119 FERC ¶ 61,149 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 292 

(Docket No. RM07-11-000) 

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

and Cogeneration Facilities 

(Issued May 18, 2007) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is revising its 

regulations governing qualifying small power production and cogeneration facilities 

(QFs), to eliminate the exemption of QFs from the requirements of section 215 of the 

Federal Power Act. From a reliability perspective, there is not a meaningful distinction 

between QF and non-QF generators that warrants a generic exemption of QFs from 

reliability standards. 

EFFECTIVE DATE: The rule will become effective [insert date 30 days after 

publication in the FEDERAL REGISTER]. 

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 

paul.singh@ferc.gov 
Docket No. RM07-11-000 -2- 

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 

samuel.higginbottom@ferc.gov 

SUPLEMENTARY INFORMATION: 
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 Philip D. Moeller, and Jon Wellinghoff. 

Applicability of Federal Power Act Section 215 Docket No. RM07-11-000 

to Qualifying Small Power Production and 

Cogeneration Facilities 

ORDER NO. 696 

FINAL RULE 

(Issued May 18, 2007) 

I. Introduction

1. The Federal Energy Regulatory Commission (Commission) revises its regulations 

governing qualifying small power production and cogeneration facilities, to eliminate the 

exemption of QFs from the requirements of section 215 of the Federal Power Act.1

 From 

a reliability perspective, there is not a meaningful distinction between QF and non-QF 

generators that warrants a generic exemption of QFs from reliability standards. 

2. A number of commenters in this proceeding also submitted comments in the 

rulemaking in Docket No. RM06-16-000 concerning mandatory reliability standards for 

the bulk-power system; they submitted comments in both proceedings concerning the 

 1

 16 U.S.C. 824o. 
Docket No. RM07-11-000 - 2 -

appropriate compliance registry criteria for QFs to be subject to reliability standards.2

 In 

this proceeding we find that QFs should not, as a general matter, be exempt from 

reliability standards; we are changing our regulations accordingly. Issues concerning the 

treatment of individual QFs are best addressed in the North American Electric Reliability 

Corporation (NERC) registry process where the unique circumstances of individual QFs 

can be individually considered. 

II. Background

3. 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.3

 

EPAct 2005 added a new section 215 to the Federal Power Act (FPA),4

 which requires a 

Commission-certified Electric Reliability Organization (ERO) to develop reliability 

standards, which are subject to Commission review and approval. Once approved, the 

reliability standards become mandatory and may be enforced by the ERO, subject to 

Commission oversight. 

4. 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 

 2

 The Commission has since issued Order No. 693, discussed below, adopting 

mandatory reliability standards. 

3

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

594, 941 (2005). 

4

 16 U.S.C. 824o. 
Docket No. RM07-11-000 - 3 -

compliance with and enforcement of approved reliability standards.5

 On April 4, 2006, 

NERC made two filings: (1) an application for certification of NERC as the ERO; and 

(2) a petition for Commission approval of mandatory 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.6

 On October 20, 2006, the Commission issued a 

Notice of Proposed Rulemaking proposing to approve 83 of 107 proposed reliability 

standards.7

 

5. 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 § 292.601(c) of the Commission’s 

 5

 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). 

6

 North American Electric Reliability Corporation, 116 FERC ¶ 61,062 (2006). 

7

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

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

subsequently approved 83 of 107 proposed reliability standards, six of the eight proposed 

regional differences, and the glossary of terms. The Commission found that those 

reliability standards met the requirements of section 215 of the FPA (and Part 39 of the 

Commission’s regulations, 18 CFR Part 39), but that many of those reliability standards 

require significant improvement to address, among other things, the recommendations of 

the Blackout Report and therefore required NERC to submit improvements to 56 of those 

83 Reliability Standards. Mandatory Reliability Standards for the Bulk Power System, 

Order No. 693, 72 Fed. Reg. 16416 (April 4, 2007), FERC Stats. & Regs. ¶ 31,242 

(2006). (Reliability Final Rule). 
Docket No. RM07-11-000 - 4 -

regulations.8

 CAC/EPUC suggested that the Commission intentionally exempted QFs 

from section 215. CAC/EPUC explained that, in Order No. 671, issued on February 2, 

2006, 9 the Commission stated that it saw no reason to exempt QFs from the newly added 

FPA sections 220, 221 and 222,10 and explicitly excluded those sections of the FPA from 

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

mention of section 215. 

6. In response to those comments, the Commission issued a notice of proposed 

rulemaking (NOPR) seeking comments on whether QFs should be exempt from section 

215 of the FPA.11 In the NOPR, the Commission pointed out that 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, owners and operators of the 

bulk-power system shall comply with reliability standards that take effect under this 

 8

 18 CFR 292.601(c). 

9

 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. 671-A, 71 FR 30583 (May 22, 2006), FERC Stats. 

