. •'44 .... fR 388633$1163. JlllyJuly 3. 1117111711, . eachEach electricelectric utiUtyutility I. required under ..... fR 811110e1111O. OctoberOctober 24 . 1m. ....,.., Fa Inm. October:N., 11119llrni1 • -12- AD 17 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 90 of 111

1ZZ1. Federal Repler I Vol. 4" No. 38 I Monday, February 25.Z5. 1980 I Rule ••nd Regulation.

The rul.rule exempt,exempt. ,UaU qu.Ufytng aemce,Mmce, rather thaDthlD onOft the number 01of 'adlit,'acilil,. 'I1!.ene utllit"'lullli!(. avoided coae-nenUon f,cIUlIe.'lclUlIe•• andnd certalocert.in cu.lomencustome,.. aft'.ded. Inc:reme:otalInaeme:olal COlt. (and notnotave,..ge .vera.. quaJl~ Imall power production Subparagnpb (5) define.deflnea "rat.""rala" ..•• fY1ItemJf1ItelD co.lI)coalJl) ahouldabould be used to 'ldUtielr,dliti •• hom eertalncertain provi,lonaprovillon. or ththee anyan~ price, raterate,. charge,ch.rge, or cl,"illcetiODcleSlillcaUoD calculatecalculat. avoIded COlta.co.ta, WWithith regard to Federal Power Act. from .nan of the made. demanded. ob.ervedobserved or receivedrece1ved capacJty,lf.capadly,lf a purchasepurchue from a qualifyingquallIying pfOyi.lon.provi.lon, of the Public Utility Holdtna with l'elpecCI'HpecC to lhath.II 1.1.••1. or pun:hasepun:hue of facility J*alItIpennJte thetha utility 10to avoid th.the Company Act ofl935of 1935 related to electrieelectric electric en.ervenerv or capacitycapacity,, or any rule. additionaddlUoa of new capacity.capliclty, then th,the ulmltulmltet... and from Stat. Ilaw...... replaUnaresulellna regulation.regWalion. or prac:ttcepracttce re.pec!ingre.pecting aOJ' 1V0idedavoided c:oMtoM 01 the DeW capacity and electric utilityutility ratesrate. and finandalfinancial .uch rate. W,..,WI'8I. or d ...i.ficatJon.LficatJon. and not the .neapancap embedded .y.temay.tem co.tCOlt ol'Janlu lion. any contract perlIIlDinlperlalDinl to thathe ..lalaI, at of capa~tycap&~ty .bou1d,bou1d be uaed..uaed. 'TheThe Implement.HonImplementation of the .. 1"0.'"rolet I,II putchue 01 electric enervtnet'8)' or eapadtJ., ManrMaar c:.ommenUc:ommenla DOtednoted that the ruervedreterved to the StateSlate regulatory In the propoaed ndende,• •aubparagnph ubparagtlpb (8) d.flo1uondeflnlUoa 01of-avoided "'.volde'd COII'"lncoal" In the luthoritlet and nonngulated electric defined "avoided"8Yoided aMbcotb"" ...a the to.teto.t. 10to propoeedpropoeerl ruM falledraUed toto link the capacitycapat1ly ..utftJU tftJthtL ... Within on"onlJ year of th.the f"llaneef.. u anoe an electric QtiUtJutiUtJ ofor tneTJ)' or capacity coatiCOItI wldcb.wldch a utility mtahtmJaht .voldavoid a.aa a of the CommlSlloo',Comml ..lon', rule ...... eachdt St.teState or both which. lNt 'orror the purchasepwthaee from mullmult or pW'Cha.tn,pun:huln.a electrlt;electric enel'lYeneflll ator resulatoryre,uI.tory authority or nonresuJetednonresuJated • qualifyiq fadUty,ladUty, the electric utility capadty or both from •a qu.lifylnaqualifying utility mUltlmplem.ntmu.llmplement the .. nalHnalet., ThThaiai would seneratagenerata or conltructcon.truct ilseUItaelf or (adlltyfadllty wttb. the .DerveDef8)' coat.co.11 ..assodatedsociated ImplementationImplementaUon may be accompli.hedaccompli.hed purch.MpurchaM from another ,ouree,source. ThitThia with the new capacitycapadty,. U the b, the 'SluanceI.. uance of regulation., on I, definitiODdenrutiOD ..II derived from&om the concept of CommlulonCommlulon required electricelectrlc ut!UUeluUUlIe. 10to cac:llte-by-c ..by-c .. ..." but.,baat.. or by any other "th.the incremectali.ocremental mitm.tto to the electric baae !belttheir ratratea.. lotfot pu.rc.hapu.rc.halel ... from •a meen.meeM reatonablyrealOn,bty designed 10fa stvegive utiJllyutility of a1lem.Uv.a1lem,Uve .Iectricelectric enef'8)'"eDergy" .ataet quall~ fadUty on tU hlab capital or effect to the CommlnionCommlnion',', rW.ruJ_ fOl'lbforth In.illsecUoa .ecUoa %lO(d)%Ul(d) of PURPA.IIPlIRPA.1t capaat)'cap.Clt)' coat of. buebaaeload load unUunJl .nd.and. In lndlldes both the flxedfixed and the OLtIL 8edfaaa.ctfoa by-SedlOlllby-Sedloa Ana.ly.iIAMiy.- runnJna .ddJUoa.addJUoa. proprovlc;ledvlt;led that the ralerate (orfor the co81lonco51. on an electric utiliI)'utiliI)' .yalemsystem which .voidedavoided energy .hould be based on Iththe SubpartSubport A--.(AnllraJA-lAnttruJ Provj,iorI.Provj,iorI. can be .vold!davoided by obta\.ningobtalnlns energy Of high eneruenerp COlt "Ioclated"8oclated wUhwuh • •t m .IOI DefinDefiniUoll6iUoM.. capadtycapacity &omfrom qquu.Ufyln,aUfyln, f.fa cUltie .. . pealdnapealdng u.nIt.unit, the electric utilities' The cosllco.la which an electric utility can purchaaed POW8l'powu expen.e.expenses would Thb MCtion contain. definltionadennltion. avoid by maldna .ucsuch purchaseputehaaet.. exceed the incrtlmental co.tcoat of apIIppUca.bplicablele to thi.this part of the seaerallygeneraJly cancan. be clacl... ..lnedmed ..aa "energy" aaltemadveltemaUve electric energyenergy,. contrary 10to Commie.lon',Commi •• loo'. rule ..•. Paragraph ra}(a) eoatlcoat. or "capadty" COltl.co.I., Energy costlcost. the limitation setaet forth inIn the 1alaslsl provide.providee thatthatlerm. tennl defined inIn PURPA are the variabl.variable cosucosla ..."Iodatedoeiated with .entencelenience of .ectlonlectloa 21O(b)210(b). blveb.ve tbe ...ameme melllling 81as they have in thethe productioDprodUCUOD ofot electric eoerpenergy One w.yway of determlnlna the avoided PURPA. unleunl.1I .. further denneddefined In' tblrbl.. (kilowaU-boW'l)(kilowatt-hour.)., They reprelentrepresent the co.tCOlt co.t III. to calculatec.lculate the total (cap( capacit~acity p..rt 01 th.the CommiaslonCommilslon',', regularegulaliona. tiona. of fuel and sometome operatingoperadog and and enetSY)enet"fY) coataC08t8 tbat would be The definitlonllndefinition, in PURPA are found IInn maintenance expenl".expen.... CapaCapacitycity coal.cost. inCWftdInCWTed by • utililyutil ily to10 meetmeet. •• lpeClnedpeclntd tleclltlecllonon , of that Act. a,..are the cosuco.la "lOClateda"oclaled wilh providing demand Inin comparisonoomparilOn to the co.tCOlt thai Subparagrapb (1) defllleldeflne, a qualifying the capabilltycapability to delivdeliverer energy: they the utilityutUSty would Incur if It purehaaedpurchased f,cilltyfat;iUty a.a •• , cogeneration oorr tltlmaDmaD power coul.tCODll,t primaril~primarily ofor the cacapitalpital costa of energy or capacity or both from.from a produt;UonroducUon facifacUitylity whwhichich 15 a qualifying facilities., quaUfyfna 'afa dlltydUty to meet partpan ooff IIIIta r.f.dlity.dUty WIderunder Subpart B ofoC the IfU. by purc::bulnapurcbulna electric energy from demand.demaad. and .uppUedl uppUed It.III remainingremalnlna CommiCommiSllon ..lon' '., regulalionsregulationa., Thate a quaUfylniquaUfylt\a flcllItyCaclllty .•• a utilityutility can reduce needlneed. from illIb ownnWD 'alacilitielcililie •,• The reaulatlonlreaulatlon. Implement .eetionleetion 201 01 Itafta enersY COlt.co.t. or can avoidIvoid purc::hapurcha'inal m, dirrerencedifference betweeDbetween theaethele two figure.flsure. PURPA.PURPA, and Ire the lubledlubject of Docket energy from another utility.utility. Ihethe ralerate (or would representrepre.ent the utilIty'autility'. nnelllVoldedetllVolded No., RM7t-MRM7t-M., a purchasepurc::haae from.Crom a Qualifytll8quali(y{ng fecililyfacility Isfl eo.1.coat. In thllthl. cuecase,. the avoided co.lscoals are Subp.ragraphSubparagraph (2) deflneldefines "purc::halepurchale" to be bued 00on tho.e eneraYenergy costscostl which'which ' Ihethe extel.exte •• of the tootaltal capacity and ii'iI. the purch.aepurdaM of elet;trleelectric energy or the utility can thereby .vold.avoid. If a energy co.tco,t of the system developed In capadtycapacity or both &om a qualtryfn,quallryfn, qualifying racilltyfaci1l1y ofTerl energy of accordancaaccordance with the utility'sutility'. optimaloptimal 'acillty' acillty by 111an electric utility. .ufficientaufficient reUabUlIynllabUlly and with sufficient Cllpacitycapacity expansionexpanalon plan,plan.' I excluding ththee SubpangraphSubparagraph (3) denn.,.definet -..Ia"Ie" .aat the legaUylegaUy enforceableenforceabl. paranleeaparante", ofor qualtfylnaqualifylfta faciliry.faciUry. over the lolaltotal .. "0' .Iectricalectric energy or capacityt;apadty 0' deliverabillty 10to pennitpermit the putehaslngputehaalng eaplcllYupacHy and energy coatcost 0'of the 8}'ltem'}'sfem both byby.n an elKlricelKiric utilityutlilly to • qualifyingquaHfyins electric utility to .voidavoid the needneed to (berore(before paymenllo Ibetbe qualifyins f.ellltyr,cliity. coa.tructcoa.trucl a seneratlngseneratlns unit, to buiJd a8 'facility)acllit}l) developed InID .ccordanceaccordance wltb In thathe proposed rule, .ubparesraphlubpangraph f4) ImaDer, lellIe.. eexpen.lv.xpen.lv, pllnt,plant, oror to the utilit}l'lutility'. optimaloptimal c.pacltycapacity expen810nexpan.lon denned ".y.tem"'Yltem emergency" .. a reduce firm power purdlale.purch"e. from pla.o IncInc/lldi",ludi", the qualifyinsquelifyin8 facilityfacility.' eondltloncondition on a utility',utility'l syslemIyalem '''which'which Is anotheranolher utUltr' then the ratelralea for suchluch it SubparaStaph (1)(7) defindefine. .. likelyUkely to nlult~.ult in dl,ruptlondisruption of aeMcaMMce to purchaaepurchue wil be bued allon the avoided "intercoMectioninlerc::OMectlon coau"coats" a.l the •a Ilgnlflcant number ofor cuatomerscustomers or I. capacitycap,cil,. .ndand energy CO.tlco.t•. . roealOnlbl.raalOll.bl, coaucoate 0'of connettlol1.connectloo. likely to and.ngerendanser lifeIile or property.," In The Conuo1ta.1oaComm1M1on. b.. added the term .wltch"",Iwltchlns. meterina.mctmna. trammillfon.b'ansnUlI{on. responaere,ponte to cornmenucornment, nollng 1M ""lnt:rementaJ"lnt:rementaJ" to D'lodJrymodify ththee COil,colta which dl.l,tributlon.tributlon. ..fety provl.fon.provl.fonl endand dlmcuhy in determining whwhal •• 8.Il alectricalectric: utOlty woald avoid a. a conatllvteeconstilute. • "llgnlficanl"'Ignlficaal number"' of ""lullre.ult ofor mak1lllarnaklna a putehasepun:h.le &omhom 8a cultome,..cu.lomera, the CommiliionCommiSllon h.. qualifyingqualiC,.ing 'aclUtyr.clU ty. Un.derUnder the prinCiple.principle. amended Ibetbe definition to "a". concUtioncondition orof ecooomJcecouomJe dispatch,dI.p.tch, utllltJeeuUllUe. generall,.genuaU,. on .nan el.ctrlcel.clrlc utility"utility' . 'Yltemaystem whichich 1. tum on lut and tumhull off fintfinllheir their likelyUkely to ,..Iultre.ult in imminentImminent .igniticanlsigniticanl 8eneratinaBeneraling unIlJ1unila wwithllh the hblghe.1lghett runnin,runnin. disruptiondlsrupllon of lervicetervice to CUllome""cu.lome,., Ofor I, cost.coat. At any given 11m.time., u economicallyecononUClllly IImminentlymminently likely to endangerendanser 1If.lit. or dispatcheddl'patched utility eancan avoidIvold operaoperalina tina property.," The ,mph"l.emphasl. I. placed on luits highe.I-COltbighe.I-cost unit.units asII a ,..Iultre.ult of Ih'the alanlficanceII",tRcane. orof the disrupllondiaruptlon of makingmakins a pu.rcha.epu.rch"e fromhom a qualifying AD 18 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 91 of 111

Federal RegialV I Vol. 45. No.No. 38 I Monday, PebruaryFebruary 25, 1980 I Rule. and Rqulation.Regulation. J.Z2171Z%17

8dmlnf,lr.!lveedmlnl.traUve co.t.lncurredco.talnC\Jlnd by the qualilylnsqualilyiD.s facUily.f.cUily_ 1DlD lhllthll cue<:ale., the Subparagraph (11) definc. el~tricel~tric: \ltU!!yutUlly direc:t1,nl.leddirect1,relaled to the quallfytalifytna facilityf.clUly may have "maintenance powerpower"" .. electriceleclrit: eaerveoerv In.lIll1allonIn.lullatlon and maintenancemaintenanc:e olth.oflh. compenl.tedcompen.ated the utWtylorutWlylor illIII or capacity supplledsupplied by an electriceleclrlc phy.iealphYlical f,c:WUe.facWUea neceuary to pennI! iatef'COnnection co.t.co.1a withwilh respect to utilityutillt)' dur1ns scheduledtcheduled oulag81OUI.g88 of the inlercoJUlededinlerconnec:ted operaUoflloper.tioDi with. aalesnles to the qUillifyinaqualify!", facility,I.cillty, either .. qualifying facmtyladilly. quauryingqu.lirying ,.cility,facility, to the extent web part of the UIUlIy'1utUlty'. dem.nddemand or energy co.t, .reare in exceuce .. of the correspondingcolTespondlna chsrseacharaea, or tbtolt8h • aeparateaeparilte (;\Islome,customer Subport C-ArmngC-A.rmnsements Between £/l!Cfric£ll!Cfric Utilities and Qualifying COltl whichwhlc:h lbe electric utility would charae.charse. H this I.Js Ihethe c ..",." the have inc:urr-.dinCW'l'8d UIf it had Dot t.n8asedt.n8aged In inletcoMecUoo co.tco,t••••• aJOdated toeI.ted wilh Cogeneration and SmollSmall Power interconnected operationl. but inlle.dinSlud the purchalN!purchaae jndude onlyoruy thOle Productian FacilitiesFocilities UndUnderer SectionStlction 110ZlD of the Public UtUtilityility &gu/alory&gulatory Policitn aeneretedaenerated 8ftan equivalent.mountequivalent amount of additional interconnection exptt11M.pe11U. 0/ energy lltell or pu.rchpurch ••ase edd.n an equlnJenlequlnlenl incWTedIncl1l'T8d by the electric utilityutillt)' 8'as a resuhreluh Acto/1mActa/1m amounllimounl of elecbic energy or capacitycapac;U)' of the purchase,purchale, and do notnOI include anyaD)' I 292.301 Scope. from other 1OW"CttlOurce •• Interconnection portion 01 the Interc:oMectJonInterconnectJon COlts lorfor Section mU01{a}ZUZ .301(a} de.cribe. the ~pe eo.l,co.t, do notnOllnclude Include any COlt. inc1ucfedinducted which the qualiryln.g facillacilityity he.haa already of Subpart C of Part 292 01or the Inin the calculation of avoided COIU. paid throuBh iu rel.Urel.lI ralesrates. throuSh C The Commiasion haa clarified this One commenl recommended UtiltUlilt the Comroil.lon'.Commi ..lon'l rules. Subpart applieappllesa to10 .alI8le.es endend purehasespurohses of electric energy definition 10to Include di.tribu1iondistribution and definitiondeCinition be revlaedrevllN!d 10 cover "all .,dmlniltratlve.,dmlnillratlve COltlcostl "Iocialedalsociated with Ihethe identifiableIdentifiable COl'S,COlt., Including bUIbut nolnot or capacity between qualifying cogeneralion or small power production interconnecinterconnecledted operllltion, inIn relponae to limited 10.to. the cost.costa 01of interconnection commenl'comment. indicating thaithat the propo.ed . . . resulting !tom[rom InlerconnectedInterconnected facilitiesfacilltlet and electric utilitiesutilities,, and .cUon. rel.ted to rule walwaa vague in these re.pect&.re.peCla. TbilThil operation"operation".. ThThee CommilliocComml ..lon teJeClateJecli !.hiiss acUonl related to such saleslales and definilion i,ia dellgneddealgned to provide the .Ugge.tiSUggea liODOD in order to malntainmaintain purchasepuran"e• . Section 292.301(b}{1) Sillte regw.toryregulatory .utboritieautboritiell .ndand consistenCJconsistency with It. InltJaInItJall providesprovide. th.tthat thi.\hi •• subpartubpart doeldoes nol oonregulatednonregul.ted electric uliliUutilitie.el with the detennlnalionnnlnation 10to .eparaleseparate the utilityuULil)".'l precludprecludee negotiatnegotiateded agreemenl.agreement. nexibillty to ensure that all coCOSIlsta which avoided co.1tcosta with regard to purchases between qualifying cogeneratol'lcogeneratotl or .. re shoshownwn to be reasonably incurred by fromrrom quaUfYinBquaUlYinB facilities..facilities, from the cosl6cosll; amall power produce,.producen .ndand electric the electric utilityutilily as a fe.ultrelult of incurredinculTed IIa. a re.ultresult of InterconnectionInterconneclion uUlitiuUlitiete. which differ from&'Om ratel,e,. or terms or would otherwae Inlf:rconnectlonInt~rconnectlon with the quallfY1ll8qualUY1ll8 with a qualifying facilityfa cility. Accordingly, or condition.conditions which would otherwise be fl+cililyf~cilily will be considered asa5 part I'If the:t: legitimatelegitimale COllico.11 Clotnot rerecovcovereered pursuant required under the subpartsubpart.. Paragraph obliglltionobUglltion of the qualifying fa cicililYlity 10[0 this .ectionlection can be nelledtted oul in the (b)(Z)(b)(z) .t.telItates thatthai thlssubparlthis lubpart does nol under t 292.306. The.eThese cost.costl may calcullttion of avoidedavoIded costs. affect the validity of any contract include, but are not limited 10to, operating ThilThis definition alaoalao incorporate.lncorporate. theth~ entered Into between a qualifying Itnd maintenancemaootenance expenses. the costacosla of concept !tomfrom the propOledpropOled rule. a& facilityit), and an electric utility for any inttaIntlallatiocon of equipment elsewhere on clariliedclarified in an elTarra tum notlce,tnollce,t thai purchapurch.seae . •t the uullllty',tiLity's .ystemsy,tem necessitatedneceasilated by Ihec Ihethese COltscosts are limitedlimi led to the nel Paragraph (b)(1)(bUl) reneclsrenects the InterconnecIn terconnection., and reasonablereuonable inCleasedincrealed JJnterconnecHonnterconnecHon COltsco.l. imposed CommiCommls.iOD',.. ioo's view that the ralerate in.urance expec.eexpen.e• .• However. Ithhee on an electric utility compared to those provislonlprovision. of sectionlection 210 of PURPA Comml,.lon does not expeclexpect thaithaI interconnection COltScoati It would havebave apply only001)' if.if a qualIfyin.gqualIfyi.ng cogeneralor Of01 liliaaUonli tigation expenleaexpenlellncurred incurred by the IncWTedIncUfTed had IlaeneratedIt generated the energy .maamaUll power productioa.racilityproduction. facility choose.s ulllll)'utility Involving this aectionlection will be. HuMitaelf or purchased an equlvalenlequivalent 10 availlueU of that .ectionsection. considered a legitimale InterconnectiIon amount of energy or cepacilycapacity lromfrom AgteemenllA8reementa between an electric utility cost 10to be bome by the qualifying another source. and a qualifyingqualUyina cogeoeratorcoaeneralor or smaImallll facility. Thi.This section of the rule coolaln6contain6 power producer for purchases al ratrales Certain interconnection COSIIi mit)'mlty be: definitions of "Iupplementary"supplementary powerpower"",, dllferentdifferent than rates required by theaethele Incurred It81 a reaultresull of sale.sales from II "back·"back-upup power", "interruptible power". rules, or under terms or conditiont utility to.to a qualifying facility, The 8ndand "maintenance power" whichwblch ddidid nolnot dmerentdmerenllroin !rain thouthose "Iset forth in lheltheaee CommissionCommission noles that the Joint appear in the proposedpropoaed rule. rules,rules, do ootnot violate the CommIssion', Explanatory Statement of the Commlltl!l!ttl!l! Subparagraph IS} defineSdefUles rulesrule. under section1~lIon 210 orof PURPA. ThtThe of Conference (Conference(Conference Report) "IupplementaryIuppleme:ntary power" as electrielectricc CommissionCommis.lon recogni%earecogni%es thaithat thethe .bUII)abilil)' prohibitsprohibita the Uteule of "unrea"unreasosonable fIIlentle energy or cap.ciIY.• •lupplied upplied by an of a qualif)'i118qualiryil18 COEeneralor or .mallsmall slruclurestruclure impediments,tmpedimenls, luch a. electric utilityutility, regularly used by •a power producer to negotiatenegotiale wwiithlh an unrealOnableunreaeonabl. hook Upup charg"el or oth."oth~t qU8lifyil18qualifyil18 facilityfacilily In addition 10 ththaiai electric utiUl)'utility 11is buttressedbuttreBBed by Ihethe dilcrlmlnatorydilcrimlnalory practices . ..~ IThisl which the facility senerates ilsIlleH.eH. existenceexillence 01 the rightsrighls and protections ooff prohlbiibitionUon II renectedrenecled in , 292.S06{a)292.S06fa) of Subparagraph (Q)(e) definedefine.s "back-up these rulurules. thesele rule8,rulee, which providellprovid811 Ihal power" a.as electric energy or capacity Some commenlacomments .tatedIta ted thatthai paragrllphparog.rllph interconnectionrconnection co.t,Co.ls mUlt be ...alteltede.ted .uppliedlupplied by an electric utility to replreplaacece (b)(2)(bJ(2) would unfairly penalize on aI nondllcrillcrimlmlnatorynatory baailbasil with energy ordinarily generagenerated led by a cogenerelorlcogeneretor1l .ndand smallsman power producen resptet to otherolher CUllomersCUltomers wilhwllh similuralmilltf fa cility'. own generation equlpmenlequipment who, priOl to the promwgationpromulgation of thesethele load cchaha reeterilUcsreeteriatica. during an I.lOscheduledunscheduled outage of thetbe regulationregulallon .. ent~dent~ed into bindbindinging A qualirylnaqualifylna facUityracllity wbich ilis alreljdyalrelldy ((lf(l cilltcilily. conlrac~contrac~ wlLbwith electric utilities under Interconnected with an ele<:trlcelectric utility Subparagrapb flO)(10) definel lIesae .. favor.bleravorable Wm:Jtenn. than might be for purpoae.purpose. of ..salesIes may seeklet!. to "interruptible power" a,at electric energ.\' obtalnabieobwlnable under lhelethele rules..les. The estabUlheslabUlh interconnection for the 01 capacily suppliedaupplIed by an electric CommIssionCommission interprets its mandaleate p urposeurpose of utilityuUlity purchases rrom Ihth,. utility .ubjectsubject 10to inlerruplloninterruption by the under tecHotectlon ZIO(a)ZIO(a) 10 prescribe "such electric utilityut ility under apedliedapedfied rutelrulet ••a. it determinesdetenninet necessarynecelSaty to , ConferellCllConf~ ... 1\CII ReponRcpon on HJI.. toll. PuLHtPuLUt. UlIlillUlIlhj conditions. encour.geencourage cogeneration andBnd .mallsmall ft'1lIlIMloryfiI'1IIIIMlory PollPoUcIdn .. kl of 1""IW" H. RrRrp.p. N" 117."67."6 I'ti.loti 11II.; ,,,,-.. Con . .. 1d SIt". [1"IJ[IW.j. '·OTho InnnI~nn -,\ll'dlne,lItChue" I.II delintddeline-d In 12921292.1011'"101(11) AD 19 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 92 of 111

