FERC-914 OMB No. 1902-0231
Supporting Statement
FERC-914, Cogeneration and Small Power Production - Tariff Filings
Request for a Three-Year Extension of a Currently Approved Collection
The Federal Energy Regulatory Commission (Commission or FERC) requests that the Office of Management and Budget (OMB) review and extend its approval of FERC-914 “Cogeneration and Small Power Production - Tariff Filings” (OMB No. 1902-0231). 1 Current OMB approval expires on July 31, 2009.
A. Justification
CIRCUMSTANCES THAT MAKE THE COLLECTION OF INFORMATION NECESSARY
Section 205(c) of the Federal Power Act (FPA) (Attachment A) requires that every public utility have all of its jurisdictional rates and tariffs on file with the Commission and make them available for public inspection, within such time and in such form as the Commission may designate. Section 205(d) (Attachment A) of the FPA requires that every public utility must provide notice to the Commission and the public of any changes to its jurisdictional rates and tariffs, file such changes with the Commission, and make them available for public inspection, in such manner as directed by the Commission. In addition, FPA section 206 (Attachment B) requires the Commission, upon complaint or its own motion, to modify existing rates or services that are found to be unjust, unreasonable, unduly discriminatory or preferential. FPA section 207 (Attachment C) requires the Commission upon complaint by a state commission and a finding of insufficient interstate service, to order the rendering of adequate interstate service by public utilities, the rates for which would be filed in accordance with FPA sections 205 and 206.
In Orders Nos. 671 and 671-A2, (Attachment D) the Commission revised its regulations that govern qualifying small power production and cogeneration facilities. Among other things, the Commission eliminated certain exemptions from rate regulation that were previously available to qualifying facilities (QFs). New qualifying facilities may need to make tariff filings if they do not meet the new exemption requirements.
FERC implemented the Congressional mandate of the Energy Policy Act of 2005 (EPAct 2005) to establish criteria for new qualifying cogeneration facilities by: (1) amending the exemptions available to qualifying facilities from the FPA and from PUHCA [resulting in the burden imposed by FERC-914, the subject of this statement]; (2) ensuring that these facilities are using their thermal output in a productive and beneficial manner; that the electrical, thermal, chemical and mechanical output of new qualifying cogeneration facilities is used fundamentally for industrial, commercial, residential or industrial purposes; and there is continuing progress in the development of efficient electric energy generating technology; (3) amending the FERC Form 5563 to reflect the criteria for new qualifying cogeneration facilities; and (4) eliminating ownership limitations for qualifying cogeneration and small power production facilities. The Commission satisfied the statutory mandate and its continuing obligation to review its policies encouraging cogeneration and small power production, energy conservation, efficient use of facilities and resources by electric utilities and equitable rates for energy customers.
HOW, BY WHOM AND FOR WHAT PURPOSE IS THE INFORMATION TO BE USED AND THE CONSEQUENCES OF NOT COLLECTING THE INFORMATION
The information filed under FERC-914 enables the Commission to exercise its wholesale electric rate and electric power transmission oversight and enforcement responsibilities in accordance with the Federal Power Act, the Department of Energy Organization Act and EPAct 2005. It also enables Commission staff and other parties to examine and evaluate the cost element of rates, as well as other financial information and to determine whether and how much of these elements should be included in the utility’s rates.
DESCRIBE ANY CONSIDERATION OF THE USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN AND THE TECHNICAL OR LEGAL OBSTACLES TO REDUCING BURDEN
On September 19, 2008, in Order No. 7144, the Commission revised its regulations to require that all tariffs, tariff revisions and rate change applications for public utilities, natural gas pipelines, oil pipelines and power administrations be filed electronically according to a set of standards developed in conjunction with the North American Energy Standards Board. This rule is part of the Commission’s efforts to comply with the Paperwork Reduction Act, the Government Paperwork Elimination Act , and the E-Government Act of 2002 by developing the capability to file electronically with the Commission via the Internet. Electronic filing reduces physical storage space needs and document processing time, provides for easier tracking of document filing activity; potentially reduces mailing and courier fees; allows concurrent access to the tariff filing by multiple parties as well as the ability to download and print tariff filings; and provides automatic e-mail notification to an applicant of receipt of the filing and whether or not it has been accepted. Beginning April 1, 2010, all tariffs, tariff revisions and rate change applications must be filed electronically. More information is available on the Commission’s web page: http://www.ferc.gov/docs-filing/etariff.asp.
4. DESCRIBE EFFORTS TO IDENTIFY DUPLICATION AND SHOW SPECIFICALLY WHY ANY SIMILAR INFORMATION ALREADY AVAILABLE CANNOT BE USED OR MODIFIED FOR USE FOR THE PURPOSE(S) DESCRIBED IN INSTRUCTION NO. 2.
Commission information requirements are periodically reviewed in conjunction with the OMB renewal process. Staff reviews the Commission's regulations and information requirements and searches for other sources of this information from outside parties. Staff could find no similar sources of information that could be used to replace any of the information collected under FERC-914. This information is not likely to be collected by other federal agencies as the Commission is the only federal entity responsible for the regulation of the nation’s interstate wholesale power sale tariffs.
5. METHODS USED TO MINIMIZE BURDEN IN COLLECTION OF INFORMATION INVOLVING SMALL ENTITIES
As FERC-914 information is collected from both small and large entities, the Commission has put forth significant effort in its design of an eFiling system that will present the least amount of burden. The North American Energy Standards Board assisted greatly in the process of developing the protocols, standards, and data formats needed to provide tariff and related data to enable the Commission to develop a database to track electronic tariff and rate schedules filings. Committees were established including representatives from the wholesale natural gas industry, wholesale electric industry, oil pipelines, intrastate natural gas pipelines, and third party software developers to work with Commission staff to develop applicable standards. Between February 1, 2007 and January 23, 2008, these committees held a total of 16 meetings in various cities over 24 days.
CONSEQUENCE TO FEDERAL PROGRAM IF COLLECTION WERE CONDUCTED LESS FREQUENTLY
Once an initial tariff filing is made and accepted by the Commission, additional filings are required only when a change in the tariff is made. This is not a recurring information collection where filings are made on a cyclical basis.
If the information were not collected, the Commission would be unable to oversee and regulate these tariffs as mandated by the FPA.
7. EXPLAIN ANY SPECIAL CIRCUMSTANCES RELATING TO THE INFORMATION
Presently and up until April 1, 2010, an entity is required to submit FERC-914 in hardcopy. Fourteen copies of the filing are required which exceeds the OMB guidelines in 5 CFR 1320.5(d) (2) (iii). Multiple copies are necessary to distribute to staff in many Commission divisions for simultaneous review and analysis in order to meet regulated review deadlines.
After April 1, 2010, when the Commission’s eTariff filing requirements become effective, paper filings will not be accepted.
8. DESCRIBE EFFORTS TO CONSULT OUTSIDE THE AGENCY: SUMMARIZE PUBLIC COMMENTS AND THE AGENCY’S RESPONSE TO THESE COMMENTS
In accordance with 5 CFR § 1320.8(d), the Commission issued a notice to renew the FERC-914 OMB approval and published it in the Federal Register on March 30, 2009 (Attachment E).5 The Commission did not receive any comments in response to this notice.
9. EXPLAIN ANY PAYMENT OR GIFTS TO RESPONDENTS
There are no respondent payments or gifts required in this proposed information collection.
10. DESCRIBE ANY ASSURANCE OF CONFIDENTIALITY PROVIDED TO RESPONDENTS
The Commission generally does not consider the information filed in FERC-914 to be confidential. However, the filer may request privileged treatment, in accordance with 18 CFR §388.112, for a filing thought to contain information harmful to the competitive posture of the applicant if released to the general public.
11. PROVIDE ADDITIONAL JUSTIFICATION FOR ANY QUESTIONS OF A SENSITIVE NATURE
There are no questions of a sensitive nature associated with the reporting requirements in this information collection.
12. ESTIMATED BURDEN OF COLLECTION OF INFORMATION
FERC Data Collection -FERC-914 |
Number of Respondents Annually (1) |
Number of Responses Per Respondent (2) |
Average Burden Hours Per Response (3) |
Total Annual Burden Hours (1)x(2)x(3) |
FPA Section 205 filings |
100 |
1 |
183 |
18,300 |
Electric quarterly reports (initial) |
100
|
1
|
230
|
23,000
|
Electric quarterly reports (later) |
100 |
3 |
6 |
1,800 |
Change of status |
100 |
1 |
3 |
300 |
Total |
|
|
|
43,400 |
ESTIMATE OF TOTAL ANNUAL COST OF BURDEN TO
RESPONDENTS
Total Respondent Burden Hours |
|
Number of Hours per Staff Year |
|
Cost per Staff Employee6 |
|
Total Annualized Cost |
43,400 |
÷ |
2,080 |
x |
$128,297 |
= |
$2,676,966.10 |
The estimated total annual cost to respondents is $2,676,966.10 [43,400 hours divided by 2,080 hours7 per year, times $128,2978 equals $2,676,966.10]. The estimated burden covers the qualifying facilities required to file electric quarterly reports, change of status filings, and tariff filings to comply with section 205 of the Federal Power Act (FPA).
14. ESTIMATED ANNUALIZED COST TO FEDERAL
GOVERNMENT:
(a) Information Analysis (1.6 full-time employees) $ 205,275.20
(b) Forms Clearance review $ 1,480.00
Total for One Year of Operation $ 206,755.20
This estimated cost to the Federal Government is based on salaries for professional and clerical support, as well as direct and indirect overhead costs. Direct costs include all costs directly attributable to providing this information, such as administrative costs and the cost for information technology. Indirect or overhead costs are costs incurred by an organization in support of its mission.
15. REASONS FOR CHANGES IN BURDEN INCLUDING THE NEED FOR ANY INCREASE
There is no change in burden from the last date of submittal.
TIME SCHEDULE FOR PUBLICATION OF DATA
Copies of the filings are made available to the public within two days of submission to FERC via the Commission's web site. There are no other publications or tabulations of the information.
17. DISPLAY OF EXPIRATION DATE
It is not appropriate to display the expiration date for OMB approval of the information collected on FERC-914 because the information is not collected on a standard, preprinted form that would avail itself to this display. Rather, public utilities and licensees prepare and submit filings that reflect the unique or specific circumstances related to rates and services involved in the filing. In addition, the information contains a mixture of narrative descriptions and empirical support that varies depending on the nature of the services to be provided.
EXCEPTIONS TO THE CERTIFICATION STATEMENT
The Commission does not use statistical survey methodology for this information collection.
B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not Applicable. Statistical methods are not employed for this information collection.
ATTACHMENT A
FPA Sec. 205. Rates and Charges; Schedules; Suspension of New Rates
[5248]
(c) Under such rules and regulations as the Commission
may prescribe, every public utility shall file with the Commission,
within such time and in such form as the Commission may designate,
and shall keep open in convenient form and place for public
inspection schedules showing all rates and charges for any
transmission or sale subject to the jurisdiction of the Commission,
and the classification, practices, and regulations affecting such
rates and charges, together with all contracts which in any manner
affect or relate to such rates, charges, classifications, and
services.
(d) Unless the Commission otherwise orders, no change
shall be made by any public utility in any such rates, charges,
classification, or service, or in any rule, regulation, or contract
relating thereto, except after sixty days' notice to the Commission
and to the public. Such notice shall be given by filing with the
Commission and keeping open for public inspection new schedules
stating plainly the change or changes to be made in the schedule or
schedules then in force and the time when the change or changes will
go into effect. The Commission, for good cause shown, may allow
changes to take effect without requiring the sixty days' notice
herein provided for by an order specifying the changes so to be made
and the time when they shall take effect and the manner in which they
shall be filed and published.
ATTACHMENT B
FPA Sec. 206. Fixing Rates and Charges; Determination of Cost of Production or Transportation
(a)
[5250]
Whenever the Commission, after a hearing held upon its own
motion or upon complaint, shall find that any rate, charges, or
classification, demanded, observed, charged, or collected by any
public utility for any transmission or sale subject to the
jurisdiction of the Commission, or that any rule, regulation,
practice, or contract affecting such rate, charge, or classification
is unjust, unreasonable, unduly discriminatory or preferential, the
Commission shall determine the just and reasonable rate, charge,
classification, rule, regulation, practice, or contract to be
thereafter observed and in force, and shall fix the same by order.
Any complaint or motion of the Commission to initiate a proceeding
under this section shall state the change or changes to be made in
the rate, charge, classification, rule, regulation, practice, or
contract then in force, and the reasons for any proposed change or
changes therein. If, after review of any motion or complaint and
answer, the Commission shall decide to hold a hearing, it shall fix
by order the time and place of such hearing and shall specify the
issues to be adjudicated.
(b) Whenever the Commission institutes a proceeding
under this section, the Commission shall establish a refund effective
date. In the case of a proceeding instituted on complaint, the refund
effective date shall not be earlier than the date of the filing of
such complaint nor later than 5 months after the filing of such
complaint. In the case of a proceeding instituted by the Commission
on its own motion, the refund effective date shall not be earlier
than the date of the publication by the Commission of notice of its
intention to initiate such proceeding nor later than 5 months after
the publication date. Upon institution of a proceeding under this
section, the Commission shall give to the decision of such proceeding
the same preference as provided under section 205 of this Act and
otherwise act as speedily as possible. If no final decision is
rendered by the conclusion of the 180-day period commencing upon
initiation of a proceeding pursuant to this section, the Commission
shall state the reasons why it has failed to do so and shall state
its best estimate as to when it reasonably expects to make such
decision. In any proceeding under this section, the burden of proof
to show that any rate, charge, classification, rule, regulation,
practice, or contract is unjust, unreasonable, unduly discriminatory,
or preferential shall be upon the Commission or the complainant. At
the conclusion of any proceeding under this section, the Commission
may order refunds of any amounts paid, for the period subsequent to
the refund effective date through a date fifteen months after such
refund effective date, in excess of those which would have been paid
under the just and reasonable rate, charge, classification, rule,
regulation, practice, or contract which the Commission orders to be
thereafter observed and in force: Provided, That if the
proceeding is not concluded within fifteen months after the refund
effective date and if the Commission determines at the conclusion of
the proceeding that the proceeding was not resolved within the
fifteen-month period primarily because of dilatory behavior by the
public utility, the Commission may order refunds of any or all
amounts paid for the period subsequent to the refund effective date
and prior to the conclusion of the proceeding. The refunds shall be
made, with interest, to those persons who have paid those rates or
charges which are the subject of the proceeding.
(c)
[5251]
Notwithstanding subsection (b), in a proceeding commenced under
this section involving two or more electric utility companies of a
registered holding company, refunds which might otherwise be payable
under subsection (b) shall not be ordered to the extent that such
refunds would result from any portion of a Commission order that (1)
requires a decrease in system production or transmission costs to be
paid by one or more of such electric companies; and (2) is based upon
a determination that the amount of such decrease should be paid
through an increase in the costs to be paid by other electric utility
companies of such registered holding company: Provided, That
refunds, in whole or in part, may be ordered by the Commission if it
determines that the registered holding company would not experience
any reduction in revenues which results from an inability of an
electric utility company of the holding company to recover such
increase in costs for the period between the refund effective date
and the effective date of the Commission's order. For purposes of
this subsection, the terms “electric utility companies”
and “registered holding company” shall have the same
meanings as provided in the Public Utility Holding Company Act of
1935, as amended.
(d) The Commission upon its own motion, or upon the
request of any State commission whenever it can do so without
prejudice to the efficient and proper conduct of its affairs, may
investigate and determine the cost of the production or transmission
of electric energy by means of facilities under the jurisdiction of
the Commission in cases where the Commission has no authority to
establish a rate governing the sale of such energy.
(e)
(1) In this subsection:
(A)
[5252]
The term ‘short-term sale’ means an agreement for
the sale of electric energy at wholesale in interstate commerce that
is for a period of 31 days or less (excluding monthly contracts
subject to automatic renewal).
(B) The term ‘applicable Commission rule’
means a Commission rule applicable to sales at wholesale by public
utilities that the Commission determines after notice and comment
should also be applicable to entities subject to this subsection.
(2) If an entity described in section 201(f) voluntarily
makes a short-term sale of electric energy through an organized
market in which the rates for the sale are established by
Commission-approved tariff (rather than by contract) and the sale
violates the terms of the tariff or applicable Commission rules in
effect at the time of the sale, the entity shall be subject to the
refund authority of the Commission under this section with respect to
the violation.
(3) This section shall not apply to —
(A) any entity that sells in total (including affiliates
of the entity) less than 8,000,000 megawatt hours of electricity per
year; or
(B) an electric cooperative.
(4)
(A) The Commission shall have refund authority under paragraph (2) with respect to a voluntary short term sale of electric energy by the Bonneville Power Administration only if the sale is at an unjust and unreasonable rate.
(B) The Commission may order a refund under subparagraph
(A) only for short-term sales made by the Bonneville Power
Administration at rates that are higher than the highest just and
reasonable rate charged by any other entity for a short-term sale of
electric energy in the same geographic market for the same, or most
nearly comparable, period as the sale by the Bonneville Power
Administration.
(C) In the case of any Federal power marketing agency or
the Tennessee Valley Authority, the Commission shall not assert or
exercise any regulatory authority or power under paragraph (2) other
than the ordering of refunds to achieve a just and reasonable rate.
ATTACHMENT C
FPA Sec. 207. Furnishing of Adequate Service
[5253]
Whenever
the Commission, upon complaint of a State commission, after notice to
each State commission and public utility affected and after
opportunity for hearing, shall find that any interstate service of
any public utility is inadequate or insufficient, the Commission
shall determine the proper, adequate, or sufficient service to be
furnished, and shall fix the same by its order, rule, or regulation:
Provided, That the Commission shall have no authority to
compel the enlargement of generating facilities for such purposes.
nor to compel the public utility to sell or exchange energy when to
do so would impair its ability to render adequate service to its
customers.
