UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part and 292 

(Docket No. RM07-11-000) 

Applicability of Federal Power Act Section 215 to Qualifying Small Power Production 

and Cogeneration Facilities 

(March 16, 2007) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Proposed Rulemaking. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is proposing 

to amend its regulations governing qualifying small power production and cogeneration 

facilities, to eliminate the exemption from the requirements of section 215 of the Federal 

Power Act. From a reliability perspective, there does not appear to be a meaningful 

distinction between QF and non-QF generators that would warrant exemption of QFs 

from mandatory Reliability Standards. 

DATES: Comments are due [insert date 21 days after publication in the FEDERAL 

REGISTER] 

ADDRESSES: You may submit comments, identified by Docket No. RM07-11-000, by 

one of the following methods: 

• Agency web site: http://ferc.gov. Follow the instructions for submitting 

comments via the eFiling link found in the Comment Procedures section of the 

Preamble. 
Docket No. RM07-11-000 - 2 -

• Mail: Commenters unable to file comments electronically must mail or hand 

deliver an original and 14 copies of their comments to: Federal Energy Regulatory 

Commission, Secretary of the Commission, 888 First Street N.E., Washington, 

DC, 20426. Refer to the Comment Procedures section of the preamble for 

additional information on how to file paper comments. 

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 

SUPPLEMENTARY INFORMATION: 
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Applicability of Federal Power Act Docket No. RM07-11-000 

 Section 215 to Qualifying Small Power 

 Production and Cogeneration Facilities 

NOTICE OF PROPOSED RULEMAKING 

(March 16, 2007) 

Introduction

1. The Commission is proposing to amend the exemptions available to qualifying 

facilities (QFs) so that they would no longer be exempt from newly-added section 215 of 

the Federal Power Act (FPA).1

 From a reliability perspective, there does not appear to be 

a meaningful distinction between QF and non-QF generators that would warrant 

exemption of QFs from mandatory Reliability Standards. The benefit of this proposal 

will be increased reliability of the North American Bulk-Power System. 

Background

2. On August 8, 2005, the Electricity Modernization Act of 2005, which is Title XII, 

Subtitle A, of the Energy Policy Act of 2005 (EPAct 2005), was enacted into law.2

 

 

1

 16 U.S.C. 824o. 

2

 Energy Policy Act of 2005, Pub. L. No 109-58, Title XII, Subtitle A, 119 Stat. 

594, 941 (2005). 
Docket No. RM07-11-000 - 2 -

EPAct 2005 adds a new section 215 to the Federal Power Act (FPA),3

 which requires a 

Commission-certified Electric Reliability Organization (ERO) to develop mandatory and 

enforceable Reliability Standards, which are subject to Commission review and approval. 

Once approved, the Reliability Standards may be enforced by the ERO, subject to 

Commission oversight. 

3. On February 3, 2006, the Commission issued Order No. 672, which implements 

newly-added section 215 and provides specific processes for the certification of an entity 

as the ERO, the development and approval of mandatory Reliability Standards, and the 

compliance with and enforcement of approved Reliability Standards.4

 On April 4, 2006, 

North American Electric Reliability Corporation (NERC) made two filings: (1) an 

application for certification of NERC as the ERO; and (2) a petition for Commission 

approval of Reliability Standards, with eight regional differences and a glossary of terms. 

On July 20, 2006, the Commission issued an order certifying NERC as the ERO.5

 On 

 

3

 16 U.S.C. 824o. 

4

 Rules Concerning Certification of the Electric Reliability Organization; 

Procedures for the Establishment, Approval and Enforcement of Electric Reliability 

Standards, Order No. 672, 71 FR 8662 (Feb. 17, 2006), FERC Stats. & Regs. ¶ 31,204 

(2006), order on reh’g, Order No. 672-A, 71 FR 19814 (Apr. 18, 2006), FERC Stats. & 

Regs. ¶ 31,212 (2006). 