122181Z218 Federal Regi.le,Register I Vol. 45, No. 38 I Monday, February 25, 1980 I RulesRules and RegulationsRegulatfons

power producllon .. . .. 10 mean that along with the eleltlmaledtl mlted capacitycapecity co,t and off-peekorf-peak periperiodods.s, for thetbe currenlcurrent Ih. lota1 coata to Ihethe utility and the rale. of planned capacity additionI'addilion•. . Thl.Thll calendar year and fforor each ofor Ihethe next to II.II, otherolher customer'customeu .hauJdshould not be change I.II intended to ensureensure that the five yeaTlyears.. greater thaR ttheyhey would have been bad calculation of avoidedavoided cost.COSt8 includeinclude,. Ibethe Subparagraph {2](2) of paragraphparagraph (hJ(b) the utilityutillt), not mamadede the pu.rc.huepUJ't.hue from lower enerzyenef'SY COlliCOlts thatthai mmightight be reqrequire.ul rel each elelecctrictric utililyutility to pro\'ide the quauryinsquauryina ffacUltyacUlty or qualifying associateassociatedd with ththee nnewew capacUY. The II.lIa ac:hedule fortor the additlODadditiOIl of cappaacitycity., faclUlle •. That a cogeneration or small CornmiliiCommis.lonon point. oulthatout that the plaMedpl'Med purebpurcha.ea18ss of firm eners,y and power produproductionction facility entered·'inlo 8a delennlnationdetermination of a raterale for purchaspurcha.e.e. capacity. and plplannedanned capcepacltyacity binding contractual 8tt8118emenl8tt8Il8emenl with from a qqualifyingualifying facility which enables retirementsreUre:ments fotfor each of the nnextext tenten ao electric utilityuUJUy indicate. that It i. a uutllJtytilJty to defer or avoavoidid the additionaddition of yeart. likely that .uIficlenl.uIficlenllnceotlvltlnceotive exl&ted.exi&ted.. a new unit mUlt alloalto reneetreneel the hhoutSoutS ofor Subparagraphraph (3) of paragraph (b](b) hashall and that the further encouragement expected useu.e of the deCerred oorr avoided been revised.revilled. II81 di.cusaeddi8cusaed prevtouslypreViously, providedprovided by these rulearule. W8I not capacity addition.addJlion. 10so thatthai the co,tsCOlts ofof planned capacity neca ..st)' . A •• result.relult. the CommillioDCommil,loD The coverage under paragrapbparagraph (a) of addition.additlona Include the assoclaledasaoclaled energy h .. nol reviled thl.this provision. thl,l•• .ectlonecUOD III. the .ame,amlt as that provided COltlCOlt •.• The CommiliionCommlliion received commeatcommenl • 292.302 A vvol/abilityol/ability ofelectric ulillty pUUu8ntpuuuant to .ectlon.ection 133 of PURPA and the CommiliCommillionion',', rule.rul .. iImpmplementinglementing noUngnollng.thalthat lome StatetStal.. have . 'Y'Y"em"em coscostt dolodoto. thatthallection secUon.. 11' 1 A.AI notednoted in the Notice of implemented or arean! planning to M~ the Conunl ..lon observed Inin the Propo.edPropoled RulemaJdngRulemaklns .• •aection eetion 133 ofor Implement alternaalternativetive methods by NoUeaNoUce of Propo.ed Rulemak.lns.RuiemakJng. La order PURPA appllelappllel to eachucb electric utilityulilHy wbJch electric utilities' 'f.temI),.tem cost data to be .bl.to.ble to evaluateeveluate the financial who.ewhOle total ..salesIes ofor electric energy for wouldwould be made available. In (ltdeorderr to (Halbtnalblllitylity of a cos,nerationcogeneration or .mall pUlp018'purpo.e. other than rellaleresale exceeded 500 prevpreventent the preparationpreparation orof duplicativeduplicative power production l.dUty, anIn (nveatorlaveatot million kWbkWh during any calendar year data where the alternativealtemative method needt to be able to10 e.timete,eatimate, with beginning after DecemberDecember 3131.. 19751975.. and sub.lantiallylubltanHally devlalesdevlalel frrromom ththee re ..onable certainty.certainty, the expected befoteberote the fmmedlalelyImmedlstely preceding CommilliooComminion approacb,approach. the CommissionCommission return 00OD a potential inveltmentinveatment before calendar year. bab .., added paragraph (d). ThisTbll COnttructlon or.or I ffacilacility,ity. nu. return Paragraph {b](b) provideaidel that each paragraphparagraph provide.provld81 that any SlateState winwlU be determined in part by ththelt price regulatedregulated electric utility meeting the regulatory authority or nonrnonreegugulalatedted atal wblchwhich the qualifying facilityFacility can aeUleU requirement.requlrementl of paragagraphraph (al(8) mu.1mUlt electric utility may. arterafter providing Ita electric output. Under' 2m.304Z91.304 of fuml.hfuml8b 10to It.III SlateSiale regulatoryregulatory autbority.authority, publipublicc noticenoUce 10In the areaBrea served by the the.e rulel.rulel, the rate al which. ulUltyulility and malotainmaintaia forror public inspection. data utllllyutility and arteraCtet opportunity (for publicpublic mUll pu.rc.hasepu.rc.halle that outpoutputut il baaedbaled on related to the costs of eenergynergy and comment. requr~ulreire data differentlbandifferent than the utilltY'1uUllty', avoided cOllll.cos Is. laklnSlaklng intoInto capacity on the electric uuttility'ility'a .y.lem'Y'lem.. thai which are otherwise required by accountaccounl the factonfacton sellet forthforth into Each noonregulatednregulated electric utilityutilily allo thlthil • .ection• ection if ItII delennineltbatdetenninea tha t avoideuavoidmJ paragraph (e)fe) of lhallectionthallection.. SectionSecUon must maintain such datadala for public co.t.CO.I. can be derived from .IUchuch data.. 291.302 of tbesethese rulel laII intended by the InspecInspection.tion. Any State regulatregulatoryory authority oror Comml"lloonn to atlatli.1i.1 tholetho.e needing data 10 responJereapon.. 10to commentltll received. the [lonregWalednonregulaled uillulllilyily shalllIhall notifynOIUy the from wblchwhich avoideidedd COltlCOlli can be CommissCommisllionion ha.hal exlended the datedala by CommilaionCommission wilhinwith in 30 days ooff any derived., ItII requrequirelirel electric utlllUe.ullIItlel to which the.e dala mu.1mUll bbee nrst provided determination toto .u.tHuleIU8titute data make lVallable 10 cogeneratorlcogeneratOrl and to November 1,1. 1980, and changed the requirements.requirementa. ,maUsmaU power producproducer!er! data concemlngconcernIng 18cond.econd datedete to May 31. 1982.1982, to conformconlorm II.I1a qualiifyingfying facilityfacilily linds thaithallhe the the pretent and anticipated futurefulure COstlcOlltl to the datudat .. required by the alternative requirement. do nolnot provprovideide orof energy and capacity on the utility'.utility', CommJ8ICommJ8IIonlon'.'. regulaUollllmplementingreguJaUollllmplementlng .ufficfenllufflcfent data from which avoided costscollla ,y.tem.sy.tem. .tction.ectlon 133 ofor PURPA. The Commlulon may be derived.derived, thelhe qualifyinging ffacilityacility In ththee preamble 10 the propopropo.edaed rule. hal added paregraphpatagraph (d](dJ to allow a mmayay aeekleek court review of thetke mattermailer asas the CommilliilSlonon .tsted.tated thaithat mo.t electric State regulatory authority or it can with regard 10to any otherotber aspeaspectct o0f1 utiutilltleali ties will havebave prepared data nonregulatnonregulateded utility toto UI8uae a different the State'l', iimplementationmplementation ofor Ihis contalnlogcOlualning someaome of thi.this InfonnaUonInformaUon in approach than that provided Inin programprogram.. compliance with the Commission'.CommlSllon'l rule.rules paragraph (b)(bJ. As part of that .ubltitutesub.tllute A qualifyingquelirying facilitacilityy may wiia.hh to sesellll Implementing .ecUonsecUon 133 ofor PURPA. program,program. a State regulatory aulhorllyauthority or energyenelllY or capacilycapaci ty 10 an eleCclrtricic utililyutili ty Several commenten observedoblerved that the 110nregulated electric utilityutility could whJcbwhlcb I. nolnot .ubjectaubject 10to the repreportingorting marginmarginalal costcoat data required 1to0 be provideprovIde th.tthat COlt data be updated motemore reqrequirementluirement. ofofpar8grapb paragraph (b)., In thattha t proVidedprovided putluantpUtluanl 10to .ectionsection 133 cannot frequently than every two year•. event, paragraph (c) provprovideaides thatthai, upon be directly translated Into a rrateale for SubparagrapbSubparagraph (1) of paragraphparagrapb (b) Hque.tHqU8lt of 8a qualifying fa cUlty. an purchueapurchue.., The Commission baab.. requires each electric utiutilitylity to provide electric utility nnolot otherwiaeotherwi.e covered byby clarified paragraph (b]to(b) to empbaempballlzelze that the estimestimateda ted avoided cosCOltt ofor energy on paragrapb (b) mustmusl provide datadala these data areani notnol intended to represent It.H. 'Iy.temf.tem for vartolllvarloUilevel. level. ofof .ufficientluIficlent to enable the cogenerator or a raterale ror purchalel from qualifying urchaaeaurchase. from qualifying facillUe"faeiliUa • . The smallIman power producer to eslimate&JUmate the 'acilltleefacUlUel. Rather, theletheee data ara to be r.evel.evell of purehalelpurchaae. are to be .latedetated In uUllty·.utility', avoided co,tCo.ll. •. UJf auchluch utilitutilityy con.ldered the nr.tnrat .tepItep in the blocks of not more than 100 megawatt.meg.watta doe.do.. not.upplynol,uppl), the requrequestede.ted dala.data. the determination of .lIthIUth a raterale. for .y.lemlay.lem. with peak demand of 1000 quallryingqualifying facUfacilitylty may apply to the StateSIaie 'TheThe Conimiulon balbat aliaallO revisedrevised thilthis megawaUI or more:,more, and in blocka regulatory authauthoriorityty which hbasas section 10.0 that the 'aill'taill. for purcba'lt'purcha.el equivaeqwv81enllolent to not mOf9more than ten percent ratemaking authority overnver the utility oror can be more readily calculated from the of syltem'yalem peak demand for Iy.lemllel.Iy.temllell to thl,thl. Commillion forfor an order dat'data produced. The CommissionCommission hasbas than 1000 megawathmegawattl., Thlll'h11!nform,UOQ WormaUoo «QuiringHQulring that the Information be changed paragraph £bU3l 10 provideprovide tbal 1.10I. to be lIated on a cenl,cenll per kilow4tt·kilowa tt· .upplled.supplied. The conlcon.ideratiooderation ooff luch a uuUUlltylIty .haU.baU .ubmlt the auoclaled hourboUt basi.,basis. forror daily and leuonalleason41 peak applicationlappllcatlone sbouldahould take intoinlo account enel'8Y co.1COil of each planned unllunit the burden impoledimpo.ed onon the .mallamall expreaeeduprellaed Intn kilowaltkilowatt·hourl· hour. (kWh) " .. fR S/l&81.&11&81. October n. 1"'"1""- uUlltieulilltle .. AD 20 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 93 of 111

Federal Regi!:ter I Vol. 45. No. 38 I Monday, February 25,~, 1980 I RuffRuh:: . and Regulation. 122t912219

An elec;1ric utility which I, 1.lIylerelly into ..-hichwhich theythe), h.dhad enteredenll!Ted requiringrequ.irin.& ,upplylnalupplylna uUllt,uUlity'., s)'"Ilem.syslem. AA.•• a relult.re:.ull, olJligated to obtain all ofil'ofil. them 10to pu.rcb8lepurchua .UaU of thellthelT the nlerate to the qua.lifyinJ facUlty would requirement. for electric energy and requirementarequiremenll from a wholenlewholeule supplier.aupplier. be baaed co00 thOHaveragethose average COIleCOIIta,. fl.« capacity from anolher utilily may One commenter noted that. with regard howeverhowever,, tM quallMnlqll8llJyina facUity'sr.cUlty's output pro\'ide the datadata providedprovided by U,It, 10 all-l'equJremenlial1-requlremenll rural electric were purchlledpurchued by the IlUpplyinaIlUpptyina uttlit)!,uttlity. supplying utilityulilHy and the rate.ratel atal which cooperaliveJ.cooperalive., anyIny impairmentImpairment ofor the It.Itl outputOUlpUI ordinarily will replace the IIIt currently purchases susuchch energy and obligalion 10to obtain.Uobtain aU of.of a hilghestghett coslcost energy onOD the tluppJylngtlupplylns captcityC8P1city forror any period durlll8 which cooperative'a requirement. from aI ulilltyutility·.', ,y.temsy.tem atal thatthai time, and itaIta thl. obligaUon willill continue. The seneratioogeneratioo and trln'mllliontranlml.. io n cooperalivecooperative cap.citycapacitY mJghtmight enable the .upplyina,upplyina .....wholesale hole.. le ralelrale. may requrequire.lre adlullmenadjulunenll mightmisht affect the fmanclng abiUty 01 the utillr, to avoid the .ddition of new In orderorder to renectrenecl properly lht .voided.... oided generatioogeneralion .ndand Inn.mIniontnniminion capacity, TbuThu,. •. the avoided co.taco.ts of the cosll,COlta. ThllThfa I.II dl.lscusaed laterlater [0 W. cooperative. The CommlllComml ..il on observesobaef'\les .upplylng.upplylna utilityul1l1ly maym.y be higher that);than the preamambleble under' 292.303292.303., In the cate of thatthaL in genertiLge:nertlL 11lilt it pe.nnlltedpermUted .uch avoided coatQOIt of the non-generatingnon-gener.ting s mall. non-generalingnon-generating utilities, the contractual provlsprovl.foralora to override the utilityutillly., requirement. ofor this secUon will be obUsalionobligalion 10to purchasepurchue &om qusUfytngquaUfytng 'I'hThlll. would nolappearnot appear to be the Clifcalif cunsldered to have been satisfiedulisfied If facililies,facilities, these contractual devices if Ihethe qu.lifyingquaUfying facility offenoffert to .uppl)!,upply Ihesethese co.s1l datadal. are readily availableavaJlable might be ",eeduled to hinder the development capacity and energy in a ,Ituatfonaltuation inIn (romfrom the supplying utility.utility, of cogeneration and .mall power which Ihethe .uppsupplyinglying utiUty i.ia In an8n Numerou. comments mentioned IhMtthltl production.production, The Comml.sion believes excelleXCelS c:apacltycapacity .fluation..aUuation.. SfnceSrnce the thehe propoledpropo.ed rule did notnoladdre sddrell.. the that the mandale of PURPA 10to .upplYinBaupplYinB uUUty haahas exceasexcess capacity, III ississueue of \'IUdalion\'aUdation oorf the datadala to be encourageencourage cosenerationcogeneration and .mall evoldedavoided costa would include ani)!only enerpenergy provideprovidedd pureuanlpUfluanl 10 this secsectionlion, As II., power production requ.lte.requItel thaithat cosll.costs. On the other hand, if the avoided resull. the Cornmia.slon has added 10 rcsul" the Cornmia.elon has added obligationsobligations to purchase under thlsthlJ cosl wn-ewne baaedbued onOD the wbolesalewholelale ratefete pparflgtaph ...r&8raph (e) whiwhichcb provprovideside. thaitbat any pro\'isionprovision .upersedeaupers«le contractualcontraclual 10to the .UaU·requlremenll·requlrements uUllly,utility, the d.,18 submitted by an electric ulllilyulllily restrictionsrestriclion. on a utility',. ability 1to0 avoidedavoided co.tcott would includeinclude the demand under Ihthiil •• .ectionection .hall be subject to oblainobtain energy or capacilYcapacity £rom 8a charsecharge lncludedincluded Into the wholeswholesaleale 1ele,ate., rertH,'lew by It I StaleState regulaN!sulalory lory authorilyaulhorily, qualif)ingqualif)in.g facility. which wouJdwould u.uallyusually reneelreneet a.n PitrasraphParagraph (el(2)(elI2) places the bburdenurden or The CommlSllon hu,has, hohowever, ...... ever, allocation of.of a portion of the fixeafixei:f pproro"\'iding support for the data onon th el!' pro\'idideded an alternate means by which chargescharge. a.aodateda ..oclated with exceas ulni!yulnilY supplyil\B the data. any electric utility can meet thi,this capacity., obligation.obligation, Under paragraph (dIdJ. if Ihethe C 292.J03292..lO3 Eltclrk: utmlyuillily obllg.tlonlobligation. under qualifyingquali£yina fa ccilityility coneent.,consents, .nen all· Use of the unadjusledunadjusted wholeaalewholesale rale ",I, .... b9Irt. (ailfail.. 10to take latalalo account the effect ofor ""t, .... b9Irt. requirementsrequiremenls uUlllyutility which would reduced revenue to the .upplylna utili'ulilil)"y , Section 210(s)210(a} ofor PURPA providesprovides IhlJl olherwiseolherwise be obligated 10 purchasepurchue thethe' CommiuionCommiuion prescribe rule.rules energy or capacity (rom£rom the quaJifyquaJifylnglng asIS •a fe.ullre.uJt ollheor the .ubatltutesub.tltuta of the (,.qulrlnrl1qolrlnss electric utilitutilitiesies 1to0 offer 10to ffacilityacility ""ould\Oo'ould be permitted to tranltransmitmil qualifying facllit)facility".'. output lor energy prevprevJouslylously .uppUed b)'by the .upplyingsupplying flUT'Cha,epUT'Cha,e eleelectricctric energy from quallfyin.gquallf)'in.s the energy or capacitycapsclty to flsits .upplyins.upplying faradlhieldlhies. The Commission interprelsin lerprets ulllityutility., In mostmoat inltanceinatencel, •. this utility. A.I the le,le\'e'ell ofor purchase by the th is provision to Impose on electric tran.actio"transactio" would .ctuallyactually take the form .n·requ.1l·requJreJrementamenli utiUutiUtyty decreudecreues,el. Ihethe uutilitlilHiesies an obligationobligation ttoo purchasepurchase all of the displacement of energy orOf .upplyinasupplyina ullllly'sullUty's fixed co.t.CO.tl will have e.Jer-tteelnc energy and capacilycapacity mademade capacity thai would bave been provided 10to be allocated ovoverer a smaller number orof ;4vall81.1le~vaihtble trom qualifyinsqualifying fadlitle.fa ciliUes with undeunderr the all·requirementsaU·requirements obligationobligation., In unit.units of outpuL In etrect,effect, the 1081lost inIn which the electric utility is directly or tbi!thi9 casecase,, the supplyingIlupplylng utility i.il deemed rrevenueevenue to the .upplylns.uppl)!lng utiliutilityty will indirectly Interconnected.Interconnected, except durifl8 to have made the purchasepurch8le and, alas a cacauaeu8e the demand charge.chargea to the periodsperiods described in 1292• 292.30410.30410 or result the aU-requlremenlaaU-requirements obligation Is ,up,upplylnaplylna uUlJly'.utWty'. cu.tomeracuatometl [includ.in8[ineludins during systemaystem emergenciesemergencies., not affected. the aD·requiremeallaU·requlremeall CUltome,.CUltomen 1\ qualifyIng fafacilitycilily may seekleek to hhaa\lt!ve In addition,, ifIf compliance wllhwith the inteinlercoMe~ledrcoMeCled with the quaJiIyingqualifying II uUutllit),lity purchasepurcha.e more energy or purchue obligation would impose a fafacility)cility) 10(0 Incre8lelncre.. e . Under the derUlltionderInllion capacitycapacfty than the-ulilitythe-utility require.require. 10 met'tmeet apeciapedalaJ hardshiph.rd.hip on an .1I·requ[rementsall·requ[remenls of "avoi"avoided co.t."cost." inIn thi. section, the Us totaltolal .y.tem load, In .uchIUch a case, cU9tomer,cu,tomel", the ComtniCommillion.. ion may considercon.ider purch8lingpurch.sing uUlityuUlHy mualmusl be in the .amesame while the utility illegallyi.legally obligatobligaleded 1100 waivinswaiving such9ucb pun::huepurchue obligation financial po.itionpo.itlon ItII would have beeD purchAse liny energy or capacitycapacit)' pursuant to the procedurproceduruu selset forlhorth in hbadad Itit nol purcb8ledpurcba.ed the qualilyiingng providedprovided by a qualifyinging fara cciliilllYty., ththt't' • 292.403.292.403. (acilily"facility'. Dulpul.Dutpul..A. A.. a te.ultte.ull, tetherrather lbanwan pupurchRserchAse raterale .hould only Include aUocatinsallocating 1111011III 1011 in revenue among allell paymelltpaymelll for eneraYenel'X)' or espacitycapacity which TraflsmissionTrollsmission 10 Other FacilitiescUlties of II.It, cu.lomert,cUltOlne.rs, in thiathis .ituation the the ut.llilyutility cancan use to meet itails 10ltotal There are severalseveral clrcumatance.circumstances in supplying ulilityutility .hould ..88ssign ign all orof systtemem load., TheteTheae rulruleses impose nunu whwhichich a qualif)quaHr)'lns'l ng facilityfacHlty mightmishl desire theee 10llel10sle. to ththee allall-requirements-requirements requirement on the purchasinspurchasing utilityuillity to thaithaI the electric ulilityutility with which itIt is ulilltyutility, 'ThaIThat uU1ltyuUllty .houldahould, inIn tumtum., ucJi,erdcli~er unusableunuuble energy or cap8citcap8cil.vV 1I0U Interconnected not bt the pW'cha.erpW'chuer of deduct theMtbeHloue. lou81 fromrrom it.il. previouslypreviously "ntlthern(Jther ututililyility for .ubsequent.ubsequent 'Ale'1'I1e the qualifying fadlHy'.facilHy's energy aDd calcultalculaleatedd ....avoIdedoIded ooat.,costs, and pay the . qualiCyinaqualifying facilJlyfac:l.1Jl}' .ccordinglyaccordin.&ly., f 192H2.,303(') ObIIiPUon 10 purCh'JItpurChan 'rom capacity,capacity, butbul would prefer insteadinstesd thatthaI qu.tifymgqullifymg fectllU.factllU. .. .nan electric utiutilitylity withwllh which the UnderUnder thatethese rulet.Met., certain smallamall purclias.inapurcbas.ina utility i.lnterconnecIs Interconnectedted electric utilitiesutilltie. are not requitedrequired to 1 .lt2.3i13(d).lt2,3i)3(d) TransmlaslonTran.mlulon 10 0"",'oUWr make such a purchase., If, forror example. provide sy.temsYltem COlli d.tadata., except uponupon electrlCelectrIC utmuulill1 ...... "II-RequlremanlAlI-Requirement CORlreellCon1r~II. . Ihethe purchasing ulilityutility i,is • non··ggeneralingener.tins requrequestest of.of a qualiryingqualifying facUityfacility. If,Ir, with SelSe~'erale,al COmmenlerscommenlers nolednoled thai the utility. its avoided co.tscolta ...... will 111 hebe the price the consent of the qualifying fa cilicilityty,, .a 1u1thgilllo.lth,iltlonn 10to purchase from qualifqualifyingyins of bulk purcbaspurchased power ordinarily .mall.maU electric utility choose, 10to Iranlml!transmit r"cllllr"c1l1liesies under ,hithis. 'eclionlection mlghight! based on the average embedded cost of energyeoergy from the qualifying facility to a !:tlnq lnnlclt with contraclualcontractual commilmunt,;commltmunl'; capacity and averase energy coat on itsils secondaecond electric utility, !.hethe .mallImall ulllilyutility AD 21 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 94 of 111

Federal RegisterRegister I Vol. 45. No. 38 I Monday. February 25,25. 1980 I RulRuleses and Regulations

ca.Dn avoid the otherwise applicable jurbdictionjurbdiction underunder Part II or the Federal to build illils line intointo the ,erviceice area of reqUirement. thai it provide the .ystem Power Act. thetethe.e charge. will be the utilityullilly., costeost data for the qualifying (acilityracillty and delenndetermi/ned pursuantpur.uanlto to Part nII. 1292,303{c) Obligation to inlerco" nf!n that It purchase th. energy Uselr. The electric utility to which the '292,303{cj Obligation to interco"nf!t'I However. the ability to tran,mlttransmit a electric energy i.Is trtranansmittedaml tted hashas the tn the Noliee of Proposed Rulemak ling.ng. purchaee to another utility I. nnotot limited obligation to pun::hasepurchase Ihethe energy alat a ththee CommiulonCommission useduaed the InterpretationInterpretation to theeethe.e .mallertmaller .yetemeIy.tem.:: It applleeapplle. 10to raterale which reflectsreflecta Ihethe costaco.la thaithat it can set forth In the Staff DiscussionDiscuaslon Paper, any utility. avoid as a resresultult ooff makmakinging suchsUGh 8 ththatlheat the obligalionobligation to interconnect with Accordingly,Accordingly, paragparagraphraph (d) proprovlduvldu purchase. In casescasea In which electricityelectrlcity 8a qualltylngqualUylng facility is subaumedsub.umed withwithinin that a utility which feceJvesrecdve, energy or actually travel'travels aero .. the ttansmittingtranamitting the requirementrequirement of section 2210(a)10(althol thol cacapacitypacity from a qualifying facility may, utility'lly.'. sy.ttem. the amount of energy electricelectric utilitieilitiess offer to sellaell eelectriclectric with the con.ent of the qualiqualifyingfying delivered will be 1e.aleas thanthan that energy 10to and pun::hpurchasasee electric energy facUlty., transrnitsuch energy to another tran.milled,ttan.milled. due to line lone,lone". When from qualifyingqualifying ffaacilitiescilities. The electric utility. However.However, If the firfir.tsl thltthi, occura,OUUta, the rate (orfo r purchase can CommJuCommJsslooll obaervedoblerved that 1010 hold facilityracUity doe. notnol agree to tranamittranlmit Ih.the renectreflecl the.ethese lone• . In ootherther ca.el.caaes, the olherwlae would mean thatthaI Congress purchaled energy or capacity. ItII retalnaretain. energy .upplied by the qualifying facility InIntendedtended to require Ihatthat qualifyqualifyinging lbe purchalepurchase obligation, 10In addition,addition, If will displacedilplace energy that would have fadlitlesfacHlt le. 80go Ihroughthrough the complecomplexx th.thlt qualifying facility doe. not consenconsentt been suppliedluppUed by the purpurchasingchasing utilityutilily procedureaprocedure•• .Implyimply to gain to tranaml88iontran.mlllion to another utility, Ihathe to the transmittingtran.mlttlng utility, In those casescases,, ininterconnection,terconnection, contrary to the nnlnnt utility retains the p~a.ep~.se a unit of energy .upplledaupplled (romfrom the mandate of .ectionsection 210 of PURPA toto obllgaUon.obllgal1on. Any electric utility to whwhichich qualifying facilityfacility may replace a greater encourage cogeneration and smallamall .ueb energy or capacllycapacity fa delivered amount ofof enefSYenergy from th.the purchasingporchaelng power production., lIIu.tmusl purchase thiathis energy under Ihethe utility. In thatthll caee.c.. e. the faterate for purchalepurchase During the comment period, chisIhls obligation. set forth iIn these rule.rules as If ahouldIhould be iIncreasedncreued to renect the net quellionqueation WitW81 further explored.explored, and It lb,th. purcha.epurchase were made directlydirectly from gain. These provl.ionprovi.ion.a are al.o set fforthotLh Watwas .lugge.tedugge.ted that the Commission hus lbathe qualifying facfacilityility.. Inin paragrapb (d),(d). ample authority under the general On. commenter .tateelatedd that ththisis mandate o(or .ectionseclion 210{a)210{a} of PURPA provi.lonprovi.loD could result In energy bbeingeing 1292,303(bj1292.303(b) Obligotion to sel/tosell to namelynamely,, that it pre.cribeprescribe rule. neceutlry tran.mllledtran.mltled to a utility which hIlS littleliltle qaalifying/aci/fti(f8qaalifyinglaci/lti(f$,. to encouragncouragee cogeneration and .mtlsmtl ll or no InformationInformalion regarding th.the Paragraph (b) .el.set. (orthrorth the .tatutorystatutory power production-toproduction-Io require reliability of the qualifying facility, The requ.lrementrequirement of section 210(a) of PURPA interconneinterconnectionction. CoMmiCoMmililon ..lon believe.believes thatthat,, prior to thesatheae that each electricelectric Ulilltyutility offer to .ellsell WhilWbilee these interpretations received tran.acUon.transacUon. occlJrTinB,occurrinB, itit will be In lbethe electric energy 10 qualifying facilities,(aclliUes. .ub.tantlal.ubltanUal support in the comments intere.t of the qualifyqualifyinging facility 10 The CommissionCommission observedoblerved In the NoticeNoUce submitted.lubmltted, Iheythey werewere at the same lime Worm any utility to which 'enefSYenergy or of Proposed RulemakingRuiemaking tbat SStatetate law crltlcitedcrHlcb:ed on the theory thatthatsectian lection ctpacltyctpacity I.It delivered,delivered. of the nature 0011 ordinarily .el1sels oul the obligation ooff an 210(e)(3) of PURPA does not providedc thou deliveries,deliveries. so thatthai such energy or electricelectric utility to provide .ervicelervice 10to thatthai a ququalifyingalifying facilltyCacillly may be c.pacltycapacity can be usefu.lly iintegratedntegrated intointo customencuslomersl locateocaledd within Its serviceaervice exempted f,omfrom .ectionlection 210 ofor lbethe th.,thai Utilit," power .upply. area. In mostlnstanmOlt Inatancet,ces, therefore.therefore, this FederalFederal Power Act (added by section Severa other commenlerecommenlen believed rule will notnotlmpo.e Impose additionaladdlUonal 202 of PURPA and providing certain thatthai W.thi. provilionprovision went beyond the obligations on electric utilltleutillties, •. IInnterconnectionterconnection authority) and lhatththaI thlIss authority ofor .ection. ection 210 of PURPA It isII possiblepossible that 8a qualifyinqualifyingg (acilityfacility Interconnection section speclricallyspeclricaJly n.maly,n.mely, lbatthat the ComminlonCommi811ion caeannonnott locatedlocated outside the .ervtceeervice area 01of an include.Include. quallIyingqualifying cogeneratcogeneralorsors and requite thathe fintfirst utility 10 wheel the electric utility might require back-up, .mallamall power producers In itsita power nor the .econdeeeond utility 10to buy Ihethe maintenance, or other types ofof power.power, applicability, These commenteucommenters powerpower.. Flnt.Flnt, the Commll8lonCommilfion notesnole. that The Commis.lonCommission belleve.belleves that thethe contendedcontended Ihatsincethat since section 210 ofof thethe 1lI1.thl. transmllliontran.mlfflon can only occur with instructioinstructionsns of sectionaectlon 210(a)210(e) ooff PURPA Federal Power Act deals expUclllyexpUcltly with lb. coD.enlCOD.ent of the utility to which that it [uueluue rulesrule. "u"8111 II delennlnesdetennlne, the .ublectlublect of Interconnections between energy or capadty from the quaJII)'lngqualifying necellaryneceual")' 10 encourage:encourage cogeneration qualifying facilities and electricelectric utilities., f.dUty'adUty "til made anilableanllable., Thut,Thu., nOno and amallImaU power production •• 0" no other .ection oro( that Act can be utility I. forced to wheel. SecondlySecondly.. mandate that it as.ureu,ure thatthet .uchIUch interpreted ••at also 8fagra.nllngnllng authority on .tetlon.ectlon 210 doetdoe. not limit the obligation faeilitie.lacllities are ablablee to fulfillfulfin their needsneed. thal.ubJthat .ubJect.ect. as suchuch an interpretationInterpretation to purdla.epwcllsse to aDY partlcularparticular utility:utility: for servicelervice. would ~nder the expreuexpress provilprovisionion nthernthar. III.III•• a generally .ppllcableapplicable However, ththee CommluionCommiuion .1soal.o ".urplu.,ge"".urplu.. ge" _ requltement.nqultement, recogni2es thatthai StateSlate and local lawlaw WhhWith regard 10to these criticisms,criticisml, thethe PuagraphParagraph (d) provide.provides that oharge.charge. limits the authority of .omesome electriceleclric Commluion obaerve.observe. thatthat Ihthisis argumenargumentt for lraD.mllllontraD.mlfflon aarere not a part of Ihethe utilitiesutili tiel 10to conslNcconltrucl! line. outoutaide.ide of might be tenablatenable In the atituatlonituatlon inIn rater.ta whichwhich an electric utility 10to wbfcbwhich their .ervlceservice area, Accordingly,Accordingly. Ihethe which the aectlonaecllon of the legislation snersYenergy It" tran.mltledtransmitted i.I. obligated to pay CommissionCommiuion requlreerequire. electric utilitiesutilltie, 10 whichwhich deal. explicitly with the .ublcctsublcct the qualifying facility., In the ca88 ofor .erve any qualifying fa cilitcility,y, and. doe.do .. notnol contacontainin an exprellllexpre81 pprovlarovisiloon elec:tricelectric uUlItieluUlItie. not .ubjecttolubject 10 the 8subjectubjectto to the re.trlction concontainedtained thatthai II I.I, noltonot 10 be consideredcon.ldered the Juri.dicllonJuritdlcllon of thisthl. CommillCorontiffion, the.etheta therein, to Interconnect. with any .uchsuch exclu.lveex.clu.lve authority on the sublect.subject. TheThe chars"charse •• .houldhould be ddrtenninedetennined under facilityfacilit;y aeas required Inin paragrapb (c). CommlfflonCommltllon note.note. ththatai aection 212 01of thhee applicable SlateState law or regulation whlcbwhich However, an electricelectric utiutillityity I.II only FederalFeder.1 Power Act (as(aa .ddedadded byby.ectlon.ectlon lUy permit agreementagreement between Ihethe required~uired 10to con.lructconstruct line.linea 0'or other 204 01of PURPA) .et..el. forth certaicertainn qu.Ufylngqualifying 'aciUtylaciUty and .ny electrielectricc uUlltyutility faciliUfadlitiulo .. 10 tthehe extent aulhorizedauthorized or determinationsdeterminations thatthai Ihethe CommluionCommluion whichwblch transmitstran.mlta energy or CJpacllycapacity with requitedrequired by StateSlate or llocalocal law. AaAe.,a mu.1 make before It can iuueialue an orderderr lb,lbe con.ent of the qualifying fa cilitycillty, For re.ult,reault, a qualifying facilityfacillly oulsldll! the under elther:.ectlonelther:tectlon 210 oorr 211 ofor the utilltieutilltie. •• lubjeclubject to the Commlfflon'"Commlulon'" eerviceaerviee sreaerea o(or a Utilityutility may be required Pederal Powar ActAcl