& Regs. ¶ 31.219 (2006). 

10 16 U.S.C. 824t-v. 

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

Production and Cogeneration Facilities, 72 FR 14254 (March 16, 2007), FERC Stats. 

& Regs. ¶ 32,613 (2007). 
Docket No. RM07-11-000 - 5 -

section.” 12 The Commission reasoned that, given the statutory directive that all users, 

owners and operators of the bulk-power system must comply with mandatory reliability 

standards under section 215, it may not 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. The Commission also 

stated that, 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 mandatory reliability standards. The Commission continued that 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. The Commission noted that while many QFs are small facilities, 

others are quite large. The Commission suggested that it saw no justification for large 

QFs to be exempt from mandatory reliability standards. The Commission therefore 

proposed to amend § 292.601(c)(3) to add section 215 to the list of FPA sections from 

which QFs are not exempt. The Commission also pointed out that the NERC registry 

criteria for inclusion of generators in the compliance registry of entities that would be 

subject to mandatory reliability standards are written to exclude most smaller entities, and 

that there are procedures to challenge a generator’s inclusion in the compliance registry 

 12 16 U.S.C. 824o(b). Section 215(b) also states that entities described in section 

201(f), 16 U.S.C. 824(f), entities that are otherwise exempt from Part II of the FPA unless 

a provision is otherwise specifically applicable to those entities, are subject to section 

215. 16 U.S.C. 824o(b). 
Docket No. RM07-11-000 - 6 -

before NERC, and if not satisfied with NERC’s decision, procedures to lodge an appeal 

with the Commission. 

III. Comments

7. On March 16, 2007, the NOPR was published in the Federal Register with 

comments due on or before April 16, 2007. 

8. Comments supporting the proposed rule were filed by: NERC, the National 

Association of Regulatory Utility Commissioners (NARUC), the Edison Electric Institute 

(EEI), Entergy Services, Inc. (Entergy Services), Xcel Energy Services Inc, on behalf of 

the Xcel Energy Operating Companies (collectively, Xcel Energy),13 American 

Transmission Company LLC, FirstEnergy Companies (FirstEnergy), Southern California 

Edison Company (SoCal Edison), Allegheny Power and Allegheny Energy Supply 

Company (collectively, Allegheny Energy Companies), and Imperial Irrigation District 

(IID). 

9. Those who support the proposed rule generally argue that including section 215 of 

the FPA among the FPA provisions that QFs are not exempted from is appropriate both 

from a statutory perspective and in terms of the impact on reliability of the bulk-power 

system. NERC states that, with the exemption removed, in determining whether QFs are 

subject to mandatory reliability standards NERC will treat QFs as it does all other 

 13 The four Xcel Energy Operating Companies are: Northern States Power 

Company, a Minnesota corporation, Northern States Power Company, a Wisconisn 

corporation, Southwestern Public Service Company, and Public Service Company of 

Colorado. 
Docket No. RM07-11-000 - 7 -

owners, operators and users of the bulk-power system, i.e., the decision as to whether to 

place an entity on the NERC compliance registry will be based on the specific 

circumstances of each QF. NARUC points out that there is no meaningful distinction 

from a reliability perspective between QF and non-QF generators that could warrant 

continuing to exempt QFs. EEI states that section 215 is clear on its face that all users, 

owners and operators of the electric production and delivery network should be subject to 

section 215. EEI believes that many QFs recognize their section 215 responsibilities; EEI 

states that it understands that many QFs have already registered with Regional Entities, 

which EEI states suggests that QFs understand the need to register notwithstanding the 

current exemption provided under section 292.601(c) of the Commission’s regulations. 

10. Entergy states that it fully supports the Commission’s determination that QFs 

should not be exempt from mandatory reliability standards but states that it is concerned 

that NERC’s registration criteria, which apply to an individual generating units that are 

larger than 20 MVA and that are directly connected to the bulk-power system might 

exempt generation facilities that are arguably not directly connected to the bulk-power 

system but are nevertheless material to the reliability of the bulk-power system. 

Similarly, Xcel Energy agrees with the Commission’s reasoning that from a reliability 

perspective there is no meaningful distinction between QFs and other generating facilities 

that warrants continuation of a QF exemption from section 215. Xcel Energy is 

concerned, however, that NERC’s registration criteria, particularly the reference to being 

“directly connected to the bulk-power system” can be read to not apply to generating 

facilities that are interconnected at distribution voltage level. American Transmission 
Docket No. RM07-11-000 - 8 -

Company supports the proposed rule and states that “the appropriate place to consider 

whether a generating facility should be exempted from compliance with the mandatory 

reliability standards is at NERC.” IID supports the proposed rule but argues that the 

Commission should recognize that the ERO or the Regional Entity should be permitted to 

include an otherwise exempt facility on a facility-by-facility basis if it determines that the 

facility is needed for bulk-power system reliability. IID asks the Commission to 

determine that all QFs in its particular footprint are collectively material to reliability in 

its particular control area. 

