RM19-15 NOPR--Commissioner Glick's Dissent in Part

CUI//PRIV

UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Qualifying Facility Rates and Requirements

Docket Nos.

Implementation Issues Under the Public Utility
Regulatory Policies Act of 1978

RM19-15-000
AD16-16-000

(Issued September 19, 2019)
GLICK, Commissioner, dissenting in part:
1.
I dissent in part from today’s notice of proposed rulemaking (NOPR) because it
would effectively gut the Public Utility Regulatory Policies Act (PURPA). 1 Our basic
responsibilities under PURPA are three-fold: (1) to encourage the development of
qualifying facilities (QFs); (2) to prevent discrimination against QFs by incumbent
utilities; and (3) to ensure that the resulting rates paid by electricity customers remain just
and reasonable and in the public interest. 2 As discussed further below, it is not clear from
the record or the discussion in today’s NOPR that many of the proposed changes will
satisfy those requirements. Although the record developed in response to this NOPR will
give us a basis to address those issues, I am deeply concerned that the Commission has
failed so far to show that certain aspects of its proposal satisfy our basic responsibilities
under the law.
2.
It appears that the Commission no longer believes that PURPA is necessary. I
disagree. I believe that the goals of PURPA—including the need to expand competition
and reduce our reliance on fossil fuels 3—remain as relevant now as ever. But our
apparent disagreement is beside the point. Whether PURPA’s goals remain relevant is a
decision for Congress, not an administrative agency. The Commission should not be
seizing the reins from Congress in order to isolate an important debate about national
energy policy within an independent regulatory agency.

1

Pub. L. No. 95-617, 92 Stat. 3117 (1978).

2

See 16 U.S.C. § 824a-3 (2018).

3

See Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 405
(1983) (describing Congress’s intent in enacting PURPA).

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000
I.

-2-

PURPA’s Continuing Relevance Is an Issue for Congress to Decide

3.
A fundamental reform to a major energy statute, particularly one that Congress
has been debated for decades, ought to come from Congress, not an independent
regulatory agency. For more than forty years, the Commission has rather consistently
interpreted Congress’s directives in PURPA. During that time, Congress has repeatedly
considered legislation to amend the statute, in some cases to expand its reach and in
others to pare it back. Indeed, almost from the moment PURPA was passed, Congress
began to hear many of the arguments being used today to justify scaling the law back.
Yet Congress only on one occasion—in 2005—significantly amended the statute. After a
lengthy debate, which included proposals to repeal PURPA, Congress adopted the
Energy Policy Act of 2005 (EPAct 2005), which left in place PURPA’s basic framework
but added a series of provisions that relieved utilities of their requirements in regions of
the country with robust wholesale energy markets. 4 Over the course of the last fourteen
years, Congress has continued to consider a wide range of proposals to reform PURPA,
some of which would have enacted into law many of the proposals advanced in this
NOPR. But Congress did not enact any of these reforms.
4.
Today’s NOPR flips that dynamic on its head. It removes an important debate
from the halls of Congress and isolates it within the Commission. That may help to
achieve certain stakeholders’ objectives and, no doubt, some Members of Congress that
have unsuccessfully sought to further reform PURPA will applaud this outcome. But
what should concern all of us is that resolving these sorts of questions by regulatory edict
rather than congressional legislation is neither a durable nor desirable approach for
developing energy policy.
5.
With those concerns in mind, the Commission’s explanation of the purported need
for reform rings hollow. The majority recites statistics to show that the energy landscape
has changed over the last 40 years. And there is no doubt that it has. Renewables are
growing rapidly and, in some parts of the country, are being financed in large numbers
without PURPA’s protections. 5 Natural gas production has increased in similarly
dramatic fashion and recently surpassed coal as the country’s principal source of fuel for
generating electricity. 6 But reams of statistics do not make a law irrelevant. The
majority and I might disagree about PURPA and the importance of its objectives, but that
4

Pub. L. No. 109-58, 119 Stat. 594 (2005).