AD 22 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 95 of 111

Federal RegisterRegister I Vol. 45. ND. 38 I Monday. February 25.25, 1980 I Rulea and Regulations 12221

Secllon 212(0) slalesslates that no provision that such. restrictive InterpeelationInterpretation of I 292.301 RatRotes for purr:hases. o f section 210 of the federal Power Act Ihethe law Is notnol supportablesupportable.. Section 210(b) of PURPA provides thai shall bo treated "(I)"(1) al requiring any Paragraph (c)(I)(c)(1) thu.thUI provides that 8nan In requiringrequiting any electric utility to p£'Nlon to utilize the authority ofof luctaluch electric utility must make an)' purchase electric energy from a section 210 or 211 in lieu of any other Interconnections with •a qualifying qualifying facility. the Commlulon mw!mwt authori1yauthority of law. or (2) al limitingIimitin8., fafacilitycility which ma)'may be necessary 10to ensure that the rates for the purchase be impairing. or otherwise affecting any pennit purchases from or .ale.lale. 10to the fuatIU8t and reasonable to the electric olherother authority of the Commiulon under qualifying facility. A State regula to.., consumers of the purchasing utility. in any other pprovisionrovision of law." Thul. the authority or nontegulalednontegulated electric utility the public Inlerest.Interest. and Federal Power Act. as amended. mUlt enforce thiathis requirement RB part of nondisiscriminatorycriminatory 10 qualifying expressly provides that the edltenceedltente of itailllimplementation implementation of the CommiBlionCommission''ss fa oilioilities,ties. but that they not exceed the authority under aection 210 of the rulearulel. incremental COllts of alternative electric FedFederaleral Power ActIoAct to require In addition. leveralleverel commentencommenters energy (the cost.costs of energy 10to the utility.utility, interconnection i. not to be Interpreted contended that., If1£ the obligation to which,which. but fortor tthehe purchase,purchase. the utilit),utility 8Sas excluding any other interconnection interconnect isI, required under .ectlonlecUon would generate itself or purcchasehase from authority availaavailiible'ble under anyIIny other law. 210(a}tlO(a} PVRPA.PURPA, the limitation providedprovided 10in another .ouree)source).. The CommCommissionission emphasizel thaithat the .ectionaection 212 of the Federal Power Act Relotion Jo StoteState Programs limitation is not relltricted to the Federal would not be available. That limitation The CommissionConuniuion has become ewareaware Power Act,Act. but rather extendl to Include provide. that an electric utility whlcbwhich that leveral SlatesStates have enacted other authority of law •, .uch• uch 81 the compliea wltb an interconnection order authority contained in Ihethe PublicPublic Utility legislationleglalal10n requiring electric utilities inIn under sectionaection 210 of the Federal Power Regulatol)'tory Policies Act of 1918. of which that State to purcha.e the electricalelectrical Act would not be ,ubjectsubject to the output ofor facilities whwhichich may be sectionleelion 210 ill 8a part. Clearly. the jurisdiction of the Federal Energy existence of this provision refutes the qualifying fa cilities under the Regulatory Commission for any contention Ihatthat .ectlonsection 210 of the Commission's rule.rulel at falestates which may purposespurpose, other than those "Peclfied'Pecined in FedeealFederal Power Acl representlrepresents the differ from the raterales required under the the Interconnection order.order. exclusiveexclusive method by whichwhich Commilsion'Commiallion·., rules implementing interconnection can be obtained. As a After consideration of thl.this concern. sectlonlecllon 210 of PURPA. result the commentcommenlthat thai the direction the Commission balbaa added paragraphparagrapb This Commission has 8elaet the raterale for contained in section 210(e)13)210{e)13) of PURPA (c)(2)(C)(2)to to provide that no electric utility i. purchases at a llevelevel which it believes that no qualifying facility can be required to interconnect with any appropriatappropriatee to encourage cogeneration exemptede.lC.empted from section 210 or 212 of the qualifyiIl8 fa cili ty,ty. if. aolelylolely by teason of and small power prproduction.oduction. as requirrequireded federalFederal Power Act i.i. not persuasive.persua.ive. purchases or 88lelaalea over the by section 210 of PURPA. While the rules prescribedpretcribed under section 210 of The CommiuionCommission find. Ihaltothat to require Interconnection. the efectric utililyutility PURPA are subject to the statutoryslatutory qualifying facilities to go through the would become subjectlubject 10 regulaUonregulation 88as a parameters. the StatesStales are freefree.. under complex procedures set forlbforth in .ection.eclion public utility under Part nU of the Federal their own authority. to enact laws or 210 of the Federal Power Act to gain Power ActAct. ThisTbia exception II provided becaule the Commislion notelnolel thatthat. Inin regulation.regulationa providing for fatesrates which interconnection would. in mostmo.t would result In even grealergreater circumstance •• aignilicantly fmatratefrustrate tbe balance.balance, the encouragement of cogeneration and amatl power encouragement of the.e technologies. achievement of the benelitabenefilll of this However. StaleState law.laws or regulatioolregulationl program. The Commiasion doesdoea not feel production would not be furthered If.If, by "Irtue"irtue of interconnection with a which would provide rates lower than that the legallnterprelatJonle8alinterprelatJon let forth In lbethe federal.tandardlfederalltandardl would fail to the Starr Discussion Paper and the qualifying facility.facility, a previouslyprevioUJly nonJuriadicUonalnonlurisdicUonal utility were relreluctantlyuctantly provide the requisite encouragement ~r~f Notice of Propo.ed Rulemaklng i.il the thesa technologieltechnologie ••. and must yield to exclusive theory by which ilit may to become .ubjectaubject to federal utility regillatiooregwatioo. federal law. require interconnectionainterconnectlonB under this If a State programpro8ram were to provide program without reaoriresort to .ectlonslections 210 1292.303{e)1292.303(8) Paralleloperation.Poralleloperation. thatthai electric utllitieautilities must purchapurchuese and 212 of the Federal Power Act. TheTbe power from certain typestypes of ffacilities.acilities. In the Notice of Propo.edPropoaed RulemaJdng.Rwemaldng, In terpretation brought outoul during the among which area~ included "qualifying"qualifylna the Comml.lio'lCommlssioll provided thaithat eacheacb comment period-that lectlon 210(a)210(8) of facilities."facilities," alat 8a rate hl8herhigher than that PURPA provide.providel a gcneralgeneral mandale for electric utility muslmust offer to operate in pro"ldedprovided by thesethelle rulearules., a quauryin8qualifying the CommisaionCommi8l!l10n to prescribe rulesrule. parallel wHhwith a qualifying facility. facilityraclllty might .eekleek to obtain ththee benefitsbenefit. necessarynccessary to encourage cogeneration provided that the qualifying facilityfacllily of that State program. In .uch a case. and amall power productlon-provldeaproduction-provldes., complie.complies with standardlItandardl e,tablilhedestablished by however, the bigherbi8her rates would be in the Commis.ion·sCommission's view. sufficientBurnclent the SlateState regillatoryregulatory authority or bbasedased on State authority to establish authority to require interconnection. TheTbe nonregulalednonregulated electric utility with regard suchluch ralerole. ••, and not on the Commission'.Commission', Commission believe.believel thai a balicbaBic to the protection of 'yatemaystem reliability rules. purpose of sectionsection 210 of PURPA IIIs to pursuant 10 1292.308. By operating in A facility which provides energy or pproviderovide a market for the electricity parallel,parallel. qualifyingquaUfylna raciliuelraciUtiel are enabled capacity to.to • utilityulllily under StaSlate generated by small power producersproducers and to export automatically any electric authority may nevertPeless seek 10to cogenerators. The CommlSlion believe. energy which ilis not coD.umedconsumed by It. obtain exemption from the Federal thaithat accomplishment of this purpose own load. The commentlcomments .ubmilledlubmllted Power Act,Act. the Public UtilityUlility Holding would be greatlygreaUy hindered If it were to have notnolaet .el forth any convincingconvincins Company Act. and SlaleStale re8ulationregulation of require qualifying facilitiesfacililles to utilize realQn.reasQn. for changing the propo,edproposed rule. electric utiliutilities tie. 88aa available under section 210 of the Federal Power Act as Paragraph (e) thusthUI continue,contlnu88 to require sectionlectlon 21O(e)210(e) or PURPA. The the exclusive meanameane of obtainingobtaining each electric:; utWtyutWt), to offerorrer to operate In CommllslonCommla.lon note. that the StatellackSlatel lack interconnection. IIlherefore concludeaconcludel parallel with a qualify-inSqualifying facility. the authority to exempt ea facilityracility from

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Ihe Federal Power Act br P\lbUcPubUc Utility exchange power on a "split-th.pUt-the·lavi,.aving."ng." 01of ecarceeCIJ'Ce (olin(o ..n fuelfuela, •. sucheuch a,al oil and HoldHoldinging Company Act The Commla.lonCommJa.lon basisballs. In thallype of tranaacUon. the gas.gal, and the more efficient use of rtnd.rind. nono iinconalatencynconalatency In a facilityfacility'a'a two utilitieauUliUea .pllIpllt the difference between energy.energy. takJngtakJng advantaadv&nlllgege ofor 'eclioDteclioll 210 in order the incrementalIncremental costa incutr'1!dinC1JtT1!d endand the The CCommommissilasionon notesnolea ththat.at. in m091most to obtain one of II. beneDa,benefia, whJlewhiJe incremenlalIncremental co.t.coat. that the purchpurchulngulng instancea, i£ pan of the savsavingsings ffromrom relying on other authority under whlchwblch utility wouldwould have inC\llndinCUlT'fd bad It cogeneration and .mallamall powerpower to buy from or.fillor.~ to a utility.utllUy. generaledgenerated the power Ueell.Uself. Several production were .1I0cated.lIocated amonaamong the t 292.304(o)!ltJw292.304(o)!lDw /oTpurclase$. commenteracommenters 8rauedargued thaithat ratea for utilitlutilitlea'ea' ratepayera,ratepayera, anyIIny rate reductions purebaee.purchasea from qualifying (acillUe.(aclllUea will be in.ignificantInaignlficant for any inIndividualdividual ParagraphParagraph. (a) .et.leta forth the .tatutoryIta tutory sbouJdIbowd be based upon thlethl. sameeame 8eneralgeneral cucustomer,stomer, On thethe other hand, If these requirementrequirement that tate.rate. (or purchasepurchase.l be principle., The effect 01of auch • pricing savingssaving' aN!.~ aallocatedllocated to the relativrelatlvelyely jus I and reasonable (0to the electric mech.nl.mmech.nlam would be to trenefertransfer to the small clallcllIlI of qualifying coge.necogeRt!.ratorstatore consumen:consumers of the electric utility and 1D utility'autility'a ratepayer1lratepayerJ a portion of tbe and small power produceraproducers, they may the public interHlinlerHl .udand notnot ddiacrimlnateilcrimlnate savinaaIlvin8' repreaenledrepreaenled by the coetcoal providede a algnificaoalgnificanlincenlivetincenUve for.(or a againstagainsl qualiIytngqualifytng cogeneraHon anandd differential between the quaUlyingqualifying higherigher growth rale of tbese technologiees.s. amall power production facilities. facility and th.the purchasingpurchasing electric AnAnotherother concern with the uleule 0of1. a In the propo.ed rule, the Commissiossionn utility. Several utilltleeutilities concontendtend thaithat by splil·the·savingsspHI-the-savings rate for purchases i!li!l .tated.tated that there III. •• rebultable soeo allocating theaethese savings.eevinga. the that it wowdwouJd require a ddeterminationetermination of preaumptionpreaumption that thetha rrateate for purchaseapurchuea CommiaafonCommil8fon would provide an incentiveincentive the coscoststs of production of thethe qUBllrtlngqUB llf)oing Is acacceptableceptable IflIlt it renect. the avoided for the electric utility 10to enter intoinlo fafacilitycility. A majorma jor portionporlion of thlthl,. costcosl relwtingre.u1ting from&om a purchase OD the purchaeepurch.ue tranJlctionatransactlona with qualifylng leglegislationislation ia intendedintended 10to exempexemptt bullbaall of Iy.temIYltem co.tCOlt data aelaet forthlorth coseneralioncogeneration and lmanlmall power qualifying facilitiracililieees !'ramfrom the co.t·o!·coat'of pUNIuantpunuanl 10to '291:'292:30%30% (h} or (c),(c), ManyMany of production ,f.dUliel.cUHie •.• service:service regulation by whichwhich electelectricric the commentacommeota received atated thaithat thlathli These commenlerscommenleJ1l.ll aliao noted that utilutiliittieies traditionallytraditJonally have been aeeUoleelionn we.wal amblguoua.amblguoua. I1 The tbey bad pN!vprevlou,Jylo usty engagedenaaged In taBulatedreRulated. The ConfereConferencence Report notednoted Commission hahass therefore providedprovided thaIthat purchaseapurchue. from facllitiealacilitiea which might that. the rate for purpurcbacbs.esaes mmeetaeeta the bebecomecome qualifyingqualifying facilitielracilitie. under the It II nolthlnot the IntlnllonIntlnllon of Ihe thaaii atatutory requJrementa If it equala Commill.ion·1Commiseion's rulea, and they had paid ta of Ihe Confeteea atatutory reqwremena equals coSIDecoglDerllorlralorl Ind smaUsmaU power prodproducert .. ce,.. avoideavoidedd costa,cosla, and huhueliminated eliminated the pricea (orfor thesethese purchasespurcbases basedbaaed on "a becxl1nl .ubJ' ubJpcPC lI., , •, 10 the type of reference 10to the "rebultable"rebuttable "apUt-the-.avings""aplit-the-llvings" methodologymethodology. Theae eumlnaliex.mlnilionon Ullt I.I. ttadllionltlyttadllioni lly lliveniven 10 presumption"".. commenterscommentera obeeobaervedrved thatthai If the elec1r1c ..u'1Ii11 (1111), taterile spptlcalion.losppllcation.lo detdC!(ermermline Some comment. rerecommendedcommended that. Commission'aCommission', rule.rules now require the whlllwhat I.t. Ih'Ih ' JUu.1II andInd reuooabreuooablele nuerale Ihthatalther Ihey aa a mattermatler of policy, ththlala gection be payment 0of1 full .v.vooldedlded cost forfot theeetheee .hawdshould receive for their electric power. IJ typea of purchases, the purchased power revisereviledd to provide Ihat. StateSlate types of purchases. the purch8led power Thu.Thue,, SlecHonsection 2210(e)10(e) of PURPA expenselexpenses ofo( the electric utility would regulatory authority or nonregulatnonregulaleded provides Ihthatal the CommissionCommil9ion shashallll increase., utility has ddiacretloniscretion 10 establish the exempt qualiryingqualifying 'acUiUesfacili ties ffromrom the relationshipelationship betweMbetween the .voidedavoided coucost MoreoverMoreove r,, .everalleveral utllitieautilities commentedcommented that. for the foraeeable future, theythey.,...,.. PubUc UtilityUHllty HoldingHoldina Comp.nyCompany AAct.c!. and the raterale for purehases. Other from(rom the federalfederaJ Power Act and hom Inextricably tied to the unUte of oU to commenlen conlendedcontended that the SStatetate law and resulalionrqulation respectingrespecting Commission 'howd .pectfy. peclfy that the rate produce electricity. They contepdcont.epd thltthat unless ththeyey are ppermIttedermitted 10 purcllalepurcha.e utility raateste, or Onanda!£Inanciai organorganization,ization. 10 for purchase mustmUll equaequall the avoided the extenlextent that Ihethe CommllsionCommission COltCOil resulting from .ucbIUch a purchase.purchase. In energy andend capaclty from quallryfnsqu.lIrytnS facilitiesfa cilities atal • raatete .omewhereeomewhere between determdetermlnealnea Ihthaialluc suchh exemptexemptionion is addition, several .uggeatedsuggested that the necessarynecesssty 10to encourage cogenecogenerationrl'fion or CommissionCommiasion adopt a ".pIiHhe-savinga"".pIiHhe-savlng," the qualifyqualifylnslns f.cilltiefacilities's· cosllcoatI and their ownown COstl,COSII, they .nd their ratepaye,..ratepayera .mall power production. .pproach.pproach., Several commenlerscommenlera have conlendedcontended It i.ie possible Ih.tth.t developeradevelope", of will be eublecllubject to the continuaU)'continuaUy increaeingIncreaaing world price of oil thai a delenndeterminationinatlon of the qualifyingqualifying technoechnologie.logiee which may be Includedlncluded II ffacilityacilit)",', coetaco.ta can be made withoutwithout the qualifying ra cilitcilitle.le. may produce andaDd Commenter.Commenler. oppoaina thisthla allocation 01of savinsalaving' 10to partieap.rtiea other th.nthan the detail required by cost-of-.ervICfJ-ol-lervICfl make avaavailableil.ble power to electric regulation.regulatio n. HoweverHowever: the CommissionCommission facilities eveneven though thelt cost of qualIfyinaqualifying f.f.cUcilityity noted that fbi.thia .ectionsection of PURPA i.II lntendedlotended 10 encourage the belie~es that the basilbasi. for ththee: producing Ihlsthis power I. greater Ihthanan the determdeterminationination of rralesates for purchases ulilily'lulillly·. avoided coscoete.ts. In most develo",ment of coseneratloncogeneratlon and aman power production.production. TheyThey nonotedted thalmthat in ehouJdahowd be ththee utility'sutility's avoided costs anandd Instances.Inslances, hhowever,owever. purchases of energy abowd not vavaryry on the basiebasis of the cosllcosts or capacity from Clua1ifylng facifacililietliliet will provprovidingiding fotfor W.thil encouragement, the CommissiooCommiaaioD may nnotaefot set ratel fforor of thethe particularpartial!ar qualifyingqualify!ns facilityfa cility., onJy occur when the cost 10to the SeverSeveralal commentera recommended qualilyingqualifying cogenecogeneratorralor oorr small powerpOWI!!' purebasespurebasea atIII a level whIchwbIch exceed.exceed. the incremental COltcoat of alttrnativealtt.mative eoergyeoergy.. that rather ththanan usinguling a aplltaplit·.the,savingst11e.savings producer of producing the energy or 'pproach,approach, the Commission should .etsel capacity is lowelowerr thantha n the utiliry'autiliry's Therefore, they obaervedob.erved thaith.t,, under the the ralearatea tor purcbaaes at a fixedrlXed percentageperuotage avoided costa.cosla. Only U tblsl.tbls Is the case fullfuji avoided coatllandard,cosl standard, the utiHtieauliJitie.'' of avoided coall~co.ta~Tbe The Commiuiulolonn nolesnotes will payment by the utility of ilsits avoided cultomeracustome,.. .te'are keptkepi whole••• • nd payp.y the aamelame rale,rate... .. they would have paid hadhad that, in mo.tmOlt situ.tiont,situations. a qualifyingqualifying coete provide economiceconomic benefit for th"the cogeneralorcogeneralor or amall power produceroducer cogeneratorcogenerator oorr .mallamall power producer., the utiliryutility not purchaaedpurchaled eneraYenergy and willwiU onlyonly produce eenergynergy ifillts Its marsinaJmarsina! When one electr1celectric utility can provide cepacitycapacity from the qu.lifyina faf.cillt,cillty__ coatcost of production Is leIStess than the ppricerice energy moremON! cheaplycheapl)' Ihanthan couldcowd another AlLbough use orof the fullfuil avoJdedavoided cott he receIves~celves forror It,It. output. IfIf some nxed eelectriclectric utulilily.iliry. the two ulililielulUiliel win onen standardatAndard willwiU not prodproduceuce any ralerate savings 10 the utility', cultomen,co,fomers, percentagpercent.ge I,la uled. a qualifyingqualifying faracilItycilIty .ever.1aeveral commentel'1 at.ledat.ted th.tthat thesathe .. "Th."The ",lallOlUhrpI'II lallOlUhrp ~I"'ffil~IWffi l I~Ih~ ulllity .)',1.111'1'11.111 coifCOIf "Conrtrenc. ItR,por1,port 011 H.R..m&.H.R..o\&. Publ'ie:Public UUllIlt)lIJUt)' dalut ••nd lfIetfIe ra\frail' 101lor pun:topu n: h ••• • u"u Ia ddIl'C'CI.HdIC1l.Hd lind".. nd.,. ratepayera and the oaUonnation as.a. , whole "Conrerene. Rt8u.l.loryRt8ul.lGr)' PoUcJnPoUcJu At t olle?a.olle?a, H. RRtpep. No. l~$O.l ~so. 11. • :blZ.3oIllud'fN302' 'lId' D'l.304lb).t:l'L304lb). will benefit from the decreaseddecn=ated reliance Q5tl1Q51l1 Con,Con . .. 2<\.2<1. s.. ... (1818).(11178). AD 24 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 97 of 111

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may ceue to producproducee additional unllt of receive full avoided cosls for It. enUre qualifyingquaUfylns facility to e.tabliahestablish a tariff or energy when II. co.ltco.t. exceed the price output.oulput.lt It would no longer have other method for 8stabll.blngestabllsblns raterates. for fofa bbee paid by the utilityutility.. U lhl.thl. occun, sufficient incentiveIncentive to continue to purchalepurchase fromCrom qualifying faeiliue.(aciliUel of 10 the utility will be forced to operate ptoduceproduce electric power., The co.tcoat ofor kw or lesalela. Upon consideration of the gengeneratinserating wtit. which either are Ie •• production may have rj.enrjaen 80ao 81U 10 commentscomment. received, the CommlilionCommlliion ha.h •• efficientefficienllhan than those whwhichich would have render the previoullprevioul rate !n.ufficlent!naumc!enl to determ1neddetermined that the concept of requlrlngrequlrins been ususeded by the qualifying faciUty,faciUly, or cover the cost.COlta of production, or permH a .tandaroIlandard taterate for purchasepurchale.a shouldahould be whichwhich consume fOllilf08.illuel fuel rather than an appropriateappropriale return. retalnedretained. Several commentcomments•• slatedIated that the allemaallemaUveti ve fuel which would have ThUI,Thus, with regard.regard to (acnitie.,facUitiel, this requirement could similarly be beenbeen consumed by the qualifying facilltyfacility construction of whJch commenced on or applied to fadlitie.facilities of up to 100 kw or had the pricpricee been .et at fullrun avoided after the datedale of enectmentenactment of PURPA lellIe ... COIlscosts. (November G,ii, 1978], the CommillionCommission halh .. The CommissionCommllllion I.Is aware thai the detennlned It appropriateappropriale to provide .upplyaupply characteristic.characteristics of a partlcu1a:parUcu1a: I 292292.304{b).304(b) RelatiRelationshiponship to Gvoidedovoided thai rates for purcha.espurchaaes .ballshaU equal fuD facilityfacilily may vary in value from the CDs18costs. avoided costscosls. For faciUtiea,faeilitie., averag~ rale.ratea set forth in the utWty'.utWty's "New"New CapacItyCapacity"" construction of which commenced .tandardstandard rate requitedrequired by Uti.Util before the enactment ofoC PURPA, the pararagraphagraph. U the CommJsslonCommJlslon were to The proposed rolrulee differentiated will pennllpennil the State betweenbelween "old" and "n"new"ew" production in Commil8lCommi.slonon I1lquireI1lQuite individualized rate.,l, however. regulatory authorities and nonregulatednonregulaled the tranaactiontranlaction coslscosts associated with connconnectionection with simultaneou.simultaneous purchaspurchaseses and ssaleaalea. The propoaed rule required electric utilitieautilities to establish rate.rates for adminiisstrationtration of the program would purchases at full avoided co.lsCOlts,, or at a likelyUkely render the program UDeconomlcuneconomic an electelectricric utility to pW'Chase at Ita lower rate, If the State regv.laloryregv.latory for thiaUtis .Izeaize of qualifying facUity. 1.4A4 a avoiavoidedded coatcoal the lolaltotal output of.of a authority or nonrtgulalednonrtgulated electric utiJlty result, the CommJlllionCommJaslon will require that f'acility,acility, cconsonatrutructionction ofo( which Walwu determine.determines that the lower rate will commencommencedced after the date of IlfuanceInuance o(of .tandardizedatandardIzed tariffa be implemented {orfor provide .ufficlentlufticlent encouragemenlencouragement ofoC faciliUes of 100 kw or lealess. •. these rules,rulea, even ifi( the utility ccogeneretionogeneration and .mallImall power In addition, someaome commenlerscommenlel'8 pointed simultaneously sellssells enenergyergy to the production. Thus, If.if a previously exiatingexisting out that standardatandard lariff.tariffa can be used on fa ccilityil ity allisal its retail rstrstee., The effect of facllJtyCacllity showsshaWl that ItII requires fatesratea for a lechnologytechnology .pecificIpecific billsbali., to renectreflect the thithiss pproposedroposed rule was to separateseparale the purchasespurchalea based on full(ull avoided COatacoats to supply characteristicscharacteristica of the particular prproductionoduction aspect of 8a qualifying facility remain viable, or to lncteasemcre88e ita outputoulput. technology. Some commenters also from its consumptionconsumption function.function. Under the StaleState regulatory authority or observed thatthel the proposed rule did notnol thisthie approachapproach., the electricalelectrical outpul ofo( a nonregulatednonregulated electricectric utlliryutdiry IsI. required require that sstandardtandard ratearates foror 'afa cilitcilityy I.Is viewed independently of it. to establish such tatesrate• . Thi.This distinction purcbase.purchases from theaethese amall facilitieafacilitie. bbee eelectricallectrical needs. Thua,Thus, if,If. cogencogenerationeration Is intended to renectreflect the need for further baaed on the purchasinspurchasing utility'.s ffeacilicilityty produces fivefive megawaUsmegawatt., and inincecentiveantivea and the reasonable avoided costcosL This oml88ionomlsaion might bave consconsumesumes three megawatte,ltmegaw,tla, 1t ia treated expectations of peraonperlons. lnvestlnglnvealing Into permittedpermHled a uUlityutility to pay le88leas thanthsn that Ihthee ssameame 88as another qualifying facilityfaeility cogeneration or small power production rate for purchases.s, thaait producproduceses five megawattsmegawalls, and thatthai facilitfacilitiesie. prior to or .ubsequentsubsequent to the The Commission has accordinslyaccordingly IIss locatedlocated nexinext 10to a factoryfa ctory that useausu enactmentenaclment of tbialawthJslaw., revisedreviaed paragraph (cl(c) to require each three megawatt.., Paragraph (b)(l(bl(ll) define.definel "new StateSlate regulatoryre$Ulatory authority or The CommiaslonCommission continuesconUnue. to believebelieve capacapacity"city" 88as any purchaaepurchase of capacity nonregWatednODregu1ated electric utility to cau'ecause to thata i permittingpermitting .imultanelimultaneousous purchase hom a qualifying facilityfacility., construction of be put intoInto effect standardatandard ratea for and sslesale is neceuaryneceusry and appropriate 10to which W81wae commenced on or after purchaeespurchases from qualifying facilitiesfacnnles with enncouragcourage cogcogenerationeneration and .mallsmall Noveembemberr 99,, 1978. Subparagraph (2) 8e design capacity o(of 100 kilowattlkilowalla or powoweerr produproductionction. The limitalionlimitation provividesdea that (orfor new capacity. uUlitiesutilities lessless.. The revised rule requi(e.requi(es that contained in the proposed rule W88wae mustmu. t pay a rate which equat.equal.. their standardslandard rate.ratea for purchase. equal the intendedIntended 10to prevent a cogenerator or avoidedavoided cost. purchllinapurchulna utility'.s avoided cost small poweerr producer, which had found(ound A utility mustmusl therefore purchasepurchaae all punuant to paragraphapsragraphs (a), (h).(b). andend (e)Ie).. It economicaleconomical to produceproduce power for its of the oulputoutput from a qualifying facility. Several commenterecommenter. notednoled fhat ownown consumption prior to the luuanccee However, as explalnedexplained above, for(or any .tandardstandard ratearates for purchases can alao&Jao be of ttbesbese rules. CramCrom receiving the por!Jonpor!-ion of thatthai output whicbwhich Is nolnot ''new usefully applied to larger facilitiesfacililies., The eeconomicconomic rentrenl that might result from Ihe capacitycapacity,"," the StateStale regulatory authorilyauthority Commission believes that the purcurchasehase of Its entire output alaat a utility',s or nonregulated electrielectricc utility, as e9tablisbmenlestablishment of standardatandard ratelrates for full avoided costCOal after that date without provided in paragraph (b)(3), may purchases can significantly encourage newnew investment on the part orof the provideprovide forCor a lower rale,rate, if it delennlnesdetermines cogeneration and smallamall power qualifyingqualifying facility. that the lower rate will provide production, provided thatthai these 'TheThe samesame reasoning eppliesapplies 10to any sufficientaufficlent incentivincentlvee for cosco8eeneneraUon.ration. .tandardatandard rates accurately reflect ththee fa cilcilityity which WBSW88 In existencexistencee prior to Paragraph (b)(4) requiresrequirel electric coat.co,ts thaithat the utility can avoid as 8a the enaenactmentctment of PURPA, whether or nolnot utilitiesutilitiea 10to pay (ullfull avoided co.t.COlts for(or result of .uchauch purchases, AccordinglyAccordingly, it seseekseks to purchase and aell purcchaseshasel from new capacitycapac::lty made the Comm188lonCommlsalon huhas added ssimultaneouslyimultaneously. That ccon.tructiononstruction of the available from a qualifyingquelifyins facility, .ubparagraphsubparagraph (2) which pennit., but ffacilityacUity walwas commencommencedced prior 10to thatthai regardlregerdleeas88 of whether the electric utilIty doeadoes not require, StaleState regulatory dslete maayy lndIndicateicate thai approprialeappropriate IIss simultaneouslyelmultaneoualy makinsmaking sale.sales to the authorities and nonregulatednonregulaled eleelectricctric eeconomicconomic returns were aavailablevailable qualifyingqualifyins 'acill!yfa cill!y. utilitieautilities to putputlnto loto effect a standard ralratee wiitthouthout Ihthe further IncentivesIncentive. providprovideded lorfor purchases hom qualifying facilities bbyy seaectionction 210. t 229292..304(C)304{C) Standard rotes for with a design capacapacitycity greatergrealer than 100 The Commisallonon I.I aware thai In ppurchases.urchases, kllowallskilowatts. These rate.nles must equal 80me Instances.In.tances, irf a preViously exl.linsexisting The Notice of Proposed RulemakingRulemakins avoided COltcost pW1luantpl111luant 10to paragraphs (a)(a),, qualifyingqualifying facility werewere notnol permitted to required eelelectricctric utilitie.utiliUel on request of a (h). ondend (eJ.(eJ.