11. Comments opposing the proposed rule were filed by: CAC/EPUC, the Florida 

Renewable Energy Producing QFs (Florida Renewable QFs), Deere & Company (Deere), 

Indeck Energy Services, Inc. (Indeck), Sunray Energy Inc. (Sunray), ARIPPA,14

Hillsborough County, Florida,15 and Pasco County, Florida.16

12. CAC/EPUC suggests that the Commission has an ongoing obligation to encourage 

cogeneration and that this must be balanced with its obligation to protect the grid. 

CAC/EPUC urges the Commission not to act on the proposed rule until it has acted on 

rehearing of Order No. 693 in order to make sure that the registry standards applicable to 

 14 ARIPPA is a regional non-profit trade association consisting of thirteen QFs and 

associated manufacturers, engineers, chemists and tradesmen who repair and service the 

units. The units are in historical coal mining regions, combust waste coal and generate 

under fixed price power agreements with the local utility. 

15 Hillsborough County owns a 30 MW solid waste QF and has plans to add an 

additional 17 MW of electrical generation capacity. 

16 Pasco County owns a 30 MW solid waste QF. 
Docket No. RM07-11-000 - 9 -

QFs are not overly broad. Florida Renewable QFs ask the Commission to modify the 

proposed rule in four respects: first, to allow QFs to qualify for a size exemption based 

on their output capability rather than on their nameplate capacity; second, the 

Commission should clarify that QFs may appeal registry designations directly to the 

Regional Entity in lieu of the ERO; third, the Commission should provide that QFs that 

by contract sell only energy and not capacity be allowed to seek a case-by-case waiver of 

the reliability standards even if they do not otherwise qualify for a size exemption; and 

fourth, the Commission should require the ERO to consider whether full compliance with 

mandatory reliability standards would raise QFs’ costs above the avoided costs set in the 

QFs’ contracts with purchasing utilities. Deere suggests that the Commission provide an 

exemption for small power production QFs 80 MW and smaller. 

13. Indeck argues that the proposed rule is fundamentally flawed. Indeck states that 

the proposed rule fails to recognize that QFs are often not connected to the grid, operate 

to support important commercial or industrial operations, are subject to fuel use 

limitations and operating and efficiency requirements, and in most cases have little or no 

impact on the reliability of the bulk-power system. To remedy these supposed flaws, 

Indeck suggests that the Commission should continue to exempt all QFs smaller than 100 

MW from section 215 of the FPA, should ignore “behind the meter” capacity of QFs, and 

should exempt all QFs that utilize a renewable energy source from section 215 of the 

FPA. Sunray states that it owns and operates two Solar Electric Generating Systems 

(SEGS) located in California. One of Sunray’s SEGs is 14 MW and the other 30 MW. 

Sunray argues that requiring it to comply with mandatory reliability standards will be 
Docket No. RM07-11-000 - 10 -

economically burdensome and will provide little or no increase in the reliability of the 

bulk-power system. Both Indeck and Sunray also question the Commission’s regulatory 

flexibility analysis. 

14. ARIPPA argues that all of its members have been required by contract with 

purchasing utilities to meet reliability requirements to obtain access to the grid. ARIPPA 

argues that additional requirements are not necessary for its QFs. Hillsborough County 

and Pasco County each state that the investor-owned utilities that their respective QFs are 

interconnected with have control over system reliability and that the QFs have no 

responsibility for bulk-power system reliability. Hillsborough County and Pasco County 

also suggest that the Commission provide that all qualifying small power production 

facilities continue to be exempt from section 215 of the FPA. 

15. The Commission received comments from the following entities that do not 

oppose the proposed rule, but ask the Commission to clarify how NERC’s registration 

criteria will apply to QFs: the Electricity Consumers Resource Council (ELCON) and 

the American Iron and Steel Institute (AISI), the Council of Industrial Boiler Owners 

(CIBO), Kimberly Clark Corporation, PPG Industries, Inc. and Valero Energy 

Corporation (collectively, Joint Cogeneration Owners), American Forest & Paper 

Association (American Forest & Paper), Lee County, Florida, Dow Chemical Company 
Docket No. RM07-11-000 - 11 -

(Dow), California Cogeneration Council (CCC), and Midland Cogeneration Venture 

Limited Partnership (Midland Cogen).17

16. ELCON and AISI state that they do not oppose the registration of QFs if particular 

facilities are found to materially affect the reliability of the bulk-power system. ELCON 

and AISI state that in fact they have cooperated with NERC staff to draft registration 

criteria that would address the unique operational characteristics of cogenerators. 