ATTACHMENT D
Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order No. 671, February 15, 2006, Docket No. RM05-36-000, 18 CFR 131, 18 CFR 292, 71 FR 7852
[30,077]
71 FR 7852 (February 15, 2006)
18
C.F.R. Parts 131 and 292
[Docket
No. RM05-36-000; Order No. 671]
Revised
Regulations Governing Small Power Production and Cogeneration
Facilities
(Issued February 2, 2006)
AGENCY:
Federal Energy Regulatory Commission.
ACTION:
Final Rule.
SUMMARY:
Pursuant to Section 1253 of the Energy Policy Act of 2005 (EPAct
2005) and Section 210 of the Public Utility Regulatory Policies Act
of 1978 (PURPA), the Federal Energy Regulatory Commission
(Commission) revises 18 C.F.R. Parts 131 and 292 to implement amended regulations
governing qualifying cogeneration and small power production
facilities.
EFFECTIVE
DATE: The rule will become effective March 17, 2006.
FOR
FURTHER INFORMATION CONTACT: Paul Singh (Technical Information),
Office of Markets, Tariffs and Rates, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, D.C. 20426, (202)
502-8576.
Samuel Higginbottom (Legal Information), Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington, D.C. 20426, (202) 502-8561.
Eric D. Winterbauer (Legal Information), Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington, D.C. 20426, (202) 502-8329.
SUPPLEMENTARY INFORMATION:
I. Introduction
1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct
2005) 1 was signed into law. Pursuant to Section
210 of the Public Utility Regulatory Policies Act of 1978 (PURPA), as
modified by Section 1253 of EPAct 2005, 2 the
Federal Energy Regulatory Commission (Commission) hereby issues a
rule that: (1) ensures that new qualifying cogeneration facilities
are using their thermal output in a productive and beneficial manner;
that the electrical, thermal, chemical and mechanical output of new
qualifying cogeneration facilities is used fundamentally for
industrial, commercial, residential or institutional purposes; and
that there is continuing progress in the development of efficient
electric energy generating technology; (2) amends Form 556 3
to reflect the criteria for new qualifying cogeneration facilities;
(3) eliminates ownership limitations for qualifying cogeneration and
small power production facilities; and (4) amends the exemptions
available to qualifying facilities (QFs) from the requirements of the
Federal Power Act (FPA) 4 and the Public Utility
Holding Company Act of 1935 (PUHCA). 5
2. As discussed below, on October 11, 2005, the Commission
issued a notice of proposed rulemaking (NOPR)6 in
which it proposed certain modifications and revisions to its
regulations governing small power production and cogeneration
facilities. Numerous comments were filed by a variety of entities.
3. In this Final Rule, the Commission adopts some of the
proposals in the NOPR as well as many of the commenters'
recommendations. Specifically, the Final Rule:
(A) Adopts the NOPR's proposal to require applicants to
demonstrate that the thermal output of a new cogeneration facility is
used in a productive and beneficial manner;
(B) Adopts a case-by-case approach for determining the
“fundamental” use of a facility's electrical, thermal,
chemical and mechanical output;
[30,078]
(C) Retains the existing operating and efficiency standard for
new oil and gas cogeneration facilities;
(D) Retains the option for new cogeneration facilities to
self-certify as QFs;
(E) Eliminates certain exemptions from regulation that were
previously granted to QFs;
(F) Eliminates the ownership limitations for all QFs;
(G) Retains the ownership disclosure requirement in the
Commission's Form 556; and
(H) Clarifies that there is a rebuttable presumption that an
existing QF does not become a “new cogeneration facility”
when it files an application for recertification reflecting either a
change in ownership or a change in operation.
4. This Final Rule will be effective on March 17, 2006.
II.
Notice of Proposed Rulemaking
5. On October 18, 2005, the NOPR was published in the Federal
Register. 7 As discussed in more detail below,
the Commission proposed to revise its regulations governing small
power production and cogeneration pursuant to Section 1253 of EPAct
and Section 210 of PURPA.
III.
Discussion
A.
“Productive and Beneficial”
1.
Background
6. Section 210(n) of PURPA requires the Commission to issue a
rule revising the criteria for new cogeneration facilities to ensure
that those facilities meet the requirements of Section 210(n)(1)(A)
of PURPA, including that the thermal output of a new qualifying
cogeneration facility be used in a “productive and beneficial
manner.” We explained in the NOPR that the Commission has
traditionally relied on a presumptively useful standard that was
irrebuttable in determining whether a cogeneration's facility's
thermal output is useful. To implement PURPA's new “productive
and beneficial” requirement for a new qualifying cogeneration
facility's thermal output, the Commission proposed to consider the
presumption of usefulness to be rebuttable rather than irrebuttable.
The Commission also proposed to consider the uses to which the
product produced by the thermal output is put, including such factors
as whether the product is needed and whether there is a market, in
determining whether a new qualifying cogeneration facility's thermal
output is “productive and beneficial.”
2.
Comments
7. Most commenters support the Commission's proposal to
eliminate the “presumption of usefulness” standard in
determining whether the thermal energy output of a new cogeneration
facility is used in a “productive and beneficial” manner.
The California Electricity Oversight Board (CEOB) notes that the
irrebuttable presumption has resulted in default granting of
qualifying status to applicants even where there was no real need for
the thermal output. Delta Power Company, et al., support the
elimination of the irrebuttable presumption of usefulness. They
suggest, moreover, that the Commission apply a rebuttable presumption
that both a thermal use is “genuine and legitimate” and
“productive and beneficial” if a facility demonstrates
that its thermal output would be supplied to the host from other
means; a challenger would have the opportunity to prove otherwise.
Primary Energy Ventures LLC (Primary Energy) and U.S. Combined Heat
and Power Association (USCHPA) support a case-by-case review of the
“productive and beneficial” standard. Both commenters
believe a QF applicant should support the application with adequate
reference to the business and economic circumstances of the
individual facility. North Carolina Eastern Municipal Power Agency
(NCEMPA) advocates that the Commission continue to apply the
“presumptively useful” standard to small QFs because the
alleged abuses have occurred in the context of large “PURPA
machines.”
8. Several Commenters argued that the irrebuttable presumption
of usefulness should remain in effect in some situations. American
Forest & Paper Association (American Forest & Paper)
recommends the Commission not abandon an irrebuttable presumption of
usefulness for many industrial applications, such as
[30,079]
papermaking. American Forest & Paper argues that a rebuttable
presumption of usefulness could open up applicants who are engaged in
traditional manufacturing processes to the threat of litigation over
the usefulness of their enterprise by cogeneration opponents.
American Forest & Paper believes that the presumptively useful
standard served a legitimate purpose in encouraging the development
of qualifying facilities by creating certainty, limiting wasteful
litigation and expediting the review process. A properly revised
standard, which provided assurance to developers and the utility
industry that certain, well-recognized industrial applications would
not be mired in litigation and controversy, could continue to play an
important role in encouraging the development of cogeneration.
Certain well-recognized industrial processes, such as papermaking,
chemical production, petroleum refining and others, should continue
to enjoy a very strong, if not irrebuttable, presumption of
usefulness.
9. Cinergy Solutions, Inc. (Cinergy) argues that the
presumption of usefulness for common industrial or commercial
applications of thermal energy should be rebuttable only when a new
thermal host is being developed in conjunction with the development
of the cogeneration facility and the presumption should remain
irrebuttable when an economically self-sustaining thermal host
already exists at the site. Cinergy states that the presumption of
usefulness, whether rebuttable or irrebuttable, should depend on the
circumstances of the thermal host. Cinergy advocates that the
presumption of usefulness should be irrebuttable where a thermal host
is in existence prior to the development of a cogeneration facility.
Finally, Cinergy notes that a change to a rebuttable presumption
creates unnecessary uncertainty and could substantially reduce usage
and the effectiveness of the self-certification process.
10. Cogeneration Coalition of Washington and the Nevada
Independent Energy Coalition (collectively, QF Parties) support
identifying current uses of thermal output that are “productive
and beneficial” as that would provide certainty to the
cogeneration owner and developer. QF Parties propose specific uses to
be identified in the regulation that could include, but not be
limited to, paper making, the drying of products such as wallboard,
steam used in enhanced oil recovery, and refining and chemical
production.
11. Several commenters contend that the thermal use standard
needs to be clear and unambiguous which would provide QFs regulatory
certainty. The Public Service Electric and Gas Company jointly with
the Texas-New Mexico Power Company (PSNM and TNMP) believe the
Commission should not rely on “rebuttable” or
“irrebuttable presumptions, but should set out unambiguous
standards that QF applicants are required to satisfy as a part of
their application so that resort to a presumption is unnecessary.
Clear, objective qualification standards are necessary in order for
QF applicants, their investors, utilities, and the Commission itself
to be able to intelligently evaluate whether the statutory
“productive and beneficial” requirement has been met.
12. Cogentrix Energy, Inc. and Goldman Sachs Group, Inc.
(collectively, Independent Sellers), state that the Commission has
not proposed any ascertainable standards to assist cogenerators in
determining whether they will meet the new requirements that will be
set forth in 18 C.F.R. §292.205(d). They point out that the
Commission's existing standard is an ascertainable one in that if the
use of the thermal output constitutes a common industrial or
commercial application then it is presumptively useful and no further
analysis is required. The presumptively useful standard provides
regulatory certainty that is critical to entities that invest in
cogeneration facilities. Cogentrix argues that a rebuttable
presumption of usefulness creates uncertainty that would harm
investment in cogeneration.
13. Indeck Energy Services, Inc. (Indeck) supports a rebuttable
presumption of usefulness, but cautions that the proposed new
regulations would make it difficult, if not infeasible, to obtain
financing or build new cogeneration facilities. Indeck claims a
case-by-case approach injects uncertainty at both the construction
phase and when the QF attempts to make facility changes. Indeck
advocates for a bright line test or at least clear standards that
remove all ambiguity concerning what constitutes acceptable uses of
thermal output.
14. Some commenters believe that the Commission's rebuttable
presumption of usefulness proposal is not enough. Edison Electric
Institute (EEI) states that making the previous presumption that any
common use of thermal energy is useful rebuttable rather than
irrebuttable does not satisfy the new “productive and
beneficial” test. EEI argues that the Commission should instead
require QF applicants to provide evidence, including economic
studies, financial projections, contracts, and other data to indicate
that the thermal use of a facility will be used in a “productive
and beneficial” manner. Many commenters endorsed EEI's
comments.
15. In reply comments, EEI opposes those comments that suggest
the Commission should retain its “presumptively useful”
policy without change as the means of demonstrating that the thermal
energy output will be used in a “productive and beneficial”
manner. EEI argues that just because the thermal output is used in a
“common” or “useful” way does not ensure that
the thermal energy use is “productive and beneficial,”
which EEI equates with “economic.” EEI reiterates its
belief that the only way for the Commission to ensure that the
“productive and beneficial” requirement is met is for the
Commission to promulgate in its regulations a list of the financial
data and studies that will be required to satisfy the determination
mandated by the statute.
16. Several commenters disagree with EEI's proposal. Delta
Power, et al., contend that EEI's proposal to require economic
analyses distorts the purpose of Section 210 of PURPA by requiring
economic analyses. Process Gas Consumers Group Electricity Committee
argues that EEI's proposal would discourage cogeneration by
increasing the costs and risks of the regulatory process.
3.
Commission Determination
17. To implement Section 210(n)(1)(A)(i) of PURPA, which
requires “that the thermal output of the cogeneration facility
is used in a productive and beneficial manner,” the Commission
will incorporate the statutory standard into its regulations. The
Final Rule accordingly will require an applicant to demonstrate that
a new cogeneration facility's thermal output is used in a productive
and beneficial manner. As we said in the NOPR, the Commission prior
to the enactment of EPAct 2005, in deciding whether to grant
certification, traditionally relied on a “presumptively useful”
standard that was essentially irrebuttable in determining whether a
QF's thermal output is “useful.” The Commission's finds
that “productive and beneficial” is nearly synonymous
with “useful,” but was intended to require the Commission
to take a closer look at the use of the thermal output of a new
cogeneration facility; the Commission's examination of the use of
thermal output of a new cogeneration facility is intended to weed out
those uses that are “shams.” Thus, the Commission, as a
starting point in its analysis of the use of a new cogeneration
facility's thermal output, will look to see if the new cogeneration's
thermal output is “presumptively useful.” As we stated in
the NOPR, however, the Commission will no longer consider this
presumption to be “irrebuttable.” The Commission will
examine the use of a cogeneration facility's thermal output to assure
that the use is not a “sham,” and that the thermal output
is used in a “productive and beneficial manner.” In
determining whether the thermal output is used in a “productive
and beneficial manner,” the Commission will consider factors
such as whether the product produced by the thermal energy is needed
and whether there is a market for the product. Consistent with the
arguments of Cinergy, we find that where a thermal host existed prior
to the development of a cogeneration facility whose thermal output
will supplant the thermal source currently in use by that thermal
host, it is appropriate to presume that the thermal output of such
facility is productive and beneficial and to apply a very high hurdle
to overcome the presumption. We foresee only rare circumstances in
which the output of a facility would not be productive and useful if
it is replacing a previously used thermal source.
18. Form 556 is being amended to include a new Section in which
a new cogeneration QF applicant must show “the thermal energy
output of the cogeneration facility is used in a productive and
beneficial manner.” 8 The initial
[30,081]
burden of demonstrating compliance with this new standard is on the
new cogeneration QF applicant.
19. We decline to institute a bright line test or specific
standards concerning what constitutes acceptable uses of thermal
output. The type of information that a new cogeneration QF applicant
must provide will vary depending on the thermal output of the
cogeneration facility and on the circumstances of the thermal host.
The level of support needed may vary depending on the product
produced by the thermal energy, the intended use of that product in
the market and the level of need for the particular product. As we
stated in the NOPR, in some geographic areas, thermal energy used to
produce distilled water can be used in a productive and beneficial
manner, but in other geographic areas it may not. Therefore, any
application for QF status for new cogeneration facilities must
provide enough detailed information, as prescribed in the updated
Form 556,9 for the Commission to determine
compliance with the new “productive and beneficial”
standard.
20. EEI's proposal to require economic or financial studies to
show compliance with the “productive and beneficial”
standard is misplaced. Our interpretation of the meaning of
“productive and beneficial” in the context of
cogeneration is that there is a real, genuine need for the thermal
output of the facility. Relying solely on an economic analysis of the
type suggested by EEI, however, may be too narrow and may deny
certification to cogeneration facilities which produce thermal output
that “is used in a productive and beneficial manner.”
Adopting a case-by-case approach that permits an applicant the
opportunity to demonstrate, whether through narrative description or
economic analysis, that its QF will have a “productive and
beneficial” thermal output will provide a sufficient means to
detect situations where the thermal output's application is not
productive and beneficial. An applicant may receive a determination
that its thermal output is being used in a productive and beneficial
manner if it can show through a narrative description of the
facility's operations that the use of the facility's thermal output
is for a common industrial or commercial application, and that the
proposed use is genuine, and not merely to allow the applicant to
achieve QF status, i.e., a “sham”; a detailed
economic analysis will not be necessary in most cases. However, the
Commission reserves the right to require additional support when
appropriate.
21. Many commenters request the Commission to identify current
uses of thermal energy that would satisfy the new “productive
and beneficial” standard. We decline to do so because a thermal
use may be “productive and beneficial” in some
circumstances and not “productive and beneficial” in
others ( e.g., the production of distilled water).
22. Several commenters call for the Commission to institute a
clear and unambiguous standard which they claim would provide needed
regulatory certainty. While the Commission recognizes the value of
regulatory certainty, we believe that the case-by-case process
proposed in the NOPR and adopted here will provide a better means to
determine what satisfies the “productive and beneficial”
standard of Section 210(n) of PURPA.
23. We note that the Commission does not intend to change
current standards related to the thermal output for existing
cogeneration facilities; as discussed later in the Final Rule, the
standards for new cogeneration facilities adopted herein will apply
to new cogeneration facilities and not existing cogeneration
facilities.
24. In the NOPR, we stated that we would consider the
previously irrebuttable presumption of usefulness to be a rebuttable
presumption. Some of the comments suggest a misunderstanding of the
meaning of the term “rebuttable presumption.” Many in the
QF industry fear, in particular, that new cogeneration facilities,
once they have been certified as QFs, will be subject to
post-certification challenges to their QF status alleging that the
thermal output of a facility has become no longer “productive
and beneficial.”
25. We address here two circumstances: certification of new
cogeneration facilities; and post-certification challenges after the
new cogeneration facilities have been certified. We clarify that, in
proceedings for Commission certification of new cogeneration
facilities, if certain uses of thermal output were previously
considered “presumptively useful” under the prior
regulations and case precedent, they will be considered “productive
and beneficial” uses, but those who oppose certification will
have the opportunity to demonstrate that the thermal output is not,
in fact, being used in a productive and beneficial manner. However,
once the Commission has granted a new cogeneration facility
certification based on the new standard adopted herein, the issue of
that particular QF's use of its thermal output is determined, even if
the economics of a particular use may change over time. Unless there
are changes in the way the QF operates, such that it does not operate
as described in the application for certification, and thus no longer
meets the statutory criteria, a QF may continue to rely on the
Commission's certification of its facility even if the economics of
the particular use have changed over time. Thus, after a QF has been
certified by the Commission, absent a change in the operations of the
facility, a purchaser of the electrical output of a new cogeneration
facility may not return to the Commission to allege that the thermal
output of a facility is not “productive and beneficial.”
26. Finally, in applying our new regulation implementing
Section 210(n)(1)(A)(i) of PURPA, §292.203(d)(1) of our
regulations, we will apply a rebuttable presumption that new
cogeneration facilities that are 5 MW or smaller satisfy the
requirement that the thermal energy output of the new cogeneration
facility is used in a productive and beneficial manner. We will apply
this presumption because it is our experience that such small
cogeneration facilities are not generally designed with a “sham”
use of thermal output whose only purpose is to achieve QF status.
Rather, such smaller cogeneration facilities are designed to meet the
thermal needs of the facility's steam host and any electrical output
available for sale is a byproduct of the thermal process.
B.
“Fundamentally” Requirement
1.