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Federal RegUtarRegfeter I Vol. 45,4S, No. S838 I Monday, February 25.25, 1980 I Rule. and RegulaUon'RegulaUon.

Man,Many commentel"lcornmenters ata t the than for wind energyenerg)' conyerslonconYl!J"IlOD price (orpun:ha.e.fer purchelel from the quallfylnsquaUfyfns Comml'lionCommJ.sfon'. pLlbUcpublic hurinphearinp and In aystelMIyltema. ParPor 'Y.temsIflteml peaking on0'0 dade f,dUtyfacUJty. Th.J,TbJ •• ,ubparagt'apb ubparagrapb will thulthu. written commentacomments rac:ommendedNCOmmendsd th.,thai windy daY'.daY". the feveraetevette mJghtmlghl be truewe. en.ureenlure the certainty of ratelrale. forror the CommiuioDCommiliioD .houldshould require th, SSubparagraphubparagraph (3)(U)(3)(11) thad proYidetprovide. that purchaaelpurchue. (romfrom a qualifyingqualilyina facUUyfacUlty e.labU.hmenletlabli,runenl of "nel"net enll1'81met81 billlnR"bUllns" for .tandard.tandatd ratelrates fotfor'purchases 'purchalet may whichwhIch entel'lintoenlarainto a commitmentcornmJtment 10to ..mallmall qualifyingquaUfying faclliUer.clUUea. .. Under thJ.thJI differentiate amanaamong quaUfytncquaUfytoc (.cilltln.f.cilltfn, dehverdeliver energy or caPlllcltcaPlicityy 10to a utility. blUlns method. the outputoutpui from Ia on thethe b.111basis of the .uppl,luppl,. ParqraphPsragrlllph (d)(l) provides that a quallfytn.quall!ytn. facilityf.cility ",venti.revene, the electric characleri.tic.characterlstiet oCof lbethe particularplll'lic:uJar qualllyinaqulllllyina facility may provide enersYenel'8Y or meimeierer u.edused 10to me81W'emeafW'e .ale.••Ie, from.from the technology. capacityclllpaclty enon an "as"u available"available" ballaba.l ... I.e.,., electric otilityutility to the qualilyinsquallfyiDs (acilltyraciUty.. without llegalegal obligation. The propoaedpropo.ed II1129Z3M =-(b)(s)(b)(s) and (d) u,alJy!.

AD 26 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 99 of 111

Federal RegtaterRegiater I Vol. 45, No. 38 I Monday, February 25, 1980 I RuJea and Regulation.

I 292.304(c) FoctOl"loffectingFoctOl"lo/fectina rol5roll!S forfor upenselupenael,, inaleadinltead of.Uof all of the COlLI amount.amounts of fum capacity emt tor purchase&. associatedBssoclated with the provi,lonprovillon of electrIleclricic dispersed wind sy,tema,'Yllema. even thouab Capacity Volutl aervice.lenrice. each machine, con.!deredconsidered uparatdy, In IdditiIddition.on. the Commi ..lonion notes ccouldould not provide capacll)'capaclly value, The An ilsuei.sue bsslcbsslc 10to this paragrapb Is the lhatlDtbatlD interpretinterprel WIWa phrillephrue 10 include esgregeteaggregate capacity Yalue orluchol,~ question of recognition of the capacity onJyonJ)/ energy would lead to &heIbe faciliUe.faciliUel must be conelderedconaldered In the v811uuee of qualiFying (.cIliUelraclliUel., conclusion thatthai the ratelrate. for ..1811018810 calculation of ratelrate. for purcha.e.. and In the propo.ed rule, the CommissIonCommissIon qualirytngqualirying facUitielfacUmea could only include the payment dlatributed to the cla .. adadopoptedted the argument setlet forthforth in the the energy component of the rate since providinaprovtdina the qpacltyCflpaclty, StaffStaff DiscussionDiscussion Paper thatthai the proper flection 210ZlO al.oalso reftl'lrefers to "elecbic Some technologiel.technologie., ,uchsuch i.if interpretationinterpretation of saeetionection 21O(bJ orof energy"ene'llY" withwUh regard 10to .uchsuch aalel.aale,. It I.I, photovo!ta!cphotovoltalc cellI,cells, although .ubJectlublect to PURPA requirearequire. that the rattlarattl' forror the Commi.alon'aCommisllon', belief that thl,thll was somelome uncertainty In power output. havehava purchaseapurchases include recognition ofo( the nnotol the intended re,ulLreaulL ThI.TbI, provide.provide, an the generaladvanta88generaiadvantag8 of providlna their capacity \palue provided by qualifyins additiooaladditional rea.onreason to interpretlnterpret the phrasephrue maximum power coincident with the cogecogenerationneration and Imall power "electric enel'flY"enel'8Y" 10to includeLnclude both energy .ystem peak when used on •a .wrunerIwruner production facilitielfacilitie •. The Commission and capacity, peaking .yssystemlem.., The value of .uch nolednoted ththatat language uaedused in seclionlection %10ZlO In implementinslhi,implementiP8 thi. ItatuloryIlatutory power is greetergreater to the utiUty than ofo( PURPA and thethe Conference RepOJ1 as sslandard.tandard. it i,i. belpful to review lndu8trylndustry power deJiveJ't!ddelivered during off~peak periodperioda... well 8Sas In the Federal Power Act prapracticectice respectingrespecti ng sasalesle. between Since the need for capacity i,il bued.ba.ed. in supports this propoliUonpropolitlon.. utilitiesutilltie •. Sale. of electricalectric power are part.part, on .y.temsystem peaks,peab, the qualifying In the propo::led rule, the CommlasionCommlaeion ordinarilyClrdlnarily clsl8ifiedclassified a. either firm "Ie.aless . . facility(acility's', coincidencecoincldance with the Iy,ternIYltern citedci ted thethe finalflnal paragraph of the where the .elleraeller provide.provides power at the peak should be renectedreflected in the Conference Report with regard to customer'.cuslomer'. requeatrequest, or non-firmnon·firm power allowance of .omesome capacity \palue end seelisectionon 210 of PURPA: salu,sales, where the .ellereeller and not the buyer an energy componentcomponenl thatthai reneclsrenecla thetha The conferee.confer«' expect thatthaI thethe CommlilionCommiliion. make.makes the decision wbetherwhether or not avoided enargyenergy costs at the time of the in~n judging whetheetherr the electric power power ia to be .vailable.available. Rate.Rates for rum peak. supplied by theth e cogenerator or .mall,mall power power purchaseslncludepurch8aeslnclude payments for A facility burning mu.nicipal waste or produproducecerr will replace future power wblchwbleb tbe thethe cosl of fuel and operatingClperating expenses, bloma88biomas. may be able to operate more utility wouldwould otherwi.e hS\ha\''e 10to generllte and also for the fixed cosllcosts usociatedusociBted predictablypredictably and reliably than .olarlolar or ilststMM eiteitherher through existins capacitycepaGity or addadditionlitions to capacicapacityty or purchnhnee ffromrom otherother with the constructIon of generatin8generating units wind systems. It can schedule its ssourt:es.ourt:e,. ""ill taketske Into accounaccountt the reliability needed to provide power aatt the outages during times when demand on uruf 'he ppowerower .uppliedlupplied by the cogenecogenilratorrator or purchaser'. discretion. The degree of the utility'sutility', system is low. U .uch ea unit smdlism dll powerer producerproducer by reliionre ll.on of any certaintycertainty orof deliverability required ttoo demonstratesdemonstrate. a de8reedegree of rel;,abililyreli,ability that legaallllyy enforceableenforceable obUgationobUga tion of ,Ud!.ud! constitute "fi"firmrm power" can ordinerilyordinarily would permitpennit thetbe utility to defer or avoid c;08tmec;o/!tmeriltorralor or .mllImllllll power producerproducer IQI Q be obtainedobtained only if a utility has severallevera) construction of 8a generatinsgeneratms unit or the 5upply~ u pply finn ppowerower 1to0 the utility." 8eneratlnggenerating unitsunita and adequate tesel'\'e purchase of fum powerpclwsr from another In additionaddition to that citation, the cacapacitypacity., The capacity paymentpayment., or utility,utility, then the ralerate fotfor lucb a purchase CommissionCDmmlssion notell that the Conference demand charge, will reflect thethe coslcost or should be basedbaled on the avoidance of Report statesslate. that: the ututilityililY','s 8eneratinggenerating units.unita. both energy and capacity co.tscosts. In contrasl, the ability to provide In order to defer or cancel the In interpretinginterpreting tha term ·'"Ilncnme.nlainaemental Cosl~CO"~ of al'ernatlve energy", the conferee.conlereel expect electric power alat the .eUingselling utility',s consconslrucliontruclion of new generating units, a thill the CommluionCommlnion and the Slates may l oo~ discretion iJnposesimposes. no requirement thatthat utility must obtain a coaunitmenlcommitment (romfrom a beyond the cosl. of ahemativealternative sources.OUTCeS which the seller construct or re.ervere.erYe capacity, qualifying facility that provides ~~rere instantaneou8!,yinstanl,nI!OU8!,y availlbleavail,ble to th e uuUJUyUlity . ' ~ In ordeorderr to provide power to customers contractual or other le8al1ylegally enforceable SeveralSeveral commenterscommenter. contendedcontended ththatat.. at the seller'lseller', discretion.discrelion. the .ellingaellitl8 assurances that capacity from sincesince .ectlonsection 210{a}{2}210{a){2} orof PURPA ututilityility need only chal'Je forror the cost of alternative sourcesaoureel will be available providesprovides thai electric utilities must opoperatin8erating itsHs 8eneratin8generating units and sufficiently aheadahaad ofo( the date on wblch "purchasechase electricelectric energy" from administration., These costs, called thethe utility would othetwi.eotherwise havebave 10to quq ualiryalirying facilitiefacilities,s, the rate fforor such "energy""energy" costacosts.. ordinarily areate the one5one, commit itself to the construction or purpurchaseschases should nolt include payment!.payment!. associated with non·finnnon-finn saleaaales of powerpower purchase of new capacUy.lf 8a qualifying for capacitcapacity.y. The Commisaion observeobservess PurchaselPurchases ofor power from&om_quaHrylngqualifying facility provides such ..surances,aUfances, it is Ihalthat the statu lory languaglangua8ee used iinn The fafacilitieacilities will fall lomewhere on the entitled tatn receive tateratels based on the federll l Power ActAcluses uees the term continuum between these two types of capacity costacosts thatthai the utility can evoldavoid "t:"t: lectricctric energy" to desdescribecribe the ra lete.s electric .ervice.leNlee. ThUI, for example.example, wind 8Sas 8a result ofor its obtaining capacity from fforor s&lessales forror resale in interslateInterstate machinelmachines thatthaI fumi.bfurnisb pclwerpower only when the qualifying facility. comcommercemerce. Demand oorr capacitycapacit)' wind velocity exceed. twelve mile. per Other commentscornment. with regard to ththee ptlymenlsp&ymenls are a traditional papar!r! of sucsuchh hour may be so uncertain in availability rrequirementequirement to include capacUy ratesates.. The term "e"eleclectritric energy" is u!ledu!led of output thatthai they would only permit a ptlyments in avoided costs generally utility 10 avoid genera ling an equivalent track those set forth in the Staff Ihrou8houtIhroughout Ihethe AclActio to rererrefer both 1to0 utility to avoid 8enerating an equivalent track those set forth the Staff eleelecctritricc energy and capacity, ThThee amount of energy. In thaithat .ituation,Iiluation, the OiacussionDiscussion Paper and the proposproposeded rule, Commission doesdoes notnot find any evidence utility must continue 10to provide capacity TheThe thrusttbrust ofo( these commentlcomment. isit: that. In Ihatthat the lennterm "e"electriclectric energy" in secsectiontion thatthat isia available 10to meet the needs of Its order to receive credit for capacity and custocustomersmers. Since there ate no avoidedevoided 10to complycomply with the requ.ltementrequirement thatthaI 210 ofof PURPA wwasas Intended to refer onl)'' capacityc~p~cit y costs,costl, ratesrates forror .uchsuch sporadic rates forfo r purchasespurchase. Dot exceed the 10 fuelfu el and operatingoperatin8 and maintensnCf!maintenanCf! purchl:lses should thus be bbasedased on the inncrementalcremental COltcost of alternative energy. utility system's avoided incremental capacity payments can only be required "Cont"Confereneren ... Rt!pOrt on H,R,R. 4018.4011. Publir.blir. Uuut,,)Util) ito;ito;j(j(uhuh,.oty'IOty Potic!e.Pollcle. ActAcl ofof 1971.tva. H., R""pp NNo:... , 1':"'~IIO.110. ~ cost of energyener8Y. On the ototherher hand, when the availability of capacity from a 'Hlh C:Dn8 ~ Zli20. Sell. (l117SI(l117SI.. tesllmony at the Commis8ion'sCommission's public qualifying faCility or facilitie.racilitie. actually ,. 1(1., pp. 98-41. hhearin8seRrings indicatedindicated that errerfeCliveective permits the purchasin3pu:chaaing utility to reduce

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12228 Federal Register I Vol. 45, No. 38 I Monday, February 25. 1980 I RuJes and Regulations

It.It. need to pro,,;de capacilycapacily by derarrlngdererrlng reference to these data in paragraph (e(e).). 'sUkelyI. likely thaithat the qualifylnsqualifying facility the construction of new plant or aloneas one factor to be considered In which would claim 10to replacereplace such commitment. to firm power purch81e calculatlngcalculating ralesralet for purchaselpurchases., capacitycapacilY may aogo oulout of servicelervlce durin8during contracts. In theUte proposed rule.rule, the Subparagraph (1)(lJ Ilatestlates tbalt!l.allhese these dala Ihethe period when Ihethe utility needs it.Its Commi"iOQ ataledalaled that it. qualifying shaU.IbaU. to the extent practicable, be taken power to meet .ystemIystem dema nd. Based facility offersOrreM! energy of sufficientlufficlent Into account In the calculation of.of a rate on the etlimatedestimated or demonstrated reliabilityreli.bility and with .ufficient legslly for purchases.purchaBel. reliability of •a qualifying facUity.acility. Ihethe enforceable guaguaranlee,ranteee of deliverabllity SubparagraphSubpara8raph (21 dealedeal. with the rate for purchahatesses from 8 qualifying to perml!permit the putch8llngputch8ling electric utility availability of capacity (rom 8a qualifying facility should be adjusted to renectitsrenect lis 10to avoid the need to con. true! a CacililyCacillty dduringuring systsystemem dailydany and value 10 the utility. generatingBenefating plant. 10 enable 1110 build. seatonaleasonal peak periods. U a qualifying Clause (iii)(iii) referl to the length of time amalier.amaller. lenIe .. expensive plant. or to facility can provide energy 10to a utility during whwhiicch the qualifyingquali£ylng faciiityraciiity hashat purchs8epurchaae lenlell firm power from another during peak period. when the electric contractuallycontraclually or otherwise guaranteed utility than it would otherwise have utilHyutilily ilIs running iI.ill mostosl expen.iveexpensive that It\I will supply energy or capacity to purchased. then the tslearales for purchases 8eneratlnssenerating unla,unit., !btlIhl. energy hhasaa a the electric utility.utility. A utillty-ownedutrlity-owned from the qualifying facility muat Include higherbigher value to the ulililyutility than energy the avoided capacity and energy colta.cost•. suppliedluppUed durin8during orr·peak periods. during generatins unit normally will supplupply A.A, Indicated by the preprecedingceding which only units with lower running pOwerpower for the lifelire of Ihth e plant. or until II diacunlon,diaeunlon. the CommissionCornminlon continues to co.18costa ateare operating. i.is replaced by more efficient capacity, In beUeve thai thue princlpluprioclplu ate valid The preamble 10 tbe proposed rule contrast, a cogeneration or smasmallll power and appropriate. and thallhey properly provided that, to the ex~x tele nlnt thai production unit might ceacea.. e 10to produce MOll Ihe mandate of the .Iatute.Ialute. melerlngmelerins equipmpmenlent fsavailable.II available. lbethe power a.as a retresult of change,changes inIn the The ConunJ"ConunilSlon also conllnues to State regulatory authorityaulhorily or Industry or inIn the industrial processes believe.beUeve. 8S stated In the proposed rule. nonregulated electric utility .hould,hould take utilized. Accordingly.rdingly, Ihthe value of the that this rulemaklng repre.enl.represents an errorleffort into account the time or seasonl8ason in which .arvice.ervice from Lhthe qualiryln8ng facility to Ihe to evolve concept.concept' in •a ne$tlyne~ly the purcha.epun:hale from the qualifyin8qualifying £a cllity eJeclriceleclric utility may be affectedaffected by the developins arnarea wHhinwithin cerlalncertain . tatutorytatulory occursoccura., Several commenteracommenlera interpreted degreede8ree to which the quallrylngquaurylng fa cility con.trainls. The Commission recognize. thisth i•• statemenlIatemenl al implyingImplyins that,that. by ensure.ensures by contract or other legally thetthat the tran.latlontranslation of the principleprincIple of refullngrdullng to 1o.tallInstall metering equipment.ent. enforceable obll8atioobligation that ItII will avoided capacity costs from theory into an electricelectrlc utility could avoid the continue 1to0 provide power. Included In practice I,I an exlt1!melyextremely dlfficulldUficuh obligation 10to consider the limetime at which thLath18 determinealio lion.n. amon8among other factors.ors. txerd.e.txerdlt!. and laI. one which. by purchase.purchaJeI occur. Thil.s Isr. not the InteInlenl of are Ihethe term of Ihethe commitment, Ihthe definition.dennltlon. ilis basedbased on estimation and this provisprOVision. Clearly, the more requirement tor nnoticeotice pMor 10to foreca.lingforecalling of future occurrences. prepredaelyciaely the time of purchase IIIIs tenninatlontermination of the commitment. and any Accordingly. the Commission supportssupportll recorded the more exacllhetlhe calculaUon penalty provisions for breach ofnf Ihethe Ihe recommendallonrecommendalion made in the StailStaIf of the avoided costs,cost •. and thusthu. the rate obligation. OiacussOlscusslonloR PapePaperr that it .hould leave to for purchasespurcblles, can be,. Ratberather then 1nIn order to provide capacity value 1t0o the Stale.Stales and nnonregulatonregulateded utilities specifyingIpecifylng thaithat exact time·of·daytime-or-day or an electric utility a qualifying facility "nelllbility"nell.lbllity for experimentationexperimentation and 188110nal.eSllonal ratel for purchases 8reare need not necelSarilyceatarily agreea8ree 10to provide accommodation of special requlrt!d.requirt!d, however. the Comml"CommillsioiOIln power for the life of the plant.plant. A ulliityutillty's drcumllances"dtcumltances" with regard 10to believesbeliev8llhal that the selectionI8leclion of a 8enerationgenera lion expansion plansplant orten Implementation of ratesrales for purehasespurehase,. methodology I.Is bestbell lefttelt to the Stat.State Include purchases of firmOrm power from Therefore, 10to the extent that 8 method of regulatory authorilielButhoritle. and nonregulated other utilitlelutilit\81ln In yearlyeat8 immediatelyImmediately calculating Ihethe value of capacity from electriceleclric utilitiesutiUUe. charged with the preceding the addition of a major qualifying facilltlufacillUu reasonably account,accounts iImplementation of !helethese provision •.l. generation unit. If a qualifying facilityracilily for the utility', avoided COltl, and doel ClauselClausee (i)(il througbthrough (v) concern contraclliocontracts to deliver power. for example. not f.UfaU to provide the requIredrequired vanoUl.specl.varioUialpeet, of01 the reliabilityreliabiUty of. for a one yearyeaf period. it may enable thethe tncoUtagement of cogeneraUoncogeneralion and qualifying facilityfecility, When an electrlcelectric purcha9ingpurchasing utility to avoid enleringtering into Imall power production. IIIt will be utility ~rovldes~rovldel power from II.lis own •a bulk power purchase e.rransemenlarrangement eon.lderedconlldered a.as leUItali.CactorilyCacton)y aeneratinsgeneratins unJtaunJlI or from£rom Ihosethose oro( another with another uUlilyutility. The rale for such a ImpJemenlingImplemenling the CommissionCommiuion'sl rules. electric utility. It normallynonnally controllcontrol. the purchase should thus be basedbased on Ihethe production of such power from a cenlralcentral '292.304(e)'292.304(e) Factors affecting rates lor locationlocalion. The ability to 10so control power price at which .uchsuch power Is purchased,purch8led. purchases. production enhancelenhance. a utility',utillty's ability 10to or can be expected 10 be purchaseed.d. buedbated upon bona fidelide offerlorrers from A. noted prevlciusly,previously, several relpondrespond 10to changes in demand. and eommenterscommentera observed that the utility thereby enhance. the value of thatthai .notheranother uUlltyutility. .y.tem.y.lem COl'COlt datadala required under power to the utility. A qualifying facility ClauseC1aule [Iv)(Iv) addresses periods durin8 '292.302 cannot be directly applied 10to may be able to enterenler Into an which a quaUfYquamy'l",ng facililyfacility 1&la unabunablele to rat"r,let fotfor purchasepurchue. The CommiCommiulon ..lon anangementlUTangement with the utilityutIlily which 81velglvea provide power. ElectricElectrtc utilities schedule .cknowledges thl.this point andand,... .. the utilUy the advantageadvantagl of elilpatchlngdispatching maintenance outag"outa8e. lorfor their own dllCUlled pf'f'vlou.ly,pnv1oully, haahas providedprovided thatthai the fafacilitycility.. By 10'0 dotng.dotna. ilit lnerelncre8le.. e. s It.lt, gener.UnsgeneraUng unit.unltl durin8during periodtperioda when !huethHe dala are to be used ... startingltatting value to the utility. Conversely, if. demand I. low.Jow.lf If a qualifyingquallfyln8 facility point forlor Ihethe calculation of an utility cennotcannot dispatch.di.palch a qualifying can almilarily scheduleschedula fItsIll maintenance appropriate raterale for puroha.espurcha.es equaequall 10to facilityfacilily. that facUltyCacUlty may be 01 lelllese valuevalua outagesoulages during period,perio(h of low demand., the utility'.utility's avoided co.t.COlt. Accordingly. 10to the utilityuUllty. or during periodlperiod. in which a utilUyutiLlty''11 lb,the Commissioionn hu removed the Clu.eC1au.e (II) refe,.. 10to the expecledexpected or own capacilyty will be adequate to handle "fnf.... nce Jo the utili ty .yslemsyltem cost ddataa ta demon.strateddemonatraled reliabilityrelJablllty or a qualifying exl.tln.sexlltln.s demand. It will enable the from the definition orof rale. for factlity., A utility cannot avoid the utility 10to avoavoidid the expenlelexpense. ..associatedsoda ted purchpurcha.ea. ••ea. and tahal .. lnaertedinlerted Ihethe construction or purchase of capacity IF It with providing an equivalent amountamounl of AD 28 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 101 of 111