ELCON and AISI state that, unfortunately, the NOPR proposes an automatic per se rule 

that would force the registration of all QFs above 20 MVA/MW regardless of whether a 

QF’s operations have any effect on reliability. ELCON and AISI also ask the 

Commission to recognize that NERC has applied a “netting” concept that recognizes that 

often QF generation never reaches the grid, or does so on a limited basis. Finally 

ELCON and AISI recommend that the Commission encourage the establishment of an 

ad hoc NERC task force that would review the criteria for determining if and when a QF 

has a material impact on the reliability of the bulk power system. 

17. CIBO states that it supports the comments filed by ELCON. Additionally, CIBO 

argues that the Commission does not encourage QFs when it fails to recognize any 

meaningful distinction between QF and non-QF generators on matters of reliability. 

CIBO states that NERC’s registration criteria for generators do, and should continue to, 

recognize that QFs are different from other generators. CIBO asks the Commission to 

 17 Edison Mission Energy and Pacific Gas and Electric Company each also filed 

comments stating that they will be affected by the proposed rule and expressing an 

interest in the rulemaking; neither, however, takes a position on the substance of the 

proposed rule. 
Docket No. RM07-11-000 - 12 -

encourage NERC in this recognition. Joint Cogeneration Owners also state that they do 

not oppose the registration of QFs whose operators do in fact materially affect the 

reliability of the bulk power system. Joint Cogeneration Owners, however, oppose what 

they characterize as a per se rule that would require the registration of all QFs above 20 

MVA regardless of whether the QFs’ operations have any effect on reliability and would 

fail to consider a QF’s net impact on the grid. 

18. American Forest & Paper states that it does not object to making those portions of 

reliability standards under section 215 which are appropriately applicable to QFs 

mandatory, but requests that the Commission clarify that the application of any reliability 

standards to QFs must nonetheless recognize and appropriately accommodate the 

distinctions betweens QFs and merchant or utility-owned generation. American Forest & 

Paper notes that almost all QFs greater that 20 MW interconnected to and operating 

synchronously with the grid are already subject to specific reliability and operating 

requirements. American Forest & Paper states that those requirements range from 

limitations on power factor and the maintenance of facilities, to emergency operating 

procedures. American Forest & Paper states that it does not object to the conversion of 

such requirements into mandatory standards. American Forest & Paper, however, states 

that it is concerned that the rush to codify reliability standards will be used as a pretext 

for renewed discrimination and utility interference with integrated manufacturing 

operations. American Forest & Paper concludes by asking the Commission to clarify that 

mandatory reliability standards applicable to QFs must reflect the operational and other 

distinctions between QFs and merchant or utility-owned generation. 
Docket No. RM07-11-000 - 13 -

19. Lee County argues that the Commission should require NERC to design a costbenefit analysis to be applied by NERC and Regional Entities when registering smaller 

qualifying small power production facilities. Lee County is concerned that small power 

production facilities smaller than 20 MVA will be required to register on the grounds that 

they “materially” impact the reliability of the bulk-power system. Lee County suggests 

that the Commission require NERC to establish a rebuttable presumption that a small 

power production facility smaller than the existing NERC size thresholds does not 

“materially” impact the reliability of the bulk-power system. Lee County also asks the 

Commission to require NERC to justify registering such small power production facilities 

using a meaningful case-by-case analysis based on a cost benefit analysis. 

20. Dow Chemical does not oppose making section 215 of the FPA applicable to QFs, 

but wants the Commission to clarify that NERC must retain its existing provision that 

measures whether a facility meets the 20/75 MVA size threshold based on the portion of 

a cogeneration unit’s /plant’s capacity made available to serve the bulk-power system. 

Dow would also like the Commission to state that directives from Reliability 

Coordinators, Transmission Operators, Balancing Authorities, and/or Transmission 

Providers need not be complied with if doing so would impair a cogeneration facility’s 

service obligations to its thermal host. CCC asks that the Commission require that NERC 

reliability criteria be applicable to QFs based upon a demonstration that the facilities are 

needed for reliability as defined in Order No. 693, and not based on the size of the 

facility. CCC also asks that the Commission clarify that NERC reliability rules must take 

into account regulatory requirements, operating characteristics and contractual 
Docket No. RM07-11-000 - 14 -

commitments of cogeneration facilities. Midland Cogen asks the Commission to clarify 

that NERC reliability criteria must accommodate the unique operating characteristics, 

regulatory requirements and contractual commitments of QFs. Midland Cogen also asks 

the Commission to provide assurances that QFs will be permitted to recover the cost of 

compliance with mandatory reliability standards through a grid charge to be assessed to 

the control area that benefits from the reliability that the facilities provide. 