5

See Qualifying Facility Rates and Requirements; Implementation Issues Under
the Public Utility Regulatory Policies Act of 1978, 168 FERC ¶ 61,184, at PP 19-21
(2019) (NOPR).
6

U.S. Energy Info. Admin., What is U.S. electricity generation by energy source?,
https://www.eia.gov/tools/faqs/faq.php?id=427&t=3 (last visited Sept. 19, 2019).

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-3-

is not a dispute that we, as Commissioners, should resolve. A policy debate about the
continuing relevance of PURPA—which, make no mistake, is what this NOPR is really
about—is an issue for Congress to resolve.
II.

Certain Proposed Revisions are Inconsistent with Our Statutory Obligations

6.
In addition to my general concerns about the direction and intent of today’s
NOPR, I have a number of more discrete objections regarding aspects of the
Commission’s proposal. I raise these concerns in particular because I believe that neither
the record established to date nor the rationale articulated in today’s NOPR suggest that
these changes are consistent with our obligations under PURPA. Accordingly, I am
especially interested in reviewing the record developed in response to these elements of
the proposed rule and I encourage parties to address these issues in detail in their
comments.
A.

Avoided Cost

7.
No issue has consumed as much attention in the debates over PURPA as how to
set avoided cost. Following PURPA’s enactment in 1978, the Commission introduced a
framework for setting “avoided cost” that allows each individual state to consider a wide
range of factors in identifying the “full” costs that are avoided when a utility purchases
energy and capacity from a QF. 7 The basic idea is that the avoided cost figure should
reflect the full cost that the utility would incur but for the purchase of the QF output of
energy or capacity, with each individual state enjoying considerable flexibility in
implementing that concept. 8 The Commission’s regulations also provide states the
flexibility to accommodate Congress’s intent that the rates paid to QFs “look beyond”
just “instantaneous cost savings” in order to consider savings over a longer time horizon. 9
7

See 18 C.F.R. § 292.304(e) (2019).

8

Small Power Production and Cogeneration Facilities; Regulations Implementing
Section 210 of the Public Utility Regulatory Policies Act of 1978, Order No. 69, FERC
Stats. & Regs. ¶ 30,128, at 30,865 (cross-referenced 10 FERC ¶ 61,150), order on reh’g,
Order No. 69-A, FERC Stats. & Regs. ¶ 30,160 (1980) (cross-referenced at 11 FERC ¶
61,166), aff’d in part & vacated in part sub nom. Am. Elec. Power Serv. Corp. v. FERC,
675 F.2d 1226 (D.C. Cir. 1982), rev’d in part sub nom. Am. Paper Inst. v. Am. Elec.
Power Serv. Corp., 461 U.S. 402 (1983) (API).
9

H.R. Rep. 95-1750, at 98-99 (1978) (Conf. Rep.) (“In interpreting the
incremental cost of alternative energy, the Conferees expect that the Commission and the
states may look beyond the costs of alternative sources which are instantaneously
available to the utility. Rather the Commission and states should look to the reliability of
(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-4-