Background
27. Section 210(n)(1)(A)(ii) of PURPA requires the Commission
to revise §292.205 of its regulations to ensure the electrical,
thermal, and chemical output of a new cogeneration facility is used
fundamentally for industrial, commercial, or institutional purposes
and is not intended fundamentally for sale to an electric utility,
taking into account technological, efficiency, economic, and variable
thermal energy requirements, as well as state laws applicable to
sales of electric energy from a qualifying facility to its host
facility. The NOPR proposed to incorporate the language of Section
210(n)(1)(A)(ii) of PURPA as §292.205(d)(ii) of the Commission's
regulations, and to apply this language on a case-by-case basis to
determine whether a new cogeneration facility can be considered a
qualifying cogeneration facility. In addition, the Commission
proposed adding the term “mechanical” output to the
statutory criteria, because this has traditionally been a part of the
Commission's analysis of cogeneration output, and is consistent with
the statutory language.
28. As described in the NOPR, applications for certification
under new Section 210(n) of PURPA, and under new §292.205(d)(ii)
of our regulations, would be required to provide a detailed
explanation of how the cogeneration facility meets the requirements
of those sections. The NOPR requested comments on whether we should
adopt this general case-by-case approach for determining the
“fundamental” use of a facility's output, or whether we
should adopt a specific standard, e.g., requiring some
specified percentage of the total energy output to be used for
industrial, commercial, or institutional purposes, rather than for
sale to electric utilities.
2.
Comments
29. Many commenters favor a case-by-case evaluation of
compliance to the new “fundamentally” requirement, and
argue: (1) that the different operating characteristics of QFs and
cogenerators render the use of a specific standard unworkable; (2)
that the Congressional language in the new Section 210(n)(1)(A)(ii)
of PURPA to “[take] into account technological, efficiency,
economic, and variable thermal energy requirements, as well as State
laws applicable to sales of electric
[30,083]
energy from a qualifying facility to its host facility” clearly
contemplates a case-by-case evaluation; (3) that any “bright-line”
test will, by its nature, be prone to becoming outdated; (4) that the
Commission does not currently have sufficient experience with the new
“fundamentally” requirement to develop specific standards
(although it may in the future); and (5) that the standards proposed
by the utilities generally seem to be designed to discourage
cogeneration. Some of these commenters also argue that the Final Rule
should provide additional detail on how the case-specific
determination will be made, or that the Final Rule should include
specific “safe harbors” that will decrease the risk and
uncertainty associated with planning and constructing a cogeneration
facility.
30. Many other commenters favor a specific, numerical standard,
arguing: (1) that a case-by-case evaluation will necessarily lead to
large amounts of uncertainty and litigation, both for new
cogeneration applicants and for utilities; (2) that Congress required
the Commission to act through rulemaking to adopt new qualification
standards in order to provide transparent criteria by which both new
cogeneration QF applicants and utilities can know in advance the
requirements of the statute and be assured that these requirements
are being consistently interpreted and applied; and (3) that Congress
specifically required revision to 18 C.F.R. §292.205, which contains very
specific mathematical formulae and numerical standards, implying
their desire for some sort of objective standard.
31. Many of the same commenters who advocate a specific,
numerical standard for the total energy output also argue that the
operating standard should be significantly increased from the current
five percent to ensure that any proposed new cogenerator is fully
integrated with its host and that the output of the facility complies
with the new “fundamentally” requirement. In particular,
EEI and other utilities advocate increasing the operating standard to
20 percent, and Southern California Edison Company (SoCal Edison)
advocates an increase to 60 percent. Some of these commenters cite
claims made in public by cogeneration advocates as evidence that such
significant increases in operating standards are achievable and
appropriate. Others argue that an increase in the operating standard
is not necessary to implement the “fundamentally”
requirements. Some argue that the cogeneration advocates' public
claims are not a sound basis for establishing a standard, and that,
in any case, the utilities are misapplying these public claims. They
point out that, since the Commission considers only half the thermal
energy output in its calculations, that such comparisons between
operating standards are not appropriate. Others argue that Congress
could have required such an increase of the operating standard in the
text of EPAct 2005, but specifically chose not to do so.
32. EEI and others point out that some commenters advocate
taking essentially no action whatsoever in response to new Section
210(n)(1)(A)(ii) of PURPA, and argue that this cannot be the intent
of Congress. Instead, they argue, the structure of the language in
the statute suggests that the entire output of a cogeneration
facility is to be aggregated, and that by calculating the percentage
of the facility's output used for industrial, commercial or
institutional purposes, the Commission can determine whether the new
“fundamentally for” test has been met. In particular, EEI
recommends a two-part test: First, a minimum threshold of 67 percent
of the cogenerator's total energy output, over the course of 12
months; and second, if the facility will generate electricity on a
continuous basis, the cogenerator should also demonstrate that the
facility has not been “oversized.” Others argue that it
has not been shown how a 67 percent “total energy output
operating standard” follows from the “fundamental”
use requirement, and that such a restrictive standard may eliminate
certain applications that could otherwise meet the fundamental use
criteria through other means. EEI responds by stating that the
Commission could establish a case-by-case waiver process for unique
technologies and industrial processes, where the applicant would have
the opportunity to demonstrate that such a waiver is warranted. EEI
also states that the notion of safe harbors is compatible with its
recommendations, so long as such safe harbors are not absolute.
33. Other types of numeric tests are also advocated by various
commenters. FICA recommends that any cogeneration facility,
regardless of fuel use, owned or
[30,084]
operated by and appurtenant to an industrial mining or manufacturing
operation, where at least 25 percent of the electric energy or 25
percent of the thermal energy is consumed in such industrial
operation, is in compliance with the “fundamentally”
requirement. Cinergy proposes that, if the Commission decides to
establish a numerical standard as urged by EEI and others, the
standard be set at 25 percent.
34. Entergy argues that, in addition to demonstrating
compliance with its proposed 67 percent standard, the Commission
should require that cogeneration applicants, at a minimum, submit the
following technical data as part of the certification process: (1)
average annual hourly useful electrical output in Btu/hr; (2) average
annual hourly useful thermal output in Btu/hr; (3) average annual
hourly useful mechanical output in Btu/hr; and (4) utilization of
thermal, electrical and mechanical output along with the steam,
electrical and mechanical usage diagrams for the facility. This data,
Entergy argues, should be accompanied by an affidavit of a senior
officer, attesting to the accuracy of the data.
35. As discussed in more detail below, some commenters urge the
Commission to consider that it may often be legitimate for a
cogeneration plant to have considerably more electric generation
capacity than is needed for consumption by the thermal host, and the
existence of such excess generation capacity does not indicate that
such output is “intended” fundamentally for sale to an
electric utility. Some commenters argue that EPAct 2005 and PURPA
clearly recognize that QF facilities will often produce a steady
stream of electricity for sale to third parties, as evidenced by the
must-take and competitive market opportunities that Congress has
required be available to QF's.
36. Entergy suggests that, as an alternative to the traditional
certification of QF facilities on an “all or nothing”
basis, the Commission should consider certifying as a QF only the
portion of a new cogeneration facility that the applicant is able to
demonstrate will meet the revised criteria for new qualifying
facilities. Entergy suggests that only this portion of a QF's total
capacity should be eligible for the benefits provided by PURPA,
including the put rights traditionally afforded to QFs. Under
Entergy's proposal, a generator selling any excess capacity above
that capacity which meets the proposed “fundamentally”
criteria for new qualifying facilities would have to be sold in the
market like any other generator. Entergy believes this would
encourage the sizing of QFs appropriately to the needs of the host,
in the manner that PURPA intended.
37. Several commenters indicate that they agree with the
Commission's statement in the NOPR that Congress intended in EPAct
2005 to discourage so-called PURPA machines, but go on to argue that
PURPA machines came to exist as a direct result of specific avoided
cost policies by certain states, and by the inability of independent
power producers to interconnect to the grid without obtaining QF
status. This Commission and state regulatory authorities have enacted
policies such that conditions are now different, they argue, and thus
significant changes to the Commission's regulations are not
necessary. Others agree with the Commission's statement in the NOPR,
but argue that the Commission must be precise in crafting its
regulatory language so that QFs which bear absolutely no resemblance
to PURPA machines are not inadvertently captured by the new rules.
38. Cinergy argues that no quantitative requirements for the
total energy output that must be supplied to a thermal host should be
established for cogeneration facilities where power from a facility
will be sold at avoided costs rates that reflect market forces.
39. Delta Power, et al., argue that the application of
the new requirements should focus on whether a facility is built to
supply a thermal product that would be generated or procured from
another fuel-consuming source in the absence of cogeneration, and
that facilities that meet this standard should be presumed to have
satisfied the new requirements unless a challenger demonstrates
otherwise.
40. USCHPA argues that no detailed analysis or explanation of
the proposed outputs of the facility should be required unless
utility sales on an ongoing basis are proposed. It argues that where
the electricity output from a facility is less than the electricity
required at the site of the facility, and there may be few or no
occasions
[30,085]
when power is exported onto the grid from that site, certification as
a QF should be virtually automatic.
41. USCHPA also points out that facilities are increasingly
being built to serve multi-family housing complexes, apartment
buildings, public housing projects and other residential
applications. They argue that, in the same manner as the Commission
has appropriately added “mechanical” energy to the listed
types of useful energy output Congress listed in EPAct, the
Commission should add “residential” to the valid purposes
for which a QF can intend its energy outputs other than sales of
electricity to a utility.
42. Several commenters request clarification that thermal hosts
are not necessarily required to use each of the enumerated
electrical, thermal, chemical and mechanical outputs. Several other
commenters request clarification that cogeneration facilities that
utilize waste heat as their primary fuel ( i.e., bottoming
cycle cogeneration facilities) are presumed to be in compliance with
the new “fundamentally” requirements. The Independent
Sellers request clarification that the technical requirements for new
cogeneration facilities will apply only to those facilities that sell
their electrical output at avoided cost pursuant to the mandatory
purchase requirement.
43. Some utility commenters argue that Congress intended in
EPAct 2005 to implement requirements that fundamentally change the
nature of what kind of cogeneration plants can qualify for QF status,
and that make such qualification much more difficult. Several other
commenters point out that Congress has not eliminated the requirement
for the Commission to issue rules which encourage the use of
cogeneration, and argue that implementing the “fundamentally”
requirement in a way that significantly increases the difficulty of
obtaining QF status for a cogeneration plant frustrates the
encouragement of cogeneration, and so cannot have been the intent of
Congress.
44. Several commenters argue that the comments of the utilities
on the procedures for demonstrating compliance with the
“fundamentally” rule demonstrate the need for procedures
to protect QFs' confidential and commercially sensitive information,
and that Entergy's proposal in particular is a thinly-veiled attempt
to gain access to QFs' most commercially sensitive information, and
goes far beyond what is needed to prevent sham transactions or curb
PURPA abuses. These commenters argue that QFs cannot be required to
hand over sensitive cost data to a utility and then be expected to
engage in bilateral power purchase negotiations on a level playing
field, and that the new §292.205 should thus specify that the
new cogeneration facilities will be able to obtain confidential
treatment for commercially sensitive information submitted in support
of their applications for certification and notices of
self-certification. SoCal Edison states that it understands the QFs'
desire to protect their business information and is willing to agree
to an appropriate protective order or other procedure for protecting
confidential QF information. However, SoCal Edison and others argue
that potential challengers to a QF application need access to all
information relevant to the application in order to evaluate whether
the potential QF meets the criteria for QF status and to challenge
the QF application, if appropriate.
45. The Council of Industrial Boiler Owners (CIBO) objects to
the Commission's use of the word “limited” in the NOPR to
describe its discretion to “[take] into account technological,
efficiency, economic, and variable thermal energy requirements, as
well as State laws applicable to sales of electric energy from a
qualifying facility to its host facility.” 10
They argue that Congress did not specifically limit the Commission's
discretion beyond its statutory terms and such a self-limitation
should not be used by the Commission to avoid undertaking the
searching inquiry necessary to meet Congress's goal of encouraging
energy efficiency. Other commenters also argue that the Commission
should be sure to take into account all of the criteria specified in
Section 210(n)(1)(A)(ii).
46. NCEMPA and APPA argue that small QF's ( e.g., those
of five or fewer megawatts (MW)) should be categorically exempt from
regulations aimed at implementing the “fundamental” use
requirement.
[30,086]
They
argue that there is little valid or widespread concern that small QFs
are constructed primarily for any purpose other than for commercial,
industrial, or institutional use, and that the output of small QFs is
not likely to cause price distortion in the energy markets.
3.
Commission Determination
47. As an initial matter, we address certain requests for
clarification. First, we agree that many residential uses of thermal
output have long been considered legitimate for the purposes of
cogeneration certification, and that “residential purposes”
is subsumed within “institutional purposes.” We therefore
find that residential purposes should be maintained as acceptable for
the purpose of satisfying the requirements of Section
210(n)(1)(a)(ii), and we will revise the regulatory text in
§292.205(d)(ii) to specifically reference residential purposes.
We also clarify that new cogeneration facilities will not need to
have each of the enumerated individual outputs (electrical, thermal,
chemical and mechanical) used for industrial, commercial, residential
or institutional purposes, so long as the cumulative safe harbor
standard, as discussed below, is met, or other sufficient support for
certification is provided.
48. We also agree with commenters who point out that the
Commission's obligation to encourage cogeneration has not been
eliminated. This obligation was established in Section 210(a) of
PURPA, which has not been repealed by EPAct 2005. As such, in
implementing EPAct 2005, the Commission's goal is to interpret the
requirements of new Section 210(n)(1)(A)(ii) in light of the
requirement to encourage cogeneration as reflected in the existing
Section 210(a).
49. Turning to the central issues regarding the “fundamentally”
requirement, we find no statutory basis for the suggestions by some
commenters that the Commission focus solely on the goal of
eliminating so-called PURPA machines instead of implementing the
specific requirements of Section 210(n)(1)(A)(ii) for all new
cogeneration facilities. The discussion of PURPA machines in the NOPR
11 was intended to provide context, and not to
establish a policy objective that could replace the implementation of
the specific requirements of Section 210(n)(1)(A)(ii). We find that
Section 210(n)(1)(A)(ii) requires new cogeneration facilities seeking
certification to make a showing that their energy output is used
fundamentally for industrial, commercial, residential or
institutional purposes and is not intended fundamentally for sale to
an electric utility. In short, we will implement the requirements of
Section 210(n)(1)(A)(ii) as written.
50. Despite comments to the contrary, we continue to believe
that a case-by-case approach to the implementation of Section
210(n)(1)(A)(ii) best provides the flexibility required to
appropriately address various facilities and circumstances. However,
we agree that the adoption of a safe harbor will provide greater
certainty to the industry, make the evaluation of applications by the
Commission more manageable, and make the certification process more
objective. Thus, we will establish a safe harbor, within which a
facility will be presumed to comply with the requirements of Section
210(n)(1)(A)(ii). Because, as discussed below, we will design the
safe harbor to reflect the requirements of Section 210(n)(1)(A)(ii),
the presumption that facilities falling within the safe harbor comply
with Section 210(n)(1)(A)(ii) will be irrebuttable; the safe harbor
will define those facilities which will automatically be deemed to
comply with the requirements of Section 210(n)(1)(A)(ii). However, as
also discussed below, the Commission, in determining whether a new
cogeneration facility's energy output is used fundamentally for
industrial, commercial, residential or institutional purposes and is
not intended fundamentally for sale to an electric utility, must also
take “into account technological, efficiency, economic, and
variable thermal energy requirements, as well as State laws
applicable to sales of electric energy from a qualifying facility to
its host facility;” a finding that one of those factors exists
may warrant a finding that facilities that do not fall within the
safe harbor nevertheless comply with Section 210(n)(1)(A)(ii).
51. We agree with commenters who argue that the structure of
the language in Section 210(n)(1)(A)(ii) suggests that
[30,087]
compliance of new cogeneration facilities with that Section will
generally depend on the percentage of the total, aggregated energy
output that is used for industrial, commercial, residential or
institutional purposes, and not sold to an electric utility. We,
therefore, believe that a safe harbor should be similarly structured
to capture the intent of the overall requirement. After careful
consideration of various recommendations of commenters, we believe a
standard of at least 50 percent is a reasonable interpretation of
Section 210(n)(1)(A)(ii) in light of the Commission's continuing
obligation under Section 210(a) to encourage cogeneration. Thus, new
cogeneration facilities seeking QF status, where the electrical
output of the facility is intended to be sold pursuant to Section
210, 12 will be required to include a demonstration that
at least 50 percent of the aggregated annual energy output of the
facility is to be used for industrial, commercial, residential or
institutional purposes, and not sold to an electric utility, in order
to qualify under the safe harbor provisions. New cogeneration
facilities complying with the safe harbor provision will be required
to comply with the safe harbor provision both for the 12-month period
beginning with the date the facility first produces electric energy,
and for any calendar year subsequent to the year in which the
facility first produces electric energy. New cogeneration facilities
that do not fall within the safe harbor provision should demonstrate
in their applications the percentage of aggregated annual energy
output that is used for industrial, commercial, residential or
institutional purposes, along with discussion of and support for why
the Commission should conclude that Section 210(n)(1)(A)(ii) is
nevertheless met “taking into account technological,
efficiency, economic, and variable thermal energy requirements, as
well as State laws applicable to sales of electric energy from a
qualifying facility to its host facility.” Unless a new
cogeneration facility qualifies under the safe harbor provision, the
information submitted by the applicant concerning the percentage of
total energy that is to be used for industrial, commercial,
residential or institutional purposes will establish the standard
that that facility must comply with, both for the 12-month period
beginning with the date the facility first produces electric energy,
and for any calendar year subsequent to the year in which the
facility first produces electric energy.