21. Georgia Pacific, LLC (Georgia Pacific) filed reply comments. Georgia Pacific 

states that it has mill and plant facilities throughout the United States and owns and 

operates eleven facilities that are certified as QFs, and that range in size from 7.5 MW to 

140 MW. Georgia Pacific states that the majority of its QFs are cogeneration facilities 

that provide electric power and steam to host processes. Georgia Pacific states that 

because its QFs primarily produce steam and electric energy for its own use, its QFs have 

little or no impact on the bulk-power system. Georgia Pacific asks that the Commission 

in this proceeding recognize the existing 20/75 MVA NERC exclusion for smaller 

facilities and that such exclusion for a cogeneration facility serving behind the meter load 

be based on that portion of the generating unit’s/plant’s capacity actually made available 

to the bulk power system. In addition, Georgia Power would like the Commission to 

create an exemption from any reliability standards to the extent that complying with such 

standards would impair service to a QF’s industrial host. 

22. Xcel Energy filed reply comments arguing that this rulemaking is not the 

appropriate forum for evaluating technical justification for any specific QF exemption 
Docket No. RM07-11-000 - 15 -

level. Xcel Energy argues that generators seeking an exemption should do so on a caseby-case basis. 

23. On May 14, 2007, Florida Renewable QFs filed supplemental comments. Florida 

Renewable QFs states that it seeks clarification of two issues left unresolved in the 

NOPR. First, Florida Renewable QFs ask the Commission to state that the Final Rule 

will not take effect for one year from issuance. The one-year period, Florida Renewable 

QFs argues, will give QFs that do not have experience with reliability standards time to 

develop programs for compliance with the reliability standards and will prevent undue 

hardship. Second, Florida Renewable asks the Commission to state that an appeal to the 

Commission from a NERC determination that a small generator (smaller than the usual 

registry criteria of 20 MVA) should be on the compliance registry would stay the 

effectiveness of the NERC ruling during the pendency of the appeal to the Commission. 

IV. Discussion

24. As proposed in the NOPR, the Commission will amend § 292.601(c)(3) of its 

regulations to add section 215 to the list of FPA sections from which QFs are not exempt. 

Making QFs subject to reliability standards is consistent with the intent of section 215. 

When Congress enacted section 215, it used broad language to ensure that all those 

entities that could affect the reliability of the bulk power system would be subject to 

mandatory reliability standards. Specifically, section 215(b)(1) states that, “The 

Commission shall have jurisdiction, within the United States, over . . . all users, owners 

and operators of the bulk-power system (including the entities described in section 

201(f)), for purposes of approving reliability standards established under this section and 
Docket No. RM07-11-000 - 16 -

enforcing compliance with this section.”18 Further, section 215(b)(2) provides that “All

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

standards that take effect under this section.”19 In using such broad language, Congress 

gave no indication that it intended to exempt any entity that could affect the reliability of 

the bulk-power system from the reach of mandatory reliability standards. 

25. Indeed, Congress included within the scope of section 215 “the United States, a 

State or political subdivision of a State, an electric cooperative that receives financing 

under the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.) or that sells less than 

4,000,000 megawatt hours of electricity per year.”20 Thus Congress included within the 

scope of section 215 entities that are normally excluded from the Commission’s 

jurisdiction under Part II of the FPA. The provision providing that these otherwise 

jurisdictionally exempt utilities will be subject to section 215 supports our determination 

that Congress intended that all utilities, regardless of whether those utilities are otherwise 

exempt from the FPA, be subject to section to section 215. 

26. While it is true that section 210(e) of PURPA grants the Commission broad 

authority to exempt most QFs from various provisions of the FPA, we cannot find that 

Congress intended that all entities that affect the reliability of the bulk-power system not 

be subject to mandatory and enforceable reliability standards. Comments submitted in 

 18 16 U.S.C. 824o(b) (emphasis added). 

19 Id. (emphasis added). 

20 16 U.S.C. 824(f). 
Docket No. RM07-11-000 - 17 -

response to the NOPR do not convince us otherwise. Indeed, the majority of the 

comments filed either fully support the Commission’s proposal to make QFs subject to 

section 215, or recognize that QFs should be subject to section 215 while expressing 

concerns as to the specifics of NERC’s registry criteria for QFs. 

27. We accordingly conclude that the addition of section 215 of the FPA to the list, 

contained in § 292.601(c)(3), of FPA sections from which QFs are not exempt is 

consistent with the Congressional directive contained in section 215 of the FPA that all

users, owners, and operators of the bulk-power system be subject section 215 and thus 

subject to the mandatory and enforceable reliability standards. 

