• Termination of Mandatory Power Purchase Obligations under the Public Utility Regulatory Policies Act of 1978
  • April 29, 2010 | Authors: Alan Claus Anderson; Shannon Coleman; William F. Demarest; Marvin T. Griff; James J. Hoecker; Elisabeth R. Myers
  • Law Firms: Husch Blackwell LLP - Kansas City Office ; Husch Blackwell LLP - Washington Office
  • At its monthly open meeting on April 15, 2010, the Federal Energy Regulatory Commission issued two orders terminating certain mandatory power purchase obligations or contracts to purchase electric energy and capacity from qualifying cogeneration and small power production facilities (“QFs”) of the The Detroit Edison Company (“Detroit Edison”) and the Public Service Company of New Hampshire (“PSNH”) pursuant to Section 210(m) of the Public Utility Regulatory Policies Act of 1978 (“PURPA”) and section 292.310 of the Commission’s regulations.

    The Commission granted the companies’ requests to terminate their purchase obligations from QFs with net capacity in excess of 20 MW on a service territory-wide basis and, with respect to PSNH, denied without prejudice its request to terminate its purchase obligation for QFs with a net capacity of 5 MW through 20 MW. These orders provide important further guidance on the circumstances under which the Commission will relieve a public utility of its PURPA purchase obligations.

    1. The Detroit Edison Order
    Detroit Edison sought termination of its obligation to purchase power from “large” QFs, i.e., QFs with net capacity in excess of 20 MW, on a service territory-wide basis for its interconnected system.

    The Commission held that Detroit Edison could terminate its purchase obligation limited to QFs that “individually have a net capacity larger than 20 MW.” According to the Commission, “that threshold is measured on an individual QF-by-QF basis, rather than by aggregating the net capacity of all QFs owned by a single entity.” QF’s net capacity, said the Commission, “is determined by its certification, whether self-certified or Commission certified” for purposes of “applying the rebuttable presumptions” under section 292.309 of its regulations. Detroit Edison Company, 131 FERC ¶ 61,039, at P 17 (2010).

    With respect to Detroit Edison’s announcement that it may exercise its rights “to challenge future generation projects that appear designed to evade the 20 MW capacity limitation,” id. at n.10, the Commission stated that Detroit Edison:

    must do so in a Commission proceeding certifying the facility as a QF, or in the context of a petition for declaratory order seeking a ruling that the self-certified net capacity or the Commission-certified net capacity of a QF is not accurate. Alternatively, Detroit Edison may file a new section 210(m) of PURPA proceeding.

    2. The PSNH Order
    The key issue addressed in the PSNH order is the rebuttable presumption established in Order No. 688 that a “small” QF -- that is, a QF with a capacity at or below 20 MW -- does not have nondiscriminatory access to markets.

    The Commission rejected PSNH’s attempt to rebut the Order No. 6881 presumption applicable to small QFs through a general showing that all QFs 5 MW and larger have access to competitive markets on a nondiscriminatory basis. The Commission reiterated its requirement first announced in Order No. 688 that an electric utility must demonstrate on a facility-specific basis that each small QF has nondiscriminatory access to the market. Public Service Company of New Hampshire, 131 FERC ¶ 61,027, at P 18.

    The Commission also addressed the grandfathering of rights of a QF under 18 C.F.R. § 292.314. The Commission confirmed that a QF that initiates “a state PURPA proceeding that may result in a legally enforceable contract or obligation prior to the applicable electric utility filing its petition for relief . . . will be entitled to have any contract or obligation that may be established by state law grandfathered.” Id. at P 24.