5

 North American Electric Reliability Corporation, 116 FERC ¶ 61,062 (2006). 
Docket No. RM07-11-000 - 3 -

October 20, 2006, the Commission issued a Notice of Proposed Rulemaking proposing to 

approve 83 of 107 proposed Reliability Standards.6

 

4. In response to the Reliability NOPR, Cogeneration Association of California and 

the Energy Producers and Users Coalition (CAC/EPUC) filed comments pointing out that 

QFs are exempt from section 215 by virtue of section 292.601(c) of the Commission’s 

regulations.7

 CAC/EPUC suggest that the Commission intentionally exempted QFs from 

section 215. CAC/EPUC explain that in Order No. 671 issued on February 2, 2006, 8 the 

Commission stated that it saw no reason to exempt QFs from the newly added FPA 

sections 220, 221 and 222,9

 and explicitly excluded those sections of the FPA from the 

QF exemptions contained in section 292.601 of its regulations, while making no similar 

mention of section 215. 

5. Section 215(b) grants the Commission jurisdiction over “all users, owners, and 

operators of the bulk-power system” for “purposes of approving reliability standards. . . . 

and enforcing compliance with [section 215]”, and further provides that “[a]ll users, 

 

6

 Mandatory Reliability Standards for the Bulk-Power Market, 72 FR 64770 

(Oct. 20, 2006), FERC Stats. & Regs. ¶ 32,608 (2006) (Reliability NOPR). 

7

 18 CFR 292.601(c). 

8

 Revised Regulations Governing Small Power Production and Cogeneration 

Facilities, Order No. 671, 71 FR 7852 (Feb. 2, 2006), FERC Stats. & Regs. ¶ 31,203 

(2006), order on rehearing, Order No. 771-A, 71 FERC 30583 (May 22, 2006), FERC 

Stats. & Regs. ¶ 31.219 (2006). 

9

 16 U.S.C. 824t-v. 
Docket No. RM07-11-000 - 4 -

owners and operators of the bulk-power system shall comply with reliability standards 

that take effect under this section.” 10 Given the statutory directive that all users, owners 

and operators of the bulk-power system must comply with the reliability standards that 

take effect under section 215, it may no longer be appropriate to allow QFs a continued 

exemption from compliance with the newly-adopted mandatory and enforceable 

Reliability Standards that apply to generator owners and operators.11 Moreoever, from a 

reliability perspective, there would seem to be no meaningful distinction between QF and 

non-QF generators that would warrant exemption of QFs from the newly-adopted 

mandatory Reliability Standards. Indeed, QF generators would seem to affect the 

reliability of the Bulk-Power System as much as non-QF generators, and so QF 

generators should be subject to the newly-adopted mandatory Reliability Standards. In 

this regard, we note that while many QFs are small facilities, others are quite large. We 

see no justification for large facilities to be exempt from the newly-adopted mandatory 

and enforceable Reliability Standards. Accordingly, we are proposing to amend 

§ 292.601(c)(3) to add section 215 to the list of FPA sections from which QFs are not 

exempt. 

 

10 16 U.S.C. 824o(b). Section 215(b) also states that entities described in section 

201(f), entities that are otherwise exempt from Part II of the FPA unless a provision is 

specifically applicable to those entities, are subject to section 215. Id.

11 Mandatory Reliability Standards for the Bulk-Power System, Order No. 693, 

72 FR , ( , 2007), FERC Stats. & Regs. ¶ ______ (2007) (issued 

concurrently with this NOPR). 
Docket No. RM07-11-000 - 5 -

6. The threshold for applicability of the Reliability Standards to generating units is 

20 MVA (gross nameplate rating) for an individual generating unit, or 75 MVA (gross 

nameplate rating) in aggregate for a generating plant.12 In addition, the Reliability 

Standards are applicable to: any generator, regardless of size that is a blackstart unit 

material to and designated as part of a transmission operator entity’s restoration plan; or 

any generator, regardless of size, that is material to the reliability of the bulk-power 

system; the determination to include an otherwise exempt facility would be made on a 

facility-by-facility basis by the ERO or Regional Entity. However, an entity that 

disagrees with NERC’s determination to place it in the compliance registry may submit a 

challenge in writing to NERC and, if still not satisfied, may lodge an appeal with the 