Federal RegisterRegi.ler I Vol. 45. No.No, 38 I Monday,Monday. February 25, 1980 I RulesRule. anc;t Regulations 12221 capacity, ThuThesee Hvings .hould btobe 01of firm power to the electric utility, lhl!!Ihl!! .avlng, actuaactuallylly accruing to the electric reflecledreOecled In thetbe rale fot purcbuupul1:buu diveniversity of thesethefe facUltiesfacllttle. may utility.utilily. If energy produced fromrrom a Clau.Clau.ee (v) refe ... to.to a quallfyiDa collectively comDrltecomDrlaa the equivalent of qualifylnaqualify1na facilityfacinty undergoelundergoes line los.elo ..e .a (lIclllly',(lIclllly'. abilityabilily and willinsnewt.ilingne .. to capedty.capadty, .ucbsuch thelthallhe the delivered power IsII not proprovviide capacity and energy dlU"inJldl1f"inB ClauseClaUia (vl!J(vU) refersrefera to the fact thai tbethe equivalent 10to the power thel would have syslem emelllencieemersencie.,•. Seclion 29%29%.301,301 0'of lead time a8loclatec!888oclate~ with the addition been delivered from the sourcelource orof power Ihethe.e.e regulation. concemstheconcerns the provisionlion of capacity hom qu"lifyl"Hfylng facilitie'ilities It replac81.replace., then the qualifying fa ccililityUy of electric .erviu.ervice during .y.lemIy.lem may be Ie .. than theo lead timeUrn e thaithat .houldIhould not be teimburledreimbursed for the em(!:raencieaem(!:raenciel., 11 'provide. lhIt.that. 10 the would havebave been required Iflithe the differencedlICetence Inin 10lles.1£10"8.. 1£ the load .erved e"lente"lenl that a qualifying fafacilitycility 11 Willing purchasing uUlityuUllty bad conltrucledcon.l.rucled itsita by the qualifying: raciUtl' isls doclo.erser 10to the to forego II.Its own use of energy dloltinjdloltina own genetltlngg1!nettltlng unitunit. Such reduced leedlead qualifyingqueJifylng fafacUcUHy thanthaD It I. to the utility., 1)·'.lem emergencie. and provide power time mightmighl produce .avtng.ln.avtng.In the II ilil possible thatthet there may be Detnet 10.to a ulility'•• ystem.y.lem. the rate lorfor utililil.i ty',·~ tolal power producllonproductlon costs., by savingssavinss ,etulUngretulUng from reduced (jneline ploIrchase.ploIr"Che.e. from the quaUfyinaqualilyinfj facUlty pennl1tin8pennlttins utllut1lJUeaHie. to avoid the lanloslees •. 1oIn .uchsuch case.,cases. the rate. shouldIhould be .hould renect the value of thaithai .eme...ervie..., "lumpineaaIumpineaa." and temporary exceSi adjultedadjuated upward.. capacity a"ociatedallociated therewwHhith,, which Small power production and 1292,3f)3tn3fJ3tn Periods duriduringng which cogeneration facililfacilitieliel could provide nonnally occur whenwben vlililiell:ltinjutililielbrlng on purcha.e ore not required. "gniRcant'lgnlRcant back-up capability to electric tine large generatingating unit• . In addition,addition. !I})"'Slemslem. during emergencies, One reduced lead time providoapro vi dOl the utility The proposedpropo.ed rule provided that an benefit of lhe encouragement of with greater nneexixibllity with whichwbich It can electric utility will not be required to interconnected cogeneralioncogeneration and .mall,mall accommodate changeschange. Inin forecasts of purchase enel'8Yeoersy and capacity from qualllym,aUfym, facilitJe.facilIUea dwina periods inIn power production may be to IncreaJt.In~alt. peak demand. dwina Qverall.y.temoverall.y.tem reliability durlng.uchuring such SubparagrapbSubparagraph (3l(3) concern,concern. the whwhichich IUcbIUch purchase.purchaaea will result In nel ee. nlergenq conditionsconditions. Any .uch benefilbenefit relatrelationshipionship of energy or capacity from.from a Increased operaUngoperating costa to .the electriceleclrlt uillll)'utIlll)'. ThI ••ectioneclion wa.was intendedinlended 10to de.1eal should be renecledted in the rale fotfor qualifying fa cility 10to the purehaaiDspurebaatng with I certain condJUon which can purchaae.purch ..e. from .uchIUch qua(jfyingqualifyinR electric utility', need (orfor .uch energy or a capacity. If an electric utiluUlltity has occur during ligblloadinglight loading periods. If a 'ttu:UitJe,.~cUitie •. sufficient capacity 10to mmeeteet ItsIII demandemanaa. uUlityutJlil)' operatlna only base load unit.units "nother"nolher related faclorfactor whichwhich ,rlearleecl.' aoc.lls not pJannl1'l8planning 10to add any new duringdwing thesethe.e periods were forced 10to cutcui the cap. cit)'cit)" value of a qualifying a capacityty to ill.ystemita .ystem,, then lbe back output rromfrom the uniteunita in ordetorder to racllityl.11Iracllity 1.111 ability to 8eparateseparate lisII. load 8vailubilityevailubility ofor capcapacityacity from£rom qualifying accommodate purchases from quallfyqualifyingln8 rrom lis generation during syslemtem fRcilitiesfRcililies will notlmmeruatelynot Immediately enable ffaclliUea,aclliUes, thelethese bad'e load units might t:mergencle •. During luch emergencilllllemergcncillll the utility to a\'old any capacity cosltss. notnol be able toto increase their output levlevelel an electric qUIItyqlillty may inlUtutelnaUtute load However, an electricelectric: utility ayslemaystem with rapidlyrapidly when the .ystem'Yltem demand later .hesheddiddingng procedure. wblcbwhich moy, amofl8 excess capacity may nevertheless plan lotteasedlneteaaed, Aa I• result. the utility wouldld other thins .. require that industrial to eddadd new, more efficientemelent capadty to be requJred to utilizeuUlize lesaless emden\. customenl or other large loads s top itafls system. U purchapurch.. se.e. £tomfrom quaJifyina hIgherhigher cotl untilunJta with falterlalter .tart-upslart-up 10fo receivinarecehina power. AI •a result.resull. 10to proVIdprovIde facilitle8racilities enable a utility to defer or meetmeel the demand that would havebave beenbeeD optimsl beneOtbenefit to.o • utility In an avoid these new planned capaclt)'capae!ty supplied by thethe lellle81 expensive base load emergency .ltuaUon,l!lusUon.• a qualifying facllllyfacllllY additiolllladditione, ththee r.lrate forlor suchIUch purcha.e&purchaee, unit hadbad It been permitted to operate atal mlgt'llmlghl be required to continue operation shouldshould renect the avoided co.tscosls of these •a conconslantstant output.oulplolL iiiIII a seneralinggenerating plant,plant. while addition!!. However, 8. noted by .evera,everal The relulteswt orof .uch •a tranl8transactJonctJon would .lmslmultuhaneou.Jyaneou. ly ce8lingceaaill.8 operaoperation lion as a commentera, the deferral or avoidavoidanceance be Ihatthat rather than .voidJnsavoldJRI cost,costa 81aaa a llOadOa d on the utility'.utility'a .yslIyatem., To Ihethe of such a unitunit will aleoalao prevent the relult of thethe purcha.epurchaBe from a qualifying ulenl thalthai a (acUityfacility il unableunable 10 substitutinn of the lower energy costsCOstli facilityfacUity,, the purchaeingpurcha.ing electric utility separateparste flifl. load fromCrom It. genera lion. iIIts& thai would havehave accompanied the new would incurIncur greater costa than it would value to the purchasing utility decresseadecres.ea capacity, A. I relult.result. the price (for the havebave hadhad It not pW"Chasedpurchaeed energy or during .ystem.yslem emergencieemergenciel •. To reneclrenect purchase of energy .ndand capacitycapae!ty .shouldhowd capacity from the qualifyins facility. A IUch aI poSllbbllityllity, elault (v) providesprovid" renect the. e llowerower avoided eneruenergy cost&C09t15 .met.trict appllcaUonappllcatJon of the avoidavoideded cost Ihlllthat the .,urcba.ingvurc.basjng utilityutllity may cocon,ldn.lde'e r thai the \i tilitytiUty would have IncurreIncurredd hadbad principle .etset forth In thlthis •• .ecUonection would the qual~qU81~g f.dllty'.facUlty'. abila bilil)'ilY 1100 Ihethe new capacity been added. useasusets the.ese additional co.tacosts as separate II. load from&-om itl genera lion Thi.Tbi.1t 11 not to saylay that eleclrielectrkt. utiliutilititiese& negative .voidedavoided costaCOltl which mu.tmu.1 be during .y.temIy.tem emergencies In which havbavee axcellexcelt capacity need notnol relmbW'Sed by the qualifyingqualifymg facility.lacilily. In detdelermining the value of the qualiryingqualifying make purchase.purchale. from qualifying order to avoidnofc:1 the anomalous resultre.ult of facility'acility 10 the electric uUlltuUlity. facilities:facilitie.: quallfyinaqualilyina faelliUelfaclliUel may obta..inobt.a..in forrorclnacing a qualilylnsquaU(ylns uUlity 10to pay an Clause (vI) refen 10 the aggregateegale paymentpaymenl ba8edbaud 01'1 the avoided energy electric uUlllyuUIUy for purcbssinspurchasiRl It.lis oulputoutput ClIpabllity of capacity !romfrom qualifyinquaUfylnSg COlts on a pW"Chastngpurcha.ing utility','s IystemIYltem. the CommlComml"lon ..lon propoledproposed that an fllcilltle. 10to ell.plar:ec'Uaplar:e planned utilityuUllty MManya ny utility .ystemsIYlteaa with axcenexce .. electric utllltyutility be requiredrequl.red 10to Id~nUfy capacity. In .ome,ome lnatancu.theinJlancea. the .mallsmall capacity ):lave lntennedlate or peaking periodsriodl du.ringdu.rina wblch thi,thI, .ituation.lIuation amounllIImounll ofo( capacity provided fromIrom unitsunila which uteuse blgb-ccblgh-co.t fo"nfO.ln fuel. AsI would occur, .0ao that the qualifying qualiusUfylnafylng faciliUelluenfaeiliU"1 luen individuallyindlvlduall), • relu1t,result during peak houn. the energy ,.cllily'aclilly couldcowd ecease.. te deliverydellwry or m1ahtml8ht not enable a purchasing utility 1to0 costlcoste on the .ystemsIyltern. are high.bJgh. and thUllthus electricityelectricity durlnadwtna iliONthOle period• . dder otor avoid scheduledacheduled capacity the raterale to •a qualifyl", utilityulillty Crom Many 01of th.the commenllcommenlt recerecelvIveded IIdIIddllion.dllion., The qgregaleqgregate capabilltycapabUlI)' or which the electric utiJllylty pW"Cha,eapurcha.es reflected a .u.plc:loolu.plclon that electrlt:ic such purchaae.purchaael,may, ,lRay, however.however, be energy should .iml[milarl)'llarl), be highblah., utilIullUUel tiel would .butaabu.ae thI.this paragraph 10to sulficlenltosufficlenlto pennit the deferral Otor Subparagraph (4) eddreuesaddreuee thtbee co.coati IS cin::umventcl.n::umvent their obligationobllaatlon to purchapurchas,,e a\'oldance of a capacity addition., or lavllivingsngs reluillngresultlng from line lOinslo.. e •.. All from quaJquallfyinaJfying facl'r.cll;t!ea.Ua •. In order to Moreover, while an individual qualifying appropriate rale forror purchase.se, from a minimize thaithat popoa'iblUty,.. iblUty, the '"dlilyfllc:l1Ily may 1'101not provide the equilvalenenlt qualirying racillty shouldIhould renecllhl!!renecllhe c081C08\ Commlstlol8llon ha.haa reviledrevised this paragraph AD 29 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 102 of 111

Federal Register J Vol. 45, No. 38 I Monday. February 25. 1980 I Rules and RegulatJon.ReguJatJon.

to provide thatthai any electric uUllty..wblchuUUty..wblch utility property (w(withinithin t.l)e meaning o(f dl.crimlnatorydi.crimlnalory agalnalagalnlt auchluch facllitie.ilities in ,ee,eekska to cealecease pun::.b8l1ngpun::.baal.ng from aectlonlectlon 46(1)(5)46(f)(5) 01the totemal Revenue comparl.on 10to ratearate. to otherother cuslomersstomers qualifyinaqualifying f.ciUliufaciUliu muttmUll notify eacb Code or 1954)19M)."." If"AI A. a re.ult, if the .erved by_thebY.the electric utllily.utility. .frected.flected qualifying facility prior to the property 01ot a qualifying (racll ity which A quallfylng (acility laII entitled 10to occ\l.l11!nceocc\l.lT1!nce of luch a period. In limetime for was otherwiseotherwi.e eligibleeUsible (or the cndllcndH purch8le back·up or .tandbystandby power a t a~ the qualifying (aclllty(acUity to cUlece"l1 deliVl!I')' were to bitb. clallifledclallIfled 81at public utllilyutility nondnondi.crtminatoryilcrtminatory raterale whichwhicb rrenectsenects of energy or capacIty to the electricelectric: property under .ectiontectfon 48(1')(5)48(r)(S) of IheIh. the probability that the qualifying ulility.ullllty. Thl. notification can be InternaJIntern.J Revenue Code, It would nolnot be facllJlyfaclllty wtll or will nonott contributecontribule to the accompli.hedaccompliahed In .nyany re8lrea.onableonable maMer eligible for the Increased lnvestmenllaxInvestment tax need for and cheche u.eule ofo( utility capacity.capacity. determineddeteJ"IIIJned by the StaleState regulatory Ch!di\.tr1!dit. Thua.Thus. where the utllilyutility mustmUlt reserve authority. Any claim by an electric The Commlatlon note.note, thai the capacity to provide .ervlcelervice to a utlllty Ihat . uch alightaUght loading pertod Treuury Department'.Department', regulationlregulations qualilylnaqualilytna facility. the co.t.COlt. allocialedallociated will occur or batbae occ\l.l11!docc\l.lT1!d laII lubje<:lubje<:1t to provide thatthai the definilloDdefinition oroC"publ "publiclc with thatthai teServ,HoDrelervaUon are properly aucbIUch ...ve erificationrtfication by ItaIla Sta le regularegulalol'}' lory utility propertyproperty"" doe'doe. nOllnclude recorecoverable ... erable from the quallryingqualifying facility. authority alaa the Stateale authority property uledused In the busine81buaine88 orof the Iflithe the utility would ..imilarlyimilariy allellassesa these delermlneadetermines necessaryneces.ary or appropriateappropriale fum!shl.nglum!shlng or .ale of electric energy if co.tltoco.ta to nODlIeneratininonlleneratins cu.lomera.customers. ellbereither before or alteratter Ita occunence. the rale.rate, are Dolnot .ubJectlubJect 10to n!gulatlonn!gulallon In the proposedpropo.ed rule. paragraph (b) MMOreQOreQver ... er.. any electric utility which failafaill thatthai fixe. a rate of relurnreturn onon required electric utlUUeautilities to providepro... lde 10 provprovideide adequate notice or whJch investment.-OnInvestmenl.-On thl. baba,I".I., the energyene18Y and capacity and other .ervicesservices incomctly IdenllflIdenllflelea suchauch a period wID Commlatlatlonlon beUevbelieve. thatthai property o(of a to any qualifyinsqualifying facfacilityility at a ralerate alat be required to relmblU'lereimburse the qualquallfyllfy1ll8ns quallfyingquallJytng facilltyf,clUty that woulnuld otherwl.e leul a.as favorable as would be provided facility for energy or capacapacitycity lupplled babe eligible for the energy lax creditcredll to a cu.lomercu.tomer who doe.doe, not have hi. ulfeat( auchluch a light loading period hadbad nol would not be excluded from Ibatthai own seneration.generation. The comment. received .,....".d.occuned. e.llgibilityeligibility under the pubUc utility concerningconceminS thl.thia peragraphparagraph noted thai The lectionlaction hathas aboallo been modified to property exclusion.exclusion. Ibisthi. provillon mlaht be interpreted as clarify that luch periperiodsoda mu.1 be due to Fira\.Firat. thlethia Commlllioltalon I.la exempting requirinsrequiring an electric utility 10to provide operallonational clrcum.lancea,circumstances, property of quaUfytrtsquallfyirts facilitifacUltiees. from .ervlceservice to a qqualifuattryingying ffacacll1tyUity at Its most The CommissionCommisaion doe. nnoott Intend that regulationregWalion under Part U of Ibethe Federal fevorablefavorable rate, even if the qualifying thl.la paragraph override contractual or Power Acl, and fromtrom similarIlmilsr SlaleStale and (acility would not be eligible for .uchsuch a other legally enJorceable obligatlonaobUgatlona local law. and regulaloryregulatory program •• rate if It did nolnot haveh .... e lIaUa own generationgeneraUon.. IncutTedIncurTed by the electric utility to Secondly. the Comml.sCommJssloDlon observea thaithat It Is not the Commllasi.. ion'. on'. iIntentionntention thal, purcha.epurchau from a qualifyinsqualifying facfa cility.fnility.fn the raWlra\8.S a qualifying fa cilitcilityy will for example, an indu.trialindustrial cogeneratoralor .ucb.uch arrangementa.arTansementa. the e.labUshedeatabUshed rate receive for .ale,.ale. of power 10to utHilie.utilitle. areBre receive .emce.ervlce at a faterate applicable 10to I. buedba.ed on the recognition that the not basba.eded on a regulatory .cheme whichwhicb re.identlalre.idenllal CU5tomersCU5tomera;; rather.•• such.uch a value of the purchapurcha.e.e will vary with the 8.xeafixea a ralerate of return on Investment of Ccu.tometUl tomer .hould be charged alat a raleate changelchanSel In Ihethe ullllty'.til ity'S operating Cosis.costa. the qualifying facility,fa cility, applicable 10to a non'geon'geneneratingrating Indu.trialIndultrial These variation,variation. ordinarily are taken N a relull,re.ull, the Commlnloinlon believesbelieve. cu.tomerCUllomer unless Ihethe electric utility InlaInro account.accounl. and the resulting ralralee that energy ppropertyroperty of qualifying .showlhow. thatthst a diUdifferent rate laIs Justified on rerepresentlpresenta the averaseverage value oflheoflbe (aciciUtieliUe. •• shouldhould notnol be barred from the bubasi.la of aumclentloadlumdent load or other cost· purchasepurcha.e oover ... er Ihe duration of the eliellgibililybility for the laxtax credit by reasoneaaon of related datadala,, Accordingly. this secllon obligatiobl/gaUon. The OCCUJTence of .ucbaucb the public utility property exclusionexclu.lon. The now provide.vldel that forJor quaUfyingquaHfying periodlperiods may similarlysimilarly be taken into CommtSllo5l10nn wi.helwi.he. to expressexpres. II.III facllilfaellitie. which do nonott simultaneously account.~unt inin determining ratraleess (orror opinion on lhlathll matter In an effort 10to 111le11ll and pun:haaepurchase (romfrom the eelectriclectric purcha.e ••.. further encourageancourage cogeneration and utility, the rate (ortor .ales,ales .hall be the rale ththaiat would be ch8J1edcha.raed·,to Ihethe cila"an to ToxlssuToxlssueses .maU power productionproduction by mean. otf ,hi.thl, Nlemaldng proceSl.proce5l. wblchwhich the qualifying facfscurty would be The ConfConferenerence Report .tates.tales Ihat:Ihal; alligned If IIIt did nolnot have II,Ita own '292.305• 292.305 Rates for soles.sales. • • • the ,x.aminJtlonIx.aminatlon of the level of rallllrales ,generatineratlonon. whleb .bouldsbould 'ppIpplyly to the purchase by lbl Section 21O(c)ZlO(c) of PURPA provide. that SubparagrapbSubparagraph (2) provldeeprovidu thall(thall(,, on I/.UIlIybU1i1y orof the cagenrretor'1cagenrrator'1 or thethe ImeUImllll power the rulesrule. requiring utllitie.uUlitie. 10to .ell Ihethe basi.i. of accurate' dala and producer',producer'. power .bould.bauld nolnot b, burdenbl/.rdeneded by elecbicelectric energy tato qualifying facilities consistenl.y.temconslslentlystem·wlde co.llngcosllng lblthe .Imelime ",.min.tlone:llImlnatlon II Ira utility rate .hall emW'8emUl'e that the rale.rate. for .ucsuch sale. principlea,theprlnciples, the utility demonslrdemonstrates that appllcatlonlIppllcatlon. to detumlne wbltwbat ,.I. the ju'tllrtdju.tllrtd are JustJutl and reasrea.onabIe,ble, Inin the publicpublic the raterale thatthai would be charged 10 a tellonablereuanabl. rate thatthlt they ., bowdbawd receive fotfat intere.t.intere.1. and nondlsnondiscrimcrlmlnaloryinatory with comparable cucustomer. tomer withoouutt ilsits own their electric power.powe,." If relpeetre.peel to qualifying cogenerator.cogeneratofl or senerationgeneration I.la nol approprlale.appropriate. thethe ullllty TheTbit CommlaaCommissionlon note. that .ectlon.actlon may base Ita tatesrain torfar saasle. upon Ihthose 301(b){2) of the EnEI'Iergy TnTax Act of 1918 11 .mall power producers. TblThis •• .eclionactlon contemplate. formulation o(or ratesrales on the daladata and principlesprinciple •.. The ulilityutility may only make. certaintertain energyenel'8Y properly ellglblaeliglbla charge . uebuch rate.rale. on a for Incl'881edIncreued bualnebualnellas ,"vestment(nve.tment laxtax baafaba.i. of traditional ratemralemald ng (i.e"i.e" Clost-of·servlce)Clo.I-of·.ervlee) concept., nondiscriminatorynondiScriminatory basis, hawever.however. so orediLo:red.iL Some of thl.thil property iaI, that a cOlenualorcoaenUlilor willwW notnol be Singlsinsleded common1y uteduaed In cogeneration and ParagraphParagrapb (a) expressesexptes.es the .lahlloryItatutOry requirement thetthai .uch rate. be lustJust and oul011.110 to loulate any interclaslInterela" or Intra class amallam,1I power production. However, .ubsidlel.ubsidle. 10to whicichh it might have been .ecUon 3Ol(bJ(2)(B)3Ol(b)(2)(B) excludeaexclude. from .ucbsuch reasonablerealonable and In Ihethe publipublicc Interett.Interelt. Paragraph (a) el,o provide. that rale. entitled had itII not aenerleneratedaled paripart otil.o(it. elJaibillty property "whi"whichch isII publlo Paragraph [a) also provide. that rale. for .aleltale. from electric utilltieaulilUiea 10to electric enel'lYenergy need. itset.elflf.. qualifying fa cilltie.ilitie. not be In .ituatlons.lIuallon. where 8a qualifying "ConI_nee Report onotI H.R..m1.R..m1l Public:Public Utillt,Ut illt, facllHyfaCility . Imultaneou.lyneoully .ell.l.eUllttas oulputoulpulto to "eauI.1Gr)'_eaulttory PoPoUdlld .. Act oorr IV7&. H. Rep. No. 1715Q,,, •",ill ilI ec.... ad Seu.Se ... (1m). .. ze usc.,u.s.C.'te(.){3)(b) ".){3)(b). an electriceleclrlc utilityutilily and purchase.purchases ItIt,• '"Pub. L No. twill.twill ze u.s.c. 1I..e. .... -TTe-TreI.1II)'•• 1II)' Rea. • 1~"l~")(ZI.)(ZI. T.O. 71m7tI02 (Mudl(M1IrdI requirement.remenl. &om£rom that electric utility.tility... II No.nI.t.ll7No...... ll7.. u.1m~ • bookkeeping maltermatter. the Caclllty'.taclllly'. AD 30 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 103 of 111

Federal Vol. 45. No. 38 I 25, 1980 I Rule. and

t=!ec;tricalt=IKtrical output will not .ervelerve It.Itl own demdemandsand. on the ullllt)'ullllty duringdurina peak with te.pectre.pect to any nonregulated load, but ralht=r will be .uppliflllupplifll to the pperiod,eriods.. electric utJlJt)'.utJlJty. ·d. AAI•• I nlultn.ult the fadUty'afadUty' •• electriclactric InlerruptibleInterruptible power I. electric energy ParsgrapbParagraph (c)(l) providl!8providd thaithat rll.rate.;, r.:oad I,I. likelyUkely 10 hIVehave the .am.I.m. or capKltycapKIly .upplled to a qualifyingqualifyins (or(or .alel.ale. of b.ck·upback·up or maintenance characleriiticicharactari.lic... III the load of other non (acilityracility .ubjectaubject letto lnterruplionInterruption by the power .hallahall not be ba.ed. wltho¥~ BeneraUngBener.Ung CUllomeriCUltOJneri ofoC the ulllJlyulllJty. lf the electric utilityuWity under .peclned factual data, on the 8IIumplionassumption that ututilityility doeldoe. not provide dala .howingIhowing conditconditiionon •. Many uUllUe.uUliUe, h.vehave utilizutilizeded forced outageaoutage. or other reduction. In otherwil8otherwit8,, the appropriate rata for(or .ale.lale. InterrupUbleInterruptible lervice 10to avoid expen.lve output b)lby each qualifying facilityfa cility on an 10 .ucbauch a facililyfacility III. the ralerate thai would Investment In new capacity thatthai would electricelectrie utility'autility' •• Iy.lemystem will occuroc::cur eithertither be charpd 10to a comparable cu.lomercu.tomer otherwlleotherwlsa be necetallrynecellllry 10to "lureallure .Imu!taneously,Imullaneoualy or during the .y.temayatem withoutwlthoullt. It. own generaUon.generation. adequaleadequate reeervualretervuat Umetime o(or peak peak.. Uke other cUltomeri.cu.tomerl. quaUfyUla Paragraph (b}(2j(bJ(2J of the ruleNle .et.aetl (orthforth demand. Under thl. approach utUltJuutilltiea faraeiliUe.cilitiea maym.y weD have lntndllllntraclall certa.in type. of .ervicelervice which electric auureassure the adequacy ofor re.e.rve.re.erve. by dlvetllty.dlvertfty. 10In addition.addition, becsubeeau.ele of the uliliUI!IuUlltie. an required to provide 8fTangartangling to reduce peak demand., rather variaUonsvariations Inin .izealze and load requlremenlarequlrem~'" qualifyingqualifying facililie,(atilitiel upon reque.trequeat of the than by addingaddil\g capacity.capaclly.lnterruptible Interruptible among variou.various types or quaUfyingquaUCying 'acWtyfacUlty. TheseThele typeatype. of .eMee.ervice are .etvicelervice I.II thereforetherefore notmall)lnonnally provided alat (acillliracillUel.ea, .uchauch facilitiesUe. may wellwall havahave • upplementary power, back-up power. a lower rate than non·l·lnlerruptJblenlerruptJble 'nlerclainlerela .. d1varalt)'dJvartlty • In terruptible power and maintenance .ervice.aervice. The effecteITecl ofo( .l uch ddlveraityiveraity iaIs that an power. In responeereaponee 10to comment., these During the Commltalon',Commlulon', public electric utility aupplying.upplying back-up or lerm.terma are deftned in the text of the rulel,Nln, hearinghearingss on thl.thl' rulemaldng.rulemald.ng. one maintenance power 10to qualifying a. well ..a. inin thllthl. preamble. commenter .Iated,tated that utJUtietutJIltle. which f.ciIlUe.facilitIes will notnol bave to plan forror Back·up or maintenance .ervlcelervlce have exCet.exCelS capacity do not aave any resereserverve capacity 10to .erveaerve .ucb faeillUfacUIUe.ea provided by an electriceleclric utility replacelreplace. cost. by providing IntemlpUbleIntemlptible .ervlce.aervlce. on the ataumpUona ..umpUon that every facllilyracllily energy or capatitycapacity which a qualifyqu.lifyilngns The commenter contendedconte.nded that the wwillill use power at the ..tameme moment. 'thene (aclUty ordinarily .upplle.luppllel tet Hull. Commission .hould aotnot require a utility CommJtalonCommJulon believe.beUeve, that probabWIUcprobabUJ.Uc TheleThe.e rulelrule. autboriuauthorize alrtalncertain facilitiesfacllitie. 10to with exces.exce .. capadcapacityty to orrer analy.e. ofor the demand of qualifying purchase and .ell.imultaneou.lylelllimultaneoully.. The InlelTUptibleInterruptible .erviceaervlce. 1f a utililyutility I.Is not (actlltJearactlltiet wlUwill .bowebow thai a utility wUJ amOWlIamOWlt of energy or capacity provided adding capacity (whether by probably not need 10to teservereserve capacity by an electricelectric utility to meel the load of construction or purch8leJpurcha.ej to meet on a one·to-one basi.basis to meet back·up a 'acUityfacUlty which simultaneouslymultaneou.ly anticipated IncrealI!JIncrealet in peak demand.demand. requirement.requirements., Paragraph {C)(l](C)(1] prohlbitlprohibit. purchaseapurchase, and sellaseUs will vary only In the ratea charged forletr lnterruptibleIntelTUptible utilitiutlUtie.es from ba.lngbe.lng ralearales on the accordanceaccordance wilhwith changee in the 'acilhy'lfacilhy', service mighlapproprialelymight appropriately be the 8amesame alSumptlonassumption that qualifying faciliUe.raciliUe. will load: interruptionsInterruptions in the facilit)l'.facilit)". as for non·interruptible .emce• • ImpoeeImpo.e demand.demand•• aimuJtaneoualyimuJlaneous ly and al generation will be manifrestedested ala. a' for non·tntelTUptible .eMce• • .y.temaYltem peak unle.,unless supported by (aclualraclual variations In putt:hase. (romrrom the facility.racility. The Commluillion believeabelieve. lbat theaethese data. mallenmailers InvolvingInvolvlns the provlJprovliion orof In .uch a case. salealalea 10to the qualifyinsquallfyins The rule provides that utilitietutilitiu may (acilityracility willwiU not be back·uupp or inlelTUptinlertuptible rateratel. are bellbe.t handledbandl~ reruterefute the.ethese assumption.assumptions on the basi.asil orof maintenance .ervice.lervice, but will be .lmUaalmUa r through the pricing mechanism.mechanilm. factualrectual datadela. TheleThe.a data need not be inIn to the fullful] ·requil'ementarequil'ement •• aervlceervlce thaithat However, II a. dl.cudJ,culled.. ed .bove,above, the fonn of empirical load data.dal... ltIt rni8ht wouldwould be provided if the facilityCacmly were a Interruptible cUltomeracUltomeri provide.provide DOIlO be the ca.ecate thaithat within certain non·seneratinsgeneraUng cu.tomercustomer. .avlngssaving. to the.the electrleleclrlc utilityutJllty. the rate for geograpbJcgeographJc area., weather data and Supplementary power III, electric lntelTUptiblelnlelTUplibJe .ervlce need not be lower performance datdala would cOMtituteconstitute a energy or capacity uledused by 8a facilityfacll/ly In than the raterale for Rnnnrm lervlceI8rvlce. In .uch.ucb a .umcientlumcient basi. 10 refute the assumptionas.umption addlUon to that which It ordinarily ca.e,case, the CommltsionCommission would con.lderconlider relatingrelaUng to the coincidence orof the generlte'generates on It.Ita own. Thul.Thu •. a granUnggranting a waiver from tbl. paragraph. demandtdemancla impoaed. for example,exampla, b)lby cogeneraUoncogeneration facilityfacililY with a capacity ofor under the provi.lonprovillon.s of • 29%.4P3.29%.~. wlndmiUIwlndmiU. or photovoltalca, with reapectre.pect lenten megawaU. m.ightmight requite five more Some comment.ta notednoled that certain to their need for(or back-up power. megawatt. fromrrom a utility on a conUnuinacontinuing electric utilitiesutilltie. do not have any Paragraph \C](2)\C)(2) provideaprovides that rateratetl bbasisuis 10to meet It.Ita electric load ofor OfteennCteen . generating capacilycapacity., and 10to require the ror .alnnlet .halIhal take Into account the megawaU"megawaU. , The fiveDve MegawaUamegawaus ,uppliedlupplied .emces.ervlces Ii.lted inIn .ubparagrapblubp.ragrapb (1) mlahtmlahl extent 10to whJchwhich a ququ.alify1ns.aJifylng (aclUtyfaelUIY cancaD by the electric utilityutility would nomanynonnally be place an undue burden on the elecbic usefuUyu.eruUy coordinate periods ofor .ch~usch~uledl ed provided ..... aupplementaryupplementary power. utilityulility. 1nIn light ofof the.e comment •• the maintenance with an electric utJlIutility. If1f a Back-upBack·up power IIit electric energy or Slatetale regulatory authoritieaauthoritie. or thetha qualifylnaquaUfy{ns (acilltylacillty .tay.Itay. on line when Ibethe capacJly available to replacerepllce energy Commillion.Commission. 81 the case m.ymay be, wUlwUJ utility will need itsIt. capacity,cepacity, and generated by •a facilityracility·.', own generation allow a waiver of these nquirementsrequirements .chedule.Ichedulel maintenance when the equlpmenequipmenlt during an un.chedu.led upon a findlngfinding after a .howinsshowing by the utllity'autUily'. other unit.unltl are operative, the outage. In Ihethe example provided above.above, utility 10to the SialeS~ate regulatory authority qualifyingquallfyi", (acllityracllity 'Iil more,vayalluableuable 10to ae cogeneratiocogenerationn facility might contract or CommissionCommission,... .. the cuec8le may be,be. thaithat the utility, a,a. ItII cantan reduce ItlIta capacit)lcapacity with an dectric utility (orfor the utilltyutility 10to provision of thele lervice. will impair requirementl.requirement •. have lVaUablelYaUable lenten megawatts.megawatts.• ahouldhould the utility'lutility', abllllYability to render adequate the cogenerator'.cogenerator', unitsunitt experienceexperience an .ervlcelervice to It. cu.tomettcu.tomerl or place an 'ZB2.,3OfJ lnltl/'COlUJ(lclion cosutostl. outoulage. undue burden on the electric utility.utility. Par_STaphParagraph (a)(e) .Iale.atale. thaithat each Maintenance power IIit electrfc energy Notice mu.t be given In the area aerved.erv~ quequallfylnJliCylnJ facility mu.1must teimburaereimburle enyany or capacity .uppliedlupplied during .cheduledacheduled by the electric utility, opportunity (orfor electric utility wblchwhich purchasespurchalles "apedt1capacitJ outase.outaae. of the qualiryingqualifying (acllilyra clllty.. 8y pre public comment must be provprovided.ided. and or energy (romfrom the qualifying facUityfaellily forror arrangement,arrangement. a uUlIty qn agree to an application mu.t be .ubmllled to the .nyany InterconnectionIntereonnecUon costscost.,, on 8a provide .uch energy during periodlperiod. SlateStale regulatory authority with respectrespact nondilnondilcrlmlnatorycrimlnatory basi. with rupectre.pect to when the uOUlyuUUty'.l other load laI, low,low. to any electric utilityutllity over which itIt haah81 other cu.lomer.cUltomera with .imilasimilarr load thereby avoiding the imposition ofo( large ratemaking aUlhorllYauthority or the Commission cbaracteriaUccharecteri.llc•. The CommlsaionCommltlion nnd,l