52. Entergy has argued that, as part of the process of
demonstrating compliance with the “fundamentally”
standard, the Commission should require that new cogeneration
facilities, at a minimum, submit: (1) average annual hourly useful
electrical output in Btu/hr; (2) average annual hourly useful thermal
output in Btu/hr; (3) average annual hourly useful mechanical output
in Btu/hr; and (4) utilization of thermal, electrical and mechanical
output along with the steam, electrical and mechanical usage diagrams
for the facility. This data, Entergy argues, should be accompanied by
an affidavit of a senior officer, attesting to the accuracy of the
data. We note that the first four items are already required by Items
10 and 13 of Form 556. 13 With respect to the request to
require applicants to submit an affidavit, we note that Form 556
already requires the applicant to submit with the filing the
signature of an authorized individual evidencing accuracy and
authenticity of information. 14 This system seems to be
working, and in the absence of any demonstration that it has not
worked or is not working, we find that Entergy's proposal is
unnecessary.
53. Many parties commented on the legitimacy of a new
cogeneration facility having “excess capacity” beyond
that needed to provide for the electricity needs of the host
facility. These parties present various situations and circumstances,
which, they argue, justify ongoing sales of electricity from a new
cogeneration facility to a utility, without violation of the
requirements of Section 210(n)(1)(A)(ii). In particular, commenters
point out: (1) that some thermal hosts may require redundant
generation capacity and/or redundant thermal capacity to ensure the
reliability of their process; (2) that long lead times and high costs
associated with siting approvals and equipment orders often make it
significantly more economic
[30,088]
to construct a large increment of capacity at one time, rather than
several smaller increments as needed over time; (3) that it is
generally more cost-effective for an applicant to keep a cogeneration
unit operating during periods of host shutdown or curtailment; (4)
that the thermal energy requirements of some thermal hosts are so
large relative to their electricity requirements that optimizing
electricity production from that facility generates a continuous
surplus of power that can only be exported; (5) that a new
cogeneration facility may require its higher capital cost to be
offset in the long term with an income stream based on electric sales
to the grid; (6) that it may be advantageous or necessary to all
concerned for a manufacturing company to export some of its power to
a utility for a short time during periods of peak demand, generally
during the summer cooling season and occasionally during the winter
heating season; (7) that power plants are extremely capital intensive
and the maximum economies of scale are found at the largest end of an
original equipment manufacturer's product line, which also typically
have the best combined cycle heat rates and lowest emission rates;
and (8) that cogenerators must size their plants to be able to
provide for the largest expected steam demand of the customer, but
also must size the steam turbine to be able to take the excess steam
created when the steam host reduces its steam needs. Some commenters
also point out that certain states require that a cogeneration
facility provide all of its output to the local utility, and that the
local utility provide electricity to the industrial host, and that
such requirements should not disqualify a new cogeneration facility
from eligibility for QF status.
54. The above-listed circumstances represent circumstances
where the Commission may possibly want to exercise its discretion and
find that a new cogeneration facility complies with Section
210(n)(1)(A)(ii), even when such facility does not fall within the
safe harbor. There may, of course, be other circumstances that would
also justify such treatment. In each particular case, the
determination of whether a new cogeneration facility meets Section
210(n)(1)(A)(ii) will depend upon the extent to which the applicant
has sufficiently demonstrated that the facts and circumstances
warrant certification under the new standard.
55. In response to the comments of CIBO, who objected to the
Commission's use of the word “limited” in the NOPR to
describe its discretion under Section 210(n)(1)(A)(ii), we clarify
that we did not intend to imply an aversion to the exercise of our
discretion, where warranted, to certify certain facilities that do
not comply with the safe harbor standard. Rather, we intended to
indicate that such exercise of discretion will depend on the
applicants making a sufficient showing to justify certification, and
that the Commission will limit its exercise of discretion to
consideration of the criteria enumerated by Congress in Section
210(n)(1)(A)(ii). We also take this opportunity to clarify that we
interpret our discretion to take into account technological and
efficiency requirements as relating closely to our obligation under
Section 210(a) to encourage cogeneration and to the new provisions
under Section 210(n)(1)(A)(iii) requiring the Commission to ensure
continuing progress in the development of efficient electric energy
generating technology. Also, applicants that do not fall within the
Section 210(n)(1)(A)(ii) safe harbor may request the Commission to
exercise its discretion to grant their application, “taking
into account technological, efficiency, economic and variable thermal
energy requirements.” The Commission will be more inclined to
make an affirmative Section 210(n)(1)(A)(ii) finding for facilities
employing modern, efficient technologies, both in order to encourage
cogeneration under Section 210(a) and to specifically encourage
continuing progress in the development of efficient electric energy
generating technology under Section 210(n)(1)(A)(iii).
56. Several commenters have requested that the Commission limit
the applicability of the “fundamentally” requirement to
topping-cycle cogeneration facilities. While Section
210(n)(1)(A)(ii), as a matter of law, applies to both new
topping-cycle and new bottoming-cycle cogeneration facilities, we
believe that many, if not most, bottoming-cycle cogeneration
facilities will readily satisfy the requirements of Section
210(n)(1)(A)(ii). The very nature of bottoming-cycle facilities is
that they utilize waste heat from a thermal process to produce
[30,089]
electric energy, as opposed to the consumption of a scarce fuel
source. If the fuel utilized in a bottoming-cycle facility is merely
enough to run the thermal process and has not been augmented for the
purposes of power production, the facility clearly should satisfy the
requirements of Section 210(n)(1)(A)(ii) that the electrical,
thermal, chemical and mechanical output of the facility is used
fundamentally for industrial, commercial, residential or
institutional purposes; in any event, such facilities may satisfy the
requirements of Section 210(n)(1)(A)(ii) by virtue of our discretion
to make an affirmative finding after taking into account
technological, efficiency, economic, and variable thermal
requirements.
57. However, some bottoming-cycle facilities supplement the
heat provided to the initial thermal process, with the intention of
producing additional power from the resulting additional steam
energy. We find that, as additional supplemental firing is added to
bottoming cycles, the basis for giving them deference under Section
210(n)(1)(A)(ii) is weakened. Therefore, in order for bottoming-cycle
facilities to comply with Section 210(n)(1)(A)(ii), applicants should
demonstrate that the heat input is sized only for the thermal
process, or explain to what extent supplemental firing is utilized.
If there is supplemental firing, applicants should either comply with
the safe harbor provision of the regulations, or explain the
situation and justify why the Commission should exercise its
discretion to make an affirmative Section 210(n)(1)(A)(ii) finding.
58. We disagree with commenters who advocate a change to the
Commission's existing operating standard. The language of Section
210(n)(1)(A)(ii) does not in our view direct a change to the
operating standard, and we do not believe that an increase in the
operating standard is necessary at this time.
59. In response to Entergy's suggestion that the Commission
consider certifying as a QF only that portion of a new cogeneration
facility that the applicant is able to demonstrate will meet the
revised criteria under Section 210(n)(1)(A)(ii), the statute does not
require this approach and it would be unduly cumbersome to
administer.
60. Finally, in applying our new regulation implementing
Section 210(n)(1)(A)(ii) of PURPA, §292.203(d)(2) of our
regulations, we will apply a rebuttable presumption that new
cogeneration facilities that are 5 MW or smaller satisfy the
requirement that the electrical, thermal, chemical, and mechanical
output of the cogeneration facility is used fundamentally for
industrial, commercial, residential or institutional purposes. We
will apply this presumption because it is our experience that such
small cogeneration facilities are generally designed to meet their
thermal host's needs.
61. Lastly, we note that some commenters have stated that there
is a need for special procedures to protect QFs' confidential and
commercially sensitive information. However, under §388.112 of
the Commission's regulations, 15 any person
submitting a document to the Commission may request privileged
treatment for some or all of its document. While the party requesting
privileged treatment must support that claim, none of the material
for which confidential treatment is requested will be disclosed
unless pursuant to a confidentiality agreement, a protective order,
or a finding that material does not warrant confidential treatment.
Given these procedures that the Commission already has in place, we
see no need to promulgate new procedures specifically for QF
applications.
C.
Continuing Progress in the Development of Efficient
Electrical Energy Generating Technology and the Efficiency Standard
for Coal-Fired Generation
1.
Background
62. Section 210(a)(1)(A)(iii) of PURPA requires that all new
cogeneration facilities seeking QF status demonstrate “continuing
progress in the development of efficient electric energy generating
technology.” The NOPR proposed that the Commission's
regulations repeat the statutory language. In addition, the NOPR
proposed to: (1) retain the existing operating standard for all
cogeneration facilities; (2) retain the existing efficiency standards
for oil cogeneration
[30,090]
facilities for which any of the energy input is natural gas or oil;
but (3) apply an efficiency standard to new coal-burning cogeneration
facilities.
2.
Comments
63. EEI states that the Commission must update the efficiency
standards in its regulations for new cogeneration facilities, and
agrees with the addition of an efficiency standard for coal-fired
generation. EEI argues that the efficiency standard should apply to
all cogeneration fuel inputs. EEI recommends that the Commission
revise the definitions in §292.202(m) to use higher heating
values instead of lower heating values. EEI also recommends that the
Commission revise the definition in §292.202(m) to take into
account the total energy input of all fuels, including coal and waste
fuels, not just oil and natural gas. EEI argues that facilities that
utilize a renewable energy resource or waste fuel should be qualified
as a small power producer and not as cogenerators. EEI states that
the efficiency standards for cogeneration QFs, which have existed for
25 years, should be increased for new facilities to reflect modern,
more efficient technology.
64. As an interim measure, EEI believes the 60 percent
efficiency standard for new cogeneration facilities primarily fueled
by natural gas is appropriate. Several comments offered support for
EEI's comments, while others argued that a 60 percent efficiency
standard is not achievable or that 60 percent is an arbitrary value
that has no rational basis other than to reduce the number of QFs
that are entitled to sell their power under PURPA. Commenters state
that fixed, objective standards as advocated by EEI are too
simplistic to be applied to the full range of facilities that could
be designed and developed.
65. Although Indeck does not object to increased efficiency
standards for new cogeneration QF plants, they must be reasonable,
and based on clear and definite standards. NARUC states that the
Commission should take care to encourage the use of better technology
and not prevent the use of any improved technologies by setting the
standards unreasonably high. Any standard the Commission adopts must
recognize that the requirement of greater efficiency is a
technological, not an environmental standard. USCHPA states that
requiring QFs to implement a “best available technology”
standard would result in fearsome costs and constraints. Primary
Energy states the rule should embrace the philosophy that deployment
of existing technology in innovative and creative ways defines
continuing progress in achieving greater overall resource efficiency.
The Cogeneration Association California states that requiring each
applicant to demonstrate that it would contribute to this “continuing
progress” standard might discourage the continued use of
well-established technologies proven to produce efficiencies, but
which may no longer be considered “progressive.”
66. The EPA believes there is little, if any, need to alter
existing PURPA criteria or processes. The EPA also believes that
because combined heat and power (CHP) systems are inherently more
efficient than the alternative (separate heat and power generation),
they always improve total efficiency, reduce fossil fuel consumption,
and therefore advance the objectives of EPAct 2005.
67. Other commenters concur with the Commission that an
efficiency standard be applied to new coal-burning cogeneration
facilities in a manner similar to that applied to natural gas and
oil-burning cogeneration facilities. In light of the advances in
generating technology, they argue that there is no policy basis to
exempt new coal-burning cogeneration facilities from efficiency
standards. Indeed, requiring compliance with efficiency standards
will help speed the adoption of the latest and most efficient
coal-burning technology. Yet other commenters argue that there is no
reason to impose an efficiency standard on coal-burning QFs. Given
the abundance of coal, market forces should regulate the efficiency
of coal-fired QFs. Commenters state the imposition of a minimum
efficiency standard on new coal- fired cogeneration facilities is
inconsistent with the intent of PURPA, as amended. Commenters state
that the Commission lacks record support for such a decision on an
efficiency standard for coal-fired units, which is technical and
would require significant analysis and each case must be evaluated
individually.
3.
Commission Determination
68. Section 210(n)(1)(A)(iii) of PURPA requires the Commission
to issue rules to ensure “continuing progress in the
development of efficient electric energy generating technology.”
As an initial matter, upon review of the comments on this issue, the
Commission now believes that the regulations it is issuing
implementing Sections 210(n)(1)(A)(i) and 210(n)(1)(A)(ii) of PURPA
are sufficient by themselves to ensure “continuing progress in
the development of efficient energy generating technology”
through, for example, the application of efficiency standards and
appropriate exemptions from certain regulatory requirements discussed
herein. Accordingly, the Commission will not require that applicants
for certification of new cogeneration facilities, provide a
description of how a particular technology used by a particular
applicant contributes to the continuing progress in the development
of efficient energy generating technology. We will delete the
requirement contained in the NOPR that applicants do so.
69. While some commenters support increasing the existing
efficiency standards, and some commenters support the Commission's
applying an efficiency standard to coal-fired cogeneration facilities
for the first time, the Commission will retain the existing operating
and efficiency standards for new oil and gas cogeneration facilities,
and, will not impose new efficiency standards for new coal-burning
cogeneration facilities at this time. 16
70. We find persuasive the EPA comments that there is little,
if any, need to alter existing PURPA criteria or processes. The EPA
states that CHP (combined heat and power) remains one of the most
significant opportunities to improve the efficiency and reduce the
environmental impact of United States energy production and it is
critical that this rulemaking advance, not constrain, these
opportunities. The EPA further states that since CHP systems are
inherently more efficient than the alternative (separate heat and
power generation) they always improve total efficiency, reduce fossil
fuel consumption, and therefore advance the objectives of EPAct 2005.
We find the comments of Solar Turbines compelling as well. Solar
Turbines, a manufacturer of generation equipment, states that, while
its products have standard efficiencies greater than 60 percent,
their PURPA efficiency is less than 50 percent. They are still much
more efficient than conventional separate electric and thermal
generation (49 percent conventional/34 percent PURPA efficiency),
however. Solar Turbines states that the existing PURPA standard of
42.5 percent LHV/38.6 percent HHV is sufficient to ensure efficient
CHP systems and still accommodate the wide range of technologies and
applications. Therefore, the Commission will retain the existing
operating and efficiency standards for new cogeneration facilities.
17
71. Developers of cogeneration facilities, moreover, have an
economic incentive
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to employ the efficient, modern technology giving due consideration
to the costs of that technology. We see no reason at this time to
impose higher efficiency standards on cogeneration facilities. As the
EPA and others point out, CHP processes are inherently more efficient
than producing electric energy and heat separately.
72. In sum, the increased efficiency that will result from our
implementation of Sections 210(n)(1)(A)(i) and 210(n)(1)(A)(ii) of
PURPA satisfy the statutory requirement that the Commission ensure
continuing progress in the development of efficient electric energy
generating technology.
D.
Self Certification
1.
Background
73. In the NOPR, the Commission invited comments on whether the
Commission's self-certification procedures 18
should be available to new cogeneration facilities in light of the
criteria proposed for certification of new cogeneration facilities as
QFs.
2.
Comments
74. Several commenters argue that self-certification can remain
an option as long as clear standards are established, but that it is
difficult to understand exactly how self-certification would work
without such standards.
75. Some commenters argue that self-certification should remain
an option for certain new cogeneration facilities. American Forest &
Paper asserts that self-certification should remain available to new
cogeneration facilities where there is: (1) a traditional
manufacturing use; (2) the facility fits into safe harbor provisions;
and (3) employs a proven or innovative cogeneration technology.
NCEMPA believes the self-certification procedures should remain
available for small QFs ( e.g., 5 MWs or smaller) because the
substantial burden associated with complying with new certification
procedures may greatly discourage development of small QFs. The York
County Solid Waste and Refuse Authority (York County) asserts
self-certification should remain available to new cogeneration
facilities except for those facilities owned largely or wholly by
traditional utilities.
76. A few commenters contend that new cogeneration facilities
should not be allowed to self-certify. Calpine Corporation (Calpine)
believes that the case-by-case approach proposed by the Commission
seems inconsistent with a self-certification option. NARUC speculates
that self-certification will inevitably lead to the qualification of
questionable facilities which undermines Congress's intent to foster
responsible QF development.
77. Several commenters maintain that self-certification should
remain an option despite the subjective nature of the new standards.
The PGC Electricity Committee, Indeck, and Ridgewood state that the
self-certification procedures are efficient, self-implementing, less
time-consuming, and relatively inexpensive. Delta Power, et al.,
assert that QFs have always been responsible for ensuring that they
meet the requirements for QF status, regardless of how they achieve
certification. They further state that owners of new cogeneration
facilities should have the option to either self-certify or to apply
for Commission certification, depending on their comfort level with
the characteristics of their facilities.
3.
Commission Determination
78. The Commission will retain the option to self-certify for
new cogeneration facilities. NARUC and others fear that questionable
cogeneration facilities will attain QF status through the
self-certification process due to the subjective nature of the new
standards unless the Commission establishes clear and objective
standards. As Indeck and Ridgeway correctly note in their comments,
however, the Commission has the authority to review and question a
self-certification.
79. Nevertheless, we note that the Commission's currently
effective regulations do not make explicit the Commission's authority
to revoke the QF status of self-certified QFs absent the filing of a
petition for declaratory order that the self-certified QF does not
meet the applicable requirements for QF status. 19
Given
[30,093]
that EPAct 2005 calls for greater Commission scrutiny of QF status,
we will modify §292.207(d)(1)(iii) of the Commission's
regulations to provide that the Commission may on its own motion
revoke the QF status of self-certified and self-recertified QFs.
80. In light of the new standards directed by Congress for new
cogeneration facilities, we find it appropriate to now publish in the
Federal Register notices of self-certifications and
self-recertifications of new cogeneration facilities; currently, the
Commission does not notice any self-certifications or
self-recertifications in the Federal Register. 20
Publication of notices of self-certification and
self-recertification of new cogeneration facilities will enhance the
visibility of self-certifications for interested parties other than
the host electric utility. Thus, we will require self-certifications
and self-recertifications of new cogeneration facilities to include a
form of notice of the self certification or self-recertification
suitable for publication in the Federal Register. Accordingly,
we will amend §292.205(d) of the Commission's regulations to
provide for publication of notice of self-certifications and
self-recertifications of new cogeneration facilities.