Commission. Therefore, a small entity may appeal to the Commission if it believes it 

should not be required to comply with the Reliability Standards. According to the 

Energy Information Administration (EIA), the total universe of qualifying facilities is 

3,265 entities. Of these, 2,423 entities are below 20 MW (which, as noted above, roughly 

corresponds to the 20 MVA standard for applicability of the reliability standards), which 

leaves 842 entities that could be potentially impacted by the reliability standards. Of these 

842 entities, only 745 are listed by EIA as being interconnected to the grid. Thus, out of 

a total of 3265 QFs, only 745, or 23 percent of all QFs would meet the generally 

 

12 Id. A 20 MVA threshold corresponds to 20 MW, if a unit is operating at a unity 

power factor. 
Docket No. RM07-11-000 - 6 -

applicable threshold of 20 MVA (although some other QFs may be specified as either 

blackstart units material to and designated as part of a transmission operator entity’s 

restoration plan or as generators material to the reliability of the bulk-power system). In 

sum, while there would seem to be no basis to exempt all QFs from the mandatory and 

enforceable Reliability Standards, as a result of the threshold for applicability of the 

Reliability Standards to generating units, and based on EIA data, it appears that less than 

a quarter of all QFs will, in fact, be affected by our proposal to eliminate the QF 

exemption from the requirements of section 215 of the FPA. 

Information Collection Statement

7. The Paperwork Reduction Act (PRA)13 requires each Federal agency to seek and 

obtain OMB approval before undertaking a collection of information directed to ten or 

more persons, or continuing a collection for which the Office of Management and Budget 

(OMB) approval and validity of the control number are about to expire.14 The PRA 

defines the phrase “collection of information” to be the “obtaining, causing to be 

obtained, soliciting, or requiring the disclosure to third parties or the public, of facts or 

opinions by or for an agency, regardless of form or format, calling for either -- 

(i) answers to identical questions posed to, or identical reporting or recordkeeping 

requirements imposed on ten or more persons, other than agencies, instrumentalities, or 

 

13 44 U.S.C. 3501-3520. 

14 44 U.S.C. 3502(3)(A)(i), 44 U.S.C. 3507(a)(3). 
Docket No. RM07-11-000 - 7 -

employees of the United States; or (ii) answers to questions posed to agencies, 

instrumentalities, or employees of the United States which are to be used for general 

statistical purposes.”15 OMB regulations require approval of certain information 

collection requirements imposed by agency rules.16

8. As noted above, the Commission is proposing to amend the exemption available to 

qualifying facilities from the requirements of section 215 of the FPA. Because the 

Commission is not proposing information collections in this rulemaking, it is not subject 

to OMB review under the PRA. However, the Commission will submit for informational 

purposes only a copy of this rulemaking to OMB. 

Environmental Analysis

9. 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.17 The Commission has categorically excluded certain 

actions from this requirement as not having a significant effect on the human 

environment. As explained above, this proposed rule carries out the intent of legislation, 

specifically section 215 of the FPA. It lifts an exemption and thus makes section 215 of 

 

15 44 U.S.C. 3502(3)(A). 

16 5 CFR 1320.11. 

17 Regulations Implementing the National Environmental Policy Act, Order 

No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987). 
Docket No. RM07-11-000 - 8 -

the FPA applicable to QFs; it does not substantially change the effect of the legislation. 

Accordingly, no environmental consideration is necessary.18

Regulatory Flexibility Act Analysis

10. The Regulatory Flexibility Act of 1980 (RFA)19 generally requires a description 

and analysis of rules that will have significant economic impact on a substantial number 

of small entities. The total universe of qualifying facilities is 3,265 entities. Of these, 

2,423 entities are below 20 MW (the threshold for applicability of the Reliability 

Standards is 20 MVA for an individual generating unit, or 75 MVA in aggregate for a 

generating plant20) which leaves 842 entities that could be potentially impacted by the 

reliability standards. Of these 842 entities, only 745 are listed as being interconnected to 

the grid. Accordingly, we estimate that out of a total of 3265 QFs, only 745, or 23 per 

cent of all QFs would likely be affected by the change in regulations proposed here. 