AD 31 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 104 of 111

Federal Vol. 45, No. 38 Rules and

merit in those commentscommentl whlcb considercon8ider assignment of uncoUectedunconected sbedding program-iprogram-j.e.e.,., 00on the samelame sU88estedIU88elled that the bashlba,la of01 comparisoncompariaon Interconnection co.t,costs to the class ftoorr basi.basl8 that other customers of 8a similaslmllittr for nondl.criminatol')nondl.criminato!,) practice. in the whicbwhich the ratratee i.is e.tablilhed.e.lablished. ciaclass.. with similar lloadoad characteristics proposedpropoaed rule to "any other CUltomer" are treated with regard to inInteterruptrruption of 1292..307307 SystemSyatem emef8encie8. Weiw.. too broad,broad. and that the correct service. reference for nondiscrimination Is18 the Paragraph {a} provides thaithat. exceptaaexcept .. Credit forfor capacity (aa notednoled in practice of th.the utility In relallon to provided under .ectlo.ectlonn 202{c) of the 1 mm.304(e)(2l{vJ).304(e)(2l{vJ) willwiIJ also take iintonto CI.IstomertCUltome" in Ihe ..me das.cJass who do oatnot Federal Power Act. no qualifyingqualifyins facifacilitylity accounlaccount the ability of the qualif)"ingqualif)"ins seoeralesenerate electricity. AsA. noted sahallhall be compelled to provide energy or facUltyfa cUl ty to separatelIepafate Its\tsload loed and pravloua!y.prevlou81y. the InterconnectionInterconnecllon co,tsco.t. of capacity to the electric utilityutiliI}' duringdurin8 an lIenera!lonMeneratlon during system emergenciesemergencies. •a facllHyfacility which I.18 already emergency beyond the extenLprovided However. the qualifyingqualifying facility may lDterconnected with the utility for by agreementagfl!ement between the qualifyingqualifying well be eligible fror some capacicapacityty credil purposespurpoSet of 88le.I8les are limitedlimited to any Facility and the ututility.ility. even Iflilt It cannot .eparaaeparatete itsit. load anandd additional expensexpenlet .. incuincurredrred by Ihe The Commis.lonConuniaslon find.finds thatthai a generation. utlillyutility to permit purchaselpurchase8.. qualifying 'acilityfacility .houldshould not be requIred to make available all of itait.senerallon aeneratlon to 1292.308 Standards for operotingoperotlng SeveSeveralral commenteracommentere expreued their rereliobilityliobility. concern that .omelome protection should be the utility during a .y.tem.ystem emergency_emergency. provided to qualJtying tacllitlesrat:ilitlel from Such a requirement mightight interruptInlerrupt Section 21O(a)210(0) of PURPA statesItate, thai potential haraumentharaument by utilitiutili tie.es inIn the Indu.trlalIndustrial proce"esprocease. with resulting the rulearule. requiring electric utilitiesutilities 10to form ofot requiring unnecessary safety damage to equipment and manufacturedmanufactuted buy from and sesellll 10to qualityingqualifying facilitieslilics equipment. A. discusseddiscu8led above, the Soods.Soadl, Many iinduatrie.ndustries installin,taU their own shall Include provision.ns re.pectingrespecting State MgulatoryMgutatory authorities {wilh generating equipment in order to en.uteensure minimumminimum reliability of quaJifybgQuaJifybs respect to electric ulilltlesutilities ovoverer which that even duringduring a syslemaystem emergency. facilitiesfacilitie. (including reliability of such their supplyaupply oro( power is notnol interrupted. they have ratemaklns authOrity) and facliillesfacilities duringdurina emergencies) and rurulesles oonnguloonregulated electric uUlltiutlllti.e.es have the TToo putputln in jeopardy the availability 01of respecting reliababiJiilityty of electricelcctric utilitiesulililiu power to & qualifyingqualifyin,s lacilacilitylity durinSdurinll a re.ponsibilityre.ponsibility and authority 10to ensuenlure durinSduring emergencies.emergenciea. ThThee CommissiCommissioon systemIystem emergencyemeraency bebecaueecauea o(of that the IntercoMectionIntercoMection requirement. the belleveabelieves thatthot ththee reliability of qualifying fCacillty'sacility', ability 10to provideprovide power 10to the ate teaaonable.reSlon,ble, and that associateated (faclllUe.acllllle. can be accounted for throuGhthroush .ystem durinSduring non-emergencynon·emergency periods co.tJCOlt. ate legitimately inCUJTed.inCU1Ted. price; namely,namely. Ihethe less reliable a would reaultesult in the discouragementdiscoutagement otof quallryingquall£ying facility mighmightt be. the lesslese It For quaqualifyinglifying facilitfacilitiesies withwllh a design Interconnectedonnected operatiooperationn and a resultant upaclty of 100 kW or less.ess, the sbould be enUtled to receive for dlscourasement of cogeneraUocogener.Uonn and purchase.ases frfromom Itit by the utility. CommiaslonCommi.slon notnoteded lbotlhatinterconnect.ion Interconllection small power production. The co.t. could be asseSledassessed on a classcla51 bui •••• AsA. a result,result. Ihthe Commissionommission has not CommiCommi"lon ..lon theretoretherefore provide.provide. that the Included specific standards relating to and the .tandardstsndard talesrate. for purchases qualifying:qualifyins facility'.racillty's obligationobllgatfon 10to provide e"lablishedestablished for c1suescianes orof fscillfacillliesties of lbethe reliability In the sense of the abUityabilIty energy andend capacity In emergencies be of qualifying fa cilicilitietiess to prOl";de energy this .Izesize pW'suanllopursuanllo 1 292.304(cJ(1292.304(c](1)) established through contract. miaht incorporateIncorporate theeetbeee costs. State or capacity. In order to teeainrecain fullrull credit flotor The CommissionCommission has determined Ihthaalt tesul8torytesulatory aut.horiHe.aulhoriHes (w(withith respectresp~ct to capacity. a qualifying (acilllyracillty mmustust offer electric utilities over which they haveha ve aaletyulety equipment exists which·which' coconn energy end capacity duringduriog .ystemsystem ensureeMure !.hatthat quautyingqualifying fa cilicilitietiess do no'nol raternakingralemaking authority) or IlonregulatedIlonreguialed emergencies to the .ame8ame extent thalllthatll energize utilityutilHy lines dduuringring ut iliilityty electric uUlltie.utilities may .abobo determloedetermIne haahas agreed to proVideprovide energy and outages.oUlages. ThislecllonThis .ecllon accordingly inten::onnectlonInterconnection costscosI8 forror qualiIylnB capacity during non·emergency facilitiesfacillUea with a design capacHycapacity of more provides thatthai eacheach StalcState rcgulatoryegulatory situations. For example. a SO30 megawatt authority or nonregulaled electdc utility thaD 100 kW on eilhereither a dassclasa average or cogeneratorcogeneralor may rrequireequire 20ZO megawmesawatt8att. authority or nonresulaled electdc 1.IIIIIty IndividualIndJvidual basis. fforor it.ita own indu,trialindustrial PW'JIoeelPW'JIOSe8. and lhu,thus may establish .tandastandards for Numerou. commentscommenta raiseaIsed the point mayrney contract to10 provideprovfde 10 megamegawatts walt. of interconnected operation between that the proposed rule did nol address capacity to the purchasing utility.utility. During electric ututiliUiliU8I .. and qualifying fara cilities.cilrlics. the manner in whiwhichch electric utilities anao emersency,emergency, the cogeneratorcogeneralor must The.aThese .tandatds8tandards may be rreecommenJcommenJudud by any utility. any qualifying (a.d llly, or would be reimbursed. Potential ownert provide the 10 mesa watts contracted tforor by any utility. any qualifyln8 ra.dlity. or .nd developedevelopersr. otof qualityingquaUtying ftacUitiesacilities toto the ul1lJuUIJIy.ty. IIIt need not disrupt itsita: any other peersonrson. These standards must recommended thatthai the coats be indu.trlalIndustrial procene.proceues by supplyingaupplying its full be accompanied by a statement showing amortized on a reasonable basbasla,la, capability ooff 30 magawatmegawattlll.. Of course.course, If the need for ththee .tandardstandard on the basibasiss ooff because payina a llargearge lumplump swn ".hould 10so desire.desire, a cogeneratorcogeneralor could .ystemsystem saretysafely andatld operoperatinsatins payment would bbee a considerable contractually agrH to .upply the full 30 requirements.requiremenls. ob.lacleob.tacle to Ihethe program. Electric utilities megawattsmegawalts during .ystem emergencies. Subpart D-Implementallonmplementollon generally preferred payment up [ront. The avaUabilil)'avaUability of .uch adaddlUonaditionall althougbalthough several commentencommenter. indicatedlndicated backup capacity .bouldsbould incrueeincruse utility SummarySummory ofo/Ihjs tnis Subpot1. thttthat amortizaamortizationtion mightmight be acceptable .ystem.yatem reliability. and should be Rule.Rule. In thbthis .ubparttubpart .l"I8are intendedIntended to forcredlt-worthyforcredlt-worlhy facilitie,facilities. The accounted for Inin I.h.ethe utility',utility'. rates forror cerrycarry out the relponsibilityresponsibility of the CommlaalooCommlsalon believes that lhethe mannermanner ofor purchases from lbethe cogenetatorcogenerator.. CommissionCommi.sion 10 encourageencourase cogeneration reimbursements (which U"IayU'1ay include ParagrapbParagraph (b) provideprovidess that an electric. and .mell.mall powpowerer productionproduction by amortizationamortizaUon over a reasonable ~odp6iod orof utility maymay discontinue purcbaseapurchases &om a clad!ytftB the nalutenature of the obligation to tlme)time) Ila. be.tlehbestleh to theth. StateStale regulatory quaUfyins facilitytaeility during a .y.temIy.tem Implemut the CommiuionCommluloo·'.s rules under authoriliuandauthoriliet and nonregulatednonregulaled utilities. In emergency 1£U lucb putCbaleapurcbaJes would secHonaecHon 210. lb.lIIe deteaninaliondeleanlnation oJ any standard ratesrat.. contribute 10to the emergency. InIn addition.. TheThull.. rulu .flordsfford Ihethe S'lleSl\le regulata toryory fg,far purchase.purchale. estabU.hedestabli.hed purauantlopursuant to during .y,sy,ttemem emergencies, • qualifyingqualifying authorilie.authorities endand nnonreguilltedonregulated electricelectric tf 291.304(cJ(I).1f291.304(c)(l). if the StaleStale .pprove.approve. facility mustmu.1 be treatedtrealed Oft. utillutilitiestle. 8featlatltudesreat latllude In determining Ihethe 1Ol'Usoma manner of .mortiJ.Uon,IJDortiJatlon, itII might nondiscriminatorynondiscriminatory ba.isba.ia in any load mannermannar of implementationimplemenlatlon of th"the AD 32 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 105 of 111

Federal Regl.terRegi.ter I Vol. 4545.. NoNo.. sa I Monday. February 25, 1980 I Rules and Regulations 12231 • Commlulon'. rule ••.. provided th.tthat the Reyiew ondand Enforcement ,292.401 Implementation by stats manner chOlenchOlen i.il re8lonably de.de.lgnedigned Fflgu/otFflgulatooryry outhoritieauthoritiess and nonregulotednonregulaled ~ction~clion 210(g) of PURPA provldelprovide. one to IImplemenllhemplement the requirement' of electricelectric utilities ofor the meansmeanl of obtaln1ns JudicJudicialial subpart C. The CommisiionCommission recognizrecognhr:e.e. Paragraph (a)(aJ oofC , 29Z292.401 sets forthCorth thai many Sialel andaod Individual review of a proceeding conducted by •a SiStateale regulatoryregulato~ authority or the obligalionobligation of each StaleState regularegulatorytory nonregulalednonregulsted electric utilltie. have authauthorilyority to commencommencece ImplemImplementationentation ongoing program. to encourage .mall nonregulalednonregulated ulililyutility for purposel of implementingImplementing the Commillion'.l rule.rulea of Subpart C wwithinithin one yearyear of the dat.edate power production and cogeneration. The thesethele rulel tatakeke erfect. In complying CommIt.lon .110 recognize. th.tthat under .ectionaection 210., Under .ubsectionsubsection (g)., review may be obtained purauantpursuant to withwith thi, paragraph the State regulatory economic and regulatory clrcum.tancelclrcum.tancea authoritleaauthorities are required to provideprovide forfot vary from State to StateStale and utility to procedure.procedures let forth inIn .ectlonlectlon 123 of PURPAPURPA.. Section 123jc)(1)123!c)(l) conlain.contain. noticenolice of and opportunity for publicpublic utility. II il within thisthll context-incontext-ln hearing. AIAs described in the summary or recognition of the work already begun provisiioonsns concerning JudiCial t(lvlewreview or thUt lisa .ubpartlubpart, .uchIUch implementationlmplementatlon may and enforcement of determlnatlonldeterminations and of thethe variety of local condJtlorwcondJtlo~ conliatconsiat of the adoption of the that the CommCommii ..u lonl on promulgate.promulgates it, made by State reguletoryregulatory euthorltiuauthorltiu it_ CommCommilss8ionsion'l'. rulel., an undertakingundertaking ttoo regulationl requiring Implementation of regulations requiring Implementation or and nontesulatednonresulated utililieutilitie.l under Subtitle resolve disputesdJaputes between qualifylnsqualifyins rulel bluedb.ued under seclion 210210.. A. B. or C oCof Title I ~ the appropriate facilitlelfaciliUe. and electric utilitielutilities eri.ingerilins BeBecausecause of the CCommission'.ommission', deliredelrre StaStatete court., TheleThe.e provis\onlalaoprovis\onl al80 apply' under Subpart C, or any other action nollo createcreale unneceunnecelaaryl aary burden. at the to review oCof any action taken 10 teetooablyteaaooably deligneddesisned to implement St.teState level theae nJle.rule.·provide a Implement the rulesrule. under section 210. Subpart eC.. procedure whereby aI State regulltol'}'regulatory ThilThis mean. thaI pertonspenonll can bring an luthority or nonregulltednonregulated electric utility 11IilThil lectlon doel not cover one action In StateSlate court to requrequireire the State provilionprovision of Subpart C which ili. not may apply to the CommlilionCommll.ion for a resulatoryregulatory authorilielauthorilie. or nonregulalednonregulated waiver ifIf itIt can demonltrate1hatdemon.trate that required to be implementedImplemented by the Stale utilitielutilities to implementImplemenl thelethe.e regulatlonlregulatlonl,. regulatory aUlhorityauthority or nonregulalednonregulated compliance with certain requirement.requirement. otof SectionSectlon 123(c)(2)123(c)(2) of PURPA provldelprovide. Subpart C i. nol neceslary to encourage electric utillty, ThiaThil provision i.is Subpart C la nol necel.al'}' to encourage thaithat peraonlper.onl seekseekinging review of any cogeneracogenerationtion or Imall power production 12921292,302.302 (Availability of electric utililyutility determination made by 8 Federal Ind IIIJ not otherwl.otherwi.ee requiredrequired under 'YltemaYltem COilCOlt data)., the ImplementationImplementalion of agency fDeyfDay bring an action in the I8ctionnction 210. which ilis lubiec!lubjecl ttoo §, 292.402.402, didlscusledsculsed Several commentcommenter.ers exprelledexpre8led their appropriate Federal court. ThThilis below. COllcemconcem th.tthat StateSiale regulatory authoritie.authorities distinction between FederalagencielFederal Bgencies SublectlonSub8ectlon (b) setaleh forth the obligatonobligaton would nol be able adequately to and non-Federal agenelelagencle. allOa110 applies to of each nODregulatnOnrl!gulated elelectricectric utility to ImplemenllheImplemanllhe Commil8ionCommil8ion'a'a rules,rulel, and review of enforcement of the commencecommence,. after DOtice Illnd opportunity therefore, recommended that the implementationImplementation of the rulesrule. under (orfor public bearing., lmplementation of CommlaaloDCommillion I"ueIllue Ipecific rulelrule. which sectionlectlon 210. SubpartSubpert C. The nonregulated eleelectricctric the Stale t8gulaloryragulatol'}' authoritiesauthoritlel would Finally., the Commission believes that utilitiesutilities., being both the regulator and the adopt withoutwithout changechange.. The Commi.,fon review and enforcement of utility .ubjectsubject to tthehe regulation., may doesdoe. nol flad ththlli. propolaltopropo.allo be~ implementetionimplementation under .ectionsection 210 of .atisfyutilfy the obligation to commencommencece appropriate .tat thll time, and believe. PURPA can con.iltconsiet not only of review Implementation of Subpart C through that providing an opportunity for and enforcemenforcementent esas 10to whether the StateSlate laluancebauance of regulatiregulations.ons. an undertak.iD8 experimantation by the StltelllStates Is more regulatory authorityeuthority or nonregulatednonregu1eted 10to comply with Subpart C,C. or any other conducive 10 development of thelethe.e electric utility ha,haa conducted the lrulielInitial action teaaooablyreasonably dealgoedde.igned 10to implement thetthat aubpartlubpart dlmcult tale principles.principle•. Implementation properiy-namelyproperly-namely. put PllJ'agraphParagraph {c)(c) setlsets forth a reporting Implementation Into eCfecterrect regulationlregulation. implementing .ectionAction 210 rulesrule. or procedurelprocedure. forror that requiremrequirementent under which each StateStete Section 21o(r) of PURPA require. that implementetion.implementation. efteraher notice and an regulatory authority and nonregulated within one year after the date that thI.thIs opportunitopportunityy for a hearing. It can alaoalao electric utility ia to file with the Cornmlaalon, not later than one year CommI"lonCommlilion prelcribe.pre.cribel It.Itl nde. under conliltconsilt of reviewreview and enforcement o(of the Com.ml"loo. not leter then one year after theletheae rulelrulea take effecteffect. a rreporteport .ubsectionsubaection (a)(e),, andInd within one year of application by a StateSiale regulatory describing the manner in whichwhicb illsit I. the date anyIny of theaethese rules iIia t8vised.ravlsed. authority or nonregulated electric utility, proceedina to implement Subpart C,. each Stale regulalol'}'regulatory authority and each on a cale-by-c8leale basisbui•• , ofor itaIta nonregulated electric utility., after notice regulation.aregulaUotll or of any other provision it Comments received regardifl8regardins this and opportunityopporlunIty for bearing.beering, muttmUll may have adopted to ImplementImplement the secUonlecUon indicated ea concern that the implement the rulelrule. or revtalotllrev:lalotll thereof. Commllalon'sCommlsllon's rule. under lection 210210.. obligation of.of a State regulatory authorit),y IIIs the cueclle may be.be. or nonregulated ulilityutility "to commenccommencee The obligationobllaalion to lmplemenlImplemenl .ectiODlectiOD Section 210(b)(2)(A}21o(b)(2)(A) of PURPA .Iate.Ilates implementation·implementation· • • withwithinin one year :no210 rule. II a contlnuingcontinuing obligation that the Commi"lonCommiaaion may enforce the • • ." did Dotnot provide any guidance 81el which beglntbegint within ona yellJ'year alter Implementation of regularegulationtl tiona under to whenwben thetha procell mu.tmUlt be completed. promulaation of luch rulel. The .ection 210(0.210(1), The CongreaaCongre.1 haabu The Commi..ulon lon notel that Ibethe intention requirement to implementImplement may be provided DotnOI only For-privaterot-private causel of or thistbJ'lection tection IsII thatthai the State fulfilled either (1) through the enactment 8ctionaction In St8teSiale court.courts to obtain JudicialJudiCial regulaloryregulatory authoriauthoritieltie. and nonregulated oUaw.oflawl or ,.."wattonsreplatlon. It the Siale levellevel., review and enforcemenlenforcement of the utillUel havebave one year in which to (2) by applJCltionIpplJettJOD on aI ca.e-by-c8lecase-by-c8Ie i.mplementation of the Commllsion'sCommlle[on'. establish proceduresprocedurel and that alat the end balilbui. by the StataState regularegulatorytory authorityauthorilY. ru181rules under teetlontectlon 210. but al.o orof thetthat year elilcbe\!lch StateStete must be prepared or nonregulated uUllt)',uUllty, of the rulesrulea provided thai the Commi"lonComml8l10n may 10to entertain applicationsapplication.., TheTha phra.ephrale adopted by the Commission.Commiltlon. or (3) by .ervalerva a.II a forum (orfor review and "commence implementation" i.il intended anyIny other actionIcUon telaooablyreasonably dellgnedde.lgned to enforcemenl of the implementation of by the Commiaaion to connote thaithat implememimplemenl the ConunlsltonComml'lton'.s rulel.rule •. lhthi.i'. program., implementationimplementetion ofor theletheae rules iI aI AD 33 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 106 of 111

Federal ReglolorRegbt.r J Vol. 45. No. 38 IJ Mooday. February 2S. 198019ao IJ RulesRul .. and Re8ulaUoRegulaUonl..

contlnuinscontInuins proceprocetl.. and that oversight nexibililynexibllily 10 the Slate.51alel and requirement under Part I of thetha Federal wulwill be onaolnJ.onaolnJ, nonregulaled utUiutUlUe.lolies 10 lmplemenlimplement the Power Act. Accordingly. no qualifying laclUtiea(actlitiea will be exempt from Pa.r1Part I 01of 'Z92.40ZI Z92.402 ImplementotionImplementation 0/ reporting CommJ"ion',CommJ ..lon'. rule. under .ectaectlon 210. ob}6ctivftob}6ctivn. Seve,..1 commecommentntl•• ausseated usgnted thatthet the the Federal Power Act. The CommillCommJ ..fot OAQ CommltalonCommJlllon .etlet (orthforth procedure. for recently 1.luedIIBued limplifiedBimplified procedure. for Th,The oblJiaUonobUaatlon to comply with conliderbu!conliderbut appUcatioftlappUcat!ona (orfor waivCH'liwaiv4H'li obtainingobtal.nlng water power llceruealicenses (orfor ,f Z9Z.30%ZS2.30.1 illmpoled directlydlrecUy on elachicelecbie whichwhlch woUld allow fonnalfonna! pardcfpaUoopartlcfpatioo hydroelectric projec'l'projec'l. orof 1.$5 megawattamegawalll lItilltiut1l1U ... ThI.ThIt I. diaelel'ltdiffereot from the reltreat 0' by qualifying facHitfe.facUitfe. in • public or lealeal•• , and halhaa luueIssuedd propotedpropo.ed Subpart C where the obligation to actacl I,i, hearing., The CommlCommiUiOll ..ion notel thai regulations to expedite licen.lngIicen.lng of ImposadImposed on the StateSlate regulatory InlereatedIntere.ted partielpartfea wouldwowd be givengivea anall existingeJd.tlng f.cilitles."faciUlle •• " authority Of the oonresuJ.aled electric opportunityopponunlty 10 be heardbeard in anyaDy Th.The CommJ"lonComm.l ..lon believes utilityudUty in IIIts role IIa. rquJator. Th, proceedina It conducllconduct. to determine cogenentioncogenerltion and .mall power CommfCommIe.lon•• lon I, exerd.inaexercl.inc It. eu.thority whether or ootnOI a walverwaiver IbowdIbould be production facilitItlele. could be the lubJect under aecUon 193 of PURPA and other sranted.granled. 01of anaJl order under .ectlonseetlon 202(c) of Ihe lawllaw, within the CommlComm.l ..louIo.a.·, ·, authorttyauthority Federal Power Act requiring them 10 to requ.lterequite lhfl reportin,.reportjn,. ~ Subp4IrtSu~ F-ExempdonF-Exemptlon of OUaItfylngQualtfylng provide energy if the Economic Any electric lltilityutility wbich fall, to SmdSmall Po.... Production and RegulaRegulatorytory AdmAdminiatraUonlni.tration determineldelermine. comply with the requirement.requirement, of CogerwaUonCogeMratIon FacllttfnFaelltd.. From C.rtatnCertatn that an emergency .ituaUonsituation exi.lI.exists. ,I Z92.302{b)Z9%.302{b) 11 rublect 1010. th.l&tnethe tam. federalFederal endand St.teSlilt. LaweLawa andend Beaul.Becau.. applicalionapplication of lhItthIt .ectionlectioo I.II penelUnpenalttn .. It mlg:btmlgbt reetinreeet .. ...II • re.ult AeguIaA_ .... llinltedUnUted 10to emergency .ltsituatiualloftlons and iI11 of. failure to complycompl" with the nol aHectedaffected by the fact matthat a facilityfacility requ1rementarequ1rementl of the CommlComml"ion'l ..ioo', I 292.801 EnmptiDnEnmpti~n of0/ quaJifyina /ocilititt./romfacilititta/rom iliff Fttderai PowerPowttr AeLAcL attainsaUains qualifyiagqualifying .tatu.atatus or engages 10In regu1aUoQlregu1aUontla.ued illued P.Dder aecdonaecttoo 133 of inlerchangesinlerchaJ:lge. wwithith an electric utUHy.utility. the PURPA..PlJRPA.. Aa atatedIlated earUeatU .... lnIn tbitthis SectionSectton 21O(e)2l0(e) of PURPA .tatHItatu thai CommltalonComml8l10n nolesnote. that qualifying preamble. the data required by t %9z.30229,302 the:the CommJaaiooCommJaaioo Ihall prelcrIb.preacnol rulelrules (ac1Utie.fac1UUel will not be exemptedexempled from Will (onnfonn the bballl.. l, from which the catesralel under whIchwhlch qualifyinsqualifying f.eilfaciJlt!elIUe. are sectionaecUon 202(c)202{c) of the AAct.ct. for purc.ha.pu.rc.ha.eaea will b.be derived: 1292t 292.302,302 exempt. inIn part. from the Federal Power FurthermoreFurthennore,. InIn respon.eresponse 10 commenl. I.i. !huttho. •a critical eelementlement to WIw. program.. Act. from the PublicPubUc UUtilitytility Holding the CoaunissionCommission hashas revised this ThaThe Coa:unJCoa:unJ.sioft •• loft believesbelie"es that. wiithth Company ActAcl ofo( 193.S.t935. from the Stal8State paragrparagrapba ph to provide that qualifyqualifyinging tegardregard to utiliLlelulilltlea .ubJect.ubJaet to sectiontection 133 lawllaw. and reguregulationllationl re.respectingpecting the facliUelfacilities are nol exemexemptpt from secllon.section. of PURPA, th,the CommJuionCommJ"IOD may cale.,rate •• or respectingrelpecting the fmanclalfmancial or 210. 2n. and 2U21% of the Federal Power exetdteexetclae itaI... aauthorityuthority under secllonsecliOD 133 organiOtBani.tation.taUOO regulationregulation.. of electric AActct... required by section 210(e)(3)(8)ZlO(e)(3)(B) to require thethe: data required by ulilitiel,uliliUe •• or from any com6inatloncom6inatlon of ththee ofPURPA. t 2Sl2.302(b)2SlZ.302(b) onOD the bub that the foregoing. If the Corrunlssion delennineadetennlne. Sections 203203.. 204. 20520S. 206zoe.. 208. 301 • CommiulonCommission findsfind. suchluch InformationInformaUon • uch eexemptionXe mption iI.s necessaryneceSlary to 302.302, and 304 ooff the Federal Power Act nece.aarynecessary 10to allow ddeetennlnationtennlnalion of the encourageencourage cogeneralion and ,mall'11'1.11 reRect traditional raterale resregulationulation or co.t.CO.tl auoeasaoelatedlated wwithith providing electric power production. M noted In the StallSlarr regulation of securities of public utililies. UN!cel,uNtee• . With regard to utUitiesutilities nolt ODisCUlailCUliionlon Paper. the CongreuCongrelll iIniendednlended The Commission hashas determined thattha t .ublubfectJect to sectionlecUon 133. iIff they (ailfail 10 the CommlulonCommlaalon to make liberal ule of qualifying facilities shall be exempexempledted provide the data called for in ItlIt, exemption authority In order 10 from thesethele secUonssections of the Feederaderall PowerPowee 1I 292.302(c). the CommiuCommlaaionion may remove the disdislncentlincentive 01of uUUty-~type Act. compel lisIts production undeunderr the FederalFederal regulation. The CommlillionCommiaeion believes Section 305(c) of the Act impo.esimposes Power Act and ototherher .talulesIialutel whichwhich that broad exemption III. appropriate.appropriete. certain reponingreporting rrequequiirementsrement. on provide the CommlaaionCOmnUuion with authorityauthority S«UonSeeUon 210(e)(2) of PURPA providea Interlocking directorates., The to require reporting ofof .uebIUch data. th.tthaI the CommCommitlionitlion ,.I. nolnolauthorized authorized to CommissionCommlsaion believes that any person exempexemptt ltDaUJlIlaU power production wbowho otherwise IsII requireded 10to file 8 1292$2.,4(}3 WaiVV'S,Wai~ I (acili(acUiUe,Ue. or 30 to 80 megawatt capacityl;apacUy reportrepon regardinaregarding interlocking pOpositionllitiona Paragrapb [a)r.) provide. for a from thenthetelaws. laws. An exception I.II made .hould.bould nOInol be eexemptedxempted fromCrom suchauch procedure by which any State regulatory for small powerpower production fafacWtie.cWtie. reqWremenl beeausebecause he or .beIhe Iti.t al..oalao 8a authority or nonregulaled e.lectricelectric IItWtyutility ullngusing bblomalom.. ..s 81as a primary energy director or officerofficer 01of a qualifyingquallrying fafacilitycility.• may apply for.for. waiver from the •lource. ource. Such faeilltie.facilltie. betwe~between 30 and Finally, the enforcement provislonlprovisions of application of any of the requirement. of 80 megawamegawall.tt. may be ex.empex.emptedled fromCrom Part m of the FederFederalal Power Act will Subpart C other than I 292292.302..302. (Section the PubUc UtilityutUity Holdingolding Company Act conUnue 10 apply with respect to Ihethe 29%.302{d)29%.302(d) hb ..a. beea revised 10to pennltapennlla of 19319355 and from State law. and lecUon.IIcUon. of the federalFederal Power Act from StaleState regulatory authority or reguJationaregula lion. but may not be exempted which qualifyqualifyinging racilitiesracililie. are nol nonresulatednon.regulated uUlityutility to adopt a .ub.Ututesub.Utute from the FederalFederal Power Act. The ex.empt. method fot the provisJonprovi.Jon of IystemIy.tem cost Commission will establishest,bU.b procedure.procedure. rot zgz,(J()2 Ex.mpti~n quo/j/yillS forlor the detennmatJondetennination orrate.oCratea forlor these I Z9Z.6fJ2 exemption 01of quoll/yins data without prior CommissionCommlllllIon locililfacililie8ie8 /romfrom the Public Utility HHoldoldiningg approvaL)approval) facilillelfa cilities In a aeparatelepara!e proceeding. Company Act and certain SSlotelote lolYlow ond the Paragraph (a) aet.letl forth tho.ethose Paragraph (b)(bJ provide.provldel that the resulation.resulation. Commillion will grant .uchluch a waiver faciliUe.facilities which areate eligible for onl)'only II the applicantappllcanl can .bow thatthai exemption. Paragraph (b) provide.a thatthet Under Iectiontaction 210(e}210(e) of PURPA thethe compliance with any of thetha facilities described InIn paragraph fa)fa} Commlasllulonon can 8)lemptexempt qualifyingqualifying requlrementarequlremenl. I,I. not oecellarynecellary to .hallIhaU be exempted from all butl;ertainbut certain 'acilltie(acilIU"l from regulationregulation under the enencouragecourage cogeneration or .mallsmail power .pecified .eclionelectionl of the FedeFederalral Power production andend i.ia nolnot otherwise required Ace ""os.os. Otd.,Ord.r NoNo.. 11t 1. SimplifiedSimpli fied 1'nIotd_PnIotd_ lor under .eclionlection 210210 or PURPA. SeCIIonSection 210(e){3)(C) ofof PPURPAURPA C!:rt.tnCe:rt,tn Water Pu ... ~ UurutuUUftUI.. OodeDodetl No. R~I:'I-I~ lulledwlle-d SepSeplembet~tembet $,. 1mtm . •en ndd ",Applic-'Ionpplicetlon lolorr ThiThll •• lecUonectlon 1&is IIncludedncluded inin recognitionrecognition providesprovidel that no qualifying fa cilicilityty may UcenM for Majo. PmifCI.-E~I,'Pmi.ct.-E~ I.lII ",n, DamDarn. Dock.oek.'' of the need for the Commission to afforda Hord be exempled from any licenseIicenl. or penni! No. RM,...... f1lf'1l1409.5 240951Apnl IApnl 21 . 1m)1m).. AD 34 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 107 of 111