81. Pursuant to §292.207(a) of the Commission's
regulations, “[a] small power production facility or
cogeneration facility that meets the applicable criteria established
in §292.203 is a qualifying facility.” There is no express
requirement in §292.203 that a facility make a filing to satisfy
the requirements for QF status. While the current Commission's
regulations do state that an owner or operator of a self-certifying
facility “must” file a “notice of
self-certification which contains a completed Form 556,” 21
the Commission has interpreted this requirement as being for record
keeping purposes, and not necessary for QF status.
82. The Commission, particularly in light of the criteria for
new cogeneration facilities, does not believe that a facility should
be able to claim QF status without having made any filing with this
Commission. Accordingly, the Commission is amending Section 292.203
to expressly require that a facility claiming QF status must file
either a notice of self-certification or an application for
Commission certification. Any existing QF that has never filed either
a notice of self-certification or an application for Commission
certification, must do so within sixty (60) days of the date this
order is published in the Federal Register, to continue
claiming QF status.
83. The original reasons that the Commission instituted the
self-certification process are still valid. Among the reasons for the
Commission's adoption of the self-certification process were that the
complexity, delays, and uncertainties created by a case-by-case
qualification procedure would act as an economic disincentive to
owners of smaller facilities. The Commission also envisioned that the
initiation of purchase and sale arrangements would require the flow
of substantial information between the proposed QF and the purchasing
utility so that the filing of substantial information with the
Commission would be unnecessary. While many new cogeneration
facilities may want the assurance that Commission certification, as
opposed to self-certification, provides, we believe that the
self-certification option should still be available to new
cogeneration facilities. Moreover, the new requirement that a
facility claiming certification file at least a notice of
self-certification, the publication of notice of self-certifications
and self-recertifications for new cogeneration facilities, and the
modification of the Commission's regulations to make explicit that
the Commission, on its own motion, can revoke the QF status of a
self-certified QF, remove the danger that a questionable new
cogeneration facility, in particular, will obtain and retain QF
status.
E.
Exemptions
1.
Background
84. In the NOPR, the Commission noted that, in implementing
Section 210(e)(1) of PURPA, which provides that the Commission shall
prescribe rules under which QFs are exempt in whole or in part, from
the FPA, from PUHCA, from state laws respecting rates or respecting
the financial or organization regulation of electric utilities, or
from any combination of the foregoing, the Commission granted very
broad exemptions
[30,094]
from the FPA, PUHCA and state laws in order to remove the
disincentive of utility-type regulation from QFs. The Commission
stated that in the context of this rulemaking proceeding it found it
appropriate to reexamine the broad exemptions from the FPA granted to
QFs, partly because those broad exemptions may no longer be needed,
and partly because the Commission through experience realized that
the broad exemptions it granted QFs removed a large number of
generation sales from any regulatory oversight. The Commission
therefore proposed to eliminate the exemptions from Sections 205 and
206 of the FPA that the Commission previously granted, except for the
exemptions from Sections 205 and 206 that are for sales that are
governed by state regulatory authorities. In addition, the Commission
proposed that QFs would not be exempt from new Sections 220, 221 and
222 of the FPA that were added to the FPA by sections 1281 (Electric
Market Transparency), 1282 (False Statements) and 1283 (Market
Manipulation) of EPAct 2005. 22
2.
Comments
85. As a general matter, the QFs were opposed to lifting of the
total exemption from Sections 205 and 206 of the FPA in the current
regulations. First, those opposed argue that in deciding to build the
generating facility, the owners relied on the existence of the
exemption. For example, the Electric Power Supply Association argues
that FPA rate regulation of existing contracts will upset
long-standing expectations and create unnecessary disruptive
uncertainty regarding the financial integrity of numerous QFs. ARIPPA
argues that the Commission's proposal amounts to a “bait-and-switch”
on investors who were encouraged to build and operate renewable small
power production facilities and cogeneration facilities. Occidental
Chemical Corporation (Occidental) adds that the Commission's proposal
creates incentives for utilities to challenge all existing QF
contracts, which will result in litigation. They also argue that
subjecting all non-PURPA sales to regulation under the FPA is
unnecessary and would discourage the development of cogeneration.
86. Several QFs suggest that, in addition to exemptions being
given to sales pursuant to a state PURPA program, QFs selling into an
organized market under applicable market rules and tariff
requirements should remain exempt from the FPA.
87. Most QFs supported the Commission's proposal to continue to
exempt QFs smaller than five MW from the provisions of the FPA.
Others suggested that the Commission raise the size of the QFs that
would retain all exemptions to 20 or 30 MW. For example, PGC
Electricity, ENEL North America and the Illinois Landfill Gas
Coalition propose exemptions for projects having capacities of 20 MW
or less. Cinergy and the American Wind Energy Association argue that
facilities under 30 MW do not have a significant market effect and
should remain exempt.
88. A number of QFs suggest that, rather than removing the
exemptions for all non-PURPA sales, the Commission remove the
exemptions only for those QFs with majority utility ownership. Other
QFs, such as USCHPA and York County, suggest that QFs that are
independent of traditional utilities be permitted to retain all of
the existing exemptions from the FPA. Other commenters note that
removing exemptions is not required by EPAct 2005. Commenters note
that a blanket elimination of exemptions will remove the incentive to
cogenerate for non-utility owned QFs.
89. Other commenters request that QFs remain exempt from
definition of “electric utility company” under PUHCA
2005. For example, the American Chemistry Council states that this
would provide an important incentive for the development of QFs by
entities that otherwise are primarily engaged in business other than
the generation and sale of electricity.
90. Utilities, on the other hand, generally support limiting
the exemptions from the FPA. AEP, for example, argues that no QF
should be exempt from the FPA, noting that QFs have the ability to
participate in the economic dispatch process within an RTO. The
California Electricity Oversight Board comments that the
[30,095]
Commission should not exempt any QF electrical sales from its
regulatory oversight unless it finds that either: (1) the energy
sales from the QF are governed by a state regulatory authority; or
(2) the QF is less than 5 MW and owned by individuals or small
businesses that are unconnected to any electric utility, electric
utility holding company, power marketer, transmission provider,
transmission owner, or others in the electricity business. Entergy
argues that QFs should be required to obtain market-based rate
authority for all non-PURPA sales. NRECA comments that the Commission
should no longer exempt QFs from the non-rate provisions of the FPA
and should require QFs owned by public utilities to make rate filings
under Section 205 of the FPA for avoided cost sales and all QFs
should make rate filings under Section 205 of the FPA for non-PURPA
sales. The Transmission Access Policy Study Group supports the
elimination of Sections 205 and 206 exemptions, except for sales
governed by state regulatory authorities. Some of the utilities
suggested that the Commission's current proposal which states that a
QF that sells electric energy “pursuant to a state regulatory
authority avoided-cost ratemaking regime would remain exempt from
Section 205” (unless it also makes sales of electric energy
that are not pursuant to a state regulatory authority avoided-cost
ratemaking regime) is not sufficiently clear. One commenter suggests
the exemption be applied to “sales ... made pursuant to a state
regulatory authority's implementation of PURPA.” This, the
commenter states, would more accurately limit the exemptions to
“PURPA sales.” Others point out that bilateral contracts
between a QF and a utility often satisfy the requirements of being
pursuant to a state regulatory authority's implementation of PURPA.
91. Commenters also propose that the Commission should add
Section 203 to the list of sections with which QFs must comply. The
Transmission Access Policy Study Group argues that the Commission
should eliminate entirely the Section 203 exemption. It states that
the consumer protection concerns that led Congress to expand the
Commission's Section 203 authority over generation acquisitions are
relevant to QF transfers as well.
3.
Commission Determination
92. We will eliminate certain exemptions that were previously
granted to QFs as proposed in the NOPR. However, we will clarify that
QFs will retain the exemption from Sections 205 and 206 of the FPA
when a sale is made pursuant to a state regulatory authority's
implementation of PURPA. The Final Rule will also essentially retain
the pre-existing exemption from PUHCA so that a QF will not be
considered “an electric utility company” under the new
Public Utility Holding Company Act of 2005. 23
93. Section 210(e)(1) of PURPA states that the Commission
“shall ... prescribe rules under which [certain qualifying
facilities] are exempted, in whole or in part, from the Federal Power
Act, from the Public Utility Holding Company Act, from State laws and
regulations respecting the rates, or respecting the financial or
organization regulation, of electric utilities, or from any
combination of the foregoing, if the Commission determines such
exemption is necessary to encourage cogeneration and small power
production.” Section 210(e)(2) of PURPA provides that the
Commission is not authorized to exempt small power production
facilities of 30 to 80 MW capacity from these laws, except for
geothermal power production facilities. Such facilities between 30
and 80 MW may be exempted from PUHCA and from state laws and
regulations, but may not be exempted from the FPA. Thus Section
210(e) requires the Commission's regulations to grant regulatory
exemptions for certain QFs, in whole, or in part, and if
necessary to encourage cogeneration and small power production.
94. In Order No. 69, the Commission first implemented Section
210(e) of PURPA. The Commission stated that a broad exemption was
then appropriate to remove the disincentive of utility-type
regulation from QFs, including Sections 203, 205, 206, 208, 301 and
304 of the FPA. In §292.601 of its regulations, the Commission
exempted QFs (other than non-geothermal small power production
facilities between 30 and 80 MW) from
[30,096]
Sections 203, 205, 206, 208, 301 and 304 of the FPA.
95. When the Commission first granted the exemptions from
Sections 205 and 206 of the FPA in Order No. 69, there was no market for electric energy produced by
non-utility generators. Indeed this was a primary reason that PURPA
was enacted. The Commission wrote its regulations, including the
provisions for exemptions from Sections 205 and 206, with the
expectation that all sales of electric energy from QFs would take
place as a result of the Section 210 of PURPA purchase obligation,
and that they would take place pursuant to state regulatory authority
implementation of the Commission's avoided-cost rules under PURPA.
Thus, there was no expectation that QFs would make sales that, by
virtue of the Commission's granting a broad exemption from Sections
205 and 206 of the FPA, would be subject to neither this Commission's
nor a state regulatory authority's oversight. However, largely as a
result of PURPA, markets for electric energy produced by
non-traditional power producers developed. And QFs participated in
those markets and began to make sales that were not subject to either
Commission or state regulatory authority oversight.
96. Therefore, in light of the significant changes that have
occurred in the industry since the first QF facilities were
introduced and in light of the changing electric markets and
resulting market power issues that have arisen in recent years, we no
longer believe that it continues to be necessary or appropriate to
completely exempt QFs from Sections 205 and 206 of the FPA. We
conclude that such a complete exemption is not necessary to encourage
the development of cogeneration and small power production facilities
and, moreover, the broad nature of the exemptions currently set forth
in §292.601 removes a large number of electric energy sales from
any regulatory oversight. Further we note that many QFs are
large and their non-PURPA sales could potentially have a significant
market effect.
97. We are not convinced by the comments that eliminating
exemptions will cause undue uncertainty or upset the legitimate
expectations of QF owners and lenders. The exemptions from regulation
previously granted were always subject to revision and QFs had no
justifiable expectation that, no matter the change in circumstances,
changes in the regulatory regime would not occur. Further, our
partial removal of the exemption from Sections 205 and 206 of
the FPA does not affect a facility's QF status under PURPA or the
obligation of an electric utility to purchase power from the QF.
However, we take note of the comments requesting that existing
contracts not be subject to this change in our regulations and we
will provide that sales that occur pursuant to existing contracts
will continue to be exempt from Sections 205 and 206 of the FPA.
98. As we also stated in the NOPR, we are aware that partial
removal of exemptions might create a hardship for smaller QFs,
particularly those owned by individuals or small businesses. The
Commission stated that we would consider that at least some of the
exemptions previously granted in §292.601 should remain in
effect for smaller QFs, such as those under five MW. Numerous
commenters suggested that the Commission should consider larger
facilities, such as 20 MW or 30 MW facilities, to be small facilities
for purposes of retaining the exemptions from Section 205 and 206 of
the FPA. We agree, and modify our proposal so that the Final Rule
provides that facilities 20 MW or smaller shall remain exempt from
Sections 205 and 206 of the FPA. However, when an existing contract
for sales from a facility expires, sales from the facility, whether
pursuant to a renewal of the existing contract or pursuant to a new
contract, will be subject to Sections 205 and 206, unless otherwise
exempt. 24
99. In the NOPR we also stated that a QF which sells electric
energy pursuant to a state regulatory authority avoided-cost
ratemaking regime would remain exempt from Sections 205 and 206 of
the FPA. In response to comments, we clarify the regulatory language
to make clear that a QF will retain exemption from Sections
[30,097]
205 and 206 of the FPA when its sales are pursuant to a state
regulatory authority's implementation of PURPA (as opposed to the
proposed regulations “pursuant to a state regulatory authority
avoided cost regime”). We believe that this is appropriate
because “avoided cost regime” is not defined and could be
interpreted to include state programs that are not grounded in PURPA.
Moreover, many sales made pursuant to bilateral contracts between QFs
and electric utilities (including contracts at market-based rates)
are made pursuant to a state regulatory authority's implementation of
PURPA. The change in language, providing exemptions for QF sales made
pursuant to a state regulatory authority's implementation of PURPA,
will ensure that such sales from QFs, even where they happen to be
pursuant to a bilateral contract and at market-based rates, will
continue to be exempt from Sections 205 and 206 of the FPA.
100. EEI states that the elimination of the ownership
requirements should not permit a qualifying facility to sell electric
energy other than electric energy produced by itself or another
qualifying facility and still retain QF status. EEI comments that
paragraph 25 of the NOPR should be deleted and the Commission
should maintain the “net output rule.” According to EEI,
the net output rule requires a utility to purchase only a QF's net
output production, i.e., the QF's total capacity minus the
power the QF requires to operate its generating facility (often
called station use or auxiliary load). EEI argues that if a QF's
sales to a utility are not limited to its net output, then the QF in
essence would be getting credit for more capacity than it is
displacing on the utility's system. EEI states that QFs, whether or
not they are majority-owned by utilities, should not be able to take
advantage of PURPA to buy power from a utility at one price and sell
it back to the utility at a higher price. EEI's comments are
supported by NYSEG, Rochester, Progress Energy, SoCal Edison, PSNM,
TNP, PG&E and Entergy Services, Inc.
101. We disagree with EEI that the elimination of the ownership
requirement should be interpreted to preclude a QF from selling
electric energy other than electric energy produced by itself or
another QF without losing QF status. The loss of QF status in the
past by a facility that sold non-QF power, such as power in excess of
the net capacity of a facility, rested on the statutory and
regulatory ownership requirements for QF status. Removal of the
ownership prohibition removes the bar to a QF selling non-QF electric
energy while retaining QF status. However, as we explained in the
NOPR, any non-QF electric energy sold by a QF must be sold pursuant
to the FPA. Before making sales of non-QF power, the QF must obtain
authority pursuant to Section 205 of the FPA to make such sales, if a
QF has not already obtained such Section 205 authority. To the extent
that EEI and others are concerned that a QF will attempt to
substitute lower-cost non-QF electric energy for the electric energy
that utilities are purchasing pursuant to the purchase obligation of
Section 210 of PURPA, the Commission does not believe that such
purchases are required by PURPA. What electric utilities are required
to purchase is the “electric energy from such facilities”
25 which the Commission interprets to mean
electric energy produced by the QF and not non-QF electric energy
which the QF has purchased or has produced itself through a process
that does not satisfy the technical requirements for QF status. Thus,
for example, if a cogeneration QF decides to produce electric energy
through non-sequential supplemental firing or a small power
production QF decides to produce electric energy by burning a
non-small power fuel, the electric energy would not be subject to the
PURPA purchase obligation and the sales of such electric energy
should not be exempt from Sections 205 and 206 of the FPA. Similarly,
purchase and re-sale of non-QF power produced by others would not be
exempt from Sections 205 and 206 of the FPA. Whether such purchases
are otherwise required by an agreement between a utility and a QF is
a separate matter of contract law, however.
102. In addition, we reject proposals to eliminate the QF
exemption from the FPA Section 203(a)(i) filing requirements. We are
not persuaded such a change to our existing practice is called for.
With respect to the NOPR proposal
[30,098]
to eliminate the QF exemption from PUHCA, we have rethought this
proposal in light of the Public Utility Holding Company Act of 2005.
We interpret PURPA to permit us to exempt QFs from the Public Utility
Holding Company Act of 2005 in §292.602 of our regulations.
Section 292.602 will thus provide that a QF shall not be considered
an “electric utility company” as defined by the Public
Utility Holding Company Act of 2005. However, consistent with our
recent actions on FPA Section 203, QFs will be considered an
“electric utility company” for purposes of 203(a)(2) of
the FPA.
103. Lastly, we see no reason to exempt QFs from the newly
added FPA Sections 220, 221 and 222, added by EPAct 2005 Sections
1281 (Electric Market Transparency), 1282 (False Statements) and 1283
(Market Manipulation).
F.
General Requirements for Qualification and Ownership
Criteria
1.
Background
104. Section 1253(b) of EPAct 2005 amended Sections 3(17)(C)
and 3(18)(B) of the FPA by eliminating the ownership limitations for
QFs previously contained in those sections. Section 292.206 of the
Commission's regulations was designed to implement the prior
statutory requirement that a qualifying cogeneration or small power
production facility must be owned by a person not primarily engaged
in the generation or sale of electric power (other than electric
power solely from cogeneration facilities or small power production
facilities). In the NOPR, the Commission proposed to implement
Section 1253(b) of EPAct 2005 by eliminating §292.206 from its
regulations, and thus eliminating the ownership limitations for all
QFs —both existing and new.
105. Section 292.203 lists the general requirements for
qualification status. Section 292.203(a)(3) requires that a small
power production facility must “[m]eet[] the ownership criteria
specified in §292.206.” Section 292.203(b)(2) requires
that a cogeneration facility must “[m]eet[] the ownership
criteria specified in §292.206.” In light of the
elimination of the ownership limitations for all QFs and the
Commission's proposal to delete §292.206, in the NOPR the
Commission also proposed to delete from §292.203 these
references to the ownership limitation from the requirements for
qualifying small power production facilities and qualifying
cogeneration facilities. Therefore, the Commission proposed to delete
§§292.206, 292.203(a)(3) and 292.203(b)(2) from its
regulations.