8.
The NOPR proposes two fundamental changes to how avoided cost is calculated
and applied to QFs. First, it proposes to eliminate the requirement that a utility must
afford a QF the option to enter a contract at an avoided cost energy rate that is fixed or
known for the duration of the contract. 10 As things stand now, a QF generally has two
options for selling its output to a utility. Under the first option, the QF can sell its energy
on an as-available basis and receive an avoided cost rate calculated at the time of
delivery. This is generally known as the as-available option. Under the second option, a
QF can enter into a fixed duration contract at an avoided cost rate that is fixed either at
the time the QF establishes a legally enforceable obligation or at the time of delivery.
This is generally known as the contract option. The ability to choose between both types
sale options has played an important role in fostering the development of a variety of
QFs. For example, the as-available option provides a way for QFs whose principal
business is not generating electricity, such as industrial cogeneration facilities, to
monetize their excess electricity generation. The contract option, by contrast, provides
QFs who are principally in the business of generating electricity, such as small renewable
electricity generators, a relatively stable option that will allow them to secure financing.
Together, the presence of these two options have allowed the Commission to satisfy its
statutory mandate to encourage the development of QFs and ensure that the rates they
receive are non-discriminatory.
9.
I am concerned that the Commission’s proposal to allow utilities to eliminate the
fixed-price contract option will make it more difficult—or in some cases impossible—for
QFs to obtain financing. The option to enter a contract with a fixed or known price has
played in essential role in encouraging QF development. 11 In addition, those contracts
that power and the cost savings to the utility which may result at some later date by
reasons of supply to the utility at that time of power from the cogenerate or small power
producers.”).
10

The NOPR proposes to eliminate the contract option for the energy component,
keeping the long-term contract requirement in place for capacity. That sounds more
reasonable than it will often be in practice. The NOPR later clarifies that the fixed
capacity value may be zero if the state determines that the electric utility does not have a
need for additional capacity resources. See NOPR, 168 FERC ¶ 61,184 at P 67. That
would also mean that, in some instances, there would be no fixed element in an avoided
cost contract, which would seem inconsistent with the Commission’s rationale justifying
variable energy price contracts. See id. P 70.
11

See, e.g., June 29, 2016 Technical Conf. Tr. at 26-27 (Solar Energy Industries
Association) (“The Power Purchase Agreement is the single most important contract of
the development and financing of an energy project that’s not owned by a
utility. Without the long-term commitment to buy the output of that agreement at a fixed
(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-5-

have played an important role in ensuring that QFs receive non-discriminatory rates,
especially in areas of the country with vertically integrated utilities that are guaranteed to
recover the costs of their prudently incurred investments through retail rates. 12 Neither
the record nor the rationale in this NOPR addresses these concerns in a manner that is
even remotely convincing.
10.
Second, I am concerned about the implications of the Commission’s proposal to
determine that a locational marginal price (LMP) is a per se reasonable measure of an asavailable avoided cost for energy and to preliminarily advance several other
“Competitive Prices” that would also be sufficient. 13 Current regulations require states to
consider factors, including reliability and when the QF is available, when calculating the
avoided cost rate. Today’s NOPR proposes to allow states to ignore these factors and,
instead, rely entirely on LMP or a price set at a “liquid market hub.” That rule would
apply across the country, irrespective of whether the QF has access non-discriminatory
access to competitive markets. 14 That is notwithstanding the fact that the evidence the
Commission relies on to justify this proposal comes overwhelmingly from regions with
sophisticated RTO and ISO markets and/or restructured utilities.
11.
As an initial matter, I support introducing more competition into the
Commission’s implementation of PURPA. Liquid price signals can be useful and
transparent inputs that are worthy of considering as part of the overall calculation of an
appropriate avoided cost number that includes both the short-term and long-term costs
avoided by the utility’s purchases from QFs. But referencing the words “competitive”
and “market” over and over again is not the same thing as proof that there is sufficient
market competition. Many regions of the country—often the same regions where the
debates about PURPA are most heated—have not established competitive markets, let
alone non-discriminatory access to those markets for independent generators, even if
price, there is no predictable stream of revenue. Without a predictable stream of
revenues, there is no financing. Without any financing, there is no project.”).
12

See Statement of Travis Kavulla, Docket No. AD16-16-000, at 2 (June 29,
2016) (“Whether compensation for a QF is a matter of market clearing prices or of
administrative decision-making is largely a reflection of how larger or utility-owned
generation is compensated.”).
13
14

NOPR, 168 FERC ¶ 61,184 at PP 50, 55-60.