Federal RegiaterRegister I/ Vol. 45. No., 38 I Monday. February 15,15. 1980 I RuleaRule. and Regulation.Regulation • • Public:PubUc Utility Holding Company Act of organiulional resulation of electric IVIV.. Effective o.te0.18 utilities. Several commenlen noted thatthai 1935 andInd Siale lawl and feBulaUonJresu1atlont TbeThe regulation.regulations promulgatedpromulgated in thi,thb eanceminscOncerning rate.ratel or flnancJalnnlncJaI Ihithie •• .ecUonecUon might be Interpreted ..a. order ateate" effecUve March 20, 1980. orslniution.o,..anlu.tion. Only cosenerationcogeneration exempting quaUfylns facilitie.racilitiel from faciUtieraciUtie,. and .mallamall Power productfonproduction .Iale,Iale law.lawe or reguletionsresulationa implmentinsimplunentins In considerationIXInlkferatlon of the (OM!80inBIOM!80inB. the fafacIlitiescilities of 30 megawansrnegawaus or leule&t may be the Commillion'aCommiasion', NleNle., •. under .ectlonlection CommllllonCommlllion amendlamend. Pan 292 of Chapter exempted from both of these laws,law•• with 210(1) of PURPA, 1nIn order to clarify that I, Tille 18, Code of FedeFedera1ral Regulations, the exception Ihalthat any qualifyins .maUsmlll quali(yingqualifying (acilitlelfacililie. are not to be exempt as se.1t forth below.below, eUeclleffectlv. ... e March 20,ZO, power productiocllonn fafacilitycility ',i.e ..~ up to 80 from thetetheae ruleerule.., the Commission halhaa 1980., By thea Commle.ion.Commillion. megawatts}megawatts) usingusing biomes.bIomass 81 a primary added subparagraphsubparagrapb (c)(2)(cl(2) prohibiting J(enoelhJ(enoelb F. Plumb,Plumb. ener'll)'ener'BY aoW"Cl oureee can be exempteexemptedd £rom an)' exemption. from SlaState law. and Secretory., these laws. regulationtegulation. promulgated pursuantpW'$uan! to (1) Subchapter I(K I.II amended 10ID the The Commission bas detennlned th.ttha i Subpart C ofo( thtltthe.e rule .. lable of content.con lent. and in the text of the wherewbere a quallfyqualifyingins fac.llltyfaclllty I •• ubJected Some commenle",commell.ten: indicatindJcateded tb,ttbat regulation by deldeletingeting the title (orfot Part to moremote atringentatringenl regulation thanthab other , 292.,3Ot(b)(1)301{b)(I) mlgbtmight be interpretedInterpreted as 292 and .ublli.ublUtutltutlng tbe followingfollOWing in Ueu companiescompanies .olelylolely by rea.onreason of the 'actfact pprohirohibitingbiting a State from reviewingiewing thereor:thereof: that Ills engagedengeged In the production of contracts (orfor purchase.purchase•. , The.e Part 292.-Regul.lIonl292.-ReguI.tlon. Under SectlonlSactlon. Z01 electric eneI'SY. these more .tringent commenteracommentert IlatedItaled thai.that, as a part o(of a electric energy. these more .tringeot .ndand 210 of lbethe PublJc UtilityUIiUty RquJRqujalo!,),tory requirementrequirements •• .bowdhawd be eased thtoUSb State'lState's regwallonregulation ofor electric uUlitie.,utili tie', a folide.Polici,. Act orof 19781178 WilbWith RegardResard 10to Small exemption of qualifying f.ci1itier.ciJitie• • By SStatetate regulregulaloryatory authority Deeds to be Power ProductionProduclion and Coaenu.tCoaeneratlonlon., excluding any quallfyLnsquauryins facility from able 10to revfew contract. enteredtmlered into by the dennition of an "electric utility electric utillUel1tutilltie.1t regulates. (2) SubchapterSubchapter K·'!.ll further amended company" under lectiolectionn 2(a)(3J2(a)(3) of the The.eThese NletNlu., and tfie exemption.exemptionl being inIn the table o(of contentatontenll to Part 292 anendd Public Utility HoldingHolding Company Act of provided by the.ethele rulesrule• .• areere not In the texttexl or the regulationsregulation. by 1935.35, luchlucb 'acilitiesfacilities would be remoremoved... ed intended to dJvestdiveat a State reguJatory reserving Su.bpartSubpart B and by addaddingJn8 oewnew (romfrom Public UlilltyUtility Holding Company agency ofo( '"Ita authority Wlderunder SteteState lea w Subpart. A. C., D0 , and F to read a. Act regulation whichwhich i. eppliedapplied 10 review conlr.cl.contractl forrOr purchaaespurchases '1as rollows!: excluslexclusively ... ely to electrlc utliltyutility companies, papartrt of ita reSul,Uooregul.tioD orof electric utililiesutilities. 01 PART 282-REGULA1l0NS2i2-REGULAllONS UNDER Moreover, b)lb)' excluding qualifying Such authority may continue to be Moreo... er. excluding qualifying SECTIONS 201 AND 210 OF THE f' acllltiesacilities from thllthil deriodefir:a lIUon.Uon, parent exercisedexercised If CODal,tenlCODIlslenl with the terms., PUBLIC UTIlITYUTILITY REGULATORY companies of quallJylngqua1lJylng facilities would policies and practice, undunderer .ectlons 210 POUCIES ACT OF 1911 WITH REIlARO not be sublect to additional tegulaUonregulaUon ,ndand o(PURPAofPURPA .Dd thia Z01 and W. TO SMALL POWER PRODUCTION AND 81aa 8 result of electric production by their Commission'.Commission's implementinglmplemenUns regulations, COGENERATION. lubsldiaries,lubsldiaries. The CommlesionCommission thereforthereroree If the authority or It. exercise i.lnil In believe8belie ... es thattbat In order to encourage connict with these .ectionslection' of PURPA or Subpart A-G~I ProvWonsProvt.Ions cogenecogeneration.ration and .mallsmall power the Commiasion·.Commiaalon'. regulation. pproductionroduction it isIs nenecessarycelsary ttoo exempt thereunder.thereunder, the State mUitmust yield to the ... 292.101 O4!lintnlinltillionJonJ. cogecogeneratoneralOrs ... and nullImall power producers federalFederal requirementarequirements. The CommllSlonCommission from .n.11 of the proproyis ... isionsions of thetbe Public doe. ,not believe ItII pollible or advisable SubplrtSubpart 8-(Rca-fR~.. rndlrv.dl UUIHyUt,il Hy HoldingHolding Company Act ooff 1935 to attempt to ettablUbeatabUsh more precisepleciae SUbpartSUbp.rt C-ArrIngementlC-Arnngementl eetweeneatween ElectriC relaledrelated to electric utilities., gUideline.guidelinel than these.theee, Accordingly,y. UtHi'IHUtlm ... and QuelilylngQUllilylng CogenerationCogenereUon and AccordinglyAccordingly, paragraph (b) statesslates thai SlatelSlalel whichb hhave.... e que.tion. in thtbl. SmallSmlll Power ProduellonProducllon facllllleafaclllll •• Unci«Under no qualifyingqualifying facilityacility .hallshall be considered regard shouldIhould .eekaeek an interpretiveInterpretive ruling SecUonSeeUon 210 olttt.or lhe PubUcPublkl UtilityUUllly RegulatOf'yAegulalOf'y to be an "electric"electrlc utilityutilily company".company", I:IS98 (rom the CommlCommiuulon'.lon'. CeDeralGeneral CaunCoUDlele!.J. PoflcleaPokIes ActAd of llr.111. denneddefined inin section 2(a)(3}2(a}(3} of tbe Public SubparagraphSubparagrapb (c)(3J(cU3J provide.provide. that.that, 292.30'1292.301 ScopeSc::cpe., UlIIUtilityIIY HoldingHolding Company Act or1935of1935.15 upon requeat of.of a SlItStatee resulalOr)'regulatory 291.302 A ..II.bllltyU,blllty of ElectrfeElectrfc UtilityUtlHry U.S.c. I 79b('1I3)79b(')(3). authority or nonregulatednonresulated electric utility., S),.llI!m.11I!1ft CottCot, oa'ollaa., Section 21O(e) of PURPA stalesItates that thethe CommiaaionCommillion maymey limit the 291.303 ElectricE1aetric Uttlit)'UtUlty Ob1i8aUonsObliBaUons Under qualifying (aclliU'aciliU es whichwblch may be applicability of the broad eexemptxemptiooioD This Subpart. 292.304 RallJ, fot PuN:hne •. exempledexempted from the Public UtilityUtUily ffromrom the StateSiale law ,.•. Tbi.Tbia provilionprovi.ion IIIs 292.304 Relll' lot Put'chne•. 292.305~ Rat"R.tes for Salu.Salu, Holdinslding Company Act may also be intended to add flexibility to thetbe exempted (romfrom State law.laws endand 292Z9Z.306 lnteintercoMecUonrconnection Coil .. exemexemptioptionn. 29z.307292.301 S),.telnSy.tem EmergencJet., regulations respecUngrespecHng thetbe ralesrates or The Commi"lonCoauniJ5lon perceive.erceive. that there 29Z.308292.308 StStand.rdsand.rds fotfor Opet.tlnaOpetatlns Relllbliity.Rellabllily, nnancial organizallon ofof electric rna)' be in,tance.in.tance. In which a qualqUBIif)'inBifying utilitlltiiee •.s. fraciUlyaciUty would wl.l h to bave an Subpart~n O--IrnptementattonD-JrnptementaUon The CommillionCommission has dedecidedcided to InInterpretationterprelation of whethuwhether or not 111.II is 292A01292.401. Implement.tionImplementalion by Sl,teStltll! RegulatoryRegulatOf')' rovlde. broad exemption from StaleSlate subjectlubjeci to a part.lparticularcular StaleState law InIn oorderrder AuihorilifllAuthorilil. and NonresulatedNonrqulated UttliliesUlilitles., r.aWl and regulation.ons whichwblch would 10to removeremo... e any uncertaintyunce:rtainty. Under 292.402292.40Z ImplementationImplemenlation of Certaln Reportlna Requ1temeDIa.RequlnmeDtt. conOidconRiel with the Sial,',S,ale'. implementation subpalubparagrapragraph (C)(4).(C)(4), the CommlsalonCommleslon ofor thetha Commllllissionon'.l rules under lelectlctloon 29z.403Z9z.403 W.lyW.l ...... ,.., may determine:termine whether.whether a quaUfylngqualifying • • • 210,21~ racility i.il exemptexempl from a perticular State • • The Corruni ..lo o believe. thai lucb The Corruni"lon belln'tt' thai luch law or regul.t1on.regulation, SUbpart F-£'umpttonF-£umptton 01of au.IIf)'lng~tno SmllSmelt broldbroad exemption I.aia neeetiarynece.. ary to (Public Ulitilitylity Re,ulaRe,ul.torytoty PolIcie.PolIciea Act orof Power PYoductionPJoduction Facftlu.tFtcftlu.t.1'Id and encourage cogenerationcogeneraUon or .mallamall power CogenefWtlonCogenemton Factll1le.FacJlltlea From Certain 19?8.19?a. 16 U.S.C. , zeot.zeot,~, ~I.eq .eq ~ EnetJY SupplySupply production. AcoordlngJy,AccordlngJy, .ubparagTapb,ubpara8Taph aandnd Environment.a1t CootdlnllioCoordinatio n Act. 15 FflMraltndFacMraI and StateSlate ...... I.awa.net .nd Ravua-tlonaR~.lIona (e)(l)(C){l) providesprovldel that .nyany qualqualifyingifying U.S.C, I 791 ete( .e9'''9.. FederlFederall PowerPo~t Act ., .. 292.,601 Exemption 0'of Qu.Ufytnaualtfyina f.clIUh!1r.dlnh!. facility .hallIhall be exempt (romfrom State law,awl •a mended, 18 U.,S.,C., 11V2, 1V2 et '''9.eq".. Dep.rtmentDepartment from lbth,e F,dF.d.rel'rel Powe,Power Act ., aandnd regulation.regulationl rerespecting.pectlng fetesretes of or EneraYEn,,'lIY O'sanl"lIoo0'8S"tUllon Act, fo2U U.s,,C., 17101, 7101 292.1102 ExempllonEx.mptlon of QuaUfytnaQu.Ufylna F.cUF,clllllIll .. electric utilities,utilUlel, and (romfrom financlaJ and el.eqet.eq.. E.,O., 12009, fo2U Fed. ReaRes., 46261)281) From lb,ihl Public Utillt)'Utility Hotd1naHoldlna CompanyCompany AD 35 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 108 of 111

Federal Register I Vol. 4545., No. 38 25, 1960 I Rules anda nd

Act and CertlinCertlln StateStata Law and gengeneratedera led an equivalent amountamounl of resale of lellless than one billion 1I10watlkilowatt Reguletlon.Regulation. electric energy itselfitseU or purchasedpurchaaed an houuhour. during any calendar year Authority: TIll.TIlII part iuuedluued under the Public equivalentequi ... alent amount ooff eleclric energy or begbeginninninging aflerafter December 31,31 . 1975. and Utility RegulRegulltoryltory PolicluPollclea ACI of 1978,1978, 18 befoTbefore the immediately preceding year, U.SS.c..c. ,t 2eO\2eOt fitfit 'eqleq.. Energy Supply and capacity fromrrom other sources.lourcel. environmentalEnvironmental CoordlnaUonCoordinaUon AcL 15 U.S.c. IntercInterconnonnection costlcosts do not Include any shallahan nnotot be subject to the provision'provlsionl of t 791 .t 'eq.eq~ Federal PowerPowlr Act. 18 U.s.c. COlts included inIn the calculation of thil seclionJecUon until May 31, 1982. 1mIm .', 'efl.eq .. DepartmentDeplrtment or EnergyEne'1Y .voided.... oided COltS.costs. (h) CeneralGeneral rurulele.. To make available OtJanlzatlollOraanlzatJolI ActAct.. (2t2 U.Ss.c..c. ,t 710t etfit 'efl,eq.. (8) "Supplementary power" meanlmeans data from which avoideda ... olded cosl"costa may be £.0. 12009.lZ009. 4Z FR te287. electric energy or capacity ,uppliedlupplled by derived, not later than NovemberNo ... ember 1t,, an eleclrlcelectric utility., rregularlyegularly used by a 1980. May 3t31 , 1981.t982, and nnotol lelless often Subpart "-General ProvtsJonaProviakma qualifyingqualifying facilityracility in addition 10to Ihatthat than every two yeanyears therufter.thel'1!8fter. each which the facility generat .. itselr. .2t2.101 DrlftnItIone.DrlftnIUone.. which the facility generatel itlelf. regulated electric utility described In (9J(9) "Back-up power"power" mean,l electric paragraph (a)(aJ of !hiethie eectlonleclion ,hallshall (aJ CeneralGeneral rule. TermlTerm' defined In the energy or capacity supplied by an Public Utility RegulRegulatoryatory PolicielPolicie. Act o( proprovide ... ide to itsIts StateStete regulatory authority. electriceleclric utility to replace energy and ahal!Ihan maintamaintainin for public inspection. 1978 (PURPA) .hallshall have the same ordinarily generated by a faciUly'lfaciUly', own and each nOnJ'egnonregulaledulated electric utility meaning (or purposel of W,WI ppartart II.. they geaerationeneration equipment during an have under PURPA.PURPA, unleuunlen (urther described inIn paragraph (al(8) of this unlunscheduledcheduled outageoUlage of the ffaaccility. sectionIecUon aIhallhan maintain for public defined inIn thtble part. (lO)(10) "!nlerruplibleInterruptible power" memeansans (b) DefinDefinition!l.ition!l. The followingrollowing inspectiOn,mspection. the followingfollowing data: eelectriclectric energy or capacity suppliedaupplled by (1) The estimated avoided cost oonn the definition.ltionl apply forror purpOJeIpurpole. o( thisthil an electric utility subject to interruptionInterruption partpart.. electric utilitYutility','1 'Yltem,Iy.tem, lolely.with by the electric utility under IpeclfledIpeclfied relpectreJpect 10to the energy compcomponent.onent, forror (1)(11 "Qualifying"Qualirylng (acility" meansmean. •a conditioncondition. •., cogenerationration ffacilityacility or a ,mallImall power varioulvarioua levelsle ... els of purchase.purchasee fromrrom (11) "Maintenance power" meanlmeana ququalifyalifying facilitielfacilltiel. Such levelslevel. of produproductioctionn (acllity(acility which IIIs a qqualifyingualifying electricelectric energy or capacilcapacity suppliedeupplied by Cacility under Subpart B orof this part of purchaaelpurchalea shallIhall be atatedIta ted inIn blocklblock, of an eleclricelectric utility during scheduledIcheduled not more than 100tOO megawattlmegawatt, for the Commls.lon',Commls.lon·1 regulations.regulaUolU. outages of Ihethe qualifying facility. (l)(2) "Purchase" meansmean. the purch8lepurchase of aystemlIyaterns wwithith peak demand of 1000 electric energy or capacity oror both from Subpart 8-{Reserved1B-{Resarved1 megawatt.megawalls or moremore,, and inIn blocksblockl a qualifying fracilityacillty by an electric utilityutility.. equivalent to not more than 10 percent {3l "Sale" means the saleaa le of electric Subpart C-Arrangement,C-Arrangement. aetweenBetween of Ihethe .ystemsyelem peak demand for systemlsYltem' energy or capacity or both by an electric ElectricElecll1c Utillti"Utllllie. and auallfylngQualifying of less than 1000 megawattmegawatt,.l. The utility 10to a qualifying facilityracility,. Cogeneration and Small Power avoided coels shallahall be atatIta teded on a cecenl.nt. {4J "SysSystemtem emergency" meanemeans a Productlon FacllltlFacllltiea.. Under Section per kilowatt-hourkilowall-hour basis. during daily and condition on a utilitY'1utility' •• IYltemyalem which I,II 21001210 of the Public UlllltyUtility Regulatory seasonal peak and off-peekoff·peak perioda,periodl, by likely to result In Imminent aignificentlignificant Pollcl"Policies Act 01 1978197. yearyear., for the current calendar year and disruption of service to customerscustomen or I,II each of the nextnextS 5 years: t 29U01292.301 Sc:ope. Imminently likely to endanger life or (ll{21 The electric utility', plan for the property., (a)raj Applicability. This subpartlubpart applies addition ofor capacity by amount and {51(51 "Rate" mmean,eanl any price,price. rate,rate. 10to the regulation of lales and purchases type, for purchasespurchasel of firm energy and charge. or clallificatlonclaslificatlon made. between qualifying facilities and electric capaccapacityity., and for capacity retirement,retlrementl demanded. observed or received with utilities. for each year during the succeeding 10 relpectre,pect 10to the lale or purchase of {bl Negotiated rates or terms,erms. NothingNOlhing years:yeara: and electric energy or capacity, oorr any rule.rule, In this aubpart:lubpart! (3) ThThee estimated capacHycapacity costs at {11(1) tlmltltlmlts tbe authority of any electric regulation. or practice relpecting~apectins any completion of the planned capacitycapacity utility or any qualifying facility ttoo agree .uchIUch rate,rate. charge.charge, or clauificationclauiCication, •• and nd addition.addilionl and planned capacity flJ1l1fll'Q1 to a rate for any purchall!,purchase, or terms or any contractconlract'PerlBlnlng 'Pertaining to the aalelale or purehpurchasea.asea, on the basis of dollars per conditionsconditiona relatingrelaling to any purchase., purchaaepurchase of electric energy or capacitycapacity.. kilowatt, and the allocialedasaocialed energy whwbicichh differdirrer from the rate or terms or (6) "Avoided"Avoided COltl"costl" mean.mean, the cost,costl of each unit. expressed inIn centlcent, coconditionanditiona which would otherwiseotherwlle be incrementalIncremental COltacoall to an electric ulility of per kilowatt hour. These COlts shall be required by thisthllsubpart; subpart; or electric energy or capacity or both {2l(2) Affecl8AffeclJ the validvalidityity of any contract expresaedexpressed inIn terml of individual generating unIt,unltl and of individual which.which, but for the purchall!purchaae from the entered Into between a qualifying planned flltn purchases, quaUfyllnsns facility or qualifying facllilles,cilities, facUity and an electric utililyutility ((oror .nyany planned fmn purchales. .uchIUch utility would generate 1I11!l£IIself or purchase., (c) SpeciolSpecial ruleru/a for small e/tfctrica/tfctric purchalepurchase from anolheranother lOuteelOutee.. utilities.utilitie,. (7) "interconnection coat."COltl" meanlmean' the t 212.302 """lltabJlltyAvailability of01 electricelectttc utility (tl(1) Each electric utility (olher(other than any realODablerealOnable CO,tlCOlt. of connection.connection, lI)'atemayetem co.tco.! data. electric utilityutUity to which paragraph (bl of .wlt.wltching,ching. metering,melering. Iran.mlulon.tranlmlllion. (a) Applicability. (1) Except ataI !hthil sectilecllonon appliel) .hall.,hall, upon request:requelt: dl.tributiondlltribution.... IIfelyfety provillonlprovilion •• .ndnd provided In paragraph (a)(l)(aJ(2) ofor thl. (I) ProvidePro ... ide comparable data to that administrativeadmlnillratlve co.tllncurredCOltS Incurred by the aectlon.lectlon. paragraph (b) appliea to each required under paragraph {bl(b) ofor !hI.thle electric utility directly related to the electric utility., In any cacalendarlendar year, if eectionleclion to enable quali£}·'jng fa cHitielciliUe, to in.t.lI.tlonIn.tallatlon and maintenancemaintenance of the the lotaltolal ,aleasalel of electric energy by .uchauch elUmateesUmate the electric utility"utility'l aavoided ... oided phYllcalphy.lcal fadUties necenecel.. .. ary ry to permit utility for pwpoSI!Ipurposea other than reaaleresale coatiCOltl for period,periodl delde,cribedcribed in paragraph interconnectedinlerconnected operationl with a exceededexceeded 500SOO million kilowatt-hourskllowatt-boure (b)(bJ of thithie ... lection:clion; or quaillyinsqualifying (acllity.(acillty, 10to the extent .uch during any calendar year beginning after (il)(Ii) With regard to an electric utility coCOl"... are 10 excel'exceu of the correlpondlng December 31. 1975.1975, and before Ihethe whlchwblch I,II legally obligaledobligated to obtain all co,tIco.ta which the electric utility would immediately preceding calendar yearyear.. Itl requlrementlrequirement. for electric energy and ban Incurred I( It had not engaged In {21I21 Each utility hevlns total 1.1"salal of capacity from another electric utility,utility. IotarconnectedInterconnected operationl, but In.leadIn.tead electric energy (or purpole.purpolel otharother thaDthan provide thetbe data of It,Itl .upplylnglupplylng utllilyutlilly AD 36 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 109 of 111