2.
Comments
106. No commenter has opposed the ownership limitation from QFs
and deletion of Section 292.206 and revision of definitions of
cogeneration and small power production facility in Section 292.203
of the Commission's regulations.
3.
Commission Determination
107. There is no opposition to the Commission's proposal in the
NOPR. We will, therefore, implement Section 1253(b) of EPAct 2005 by
eliminating §292.206 from our regulations, and thus eliminate
the ownership limitations for all QFs —both existing and new.
We will simultaneously delete §§292.203(a)(3) and
292.203(b)(2) from our regulations describing the general
requirements for qualifying status.
G.
Form 556
1.
Background
108. In the NOPR, the Commission proposed changes in Form 556
for new qualifying cogeneration facilities. Form 556 is used by
Applicants seeking qualifying facility status, whether by Commission
application or by self-certification. The Commission's removal of
§292.206 prompted the amendment of Form 556 to reflect the new
criteria for QF status. Specifically, the Commission proposed to
eliminate references in Form 556 to the requirement that a QF may not
be owned more than 50 percent by certain entities and also proposed
to eliminate the requirements designed to help the Commission enforce
that 50 percent ownership limitation. Nevertheless, the Commission
also proposed to retain a requirement that a QF provide in Form 556
ownership information, including the percentage of ownership held by
any electric utility or electric utility holding company, or by any
person owned by either. While ownership limitations were no longer
part of the criteria for QF status, the Commission nevertheless
believed that an applicant for QF status should inform the Commission
of the identity of its owners, and their percentage interests. The
Commission believed that this information would help the Commission
determine in the
[30,099]
future, as it gained experience subsequent to the enactment of EPAct
2005, whether the exemptions from the FPA and state laws should
continue to be available to all QFs, especially those affiliated with
traditional utilities, transmission providers and other power
producers. It would also allow the Commission to better monitor for
undue discrimination or preference both in the provision of
transmission service and sales for resale in interstate commerce.
2.
Comments
109. Several commenters supported the Commission's proposal to
retain the facility ownership disclosure requirement in the
Commission's Form No. 556. These commenters believe that such
information will allow the Commission to better monitor potential
discrimination in the provision of service to customers and would
assist the Commission in reviewing the extent to which various QFs
should continue to be exempt from state laws and various provisions
of the FPA. However, Independent Sellers disagreed with the NOPR but
maintained that the ownership disclosure should be limited to those
owners that hold 10 percent or more of the equity interests in the
QF.
3.
Commission Determination
110. Upon consideration of comments, we conclude that we should
still include an ownership disclosure requirement in the Commission's
Form No. 556, as proposed in the NOPR. Contrary to Independent
Sellers request to limit the ownership enquiry to 10%, the Commission
would like to know all utility owners. This information will
assist us in monitoring potential discrimination in the provision of
service to customers and will assist the Commission in reviewing the
extent to which various QFs should continue to be exempt from various
provisions of the FPA and state laws.
H.
Other Issues with Respect to Section 210(n)
1.
Background
111. A number of commenters have asked the Commission to define
what a “new cogeneration facility” is for purposes of
EPAct 2005. Specifically, they want the Commission to clarify that an
existing QF does not become subject to the requirements of newly
added Section 210(n) of PURPA when it files for recertification.
2.
Comments
112. ELCON and many other commenters maintain that change in
ownership or other modifications should not convert an “existing
facility” to “new facility” on recertification.
They request that the regulations clarify that the new standards
apply only to “new facilities,” those being built and
first certified after the EPAct 2005 effective date. They
argue that the requirements of Section 210(n) of PURPA should not
apply to facilities that are requesting recertification.
113. SoCal Edison opposes ELCON's suggestion arguing that the
Commission's revised regulation for ‘new’ qualifying
cogeneration facility should apply to a cogeneration facility that
seeks recertification as a QF. It argues that an existing qualifying
cogeneration facility substantially modified or altered in a way not
covered by 18 C.F.R. §292.207 (a)(2)(i) and completing an extensive
re-powering of the facility or converting from one technology to
another should be subjected to the revised regulation for “new”
qualifying cogeneration facilities.
114. Cinergy Solutions and EPSA seek clarification from the
Commission that a QF facility designated as an old facility under the
Commission's rules should not subsequently become a new facility
because of non-compliance for a certain period or withdrawal of an
application. EPSA requests that the Commission confirm that,
notwithstanding future changes in the allocation of QF benefits, as a
result of elimination of QF ownership criteria or otherwise, such
future changes will have no retroactive effect on the QF status for
periods prior to the effective date of the new rules.
3.
Commission Determination
115. Initially, we note that the regulatory text adopted in
§292.207(d) defines what cogeneration facilities will be
considered new cogeneration facilities. In addition, we clarify that
there is a rebuttable presumption that an existing QF does not become
a “new cogeneration facility” for purposes of the
requirements of newly added Section 210(n) of PURPA merely because it
files for recertification. However, we caution that changes to an
[30,100]
existing cogeneration facility could be so great (such as an increase
in capacity from 50 MW to 350 MW) that what an applicant is claiming
to be an existing facility should, in fact, be considered a “new”
cogeneration facility at the same site.
IV.
Information Collection Statement
116. The Office of Management and Budget (OMB) regulations
require approval of certain information collection requirements
imposed by agency rules. 26 Upon approval of a
collection of information, OMB will assign an OMB control number and
an expiration date. Respondents subject to the filing requirements of
this rule will not be penalized for failing to respond to these
collections of information unless the collections of information
display a valid OMB control number.
117. The Commission is amending its regulations to implement
Section 1253(a) of the EPAct 2005; specifically, its regulations
governing qualifying small power production and cogeneration
facilities. The Commission's regulations, in 18 C.F.R. Parts 131 and 292, specify the certification procedures
that must be followed by small power production and cogeneration
facilities seeking QF status; specify the criteria that must be met;
specify the information which must be submitted to the Commission in
order to obtain QF status; specify the benefits which are available
to QFs; and specify the transaction obligations of electric utilities
with respect to QFs. The information provided to the Commission under
Parts 131 and 292 is identified as Form 556. In addition, the
Commission is amending its regulations providing exemptions to
qualifying facilities; among other things, certain entities will be
subject to the provisions of Section 205 of the FPA and Part 35 of
the Commission's regulations. The information provided to the
Commission under Part 35 is identified as FERC-516.
The Commission is submitting these reporting requirements to
OMB for its review and approval under Section 3507(d) of the
Paperwork Reduction Act. 27 Comments were
solicited on the Commission's need for this information, whether the
information will have practical utility, the accuracy of provided
burden estimates, ways to enhance the quality, utility, and clarity
of the information to be collected, and any suggested methods for
minimizing the respondent's burden, including the use of automated
information techniques. Comments were received noting that the NOPR
only mentioned costs associated with filing a revised Form 556, and
does not address the new applications and reports that will be
required due to the elimination of certain exemptions from the FPA
for QFs. Below we have revised the estimates provided in the NOPR to
account for the elimination of exemptions.
Burden Estimate: The Public Reporting burden for the
requirements proposed here are as follows:
Data Collection Number of No. of Hours Per
Total
Respondents Responses
Response Annual
FERC Form 556
FERC
27 1 4 108
Certification
Self-Certification 270 1 38
10,260
Sub Totals 297
10,368 *
FERC-516
205 filings 100 1 183 18,300
Electric 100 1 230
23,000
quarterly reports (initial)
Electric 100 3
6 1,800
Quarterly Reports (later)
Change of status 100
1 3 300
Sub-totals
100 43,400
*Off-setting
changes to FERC-556; no change to current burden.
Total Annual Hours for Collection: (Reporting +
recordkeeping (if appropriate)=43,400 hours (excludes the 10,368
hours for FERC-556).
Information Collection Costs: Costs for
FERC-516=$15,190,000 (43,400 hours @ $350 an hour). Costs for
FERC-556=$3,591,000 (10,260 hours at $350 an hour) + $37,800 (108
hours @ $350 an hour=$3,628,800. (The hourly rate includes attorney
fees, engineering consultation fees and administrative support.)
Title: FERC Form 556 “Cogeneration and Small Power
Production”
Action: Proposed Collections
OMB Control No: 1902-0075
Respondents: Business or other for profit
Frequency of Responses: On occasion
Necessity of the Information: This Final Rule adopts the
Congressional mandate found in Section 1253(a) of EPAct 2005 to
implement the establishment of criteria for new qualifying
cogeneration facilities; and the elimination of ownership
limitations. By amending its regulations, the Commission is
satisfying the statutory mandate and also satisfying its continuing
obligation to review its policies encouraging cogeneration and small
power production, energy conservation, efficient use of facilities
and resources by electric utilities and equitable rates for energy
customers. The information collected under 18 C.F.R. Parts 131 and 292 is used by the Commission to determine
whether an application for certification (Commission certification or
self-certification) meets the criteria for a qualifying small power
production facility or a qualifying cogeneration facility under its
regulations and eligible to receive the benefits available to it
under PURPA. The information collected under 18 C.F.R. Part 35 is used by the Commission to carry out
its statutory responsibility to assure that electric rates are just
and reasonable. Sufficient detail must be obtained for the Commission
to make informed decisions concerning appropriate cost and rate
levels and to aid customers and other parties who may wish to
challenge costs and rates. A public utility must obtain Commission
authorization for all rates and charges for wholesale sales and
transmission of electric energy in interstate commerce. The
Commission is authorized to investigate the rates charged by public
utilities for such sales and transmission. If, after investigation,
the Commission determines that the rates are unjust and unreasonable
or unduly discriminatory or preferential, the Commission is
authorized to determine and prescribe the just and reasonable rates.
Internal review: The Commission has reviewed the
requirements pertaining to qualifying small power production and
cogeneration facilities and determined the proposed requirements are
necessary to meet the statutory provisions of EPAct 2005, PURPA and
the FPA.
These requirements conform to the Commission's plan for
efficient information collection, communication and management within
the energy industry. The Commission has assured itself, by means of
internal review, that there is specific, objective support for the
burden estimates associated with the information requirements.
Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street, N.E., Washington, D.C., 20426 [Attention: Michael
Miller, Office of the Executive Director, Phone: (202) 502-8415, fax:
(202) 273-0873, e-mail: <michael.miller@ferc.gov>.
[30,102]
V.
Environmental Analysis
118. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that
may have a significant adverse effect on the human environment. 28
The Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. As explained above, this Final Rule interprets
amendments made to PURPA by EPAct 2005, and clarifies the
applicability of these amendments to QFs; it does not substantially
change the effect of the legislation. Accordingly, no environmental
consideration is necessary. 29
VI.
Regulatory Flexibility Act Analysis
119. The Regulatory Flexibility Act of 1980 (RFA) 30
generally requires a description and analysis of final rules that
will have significant economic impact on a substantial number of
small entities. In the NOPR, we stated that many, if not most, QFs to
which this rule would apply do not fall within the definition of
small entities, citing the RFA's definition that a small entity is “a
business that is independently owned and not dominant in its field of
operation.” 31 The Non-Utility QF Group,
however, argues that the Commission's proposals will impact small
entities. It argues that it is likely that a majority of QFs are
owned in whole, or at least up to 50 percent, by small entities. It
argues that under Small Business Administration (SBA) standards, an
electric production firm is considered “small” if its
output does not exceed 4 million MWh per year. It also argues that
the forms and applications that will be required due to the
modification of exemptions, including Section 203 applications,
Section 205 tariffs, electronic quarterly reports and triennial
market power reports, will cause a significant impact on a
substantial number of small entities.
120. First, we note that certain rules are exempt from the
RFA's requirements; exempt rules include interpretive rules, general
statements of policy, or rules of agency organization procedure and
practice. Interpretive rules “generally interpret the intent
expressed by Congress, where an agency does not insert its own
judgments or interpretations in interpreting a rule and simply
regurgitates statutory language.” This Final Rule to a large
extent is an interpretive rule; Congress directed the Commission in
Section 1253 of EPAct to revise our regulations governing new
cogeneration facilities, and we have responded by following our
statutory mandate.
121. Moreover, many QFs, although certainly not all, would not
be considered “small,” even under the SBA's standards.
Also, while there will be QFs that are small and that will be
affected by the Final Rule, we also have included numerous provisions
in the Final Rule designed to reduce the Final Rule's impact on such
small entities. First, in response to commenters, the Final Rule
provides that facilities 20 MW or smaller shall remain exempt from
Sections 205 and 206 of the Federal Power Act (this is an increase
from five MW or smaller as proposed in the NOPR). The Final Rule
further provides that sales that occur pursuant to existing contracts
will continue to be exempt from Section 205 of the FPA. In addition,
the Final Rule also provides a rebuttable presumption that new
cogeneration facilities that are 5 MW or smaller satisfy both the
requirement that the thermal output of a new cogeneration facility is
used in a productive and beneficial manner and the requirement that
the electrical, thermal, chemical, and mechanical output of a new
cogeneration facility is used fundamentally for industrial,
commercial, residential or institutional purposes. The Final Rule
also provides that a qualifying facility shall retain its exemption
from Sections 205 and 206 of the Federal Power Act when its power
sales are made pursuant to a state regulatory authority's
implementation of PURPA. This will mean that many QF power sales will
continue to be exempt from Sections 205 and 206 of the Federal Power
Act.
122. The Final Rule also interprets PURPA to permit the
Commission to exempt QFs from the newly enacted Public Utility
Holding Company Act of 2005, and, accordingly, exempts QFs from that
statute. In addition, to the extent the proposed regulations remove
now-unnecessary regulations such as ownership limitations for
qualifying cogeneration and small power production facilities, the
proposed regulations will be beneficial to QFs.
VII.
Document Availability
123. In addition to publishing the full text of this document
in the Federal Register, the Commission provides all
interested persons an opportunity to view and/or print the contents
of this document via the Internet through the Commission's Home Page
<http://www.ferc.gov> and in the Commission's Public Reference
Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern
time) at 888 First Street, N.E., Room 2A, Washington, D.C. 20426.
124. From the Commission's Home Page on the Internet, this
information is available in the Commission's document management
system, eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing,
and/or downloading. To access this document in eLibrary, type the
docket number excluding the last three digits of this document in the
docket number field.
125. User assistance is available for eLibrary and the
Commission's web site during normal business hours. For assistance,
please contact FERC Online Support at 1-866-208-3676 (toll free) or
(202) 502-8222 (email at <FERCOnlinesupport@ferc.gov>), or the
Public Reference Room at (202) 502-8371, TTY (202) 502-8659 (E-Mail
the Public Reference Room at <public.referenceroom@ferc.gov>).
VIII.
Effective Date
126. These regulations are effective March 17, 2006.
The Commission has determined, with the concurrence of the
Administrator of the Office of Information and Regulatory Affairs of
OMB, that this rule is not a “major rule” as defined in
Section 351 of the Small Business Regulatory Enforcement Fairness Act
of 1996.
List of subjects in 18 C.F.R. Parts 131 and 292
Electric power, Electric power plants, Electric utilities,
Natural gas, Reporting and recordkeeping requirements.
By the Commission.
Magalie R. Salas,
Secretary.
[Note:]:
The following Appendix will not be published in the Code of
Federal Regulations.
Appendix
List of Petitioners Requesting Clarification or Submitting
Comments
American Chemistry Council
American Electric Power Service Corporation jointly with AEP Texas North Company, AEP Texas Central Company, Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company, Kingsport Power Company, Ohio Power Company, Public Service Company of Oklahoma, Southwestern Electric Power Company, and Wheeling Power Company (collectively, AEP)
American Forest & Paper Association (American Forest & Paper)
American Public Power Association (APPA)
American Wind Energy Association (AWEA)
ARIPPA
California Electricity Oversight Board (CEOB)
Calpine Corporation (Calpine)
CE Generation, LLC (CE Generation)
Cinergy Solutions, Inc. (Cinergy)
Cogeneration Association California jointly with Energy Producers and Users Coalition, Cogeneration Coalition of Washington, and Nevada Independent Energy Coalition (collectively, QF Parties)
Cogentrix Energy, inc. (Cogentrix) jointly with Goldman Sachs Group, Inc. (Goldman Sachs) (collectively, Independent Sellers)
Constellation Energy Group, Inc. (Constellation)
Council of Industrial Boiler Owners (CIBO)
Delta Power Company, LLC (Delta Power) jointly with Juniper Generation, LLC (Juniper), and California Cogeneration Council (California Cogen)
Department of Housing and Urban Development
Dow Chemical Company (Dow)
Edison Electric Institute (EEI)
Edison Mission Energy jointly with Edison Mission Marketing & Trading, Inc., Midwest Generation EME, LLC (collectively, Edison Mission Energy) (intervention only)
Electric Power Supply Association (EPSA)
Electricity Consumers Resource Council (ELCON) jointly with American Iron and Steel Institute (AISI) (collectively, Industrial Consumers)
Enel North America, Inc. (Enel)
Entergy Services, Inc. jointly with Entergy Arkansas, Inc.; Entergy Gulf States, Inc.; Entergy Louisiana, Inc.; Entergy Mississippi, Inc.; and Entergy New Orleans, Inc. (collectively, Entergy)
Environmental Protection Agency
The Fertilizer Institute (Fertilizer Institute)
Florida Industrial Cogeneration Association (Florida Industrial Cogeneration)
GE Energy Financial Services (GE)
Granite State Hydropower Association, Inc. (Granite State Hydropower)
Illinois Landfill Gas Coalition (Illinois Landfill Gas)
Indeck Energy Services, Inc. (Indeck)
Kentucky Public Service Commission (Kentucky Commission)
Marina Energy, LLC (Marina Energy)
National Association of Regulatory Utility Commissioners (NARUC)
National Rural Electric Cooperative Association (NRECA)
New York State Electric & Gas Corporation (NYSEG) jointly with Rochester Gas and Electric Corporation (Rochester G&E)
Non-Utility QF Group
North Carolina Eastern Municipal Power Agency (NCEMPA)
Occidental Chemical Corporation (Occidental)
Oklahoma Corporation Commission (Oklahoma Commission)
Oklahoma Gas and Electric Company (OG&E)
Pacific Gas and Electric Company (PG&E)
Primary Energy Ventures LLC (Primary Energy)
Process Gas Consumers Group Electricity Committee (Electricity Committee)
Progress Energy, Inc. (Progress Energy)
Public Service Company of New Mexico (PSNM) jointly with Texas-New Mexico Power Company (TNP)
Public Service Electric and Gas Company jointly with PSEG Power LLC, PSEG Energy Resources & Trade LLC, and PSEG Global L.L.C. (collectively, PSEG)
Public Utility Commission of Ohio (Ohio Commission)
Ridgewood Renewable Power, LLC (Ridgewood)
Solar Turbines Incorporated (Solar Turbines)
Southern California Edison Company (SoCal Edison)
Transmission Access Policy Study Group (TAPS)
U.S. Combined Heat and Power Association (USCHPA)
U.S. Environmental Protection Agency (EPA)
Xcel Energy Services Inc. (Xcel)
York County Solid Waste and Refuse Authority (York County)
1
Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005).