28. In addition, we find that for reliability purposes there is no meaningful distinction 

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

mandatory reliability standards. 

29. Comments submitted in this rulemaking argue that the Commission should 

consider in this rulemaking a number of factors in determining whether individual QFs or 

classes of QFs do not materially affect the reliability of the bulk-power system and thus 

should be exempted from section 215 of the FPA; these factors include small size of 

some QFs and the fact that, while a QF may individually be large, it may deliver most of 

its output to behind the meter load and thus would have little effect on the bulk-power 

system. We do not believe that any of the factors mentioned by commenters, including 

small size or primarily serving behind the meter load, justifies a generic exemption from 

section 215 of the FPA for all facilities below a certain size, or for all facilities serving 

behind the meter load. While these factors may be appropriate in determining whether an 
Docket No. RM07-11-000 - 18 -

individual QF should be placed on the NERC reliability registry, they are not factors that 

justify exempting QFs, as a class, from section 215 of the FPA and from reliability 

standards. Nor are they factors that justify exempting any particular subset of QFs. 

30. Whether a generation facility should be subject to reliability standards should 

depend on whether a generation facility is needed to maintain the reliability of the bulkpower system. The reliability criteria adopted by NERC and approved by the 

Commission, as well as the compliance registry process adopted by NERC and approved 

by the Commission, are designed to ensure that only those facilities needed to maintain 

the reliability of the bulk-power system are subject to the reliability standards. The 

ultimate decision with respect to individual generation units and/or plants is, and must be, 

made on a case-by-case basis. Thus, whether a particular QF or type of QF should be 

exempt from reliability standards is an issue that is more appropriately made in the 

context of NERC’s establishment of registry criteria for owners and operators of 

generators, and in the context of NERC’s compliance registry process. The reliability of 

the bulk-power system will be better protected by utilizing the NERC compliance registry 

process, which will ensure that no generator that is needed to maintain the reliability of 

the bulk-power system will be exempt from reliability standards, while excusing those 

generators that are not needed to maintain reliability. 

31. NERC’s compliance registry criteria for generator owner/operators encompasses: 

a. Individual generating unit > 20 MVA (gross nameplate rating) and is 

directly connected to the bulk power system, or 

b. Generating plant/facility > 75 MVA (gross aggregate nameplate rating) 

or when the entity has responsibility for any facility consisting of one or 
Docket No. RM07-11-000 - 19 -

more units that are connected to the bulk power system at a common bus 

with total generation above 75 MVA (gross nameplate rating), or 

c. 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; 

d. Any generator, regardless of size, that is material to the reliability of the 

bulk power system.[

21] 

32. In addition NERC’s compliance registry criteria for generation facilities contain 

the following exclusions: 

a. A generator owner/operator will not be registered based on these criteria 

if responsibilities for compliance with approved NERC reliability 

standards or associated requirements including reporting have been 

transferred by written agreement to another entity that has registered for 

the appropriate function for the transferred responsibilities, such as a 

load-serving entity, G&T cooperative or joint action agency, or 

b. As a general matter, a customer-owned or operated generator/generation 

that serves all or part of retail load with electric energy on the customer’s 

side of the retail meter may be excluded as a candidate for registration 

based on these criteria if (i) the net capacity provided to the bulk power 

system does not exceed the criteria above or the Regional Entity otherwise 

determines the generator is not material to the bulk power system and (ii) 

standby, back-up and maintenance power services are provided to the 

generator or to the retail load pursuant to a binding obligation with 

another generator owner/operator or under terms approved by the local 

regulatory authority or the Federal Energy Regulatory Commission, as 

applicable.[22]

33. Finally, the registration criteria contains a provision that an organization that 

otherwise meets the criteria for registration need not be registered if it can be 

 21 NERC Statement of Compliance Registry Criteria (Revision 3), February 6, 

2007. 

22 Id. 
Docket No. RM07-11-000 - 20 -

demonstrated to NERC that the bulk power system, owner, operator, or user does not 

have a material impact on the bulk-power system. 

34. In the Reliability Final Rule, moreover, the Commission found that NERC had set 

reasonable criteria for registration, and approved the compliance registry process.23 

35. Many of the comments filed in this proceeding appear to be based on a 

misunderstanding of what the Commission was proposing to do in this proceeding. Many 

of the comments submitted in response to the NOPR suggest that commenters thought 

that the Commission was proposing to mandate that NERC adopt registry criteria that 

would require all QFs over a certain size to register with the ERO or Regional Entity. All 

the Commission proposed to do in the NOPR, and all the Commission is doing here in 

the Final Rule, is to eliminate the generic exemption of QFs from section 215 of the FPA 

and thus from mandatory reliability standards, thus treating them like other, non-QF 

generators for reliability purposes. The Commission was not proposing to, and does not, 

require that all QFs be subject to reliability standards no matter their circumstances. 