The NOPR proposes to allow states or utilities to use this liquid market price
only for the “as-available” energy sales rate, not the capacity rate or for QFs that choose
the contract option. But given that the Commission is also proposing to allow utilities to
eliminate the fixed-price contract option for energy sales, QFs may have no choice but to
rely on the “as-available” option for sales of energy.

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-6-

there are liquid market hubs for spot energy purchases. When combined with the
Commission’s proposal to allow utilities to eliminate the contract option, discussed
above, QFs may be reduced to relying solely on some synthetic measure of what spot
prices would be in a competitive market based on gas prices and heat rates. I am not
persuaded that this will satisfy our obligation to encourage QFs.
12.
Nor am I confident that this proposal will not result in discriminatory rates. In
regions of the country with vertically integrated utilities (including some parts of
RTO/ISO markets) the relevant utility will almost always receive guaranteed costrecovery on its generation investments. Indeed, state regulators will often effectively preapprove certain incumbent utility investments through those utilities’ integrated resource
plans, making it highly unlikely that the utility investments will ultimately be disallowed
as imprudent. Under those circumstances, it is not clear to me how a rule that
conclusively presumes that LMP—let alone some other measure of price—is a nondiscriminatory rate in those regions.
13.
I recognize that in some regions of the country—such as the RTOs and ISOs with
developed real-time and day-ahead markets and largely restructured utilities—this may
be an appropriate approach for calculating the as-available rate for energy, at least for
relatively large QFs. But the NOPR’s proposed revisions are not limited to those regions
and are not even predicated on utilities themselves actually relying on LMP, liquid
market hubs, or other calculations of “Competitive Prices.” In any case, neither the
record nor the rationale in this NOPR addresses these concerns in a convincing manner.
B.

Reducing the 20 MW Rebuttable Presumption

14.
The Commission is also proposing to reduce the threshold for the rebuttable
presumption of non-discriminatory access to competitive wholesale markets within RTOs
and ISOs from 20 MW to 1 MW. This proposal would, in essence, relieve most utilities
within RTOs and ISOs from the must-purchase obligation for any resource greater than 1
MW based on the theory that those resources have non-discriminatory access to the RTO
and ISO markets. 15
15.
The Commission created the rebuttable presumption framework in response to
Congress’s enactment of section 210(m) in EPAct 2005. The Commission explained that
QFs smaller than 20 MW often face more challenges than larger QFs in accessing
competitive wholesale markets and therefore presumptively do not have nondiscriminatory access. 16 The challenges it identified included issues such as
15

This issue, as much as any other, has been subject to vigorous debate in
Congress. See supra at 3.
16

New PURPA Section 210(m) Regulations Applicable to Small Power Production
(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-7-

interconnection at the distribution level, jurisdictional differences, pancaked delivery
rates, and administrative burdens to obtaining access to distant buyers. 17
16.
Today’s NOPR contains precious little justification to support that change and
does not cite a single piece of record evidence supporting its proposal. 18 That may be
because it seems a stretch to suggest that a 1 MW resource can generally access and
compete in markets as sophisticated and complex as, for example, PJM Interconnection,
L.L.C., on a similar footing as the resources in the portfolio of a large vertically
integrated utility or merchant power generator.
17.
These are among the most important issues presented in this NOPR. I hope that
the parties will assemble a correspondingly robust record that allows to us to dig into
them in detail and evaluate whether the Commission’s proposals are consistent with our
obligations under the statute.
III.

PURPA Should Be Revised to Create More Competition, Not Less

18.
Insofar as I can tell, the Commission interprets the success of PURPA since 1978
as evidence that the law is no longer needed and that the Commission should revise its
regulations so that they do less to encourage QFs. I draw a slightly different conclusion
from the same evidence. I view PURPA’s success in deploying gigawatts of relatively
low-cost electricity as proof of the benefits of introducing competition into the bulk
power system.
19.
Several proposals in the record would do just that. For example, the National
Association of Regulatory Commissioners (NARUC) submitted a proposal for how the
Commission might implement section 210(m)(1), which was added by the Energy Policy
Act of 2005. The new provision provided three bases for FERC to terminate a utility’s
and Cogeneration Facilities, Order No. 688, 117 FERC ¶ 61,078, at PP 9-12 (2006),
order on reh’g, Order No. 688-A, 119 FERC ¶ 61,305 (2007), aff’d sub nom. Am. Forest
& Paper Ass’n v. FERC, 550 F.3d 1179 (D.C. Cir. 2008).
17

NOPR, 168 FERC ¶ 61,184 at P 121.