Thus, most, if not all, QFs affected by this rule do not fall within the definition of small 

entities, 21 nor do they meet the threshold criteria for applicability of the RFA to electric 

 

18 18 CFR 380.4(a)(2)(ii). 

19 5 U.S.C. 601-12. 

20 The 20 MVA threshold corresponds to 20 MW, if a unit is operating at a unity 

power factor. 

21 The RFA definition of “small entity” refers to the definition provided in the 

Small Business Act, which defines a “small business concern” as a business that is 

independently owned and operated and that is not dominant in its field of operation. See 

15 U.S.C. 632. 
Docket No. RM07-11-000 - 9 -

utilities established by the Small Business Administration, which is based on a size 

standard of 4 million MWh.22

Comment Procedures

11. The Commission invites interested persons to submit comments on the change 

proposed in this notice to be adopted, including any related matters or alternative 

proposals that commenters may wish to discuss. Comments are due [insert date 21 days 

from publication in the FEDERAL REGISTER]. Comments must refer to Docket 

No. RM07-11-000, and must include the commenter's name, the organization they 

represent, if applicable, and their address in their comments. Comments and reply 

comments may be filed either in electronic or paper format. 

12. Comments and reply comments may be filed electronically via the eFiling link on 

the Commission's web site at http://www.ferc.gov. The Commission accepts most 

standard word processing formats and commenters may attach additional files with 

supporting information in certain other file formats. Commenters filing electronically do 

not need to make a paper filing. Commenters that are not able to file comments and reply 

 

22 The Small Business Size Standard component of the North American Industry 

Classification System (NAICS) defines a small utility as one that, including its affiliates, 

is primarily engaged in generation, transmission, and/or distribution of electric energy for 

sale and whose total electric output for the preceding fiscal years did not exceed 4 million 

MWh. 13 CFR 121.201. 
Docket No. RM07-11-000 - 10 -

comments electronically must send an original and 14 copies of their comments to: 

Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, 

N.E., Washington, D.C., 20426. 

13. All comments and reply comments will be placed in the Commission's public files 

and may be viewed, printed, or downloaded remotely as described in the Document 

Availability section below. Commenters on this proposal are not required to serve copies 

of their comments and reply comments on other commenters. 

Document Availability

14. 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. 

15. 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. 

16. User assistance is available for eLibrary and the Commission's website during 

normal business hours. For assistance, please contact FERC Online Support at 1-866-

208-3676 (toll free) or (202)502-8222 (e-mail at FERCOnlineSupport@FERC.gov), or 
Docket No. RM07-11-000 - 11 -

the Public Reference Room at (202) 502-8371, TTY (202)502-8659 (e-mail at 

public.referenceroom@ferc.gov ). 

List of subjects in 18 CFR Part 292

Electric power, Electric power plants, Electric utilities, Natural gas, Reporting and 

recordkeeping requirements. 

By direction of the Commission. 

( S E A L ) 

Philis J. Posey, 

Acting Secretary. 
Docket No. RM07-11-000 - 12 -

 In consideration of the foregoing, the Commission proposes to amend part 292, 

Chapter I, Title 18, Code of Federal Regulations, to read as follows. 

PART 292 – REGULATIONS UNDER SECTIONS 201 AND 210 OF THE PUBLIC 

UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO 

SMALL POWER PRODUCTION AND COGENERATION 

1. The authority citation for part 292 continues to read as follows: 

 Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352. 

2. In section 292.601 paragraph (c)(3) is revised to read: 

§ 292.601 Exemption to qualifying facilities from the Federal Power Act.

* * * * * 

 (3) Sections 202(c), 210, 211, 212, 213, 214, 215, 220, 221 and 222; 

* * * * *