Rather QFs and non-QFs alike would have an equal opportunity to not be subject to 

reliability standards. But that would be a case-by-case determination based on the 

circumstances of each case. 

36. In this regard, in the Reliability Final Rule the Commission found that NERC had 

set reasonable criteria for registration and approved the compliance registry process;24 the 

 23 Reliability Final Rule, FERC Stats. & Regs. ¶ 31,242, at P 92-101. 

24Id. 

 
Docket No. RM07-11-000 - 21 -

compliance registry process provides procedures for individual generators to contest 

determinations by Regional Entities and the ERO. Additionally, 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.25 

Thus, an individual QF may appeal to the Commission if it believes it should not be 

required to comply with reliability standards. Florida Renewable QFs asks the 

Commission to rule that the filing of such an appeal by a QF smaller than 20 MVA will 

stay the effect of the NERC determination to place an entity on the compliance registry 

during the pendency of the appeal to the Commission. Whether a stay should be granted 

depends on a number of factors that are fact specific; such a decision is more 

appropriately made on a case-by-case basis. It is thus premature to decide now whether 

an appeal to the Commission should stay a NERC decision that a particular QF be placed 

on the compliance registry. We will deny Florida Renewable QF’s request that we state 

that the filing of an appeal by a small generator will stay the effect of the NERC 

determination; however, this is without prejudice to any entity seeking a stay at the time 

it files an appeal of a NERC determination with which it disagrees. 

37. The Commission notes that because of the operation of the size sections of the 

NERC registry criteria applicable to generators (i.e., greater than 20 MVA), only 23 

percent of all QFs would meet this generally applicable threshold of 20 MVA (although 

 

25 Id. at P 101. 
Docket No. RM07-11-000 - 22 -

some other QFs may be specified as either blackstart units material to and designated as 

part of a transmission entity’s restoration plan or as generators material to the reliability 

of the bulk-power system) and so would be subject to reliability standards.26 While some 

QFs may be classified as blackstart or as “material” to the reliability of the bulk-power 

system, and so made subject to reliability standards, other QFs may qualify for 

exemptions because, despite their size, either as a QF that is a cogeneration facility that 

primarily serves behind the meter load such that the net capacity supplied to the bulk 

power system is less than the size threshold for compliance, or as a QF that has 

contractual arrangements to transfer responsibility for compliance with reliability 

standards or associated requirements including reporting to another entity that has 

registered with NERC. The net effect is that the universe of QFs that will be affected by 

this Final Rule, by virtue of operation of the NERC registry criteria, is likely to be 

relatively small. 

V. Information Collection Statement

38. The Paperwork Reduction Act (PRA)27 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 

 26 See NOPR at P 6. Energy Information Administration (EIA) data identify 3,625 

QFs, of which 2,423 QFs are below 20 MW (which roughly corresponds to 20 (MVA), 

leaving only 842 QFs that could be affected by this Final Rule. And, of these 842, only 

745 – 23 percent – are interconnected to the grid. 

27 44 U.S.C. 3501-3520. 
Docket No. RM07-11-000 - 23 -

(OMB) approval and validity of the control number are about to expire.28 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 

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.”29 OMB regulations require approval of certain information 

collection requirements imposed by agency rules.30

39. As noted above, the Commission is amending its regulations to eliminate the 

exemption available to QFs from the requirements of section 215 of the FPA. Because 

the Commission is not adopting information collections in this Final Rule, it is not 

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

informational purposes only a copy of this Final Rule to OMB.

VI. Environmental Analysis

40. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 

 28 44 U.S.C. 3502(3)(A)(i); 44 U.S.C. 3507(a)(3). 

29 44 U.S.C. 3502(3)(A). 

30 5 CFR 1320.11. 
Docket No. RM07-11-000 - 24 -

on the human environment.31 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 

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

Accordingly, no environmental consideration is necessary.32 

VII. Regulatory Flexibility Act Analysis

41. The Regulatory Flexibility Act of 1980 (RFA)33 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.34 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 plant35) which leaves 842 entities that could potentially be impacted by 

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

the grid. Accordingly, out of a total of 3265 QFs, only 745, or 23 percent would likely be 

 31 Regulations Implementing the National Environmental Policy Act, Order No. 

486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987). 

32 18 CFR 380.4(a)(2)(ii). 

33 5 U.S.C. 601-12. 