18

To the contrary, the Commission has found that QFs less than 20 MW may not
have non-discriminatory access, even within RTO/ISO markets. In just the last few
years, the Commission has explained that barriers such as transmission constraints are the
very “circumstances explained in Order No. 688 that gave rise to the rebuttable
presumption that smaller QFs lack nondiscriminatory access to markets.” N. States Power
Co., 151 FERC ¶ 61,110, at P 34 (2015). Today’s NOPR fails to provide any explanation
for the departure from the Commission’s existing policy.
(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-8-

must-purchase obligation under PURPA, all of which hinged on QFs’ access to
competitive wholesale electricity markets. 19 The NARUC proposal urged the
Commission to give meaning to section 210m(1)(C) of the Federal Power Act by
establishing criteria by which a vertically integrated utility outside of an RTO or ISO
could apply to terminate the must-purchase obligation if it conducts sufficiently
competitive auctions or RFPs for energy and capacity. 20 In other words, it would use the
pathway established by Congress’s amendments to PURPA to create more opportunity
and competition in areas where, for non-incumbent utilities, PURPA is often the only
game in town.
20.
The NARUC proposal was a whitepaper, not a detailed NOPR. It would surely
require more development before we could determine whether it satisfies PURPA’s
statutory requirements. Nevertheless it represented a step in the right direction that
19

Section 210m(1) provides:
(A)(i) independently administered, auction-based day ahead and real-time
wholesale markets for the sale of electric energy; and (ii) wholesale markets
for long-term sales of capacity and electric energy; or
(B)(i) transmission and interconnection services that are provided by a
Commission approved regional transmission entity and administered
pursuant to an open access transmission tariff that affords
nondiscriminatory treatment to all customers; and (ii) competitive
wholesale markets that provide a meaningful opportunity to sell capacity,
including long-term and short-term sales, and electric energy, including
long-term, short-term, and real-time sales, to buyers other than the utility to
which the qualifying facility is interconnected. In determining whether a
meaningful opportunity to sell exists, the Commission shall consider,
among other factors, evidence of transactions within the relevant market; or
(C) wholesale markets for the sale of capacity and electric energy that are,
at a minimum, of comparable competitive quality as markets described in
subparagraphs (A) and (B).

16 U.S.C. § 824a-3(m)(1) (2018)
20

National Association of Regulatory Utility Commissioners Supplemental
Comments, Docket No. AD16-16-00 (Oct. 17, 2018), Attachment A at 8; id. (proposing
the Commission’s Edgar-Allegheny criteria as a basis for evaluating whether a proposal
was adequately competitive).
(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