2 Pub. L. No. 109-58, §1253, 119 Stat. 594, 967-70 (2005).
3 Form 556 is set forth in 18 C.F.R. §131.80 (2005).
4 16 U.S.C. §§824 et seq. (2000).
5 15 U.S.C. §79 (2000); Pub. L. No. 109-58, §§1261-77, 119 Stat. 594, 972-78 (2005).
6 Revised Regulations Governing Small Power Production and Cogeneration Facilities, 70 Fed. Reg. 60456 (October 18, 2005), FERC Statutes and Regulations ¶32,590 (2005).
7 Id.
8 See 18 C.F.R. §131.80, Part C, 15(i) (2005).
9 QF applicants may provide studies or testimony to support compliance with this new standard.
10 See NOPR at P 14.
11 Id. at P 11.
15 18 C.F.R. §388.112 (2005).
16 To the extent that commenters suggest that the Commission change its regulations containing criteria applicable to existing cogeneration facilities, those suggestions are inconsistent with Section 210(n)(2) of PURPA, which states that the Commission does not have the authority to change the criteria for existing QFs:
“Notwithstanding
rule revisions under paragraph (1), the Commission's criteria for
qualifying cogeneration facilities in effect prior to the date on
which the Commission issues the final rule required by paragraph (1)
shall continue to apply to any cogeneration facility that —(A)
was a qualifying cogeneration facility on the date of enactment of
subsection (m) [ i.e., August 8, 2005], or (B) had filed with
the Commission a notice of self-certification, self-recertification
or an application for Commission certification under 18 C.F.R.
§292.207 prior to the date on which the
Commission issues the final rule required by paragraph (1) [ i.e.,
the date of issuance of this Final Rule].”
17 Recently built cogeneration facilities have been dominated by natural gas fired technologies. Their construction has been driven by lower capital costs in comparison to coal facilities and the anticipation of moderately priced natural gas. A coal-fired facility, in contrast, typically will recover its more substantial investment over a longer period of time. While newer coal-fired generation technologies could offer greater fuel efficiency and better environmental performance than older designs, they also require greater capital investment. It is not the intent of the Commission to discourage more economic coal-fired generation technologies. Commenters also feel that applying an efficiency standard to coal-fired facilities is likely to impose additional barriers for cogeneration at coal-fired facilities, undercutting the underlying statutory directive to encourage cogeneration by hampering the flexibility of coal-fired cogeneration units to shutdown their facilities for repairs, or engage in other maintenance. Therefore, the Commission will impose no new efficiency standards for new coal-fired cogeneration facilities at this time.
18 18 C.F.R. §292.207 (2005).
19 18 C.F.R. §292.207 (d)(1)(iii) (2005).
20 18 C.F.R. §292.207 (a)(1)(iv) (2005).
21 18 C.F.R. §292.207 (a)(1)(ii) (2005).
22 Pub. L. No. 109-58, §§1281-83, 119 Stat. 594, 978-80 (2005).
23 See Pub. L. No. 109-58, §§1261-77, 119 Stat. 594 972-78 (2005).
24 As we discuss below, such sales may be otherwise exempt because they are from facilities 20 MW or smaller or because they are made pursuant to a state regulatory authority's implementation of PURPA.
25 16 U.S.C. §824 a-1(a)(2).
26 5 C.F.R. §1320.13 (2005).
27 44 U.S.C. §3507(d) (2000).
28 Regulations Implementing the National Environmental Policy Act, Order No. 486, 52 Fed. Reg. 47897 (December 17, 1987), FERC Statutes and Regulations, Regulations Preambles 1986-1990 ¶30,783 (1987).
29 18 C.F.R. §380.4 (a)(2)(ii) (2005).
30 5 U.S.C. §§601 - 12 (2000).
31 15 U.S.C §632 (2000).
Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order No. 671-A, May 30, 2006, Docket No. RM05-36-001, 18 CFR 292, 71 FR 30585
[30,400]
71 FR 30585 (May 30, 2006)
18
C.F.R. Part 292
[Docket
No. RM05-36-001; Order No. 671-A]
Revised
Regulations Governing Small Power Production and Cogeneration
Facilities
(Issued May 22, 2006)
AGENCY:
Federal Energy Regulatory Commission.
ACTION:
Final Rule; Order on Rehearing.
SUMMARY:
In this order on rehearing, the Federal Energy Regulatory Commission
(Commission) reaffirms its determinations and grants clarification in
part of Order No. 671, which
amended the Commission's regulations governing small power production
and cogeneration facilities.
EFFECTIVE
DATE: The Final Rule and order on rehearing will become effective
June 29, 2006.
FOR
FURTHER INFORMATION CONTACT: Paul Singh (Technical Information),
Office of Energy Markets and Reliability, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, D.C. 20426, (202)
502-8576.
Samuel Higginbottom (Legal Information), Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington, D.C. 20426, (202) 502-8561.
Eric D. Winterbauer (Legal Information), Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington, D.C. 20426, (202) 502-8329.
SUPPLEMENTARY
INFORMATION:
1. On February 2, 2006, the Federal Energy Regulatory
Commission (Commission) issued Order No. 671, 1 in which the Commission revised its
regulations governing qualifying small power production and
cogeneration facilities. Specifically, the Commission, among other
things, eliminated certain exemptions from rate regulation that were
previously available to qualifying facilities (QFs). Several parties
have requested rehearing or clarification. For the reasons discussed
below, we deny the requests for rehearing and grant clarification in
part.
Introduction
2. Order No. 671 was
issued in response to the Energy Policy Act of 2005 (EPAct 2005),2
which modified in relevant part section 210 of the Public Utility
Regulatory Policies Act of 1978 (PURPA). Specifically, Order No. 671 sought to: (1) ensure that new
qualifying cogeneration facilities are using their thermal output in
a productive and beneficial manner; that the electrical, thermal,
chemical and mechanical output of new qualifying cogeneration
facilities is used fundamentally for industrial, commercial,
residential or institutional purposes; and that there is continuing
progress in the development of efficient electric energy generating
technology; (2) amend Form 5563 to reflect the
criteria for new qualifying cogeneration facilities; (3) eliminate
ownership limitations for qualifying cogeneration and small power
production facilities; and (4) amend the exemptions available to QFs
from the requirements of the Federal Power Act (FPA)4
and the Public Utility Holding Company Act of 1935 (PUHCA 1935).5
ARIPPA,6 the National Rural Electric Cooperative
Association (NRECA) and the Non-Utility QF Group have requested
rehearing.
Exemption
of QFs from FPA Section 205/206 Authority
Background
3. In Order No. 671, the
Commission stated that in light of significant changes that have
occurred in the industry since the first QF facilities were
introduced and in light of changing electric markets and resulting
market power issues that have arisen in recent years, it was no
longer necessary or appropriate to completely exempt QFs from
Sections 205 and 206 of the FPA.7 However, the
Commission clarified that QFs would continue to have an exemption
from Sections 205 and 206 of the FPA when a sale is made pursuant to
a state regulatory authority's implementation of PURPA. In addition,
to avoid creating the hardship that removal of exemptions might cause
for smaller QFs, the Commission provided that facilities 20 MW or
smaller would remain exempt from Sections 205 and 206 of the FPA.
Requests
for Rehearing
4. ARIPPA argues against the imposition of rate regulation on
QFs that are not owned by electric utilities. It argues that the rule
change is a “bait-and-switch,” in that it would impose
rate regulation on QF owners who had been induced to invest in and
develop QFs by the exemption from the state and federal rate
regulation.
5. ARIPPA points to the Commission's statement that “a
complete exemption is not necessary to encourage the development”
of cogeneration.8 It emphasizes the word
“development,” noting that this might be a reasonable
basis for a rule that newly-built QFs would not enjoy exemptions from
rate regulation, but argues that the statement does not address the
issue of the Commission's treatment of those who invested in such
facilities in the past in reliance on the exemption from rate
regulation. It argues that the Commission's statement that QF's had
no reasonable expectation that the rules would not be amended is
wrong. It argues that that was the inducement for developers to
invest.
6. ARIPPA argues that the Commission cites to no record for its
assertion that non-QF sales by QFs could potentially have a
significant market effect. It argues that the Commission did not cite
to a single indication that one or more non-utility QFs under common
ownership and control have achieved or could achieve market power. It
argues that Commission's assertion is mere speculation.
7. ARIPPA argues that the exception for QFs selling pursuant to
a state avoided-cost regime is inconsistent with other parts of the
existing rule. It argues that it is vague and that the uncertainty it
will create will stymie future development, despite Congress'
continuing charge to the Commission to continue to encourage
development. It contends that it is unclear how much variance from a
state avoided-cost regime is tolerable and how much crosses the line
and would cause the QF to lose its exemption from federal rate
regulation. It questions whether investors will be willing to
initiate development knowing that the process may be affected by such
uncertainties. It also questions whether it is in the public interest
for the Commission to set up what is sees as barriers and
disincentives to settlement of disputes arising during contract
negotiations between utilities and QFs.
8. NRECA, on the other side, argues that all power sales by QFs
owned by Commission-regulated public utilities should be subject to
Sections 205 and 206 even if the sales were made pursuant to a
state's implementation of PURPA. It states that Order No. 671 continues to exempt from Sections 205 and 206 any sales made
pursuant to a state PURPA implementation plan, even if the QF is
owned by a public utility.10 It argues that there
is no policy reason why such wholesale sales of power from QFs owned
by public utilities should be exempt from Commission review under
Sections 205 and 206, while all other wholesale sales by such public
utilities ( i.e., from resources other than QFs) are subject
to such review.
9. NRECA argues that all sales by QFs owned by public utilities
should be subject to the Commission's rate authority, whether such
sales are pursuant to an avoided cost rate or not. NRECA also states
that the filing of avoided cost contracts with the Commission will
enhance oversight and transparency, while not requiring
[30,402]
filing creates a risk of market power abuse.
10. NRECA further argues that all QFs that make non-PURPA sales
should be subject to Sections 205 and 206, no matter how small. It
states that it is sensitive to the needs of smaller QFs, but that a
QF as small as 5 MW could have a substantial impact upon a small
distribution cooperative. NRECA states that small QFs that believe
they are too small to handle public utility regulation may continue
to make sales pursuant to a state PURPA implementation plan, and
continue to be exempt from Section 205 and 206 (unless they are owned
by a public utility). NRECA adds that, on the other hand, if small
QFs want the flexibility available to utilities with market-based
rates and feel that they are large enough and sophisticated enough to
sell at market-based rates, they should be subject to Sections 205
and 206, like any other public utility that sells power at
market-based rates.
11. NRECA argues that, under Order No. 671, if a large public utility owned a
20 MW QF, it could make power sales from that QF without any
Commission review. It further argues that, if the facility were not a
QF, the public utility would not be able to make such a sale without
the Commission's express approval. It argues that this underscores
the potential for market power abuse and affiliate transaction abuse
that could occur if Order No. 671 is not changed.
12. The Non-Utility QF Group argues that the Commission should
increase the threshold for exemption from Sections 205 and 206 of the
FPA from 20 MW to 30 MW. First, it argues that the change would
simplify Commission regulation by maintaining a consistent 30 MW
threshold for all FPA exemptions as they apply to qualifying small
power production facilities. Second, it argues that, in PURPA,
Congress determined that 30 MW was a critical threshold for small
power production facilities, and notes that Congress did not disturb
that threshold in EPAct 2005. Thus, it argues, the Commission already
has a ready statutory reference for a 30 MW threshold, while the 20
MW threshold is more arbitrary. Third, it argues that the total
installed generation capacity for all qualifying cogeneration plants
under 30 MW, combined with the total installed generation capacity of
all qualifying small power production facilities under 30 MW, totals
a mere 7,095.5 MW. 11 It argues that this
represents less than 0.7 percent of the total installed generation
capacity in the U.S. in 2004. It argues that, accordingly, exemptions
for QFs less than 30 MW would not detract from the purposes of
Sections 205 and 206 of the FPA, and would serve both administrative
efficiency and Congressional mandates to avoid utility-type
regulation of entities having de minimis market presence.
Commission
Determination
13. We disagree that any original “bargain” has
been reneged on, or that the Commission has engaged in what ARIPPA
refers to as a “bait and switch.” The Commission granted
very broad exemptions from the FPA (and state laws) in order to
remove the disincentive of utility-type regulation from QFs.
Exemptions from FPA Sections 205 and 206 rate regulation were
necessary to encourage the development of QFs. However, at that time
the Commission had no way to predict how markets would develop in the
decades to follow. When the Commission first granted the exemptions
from Sections 205 and 206 of the FPA in 1980, there was no market for
electric energy produced by non-traditional generators and thus such
generators were rare. However, prompted originally by PURPA, markets
for electric energy produced by non-traditional generators have
developed. Now that these markets are in existence and provide a
forum for sales of electric energy produced by non-traditional
generators, the same level of encouragement for QFs is no longer
necessary; access to these markets provides encouragement.
Accordingly, it is no longer necessary to completely exempt QFs from
Sections 205 and 206 of the FPA in order to encourage development of
QFs.
14. Moreover, given these changes to energy markets, there will
be times when
[30,403]
Commission oversight of QF sales is appropriate and necessary under
Section 205 and 206 of the FPA. The passage and implementation of
EPAct 2005 has provided us an opportunity to now provide for such
oversight.
15. We remain unpersuaded that eliminating exemptions will
upset the legitimate expectations of QF owners, lenders and
investors. As we stated in Order No. 671, the exemptions previously granted
were always subject to revision and QFs had no justifiable
expectations that, no matter the changes in circumstances, changes in
the regulatory regime would not occur. In addition, the Commission
has already taken significant steps to ease any adverse impact.
Specifically, the Commission recognized that expectations reflected
in current contracts should be protected, and did so by
grandfathering the exemption from Sections 205 and 206 of the FPA for
existing contracts.12 However, on a prospective
basis, the need for oversight of QF sales is a compelling reason to
subject new contracts to rate regulation under Section 205 and 206 of
the FPA.
16. ARIPPA's argument that Order No. 671's changes to the exemptions from
Sections 205 and 206 of the FPA will discourage future development of
non-traditional generation is misplaced. The large number of non-QF
independent generators that have developed in recent years, addressed
in the many orders granting them market-based rate authority under
Section 205 of the FPA, indicate that the exemptions from Sections
205 and 206 are not necessary to promote non-traditional generation.
17. We find unpersuasive the arguments made by NRECA that even
sales made by utility-owned QFs that are subject to a state's PURPA
implementation plan should nevertheless be subject to Section 205 and
206 regulation. Our goal in part was and is to close the gap that had
developed in the regulatory regime that allowed some QF sales to
avoid any rate regulation.1 We believe that having
QF sales regulated at the state level is sufficient, and will allow
us to close the regulatory gap while not dramatically or
inappropriately increasing the regulatory burden on QFs.
18. Likewise, we find unpersuasive the arguments of the
Non-Utility QF Group and NRECA to change the threshold for Section
205/206 exemptions. The Non-Utility QF Group argues that the
threshold should be increased to 30 MW; NRECA argues that all
non-PURPA sales should be regulated no matter how small the QF. In
Order No. 671, we attempted to strike a balance by ensuring that QF sales
are regulated by either the states or the Commission while at the
same time easing the burden on the smallest facilities.14
In the NOPR, the Commission originally suggested that the exemptions
should remain in effect for QFs under 5 MW. Most commenters supported
the exemption for QFs under 5 MW, while some suggested a higher
figure.15 In response to those comments, the
Commission raised the threshold to 20 MW.16 The 20
MW threshold strikes a reasonable balance by protecting the smallest
facilities while ensuring that sales by larger QFs are subject to
Commission oversight.1 The arguments presented by
the Non-Utility QF Group are simply not compelling enough to persuade
us to raise the threshold further. In addition, we reject arguments
by NRECA to make all non-PURPA sales subject to rate regulation, no
matter how small the QF. We believe that an exemption from regulation
is still appropriate to ease the regulatory burden for the smallest
QFs.
Self-Certification
Background
19. In Opinion No. 671, the Commission retained the option to
self-certify for
[30,404]
new cogeneration facilities. The Commission also stated that
self-certifications and self-recertifications of new cogeneration
facilities would now be noticed in the Federal Register, in
order to enhance the visibility of self-certifications for interested
parties. The Commission further stated that a facility should not be
able to claim QF status without having made any filing with the
Commission. Accordingly, the Commission amended its regulations to
expressly require that a facility claiming QF status must file either
a notice of self-certification or an application for Commission
certification. 18
Requests
for Rehearing
20. NRECA argues that the Commission should not permit new
cogeneration facilities to self-certify. It states that the
“fundamental use” and “presumptively useful”
standards are subjective and that there are no guidelines established
yet on how the standard will be applied. It contends that, although
the Commission has stated that these factors will require a
case-by-case review, self-certification will be meaningless if the
Commission accepts a new cogeneration facility's unsupported
representation in a self-certification that it satisfies subjective
standards. It argues that, consequently, new cogeneration facilities
should at the present time be required to submit an application and
obtain a Commission determination as to its QF status. 19
21. NRECA further argues that the Commission's proposal in
Order No. 671
to notice self-certifications and self-recertifications in the
Federal Register is insufficient to ensure that new
cogeneration facilities satisfy the new standards for QF status,
given the inherently subjective and case-by-case nature of the
application of such new standards. It contends that, because QFs
frequently file self-certifications before they have approached an
electric utility for interconnection or power sales, electric
utilities would be compelled to monitor every self-certification
filing in order to determine whether the QF is planning to locate in
the electric utility's service territory. It further argues that,
until the new standards are better developed, it will be unclear on
what basis an electric utility could challenge a QF's qualifying
status. It contends that only electric utilities with significant
litigation resources will be in position to protect themselves from
inappropriate self-certifications, and that small cooperatives will
be at a disadvantage.