Federal Register I Vol. 45, No. 38 I Monday. February 2525.. 1980 I Rul eess end Regulation, U235

and Ihe rates.trates II which II currently ovoverer thtbee intnterCOMeclion.erconnection. the electric regardlessregardless ofoC whether the eleclricelectric utUlty purchase. suchluch enersy and capacity. ututilityility ""ould\o"ould bec:omebecome .ubject. ubject to making susuchch purch8leaporchues i8 (ZllIanyIZ)1I8"y .uchsuch eleGtric utility (aU.faJl. to regulation esas a publicpublic utilityutility underunder Par! simultaneouslysimultaneously making sales to the provide .uchIUch infInformationormation on requeltrequest. thethe II of Ihethe Federal Power AAct.ct. qualifyingqualirying (acility.facility. qualifying (acUityfacUHy may applyappl)' 10 the StaleState CdId) TronsmissiDnTransmission ttoo other eleelectricctric (5}ln tthehe case in which the rates lorfor resulareBula tory authority (which haa ututilities.ilities. If a qualifying facility agrees.agrees. purpurchaseschases are basseedd uponupon estimste.estimate. of ratemaklng authority o,,'er the electric an electric utiutility lit)' whiwhichch would avoided coltacosl. over the specificapecific tem! of ullllly)utlll1y) or the Commission for an81'1 order olherwotherwiisese be obligated to10 purchase the contract or other legally enforceable requiring Ihthat the inrormation be energy or capacllycapacity from .uchsuch quaUCyinquaUCyingg obligation. the rate.rates ror suchauch purchase.ses provided. facility may transmit the energy or do nnotot violateviola Ie !.hiethis .ubpa.rtsubpa.rt if the ratetrates (d) SubslllullonSubslltullon of oltemotlv6oltemotlv8 Ole/hod. capacity to any otherothl!r electric utility. rororr such purchases dillerdiffer from avoavoidedided ill(11 ArterAfler pupublicblic nOlicenOlice in the lreIre.l seervedrved Any electric utilityulliny 10to which lucluchh energy cosl.COlts at the time of delive.rydelivery. b), the electricelectric utilily.utility. aodlod .ne.nerr or capacilYcapacity ilis lran.nUlledlransmJlled shall purchase (cllc) StandardSlondord rotes lorfDr purchasespwchoses. 111(1' opportunity forror pubUc comment.cammen", an)'Iny suchluch energy or capacltycapselty under thl.hla Thentn!" shallahall be put into erred (with Slate ugulatory~gulatory authority ma),rn a)' require subpartaubpart as if the qualify;ng (acllltyfacility were resperespecct to each electric utility)utility) standardatandard (with respectre.pecl to anyan}, electriceleclric ulilltyutility ooverver supplying energy or capacity directly toto rale.rate. fOf' purchase.purchases (romrrom qualifying which it has ratemaking authority).authority). or such electric utility. The rate ror fafacilitiescilities with a design capacity 0(100of 100 anyan)' non ·regulated electric utllllyullllly ma),may purchase by the electric utility to whichwhich kilowatts or less. provide. datdatss different than those which suchsuch energy Is transmittedtransmitted shallahall be (2) There may be putpul into effect are otherwiotherwisese required by Ihth lsis lection ir adjusted up or down to renect line standarstandard tatearatea for purcbaeespurcbases from it determines thaithat avoided cost.cosl, can be losselossess pursuant toto 1• 292292.304(e){4).304(e){4) and qualifyingqualifying facUitiearacUities with a designdesign derivedderived frrromom such data. shaUabaU notnot include aoyany chargesdlarges for capacitcapacityy ofor more than 100 kilowattkilowaU •• (2)(Zl An) Stale regulatoryregulatory authority transmission (3) The .tandardstandard ratesrales for purchase.purchases (wi(wilhlh rL'fiOpeC1rL'fope C1 1100 an.yan.)' elecelectrictric utilityulilil), over (e)Ie) ParolJeloperationParallel operation. Each.,electrielectricc undeunderr !hI.thle paragraph:paragraph:.: whichwhich ilil hu rratemakingatemaking aauthuthoorily)rity) or ututilityilily shall offerorter to operate iinn parallel (I) Shall be consislentconsistent with paragraphparagraph.. nonresulatednonres ulated utility which requiJresre•• such uch withwilh a qqualilyualifylnslns (acil(scilltylty. provprovidedided ththatai (a)la) and (e)tel of thlsthis saection;ection; and dlnnerenterent data shall Dotify the the qualifying facUlty complies with any IiiIii I) May differentiate among Commiisssionsion wiithinthin 30 daYIdays of making applicable standardsItandards established in qualUyingqualifying raratilltiescillties using various suchsuch determdeterminationination. sCGordanceaCGordance with t 292,306292,306. technoltechnoloogie.gies on the basis ofor ththee supplyaupply (e)(eJ Stole RelRel''iewiew. (lJ(1) Any daladata characteristics of the differentdif£erenl •subm ubmittedilled by an electriceleclric UuItilityJIIly under 1292.3041212.304 RatRlt •• for purch.aIH.purch.a.H, technologies . thi.l. ssectionection shallshall be subject to ft!viewH!view by Ca)la) Rates forpurchase8forpurchose!J. (1) RatesRates for (d) PurchasPurchaseses "as availableavailable"" oror thethe SStlltetllte regulatoryregula to ry authorityauthori ty which has purpurchaseschases sballshall: pUl'$uonpursuantt to 0 leslesallyoJ/y enforceobenforceablele ratemaldngratema~jng aUlhorityauthority over .uch electricelectric (I) Be just and reasonable to the obligatobligationion. Each qualifying fafacilitycility shallIhall utility. electric consumer of the electric utility have the opdonoption either: (2(2)J In anyan)" suchsuch re\·iew. ththe elecbic anandd inin the public interest: and (I)(1) To provide energy as the qualifyqualifyinging uUlityuti lit)' haha.s tthehe burburdenden of01 comingcomlR8 ffonvardonvard liiJliiJ fl.:otl'-:ot diacriminatediscriminate againstagalnst qualifyingqualifying rracillacllflyty determinesdetermines suchauch energy 1010 be withith jusjustiOcationti Ocation forfor its data. cogeneration andBnd .mallsmall power available forfor .uchsuch purc.bases. in whlcb·which, productionproductioD facilities.fscilllie •. casetase the raralellea forfOr suchauch purchasespurchasea .ball,bs ll f 2120303 Electric utilityutllit)' obligatobligationionss under (2)f2J Notb.ins In tbJ.thi, .ubpartaubp8J1 requires be ba.edbaled on the purchasing utiJjly'sutility', tNstN, IWbpeubpsrt..rt. any electric utility 10to pay more than the avoided COStlcoalS calculatedcalcuJated at the time orof (8)(a) ObObligationligation 10to purchase framfrom avoided costlcosts for purchaaespurch ..es, , delivery: or qualifylnsfacilitiesfylnsfacilities. EachEach electric utility (b) RelationshipRelationshIp 10to avoided costs. (11 (Zl(Z) To provide energy or capacity shall purrcchase.hase. in accordance with Por purposespurposel of thisthi. paragraph. "new pursuant to a lega1ly enforceable 1191192.3042.304.. any energy and capacitcapacityy c.apacityc.apacity"" meansmeana any pun:hasepwt:hase from obli.gationobli,galion (orfor !be!he delivery or energy or whiwblchch I.Is made availavailableable from II capacitycapacit)' or a quallfyi.ngquallfyi.na: (acUlly,f",cUlly. capacity over aI .peclfiedapeclfied tennterm, in whicb quaqualifyinglifying faciJityracility: constn.u::tionconstruction ooff whichwhIch Wafwas commenced cuecase ththee ralesrates for suchauch purchasepurchaae,s .hall. (1)(11 OirecUyDirectly to the electric uliutilJt)llt )~ orOt on nr after November 0.19780.1978.. at the option of the qualifying facilityfaciUty (2(2)) IndireIndi~ctlyctly to the electric utllilyutilily in (Z)(2) Subject to paragrapb (b)(3) of this exercludexerclaed prior to the beginninsbeginniR8 of the acaccordancordancece with paragraph Cd) of this .ectionlection,, a rate fot(or purchaaespurchues aalisfiesastisfies the lpecilied lerm.term. be baaed on either: .reHon.etUon. requift!mentsrequirements of paragrapbparagraph (a)Ca) of this (I) The avoided costscoats calculated at the (bl(b) OblObliBatianigafion to seJ/ to quolifyif18qualifying sectionlie<:tion itjJ the rate equal. the avoided lime of delivery. or facilitiesfocilitiel., Each electric utility shall sellseli costs determined after conlideration o(of (Ii) The avoided cost.COlt. calculated atal 10to 8nyan)' qualifying facility. in accordance the factorl(actors .atet fo'rthrtb In paragraph (e) or the time the obUgation IIIs incurTedincurred. withwith 1292.3051292.305.. any energy and capacHy Ihls section (e)Ie) Factors DllDffecting rotes fforor requested by Ihethe qualifying facilIty.feciUty. (3) A taterate for purchaee.lothpurchatel (otherer than purchasespurchases.. In detenninlngdetermining avoided co.coa lsIS. (c)(eJ ObligationObliBatian to interconnect.interconnect. (1) from new capacity)capecit)')lDsy may be leISleas lb.anth,an thethe the following factol'Sfactors Iball. to the extentextenl Subject to paragraph (c)(2)(cJ(21 of Ihlsthis avoided coetl(COlt II the State regulatory prapracticable.cticable. be taken into account:; section.lecUon. any electric utility .hallshall mellemalle aulhorilyaulborily (with f1!apectrespect to any electric (lJ The data provided pursuanlpursuant to .uchluch InterconnectionsInterconnedion. with anyan)' utility over which IIIt hbasn rall.:makingratemaldng I 29UOZ(b)29UOZ(b),, (c). or (d)(d).. includingincludin8 Slate qualifyIngqualifying facfacilityility .1as may be nece ..aryal")' aauthoriuthority)ty) or the nonreguJ.atednonregulated electric review ofo( l.OylUly luchIUch data: 10to aaccomplishccomplish purchaseapurchases or sale.aale. WIderunder utiUty determinesdetennlnes thatthai •a lower rIterate isia (Zl(2) The IvaIlability ofo( capacitycapacit)' or thil .uhparL.ubparL The obligation 10 paypa)' (orfOl' consistentconllstent with paragraph (al(a) of thisthis enel"8)'enel'8')' from a qualifyill8laqualifying facilitycility duringdurinS any Interconnection COlts sball be section.section. andlind laIs sufOclentaufOclent 10to encourageencoursge the .ystem.yatem dally and seasooaltealooal peak determineddetermined InIn accaccordanceordilnce with cogenerationcogeneration and .malltmall powpowerer periods.period,. Including: 1292I ZS2.306..308. production.production. (I)(II The abilityabill!y of the utility to dispatch (2) No electricelectric utility is required to (4) RateaRatee (orfor purchaseepurchatet from new the qualifyqualifyln8lns facility;facility: Interconnect with any quaHryingquaUfying (acilityfacilily capacity shall be Inin accordllnceaccord.nce with (II) The expected or demonstrated If, solelylolely by reaaonreason ofor purchasespurchalea or salesaslea paragraphparagrapb (b)(2) of lhllthla .ection. ft!liabllltyreliability orof the qualifylngqualifying facilityracility: AD 37 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 110 of 111

12238 Federal Regliler I VoL 45. No. 38 J Monday, February 25, 1980 I Rule. and Regulations

(iii) The term,term. of any contract or other regulatory authority detenruneldetermlnel regulatory authority (with resppeectct to any lele811111ygllllly enforceable obligation. lI'Icludlna necellarynece8lary or appropriate, either before electric utility over whichwhich it haahas the duration of the Obligation. or after the occurrence. fatemaklngratemaking authority) or nonregulalednonregulated termination notice requirement and electric utility mamayy assessasseaa against the aanctlon. (or non-compUance:non-compUance: ,HUOS,2920305 R8tRat.. tOt ...... qualtryingquaUfying facility on a (Iv) The extenlextent to which scheduled (a) General role,.ru/e$. (1) RateaRates for ,1atel:lalel: nondiscrimInatory baalabull with respect 10to outage.outage. of the qualifyinsqualifying facility can be (I) Sball be JUIIJUILI and reasonablerealonable and in other custome"customers with similarlimilar load usefully coordinated with scheduled the public inlerest;intereal; and characteristics. out8ge.outage. of the utility'.utility', fac:lUtJe.:rac:llitJea: (il)(ii) Shall not dilcrim1natediscrim1nate agalJulag8lnalany any (b) Reimbursement of interconneclionInterconneclion (vI Tbe u.erulneutefulne .. of energy 8.lIdud qualifying facility in comparison to ralelrate. costs. Each State regregululaa tory authority capacity .upplJedlupplled from 8 qualifyllllqualifytlll for lalellale. to other cu.atorneracu.atornetl served by (with respect to any electric utility over facilityfacility during ly,lernIyslern emergencleemergencies. .. the electric utility. which It has ratemaking authority) am' including It.It, ability to leparate ItIIload 12)(2) RatelRate. for lale.lalea which are based on nonregulated utility shallshall determine thethe from It. generation: accurate data and consistentconsistent manner for payments of interconnectioninterconnection (vi) The individualIndividual and aggregate systemwideIyatemwide coaUogcosting principles .ballIball notDot colta.cosla. which may include reimbursemeentnt value of energy and capacity from be considered to dilcriminatediscriminate agaln.tagain.t over a reasonable period 01of time. quaHfyingqualifying f.ciUtle.f.cUilie. on the electric any quallfyins facilityracility to the extent that utility',utility" Iy.lem;Iyalem; and such ratesratea apply to the utility's other '212.307'212-307 SYltem emergencl...... (vii) The amaller capacity Increment. cuatomerlcustomerl with limllarlimililt loadlosd or other (a) QualifyingQuobfying fac/lityfacility obligoliollobligOlioll to and the aborter lead time. available coat-relatedcost-related charaCleriltics.cblltacterlstica. provide power during system with additions of capacity from (b) Additional Services to be Provided emel1Jencies.emBTBencies. A qualifying facility shall qualifylns facilltiea;faci1ltiea: and 10 Qualifying FacilitieFacilities.•. (1)(l) Upon be required to provide energy or (3) The niatioRabipniatioDabip of the availability requelt orof a qualifying facility. each capacity to an electric utility during a ofor energy or capacity from the qualifying electric utility Ihall provide: system emergency only to the extent: f.cllityf,cllity 81 derived ininparagraph paragraph (e}(2) of (I) Supplementary power;power; (l)(1) Provided by agreement between thll .ectlon.lectlon. to the ability of the electric (ii) Back-up power; ,uchsuch qualifying facility and electric utility to avoid co.t..COltA. including the (Iii) Maintenance power: anandd utility; or deferral of capacity additionl and the (lv}lnterruplible(Iv) Interruptible power.power. (2)(21 Ordered under sectiolIection 20Z(c)202(c1 of lhethe reduction of fOlln ruel ule; and (2) The State regulatory euthorityauthority FederalFedersl Power Act. (4) The coallCOlt. or lavingslavingl reswting from (with respect 10to any electric utility over (b) DiscontDiscontinuanceinuance of purchases and variation. in line 101lea10lses from thoaethose that which it bal ratemaking authority) andand sales during system emergencies. During would have existed in the absence of the Commission {with(with respect to any any syatemIystem emergency,emergency. an electric util ityit y pun:hales from a qualifying facility. if nonregulaled electric utility}utility) tIlaymay waive may discontinue: the purcbasingpurcba.tng electric utility generated any requirement of paragraphparagrapb (b)(l) of (ll(I) PurchasesPurchsses from.from a quatjf)qualjf)'illg facilitacilit)'y an equivalentequJvalent amount of energy itselfItlelf or thiathis section If.if. after notice in the area if such purchases would contribute to purchased an equivalent amount of servedaerved by the electric utility and after such emergency: and electric energy or capacity. opportunity for public comment. the (2) Sales to a qualifying facility. (I] PerPeriodsiods during which purchases electric utility demonstrateldemonatrate. and the provided that such discontinuancedisconlinuance is on not required. State regulatoryregulstory authority or the a nondiscriminatory basis. (1) Any electric utility which gives Commission, asaa the calecase may be. findafindt 1212.301 StandardsSt.ndards lor operoperatatInIng notice pursuant 10to paragrapb (I](2)(1](2) ofor that compliance with suchluch requirement ,...lMImty,..u.,mty. this section will notnol be required 10to will: Any State regulatregulatoryory authoritya uthority [with pureba8epureb.se electric energy or capacity (1)Ci)lmpair Impair the electric utility'lutility's ability respect 10to any electric utilityutility over whichwh ich during any period during which. dua 10 which. to render adequsteadequate service to ita:III it basbas ratemaking authority)authority) or operational circumstancel,clrcumstancea, purebaaespurebales cUltomera:customers; or nonregulated electric utility may from quaUfy1lna fac.ilitlelfacilities will teswlinreluliin (il) Place an undue burden onon the elltabUsheltabllah reasonable standardsIItandards to co.taCOltA greater than thoaethose which the utility electric utility. eensurenaure system safety and reliabilityreUabllily of would Incur Ifif It did not make auchluab {cl Rate,Rate. for sale.solell of bock·up and interconnectedlnlerconnected operations. Such purchases.purchaaea. but inateadInstead generated an maintenance power. The rate for laleslel staatandard. may be recommended by aan}'n}' equiva lent amount of energy ItlelfIlaelf. of back-up power or maintenance electric utility. any qualifying facility.rseilHy. or (2) Any electric utility leeking to power: any other person. If1£ any StateSiale regu latatoryory invoke paragraph (1]11)(1](1) of t.hiat.bit aecUonIIctlon (1) ehallIhall not be baledbaeed uponupon an authority (with respect to any electric mustmuat Dotifynotify, in accordance with assumption (unIe.. euluppqrppqrtedted by ffactualactual utility over whichwhlc~ IIit has ratralemaking applicable State law or regulation. each data) that forced outagesoutagel or other affected qualifying facility Inin time for authority) or nonregulated eleele:::tctric utilityut ility reductions in electric output by all eatabliaheseltablilhea such standards. it shall the qualifying (acillty to ceale the qualifyingqualifying: facilltlel on an electric .pecify,pecit'y the need for luch standards on delivery of energy or capacl.1fty to the I,Itlllty'lutWty'1 Iy.temIYltem wUl occur electric uUllty. the balisballis of sYlternsystem safelY and simultaneously.almultaneoualy, or durlna the sYltem rellabiUty.reliability. (3) Any electric utility which fail.U. to peak. or bolk and comply with the provi.ionlvi.ion. of paragraph (2) .hallIhall take into account lbethe extent SUbpart D-ImplementatlonD-Implementation (flI2)((J(21 of (hi.lhia lectionleclion will be required to to which acheduledIcheduled outagesoutagea of the pay the .amelame rate for .uch,uch pureha18purchaae of qual1fytnsqualifytns facilitielfaeiliUe. can be ulefullyuaefully ,212.401 lmp..mentlUonImplementation by Stat.Slat. energy or capacity 81 would be required coordinated with IcheduiedIcheduJed outageloutagea of ~toryNOtJlIItory authortUealulhortUes and nonrelilutatedngnregulated bad the period described In paragrapbparagraph the utility'.utility', facilitlel.raclliUea. -..ctrIcIlIIIctrIc ~ltIn.~Ittn. (fI(t)((J(l) of thi.thia sectionaeclion nolnot occurred. (a) StoleState regulatory ourhoritiell.authorities. NolNot (e) A claim by an electric utility thai It 2t2.301 Int..-conneeuonIntlll"COnMCtlon eo.ta.eosta. later than one year after these rules lake .ucbIUcb a period haahas occurred or will occur (a) Obligation to pay. EachEacb qualifying effect. each State regulatory authority I,I. .ubJectaubJect to such verificationverificaUoD by It.ill facilityracillty shall be obligated to pay IInyany .halL after noUcenolice And an opportunity for State regulatory authori~autbori~ a.as the State lnter<:onnectionlnlerc:onnectioD cost.COlt. which the Stat. publicpubllc hearing. commence AD 38 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-1, Page 111 of 111

Federal Register I Vol. 45, No. 38 I Monday, February 25. 1980 I Rule. and RegulationsRegu1ation. 12287

Implementalion or Subpart C (other than Subpart F-E.emptlonF-Exemptlon of QualifyingQ~lItylng qualifying 'adlltyfacility I.Is exempt from 8a I 292.302 thereof). Such ImplementanonImplementation Sm."sm." PowerPow.r Production FacJlltlFacJlJtI .. end patUcularpatUcuJar State lawJawor or regulaUon.regulaUon.. may consiltconsllt ofor the laauanceI"uance ofor Cogeneration hcllltln from Certain 1"DDc.~"'ru.d1"DDc.~JOru.d ~_ ..J) regulations. an undertaking 10to re,olverelolve Federal and Stal.Stale Law.Lawa and ..... _---_- disputesdisputea between qualirylngqualfrylng racilitietracJlltiet R.gula.tionIRagulationl and electric utillUea arisinaarillin8 under f 2t2.50tH2.SOt E.atmpUonEatrnpUon to qualltyktgqualltytng Subpart C. or any other aclionacllon fllClliti.afllCllitlea from the 'Federal p~ Act. reasonably designeddealgned to Implement IUch .aubpaubpartrt (oiher(olher than 1292..3021292.302 thereof). (a) ApplicabilityApplicability.. Thilrbia aectlon appliesappliea 10:to: {bl(bl Nonrrgu/oledNonrrguloted electric utilities. Not (1) qualifying cogeneration 'acllities:facilities: laler than one year after the.eIheae ruletrulea lake errect.effeci. each nonnonregulaledregulaled electric utilityutllily .ndand shall. afler nolice .ndand an opportunity for (2) qualifylnaqualify1na .mall power producllon 'acililie.facilitie. whJchwhJeh have a power public hearingbeanns. commencecommence,, pnxfuctionproauction capacity which doesdoes not implementation or Subpartart C (other(olber than exceed 30 megswaUsmegawatts. I 292.302292.302 thereoij. Such implementation CenerolCeneI'DI ttllerule. AXIyAIly qualllyinsqualifying may con.illconsisl of the l"uanc8laauancB of fb]£hI facility de• .cribedcrlbed In paragrapbparagraph (a) .ballshall _2'; .....126 roL~ Wedn•• _____ esday. ._ AprflAprrt.. __ 9. 1980 rcgulationregulations.•. an undertaking to comply _2';126 ..... roL-...... Wedn•• _____esday. ._ .. __9, 1980 = be exempt frofromm aUlectionsall.ection. of the with Subpart C. or any otherother acllon Federal Power Act. except:e.xcepl: reasonably designed 10to Implement .ucbsuch (1) SecUonlSectlon.l-3O; 1-30; subpartaubparl (other(other than t 292.302 thereof). ,. CFR Part 292 (2) Section.Secllon. 202{c). 210. 211211.. and 212;2.12; (c) Reporti1l8ortj1l8 requirement. NotNollater later (3) Sectlon.Sectlonl 3OS(c):JOSlc}: and than one year afterafler these rulelltekerules take (tlocke'(tlo~k.t No. RM7t-55) effect. each StateSlate regulatory authority (4)(41 Any neceuarynecessary enforcementenforcemenl provilion Part UI with regard 10 the and nonregualednonregualed electric utility .haUshaU 6leme proviSion 01of Part UI with re8ard to the RatesA'ates and ExemptionsExemptions for Qualifying ,ectlonllectionsli.led li,ted Inin para8raphsparagrapha (b) (1].fll. (2) with the Commission a report describing Small Power ProducUon and with the Commission a report describln8 and (3](3) of thl.thl •• aectlonectlon . thethe manner in which iIit wIU implement Cogeneration FaciIlUe:s;FacillUe:Si Comcllo"Corne-tJo" Subpart C (olherlather than 1292.302 thereol'}reol'). 1211..1021211.102 £Iampt!onEJempUon to quallfy1nollfy1no April 3. 1sao. tadlltlntadUtln from theth. Public UIllttyUtUtty Holding 12t2.4o2t2.402 02 ImpllmenlaUonImpl.mentaUon ot Clrtalnc.rtaln CompanV Act anet c.n.lnc.rtaln SUiteSUIt. law"wand and AGENCY: FederaJPederaJ Energy Regulatory reportlnoteportlno ,..qultaMenla.rtqulr.Menla. regulation.'egu"Uon. Commission. 00&DO& Any electricelectric utilityulility which ffaJlsalls 10 'a)(a) ApplicabAppHcabilijljty.ty. This section applies ACTION: Erratum notice. comply withwilh the requirement.requirement. ofor 10to any qualifyingqualifying 'racility de.cribeddeacribed in § Z92.302(bJZ9z.302IbJ .hshallall be subjesubjectcllo to the same 1I 292.601(a).292.601{a). and to any qualifying ,mallImall IUMMARY: Thllis notinoticece contain,contains a penapenaltiesllies 10to which IIIt may be .ubjected power production facility with 8 power correction ofor I 29229Z.302.302 (a) and (b)(h) of the for failurelailure to complycomply wilhwith the production cap.citycapacity over 30 megawallsmegawatts Federal EnergyelllY Re&uJalRe~u1atoryory requirements of Ihe Commiulon's lI,uchlI.ucb facility produceaproduces electric energy Commission',sion'l rinal regulations: lolely by the uteuse of blome81me .. 8'as ae regulation. 'I .. ued under .ectionseclion 133 of fOR '!,I~THER'!J~THER IHFCRMATIOH CONTActCONTACT:: primary energy loureelouree.. PURPA. OehcrahDebcrah CottheilGOltheil.. Office of the Ceneral (b) Exemption from the Public Uti/ityUtility Counsel. Federaederall Energy Regu!3toryegu!3tory t 212292.403 W.I".,.,W.tv.,., Holding ComponyCompany Act of 1935. A qualifying facility describedde.crlbed In ComCommmlssi{'n.lssi{'n. 825 North Cepitol Street. (a) StoteState regulatory outhauthorityarity ondand !'olEtolE .. WaWashL'lgton.shL'lgton. D.C. 20426204.26 (202)(202)357 357.. nonregulatednonreguloted electric utility waiverswaivers.. paragraph (a) shall not be con.idered 10 8000. Any StateSlate N!gulaloryN!gulatory authority (with be aoan ""electricelectric uUlltyutility company" uAI respectrespecllo 10 any electric utility over whlcbwhlcb defined in aecllonlecllon 2(a)(3) ofoflhe the Public SUPPUMEHTARVSUPPUMEHTARY INFORMATIONINFORMATIOH: Inin the iIit has rratalemakingemaking authority) or UIfliUtOilVIV Holding Company ActAcl of 1935. 15 Fedef3et31 Energy RegulstoryRegulatory nonregulalednonregulated eleclricelectric utilityulillty may. alterarter U.S.C. "bl')I')?Obla)I'). CommCommllsion',ission', Final RRegulations.egulations. IssueIssuedd public nolicenotice In the area .ervedlerved by the (c) Exemption from certain Stote lowlaw February 19. 19)980.80. entitled Regulatior>.! eeleClriclectric utility.uUlily. apply for a welvelverr fromIrom and regulationregulation.. Under Section 2tO of !.hethe PP'.Jtlblicblie UUlity Ihthe application of any of the (1) ArtyAny qualiryingqualifying facilityfacility ahall be Regulatory Policiu AActct of 1918 (45 FR requirement.requirement, of Subpart C (other than exempledmpted (exceptfex cept II provided Inin 122H. february 25. 198019801.1. at 45 FR 1223412234,. I 292.302 thereon. paragraph (C)(2')(e)(2)} ofof this aectlonlecllon from In 12§ 29292 ..302 (a) and (bJ.(h). the :ererence:eference to SialeState law or regulation respecting: (b) CCommiommisssion octionaction. The May 31. 1l S8ZsaZ dhouldilhould be.cbanbe. changedgo!d to fu.'ll; CommisalonCommis.lon wlllsrantwlllarant .uchauch a wavier (I) The ratelrates of electric utilities:ie.: and 30.1932.932. Th!sis revision will accuratelcura telyy only if an applicant under paragraph (a)la) (II) The financiafinanciall and organizational C.3.:yc.3>:y OOl:tl;t :..': e Cccm:nilS~cm:nh s!c;:.·s:-:, 'S i.nL.., !o!o;o;r;t.t. u of !.histhis .ectionsection demonstrate,demonstratel that re8ulationregulation or electric utilitielutilitie,. s!!!::e1!!::e1 !!,!'l... , L~L~ee pp::o!'!J.mh!eJ..m h!e 10 the :'U!:"U! '!. to compliance with any of the (2) A qualUyina:qualifying facility may notnol be Ncon rorto ~~ to !.hth e- ddtoito!!.!! re'.:j.re~u:.tu:.to? .. ,jd bbyy the exempted from StaleState law and regulationregulation requirementlrequirement' of Subpart C I,II not CCon;mon;mi5~:oiS :i ~o n'5 reidaegdalfcfc;:j,.j iimmplementi!13ple menli!13 Implementing Subpart C. neceuarynecel8ary to encourage c08enerationcogeneration eeclieectionon 1330fP1330fPURf';\URi'A." and smallImall power productionproducllon and ia not 131(3) Upon requestrequeat ofeof e Stale re8ulatoryregulatory authority or nonregulalednonregulated electric uUlily.utility. KKen.oen.oe~e ~ f. Plu nl~. otherwi,eotherwise requiredrequi red under aeaectlonctlon 210 of $e(;re!ar/$e¥:J"e!ar/. PURPA. the ComminCommissloion may conlilder a limitation on the exemptionaexemption. specifiapecifled in Ifl Ooc.Doc. <<).<<).111:Il0l111:Il0l fli.dfilM ~. u ..., subparagraph (t).(1). allJlliJJHOJHO COOl:COOl. u~s."U~s.u (4) Upon tequeatrequeat or any perlon. the CommlulonCommi ..lon may determine whether a AD 39 Case: 17-17531, 04/02/2018, ID: 10821327, DktEntry: 13-2, Page 1 of 1

CERTIFICATE OF SERVICE

I hereby certify that on April 2, 2018, I electronically filed the foregoing

with the Clerk of the Court for the United States Court of Appeals for the Ninth

Circuit by using the appellate CM/ECF system.

I certify that all participants in the case are registered CM/ECF users and

that service will be accomplished by the appellate CM/ECF system..

Date: April 2, 2018

/s/ Thomas Melone Thomas Melone

ATTORNEY FOR WINDING CREEK SOLAR LLC