-9-

would have been consistent with PURPA’s pro-competitive purposes. It was also an idea
that we could have—and should have—amply explored through a technical conference or
other proceeding since the Chairman indicated his intent to go forward with revisions to
PURPA.
21.
The Solar Energy Industries Association also put forward a pro-competitive
proposal of the type that I would like to have explored in more detail in this NOPR. 21
The proposal would address competitive solicitations as a means of procuring energy and
capacity from all new generation resources, including QFs. It also discussed the potential
for these competitive solicitations to set avoided cost under certain circumstances. As
with the NARUC proposal, this proposal would revise PURPA to include more genuine
competition rather simply revising the regulations to do less to encourage QFs.
22.
Rather than seeking to expand competition, the majority is instead using the
success of competition in certain parts of the country as a reason to scale back PURPA
throughout the country. In some areas of the country, particularly those with developed
RTO and ISO markets and with few, if any, vertically integrated utilities, competition is
the norm and PURPA may not be necessary, at least for generators that are sufficiently
large and sophisticated to participate on an equal footing with other market participants.
But it does not necessarily follow that the healthy competition we see in those regions
means that PURPA does not continue to play a vital role in other parts of the country,
including those without RTO and ISO markets or where vertically integrated utilities
dominate. To put it bluntly, the success that a QF might have in selling its energy and
capacity within ISO New England Inc. tells you very little about the success a similar
resource might have in the Southeast or the West, at least without PURPA. I worry that
applying lessons learned in the truly competitive regions of the country to the less
competitive regions will actually result in less competition and, ultimately, higher prices
for consumers.
23.
I support certain aspects of this NOPR that I believe are consistent with the
Commission’s proper role in administering PURPA and are supported by the record
developed so far. First and foremost, I agree that it is time to address the “one-mile” rule,
which currently provides an irrebuttable presumption that resources located more than a
mile apart are separate QFs. 22 There is evidence compiled as part of the Commission’s
2016 technical conference on PURPA that suggests that this rule is susceptible to gaming
and that some developers are splitting what should fairly be considered one project into a
21

Solar Energy Industries Association Supplemental Comments, Docket No.
AD16-16-000 (Aug. 28, 2019).
22

18 C.F.R. § 292.204(a) (2019).

(continued ...)

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

- 10 -

series of discrete projects spread separated by a mile each. 23 I do not believe that is what
Congress had in mind when it set out to promote small power production facilities in
PURPA. The NOPR proposes what I believe is a reasonable framework for addressing
this issue and I look forward to reviewing the comments we receive.
24.
In addition, I support the proposal to require that QFs demonstrate commercial
viability before securing a legally enforceable obligation with the relevant utility. It
seems only fair to require that a proposed QF demonstrate that it is not speculative and
will likely enter service before a utility incurs an obligation to purchase that QF’s output
at any particular price. The proposal in today’s NOPR appears to strike a reasonable
balance between allowing QFs to secure a commitment for purchase early enough in their
development cycle so that they can use it to facilitate financing while preventing QFs
from locking-in avoided-cost rates too far ahead of their actual delivery of any energy or
capacity. Nevertheless, in contrast to the one-mile rule, the record on this question is
relatively underdeveloped and I hope that parties will address the specifics of this
proposal in detail.
25.
Finally, I support the proposal to allow stakeholders to protest self-certification of
QFs. If an entity believes a resource does not qualify as a QF, it should have the
opportunity to protest the QF’s filing in the same way that stakeholders have the
opportunity to protest most other Commission filings. At the very least, it seems unfair
to require them to file a declaratory order, and pay tens of thousands of dollars, in order
to inform the Commission of their views.

*

*

*

26.
The Commission seems to believe that PURPA’s time has passed. But that is
Congress’s decision to make, not the Commission’s. So long as PURPA is on the books,
we must faithfully implement the requirements of the law. Although I support certain
elements of today’s NOPR, I am concerned that many of the Commission’s proposals
will fall short of our statutory obligations. In addition, I am also disappointed that the
Commission is not doing more to explore using PURPA to expand opportunities for
genuine competition, including through section 210(m)—the avenue for reform that
Congress enacted in 2005. I believe that focusing on expanding opportunities for genuine

23

See Statement of Paul Kjellander, Docket No. AD16-16-000, at 4-5 (June 29,
2016); Portland General Electric Company Comments, Docket No. AD16-16-000, at 6
(June 29, 2016).

CUI//PRIV
Docket Nos. RM19-15-000 and AD16-16-000

- 11 -

competition would far better serve the public interest than simply rebalancing the scales
against QFs, which seems to be the principal goal of today’s NOPR.

For these reasons, I respectfully dissent in part
______________________________
Richard Glick,
Commissioner