Commission
Determination
22. We deny rehearing. We find the processes and safeguards
included in Order No. 671 to be sufficient. As we noted in Order No.
671,
the Commission has the authority to review a self-certification.20
With this authority, the Commission is able to review the
self-certifications of new cogeneration facilities to ensure their
compliance with the new standards. NRECA argues that, for the first
self-certifications, there will be no prior cases that provide
guidelines on how to satisfy the standards. We think EPAct 2005's
statutory language and the newly-adopted regulations provide a
sufficient starting point, and we also expect such case law to
develop quickly so that QFs and electric utilities will have further
guidance on what is necessary to meet the new standards.
23. In addition, we disagree with NRECA's argument that
publication of notice in the Federal Register will not help to
ensure that prospective QFs comply with the new standards.
Publication of such notices will enhance the visibility of
self-certifications and self-recertifications for interested parties.
We expect that such visibility will allow attempted
self-certifications and self-recertifications of new cogeneration
facilities that fail to meet the new standards set forth in Order No.
671 to
be spotted quickly, and so help to ensure that such facilities
satisfy the new standards in Order No. 671.
PUHCA
Clarification
Background
24. In Order No. 671, the Commission stated that it interprets
PURPA to permit it to exempt QFs from the Public Utility Holding
Company Act of 2005 (PUHCA 2005) 21 in 18 C.F.R.
§292.602.
[30,405]
The
Commission stated that, accordingly, revised 18 C.F.R. §292.602 would now provide that a QF
shall not be considered an “electric utility company” as
defined by PUHCA 2005. We also stated in Order No. 671 that, consistent with recent
actions on FPA Section 203,22 QFs would be
considered “electric utility companies” for purposes of
Section 203(a)(2) of the FPA. 23
Requests
for Rehearing
25. The Non-Utility QF Group argues that there is a tension
between Order No. 671 and Order No. 669 24 in how the
two orders relate to transactions involving entities that only own
QFs and exempt wholesale generators (EWGs) for purposes of Section
203(a)(2) of the FPA. It states that, in Order No. 669, the Commission explained that,
regardless of their status under PUHCA 2005, QFs (and EWGs) will be
regarded as “electric utility companies” for purposes of
Section 203(a)(2), which addresses the acquisition of securities by
“holding companies” as defined in PUHCA 2005.25
It notes that the Commission also stated that, while most QFs
themselves remain exempt from Section 203, holding companies will
require Commission approval pursuant to Section 203 in order to
acquire an interest in a QF or an EWG.26 Finally,
it notes that the Commission in Order No. 669 stated that this would hold true
even if the holding company were a holding company solely by reason
of its ownership interest in QFs, EWGs and foreign utility companies
(FUCOs).
26. The Non-Utility QF Group states that, while it understands
why the Commission would want some review of acquisitions of large
QFs by holding companies having real generation or transmission
market power, it disagrees with the Commission's suggestion in Order
No. 669
that holding companies otherwise exempted by Congress from PUHCA
2005, i.e., owners only of QFs, EWGs and FUCOs, should be
subject to Section 203 requirements. It argues that this assertion
represents a potential dramatic increase in regulatory oversight over
independent companies that own precisely the types of smaller,
non-traditional generating plants that Congress has long sought to
encourage. It argues that it is “silly” to require every
500 KW landfill gas or hydroelectric plant to be subject to Section
203 just because it is being acquired by the owner of another small
QF.
27. The Non-Utility QF Group argues that a better balance is
provided by Order No. 671. It argues that, by exempting QFs from
PUHCA 2005's definition of “electric utility company,” a
QF would not be an “electric utility company” under PUHCA
2005, and therefore its upstream 10 percent owners would not be
“holding companies” under PUHCA 2005 —and therefore
would not be “holding companies” for purposes of Section
203(a)(2) of the FPA. 27
Commission
Determination
28. The Non-Utility QF Group is correct that there was an
inconsistency in the treatment of QFs with regards to their status
under PUHCA 2005. However, the Commission has corrected this
inconsistency in its order on rehearing of Order No. 667, 28 the Final
Rule which amended the Commission's regulations to implement the
repeal of PUHCA 1935 and the enactment of PUHCA 2005. In that order
on rehearing, the Commission clarified that QFs will not be excluded
from the definition of “electric utility company” but
added that the Commission intends nevertheless to exempt QFs
[30,406]
from PUHCA 2005 and most FPA requirements pursuant to the
Commission's PURPA authority to grant such exemptions.29
Accordingly, we will on rehearing here revise 18 C.F.R. §292.602 to remove the statement that
a QF is not an “electric utility company” within the
meaning of PUHCA 2005, and to provide an exemption from PUHCA 2005.
As to FPA Section 203, the definition of “electric utility
company” in that context was addressed in Order No. 669-A. 30
The
Commission orders:
Rehearing is hereby denied and clarification is hereby granted
in part, as discussed in the body of this order.
List
of Subjects
18
C.F.R. Part 292
Electric Power Plants, Electric utilities, Natural gas,
Reporting and recordkeeping requirements.
By the Commission.
Magalie R. Salas,
Secretary.
1
Revised Regulations Governing Small Power Production and
Cogeneration Facilities, Order No. 671, 71 Fed. Reg. 7852
(February 15, 2006), FERC Statutes and Regulations ¶31,203 (2006).
2 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005).
3 18 C.F.R. §131.80.
4 16 U.S.C. §§824 et seq.
5 15 U.S.C. §79; See Pub. L. No. 109-58, 1261-77, 119 Stat. 594, 972-78 (2005).
6 ARIPPA, formerly known as the Anthracite Region Independent Power Producers Association, states that it is a not-for-profit association comprising fourteen independent power producers in Pennsylvania that generate approximately 1,346 MW of electrical power buring coal mining refuse.
7 16 U.S.C. §§824d, 824e.
8 Id. at 6 ( citing Order No. 671 at P 96).
9 NRECA Request for Rehearing at 5.
10 Id. ( citing Order No. 671 at P 99).
11 Non-Utility QF Group Request for Rehearing at 4-5 ( citing U.S. Department of Energy Annual Electric Generator Report (2004)).
12 Order No. 671 at P 97.
13 Id. at PP 95-96.
14 Id. at P 98.
15 Id. at P 87.
16 Id. at P 98.
17 The 20 MW threshold adopted in Order No. 671 is also consistent with the 20 MW size limit for small generating facilities found in Order No. 2006. Standardization of Small Generator Interconnection Agreements and Procedures, Order No. 2006, 70 Fed. Reg. 34,190 (June 13, 2005), FERC Statutes and Regulations, Regulations Preambles 2001-2005 ¶31,180 at P 75 (2005), order on reh'g, Order No. 2006-A, 70 Fed. Reg. 71,760 (November 30, 2005), FERC Statutes and Regulations, Regulations Preambles 2001-2005 ¶31,196 (2005).
18 Id. at PP 78-83.
19 NRECA Request for Rehearing at 8.
20 Order No. 671 at P 78.
21 Pub. L. No. 109-58, 1261-77, 119 Stat. 594, 972-78 (2005).
22 16 U.S.C. §824b.
23 Order No. 671 at P 102.
24 Transactions Subject to FPA Section 203, Order No. 669, 71 Fed. Reg. 1348 (January 6, 2006), FERC Statutes and Regulations, Regulations Preambles 2001-2005 ¶31,200 (2005), order on reh'g, Order No. 669-A, 71 Fed. Reg. 28,422 (May 16, 2006), FERC Statutes and Regulations ¶31,214 (2006).
25 See Non-Utility QF Group Request for Rehearing at 5.
26 Id. ( citing Order No. 669 at PP 59-60 and 70).
27 Id. at 6 ( citing Order No. 671 at PP 92-94).
28 Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order No. 667, 70 Fed. Reg. 75,592 (December 20, 2005), FERC Statutes and Regulations, Regulations Preambles 2001-2005 ¶31,197 (2005), order on reh'g, Order No. 667-A, 71 Fed. Reg. 28,446 (May 16, 2006), FERC Statutes and Regulations ¶31,213 (2006).
29 See Order No. 667 at P 14 n. 31.
30 Order No. 669-A at PP 41-54.
ATTACHMENT E
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
[Docket No. IC09-914-000]
COMMISSION INFORMATION COLLECTION ACTIVITIES (FERC-914);
COMMENT REQUEST; EXTENSION
(March 30, 2009)
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of proposed information collection and request for comments.
SUMMARY: In compliance with the requirements of section 3506(c) (2) (a) of the Paperwork Reduction Act of 1995 (Pub. L. No. 104-13), the Federal Energy Regulatory Commission (Commission or FERC) is soliciting public comment on the specific aspects of the information collection described below.
DATES: Comments on the collection of information are due June 1, 2009.
ADDRESSES: Comments may be filed either electronically or in paper format, and should refer to Docket No. IC09-914-000. Documents must be prepared in an acceptable filing format and in compliance with Commission submission guidelines at http://www.ferc.gov/help/submission-guide.asp.
Comments may be eFiled. The eFiling option, under the Documents & Filings tab on the Commission's home web page (www.ferc.gov), directs users to the eFiling web page. First-time users follow the eRegister instructions on the eFiling web page to establish a user name and password before eFiling. Filers will receive an emailed confirmation of their filed comments. Commenters filing electronically should not make a paper filing. If electronic filing is not possible, deliver original and 14 paper copies of the filing to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, NE, Washington, DC 20426.
Parties interested in receiving automatic notification of activity in this docket may do so through eSubscription. The eSubscription option under the Documents & Filings tab on the Commission’s home web page directs users to the eSubscription web page. Users submit the docket numbers of the filings they wish to track and will subsequently receive an email notification each time a filing is made under the submitted docket numbers. First-time users will need to establish a user name and password before eSubscribing.
Filed comments and FERC issuances may be viewed, printed and downloaded remotely from the Commission’s website. The eLibrary link found at the top of most of the Commission’s web pages directs users to FERC’s eLibrary. From the eLibrary web page, choose General Search, and in the Docket Number space provided, enter IC09-914 then click the Submit button at the bottom of the page. For help with any of the Commission’s electronic submission or retrieval systems, email FERC Online Support: ferconlinesupport@ferc.gov, or telephone toll-free: (866) 208-3676 (TTY (202) 502-8659).
FOR FURTHER INFORMATION CONTACT: Ellen Brown may be reached by telephone at (202)502-8663, by fax at (202)273-0873, and by e-mail at ellen.brown@ferc.gov .
SUPPLEMENTARY INFORMATION: FERC is requesting comments on the FERC-9149, “Cogeneration and Small Power Production - Tariff Filings”, OMB Control No. 1902-0231. The information filed in FERC-914 enables the Commission to exercise its wholesale electric rate and electric power transmission oversight and enforcement responsibilities in accordance with the Federal Power Act, the Department of Energy Organization Act (DOE Act) and EPAct 2005.
In Orders 671 and 671-A,10 the Commission revised its regulations that govern qualifying small power production and cogeneration facilities. Among other things, the Commission eliminated certain exemptions from rate regulation that were previously available to qualifying facilities (QFs). New qualifying facilities may need to make tariff filings if they do not meet the new exemption requirements of 18 CFR Part 292.
Section 205(c) of the FPA requires that every public utility have all of its jurisdictional rates and tariffs on file with the Commission and make them available for public inspection, within such time and in such form as the Commission may designate. Section 205(d) of the FPA requires that every public utility must provide notice to FERC and the public of any changes to its jurisdictional rates and tariffs, file such changes with FERC, and make them available for public inspection, in such manner as directed by the Commission. In addition, FPA section 206 requires FERC, upon complaint or its own motion, to modify existing rates or services that are found to be unjust, unreasonable, unduly discriminatory or preferential. FPA section 207 further requires the Commission upon complaint by a state commission and a finding of insufficient interstate service, to order the rendering of adequate interstate service by public utilities, the rates for which would be filed in accordance with FPA sections 205 and 206.
FERC implemented the Congressional mandate of EPAct 2005 to establish criteria for new qualifying cogeneration facilities by: (1) amending the exemptions available to qualifying facilities from the FPA and from PUHCA [resulting in the burden imposed by FERC-914, the subject of this Notice]; (2) ensuring that these facilities are using their thermal output in a productive and beneficial manner; that the electrical, thermal, chemical and mechanical output of new qualifying cogeneration facilities is used fundamentally for industrial, commercial, residential or industrial purposes; and there is a continuing progress in the development of efficient electric energy generating technology; (3) amending the FERC Form 55611 to reflect the criteria for new qualifying cogeneration facilities; and (4) eliminating ownership limitations for qualifying cogeneration and small power production facilities. FERC satisfied the statutory mandate and its continuing obligation to review its policies encouraging cogeneration and small power production, energy conservation, efficient use of facilities and resources by electric utilities and equitable rates for energy customers.
ACTION: The Commission is requesting a three-year extension of the current expiration date for the FERC-914Error: Reference source not found, with no changes to the reporting requirements.
BURDEN STATEMENT: Public reporting burden for this collection is estimated at:
FERC Data Collection -FERC-914 |
Number of Respondents Annually (1) |
Number of Responses Per Respondent (2) |
Average Burden Hours Per Response (3) |
Total Annual Burden Hours (1)x(2)x(3) |
FPA Section 205 filings |
100 |
1 |
183 |
18,300 |
Electric quarterly reports (initial) |
100
|
1
|
230
|
23,000
|
Electric quarterly reports (later) |
100 |
3 |
6 |
1,800 |
Change of status |
100 |
1 |
3 |
300 |
Total |
|
|
|
43,400 |
The estimated total annual cost to respondents is $2,676,966.10 [43,400 hours divided by 2,080 hours12 per year, times $128,29713 equals $2,676,966.10]. The cost per respondent is $26,769.66. The estimated burden covers the qualifying facilities required to file electric quarterly reports, change of status filings, and tariff filings to comply with section 205 of the Federal Power Act (FPA).
The reporting burden includes the total time, effort, or financial resources expended to generate, maintain, retain, disclose, or provide the information including: (1) reviewing instructions; (2) developing, acquiring, installing, and utilizing technology and systems for the purposes of collecting, validating, verifying, processing, maintaining, disclosing and providing information; (3) adjusting the existing ways to comply with any previously applicable instructions and requirements; (4) training personnel to respond to a collection of information; (5) searching data sources; (6) completing and reviewing the collection of information; and (7) transmitting, or otherwise disclosing the information.
The estimate of cost for respondents is based upon salaries for professional and clerical support, as well as direct and indirect overhead costs. Direct costs include all costs directly attributable to providing this information, such as administrative costs and the cost for information technology. Indirect or overhead costs are costs incurred by an organization in support of its mission. These costs apply to activities which benefit the whole organization rather than any one particular function or activity.
Comments are invited on: (1) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. permitting electronic submission of responses.
Kimberly D. Bose,
Secretary.
1 Normally, these requirements and burden would be included in FERC-516, “Electric Rate Schedule Filings” (OMB Control No. 1902-0096). However, FERC-516 is currently the subject of OMB review, so the Commission will continue to track these requirements (and the related burden hours) separately under FERC-914 [formerly labeled “FERC-914(516)”]. FERC-914 covers the tariff filing requirements under 18 CFR Part 35 for those qualifying facilities that do not meet the exemption requirements in 18 CFR Part 292.
In the future, the Commission will incorporate the FERC-914 reporting requirements and related burden into the FERC-516.
2 Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order No. 671, 71 FR 7852 (Feb. 15, 2006), FERC Stats. & Regs. ¶ 31,203 (2006); and Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order 671-A, 71 FR 30585 (May 30, 2006), in Docket No. RM05-36.
3 The FERC-556 is cleared separately as OMB Control No. 1902-0075 and is not a subject of this notice.
4 Electronic Tariff Filings, Order No. 714, 73 FR 57,515–57,538, (October 3, 2008).
5 The notice appeared in the Federal Register Vol. 74, No. 59 issued on Monday, March 30, 2009.
6 6 The “Cost per Staff Employee” is based on the estimated annual allocated cost per Commission employee for fiscal year 2009. The estimated $128,297 “cost” includes salaries, benefits and overhead.
7 Number of hours an employee works each year.
8 Average annual salary per employee.
9 Normally, these requirements and burden would be included in FERC-516, “Electric Rate Schedule Filings” (OMB Control No.1902-0096). However, FERC-516 is currently the subject of OMB review, so the Commission will continue to track these requirements (and the related burden hours) separately under FERC-914 [formerly labeled “FERC-914(516)”]. FERC-914 covers the tariff filing requirements under 18 CFR Part 35 for those qualifying facilities that do not meet the exemption requirements in 18 CFR Part 292.
In the future, FERC plans to incorporate the FERC-914 reporting requirements and related burden into the FERC-516.
10 Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order No. 671, 71 FR 7852 (Feb. 15, 2006), FERC Stats. & Regs. ¶ 31,203 (2006); and Revised Regulations Governing Small Power Production and Cogeneration Facilities, Order 671-A, 71 FR 30585 (May 30, 2006), in Docket No. RM05-36.
11 The FERC-556 is cleared separately as OMB Control No. 1902-0075 and is not a subject of this Notice.
12 Number of hours an employee works each year.
13 Average annual salary per employee.
| File Type | application/msword |
| File Title | Supporting Statement |
| Author | Heather Dowding |
| Last Modified By | Ellen Brown |
| File Modified | 2009-06-08 |
| File Created | 2009-06-08 |