34 NOPR at P 10. 

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

power factor. 
Docket No. RM07-11-000 - 25 -

affected by the change in regulations proposed here. Most, if not all, of the QFs that 

would be affected by this Final Rule do not fall within the definition of small entities, 36 

nor do they meet the threshold criteria for applicability of the RFA to electric utilities 

established by the Small Business Administration, which is based on a size standard of 4 

million MWh.37

42. Comments filed by Indeck and Sunray argue that the Commission’s analysis is 

deficient. They argue that, contrary to the Commission’s findings, that most QFs are 

independently owned and operated and thus do meet the definition of “small entity.” 

They also argue that there are many QFs whose total electric output for the preceding 

fiscal years does not exceed 4 million MWh. They state that is particularly true because 

many QFs operate only on an intermittent basis and thus “it is entirely possible that many 

wind, solar, run of the river hydroelectric, and cogeneration facilities with nameplate 

capacities well in excess of 20 MW are still protected by the RFA and that many of the 

745 QFs identified as being subject to the rule are, indeed, small entities.”38 

 36 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. 

37 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. See 13 CFR 121.201. 

38 Sunray at 11; Indeck at 9. 
Docket No. RM07-11-000 - 26 -

43. We continue to believe that, given the NERC size threshold for registering 

generators, few if any of the QFs that will be required to comply with reliability standards 

as a result of this Final Rule will be small entities. Sunray and Indeck recognize that a 20 

MVA or 20 MW facility would not normally be considered small for purposes of the 

RFA. They argue, however, that some QFs generate so intermittently that they would be 

considered small. Given that the Small Business Administration’s standard (4 million 

MWh annually) is the equivalent of a 4 MW facility, we would not expect that many 20 

MW facilities would generate so intermittently that they fall within the SBA definition of 

a small facility. Moreover, the NERC registry criteria provide for exclusion of an entity 

that otherwise would meet the registry criteria, if the entity can reasonably demonstrate 

that it does not have a material impact on the reliability of the bulk-power system. 

Generators that meet the nameplate size threshold for registration, but generate so 

intermittently that they would be considered small entities under SBA criteria, are likely 

to be able to show that they do not have a material impact on the reliability of the bulkpower system and thus need not be registered. Further, we note, in the Reliability Final 

Rule, the Commission took steps to lessen the effect of the reliability standards on small 

entities in general.39 While few generators affected by the reliability standards will fall 

within the definition of small entities, the Commission has thus taken steps to further 

minimize the effects on small entities while at the same time assuring the reliability of the 

bulk-power system. 

 39 See Reliability Final Rule, FERC Stats. & Regs. ¶ 31,242 at P 1926. 
Docket No. RM07-11-000 - 27 -

44. Even if a very small number of QFs that fall within the definition of small are 

affected by this Final Rule, we believe that assuring the reliability of the bulk-power 

system justifies our action here. 

VIII. Document Availability

45. 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. 

46. 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. 

47. 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 

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

public.referenceroom@ferc.gov ).
Docket No. RM07-11-000 - 28 -

IX. Effective Date

48. We will deny Florida Renewable QFs’ request that QFs be given a grace period of 

one year to comply with this rule. Florida Renewable QFs argues that it will be more 

burdensome on QFs than for other generators to comply with mandatory reliability 

standards because QFs were not previously subject to non-mandatory NERC reliability 

guidelines. We do not agree; we see no reason to delay the effectiveness of reliability 

standards for an entity that is needed to maintain the reliability of the bulk-power system. 

Moreover, all users of the bulk-power system that meet compliance registry criteria are 

becoming subject to mandatory reliability requirements for the first time. It is not just 

QFs that face compliance with mandatory reliability standards for the first time. In this 

regard, as several commenters point out, many QFs have been subject to some type of 

reliability standards, by contract or otherwise, for a long time. We therefore do not 

believe that QFs are in a markedly different position than other generators in terms of 

being prepared to comply with the reliability standards. Moreover, as we have discussed 

earlier, 40 the reliability standards, because of the operation of the registry criteria, will 

generally affect larger generation facilities, so that concern that an earlier effective date 

will constitute a particular burden for small facilities is misplaced. These regulations are 

effective [insert date 30 days after publication in the FEDERAL REGISTER]. 

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 

 40 P 37, 41-43. 
Docket No. RM07-11-000 - 29 -

defined in Section 351 of the Small Business Regulatory Enforcement Fairness Act of 

1996. 

List of subjects in 18 CFR Part 292

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

recordkeeping requirements. 

By the Commission. 

( S E A L ) 

 Kimberly D. Bose, 

 Secretary. 

 
Docket No. RM07-11-000 - 30 -

 In consideration of the foregoing, the Commission amends part 292, Chapter I, 

Title 18, Code of Federal Regulations, 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 § 292.601, paragraph (c)(3) is revised to read: 

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

* * * * * 

 (c) * * * 

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

* * * * *