UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 292 

(Docket No. RM06-10-000; Order No. 688) 

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

Cogeneration Facilities 

(Issued October 20, 2006) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule. 

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

to amend its regulations governing small power production and cogeneration in 

response to section 1253 of the Energy Policy Act of 2005 (EPAct 2005), which 

added section 210(m) to the Public Utility Regulatory Policies Act of 1978 (PURPA). 

EFFECTIVE DATE: The rule will become effective [insert date_60_days after 

publication in the FEDERAL REGISTER].

FOR FURTHER INFORMATION CONTACT: 

Deborah Wyrick (Technical Information) 

Office of Energy Markets and Reliability 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6113 
Marka Shaw (Technical Information) 

Office of Energy Markets and Reliability 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8641 

Samuel Higginbottom (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8561 

Eric Winterbauer (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8329 

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. 

New PURPA Section 210(m) Regulations Docket No. RM06-10-000 

Applicable to Small Power Production and 

Cogeneration Facilities 

ORDER NO.688 

FINAL RULE 

(Issued October 20, 2006) 

I. Introduction

1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005)1

 was signed into 

law. Section 1253(a) of EPAct 2005 adds section 210(m) to the Public Utility Regulatory 

Policies Act of 1978 (PURPA)2

 which provides, among other things, for termination of 

the requirement that an electric utility enter into a new contract or obligation to purchase 

electric energy from qualifying cogeneration facilities and qualifying small power 

production facilities (QFs) if the Federal Energy Regulatory Commission (Commission) 

finds that the QF has nondiscriminatory access to one of three categories of markets 

 1

 Pub. L. No. 109-58, 1253, 119 Stat. 594 (2005). 

2

 16 U.S.C. 824a-3 (2000). 
Docket No. RM06-10-000 - 2 -

defined in section 210(m)(1)(A), (B) or (C). Thus, to relieve an electric utility of its 

mandatory purchase obligation under PURPA, the Commission must identify which, if 

any, markets meet the criteria contained in 210(m)(1)(A), (B) or (C), and, if such markets 

are identified, it must determine whether QFs have nondiscriminatory access to those 

markets. 

2. On January 19, 2006, the Commission issued a notice of proposed rulemaking 

(NOPR) proposing regulations to implement the provisions of the new PURPA section 

210(m) and proposing to terminate the requirement that an electric utility enter into a new 

contract or obligation to purchase electric energy from QFs if the electric utility is a 

member of Midwest Independent Transmission System Operator, Inc. (Midwest ISO), 

PJM Interconnection, L.L.C. (PJM), ISO New England, Inc. (ISO-NE), or New York 

Independent System Operator (NYISO). After considering industry comments on the 

NOPR, the Commission issues this Final Rule amending the Commission’s regulations to 

implement the requirements in section 210(m). We believe the regulations adopted in the 

Final Rule reflect Congress’s intent to differentiate between three types of market 

structures, each of which presents differing factors relevant to our determination of 

whether QFs have access to a sufficiently competitive market to support elimination of 

the purchase requirement. Our Final Rule also recognizes the special circumstances 

faced by small QFs and, accordingly, applies a different test for this class of QFs. In 

addition to a presumption in favor of small QFs, the rule also recognizes that some QFs, 

irrespective of size, may not have the ability to sell in certain markets because of 

operational characteristics or other constraints. 
Docket No. RM06-10-000 - 3 -

3. The Commission received extensive comments on its NOPR.3

 At one extreme are 

commenters who argue that the Commission may not address the mandatory purchase 

requirement issues by rulemaking and that competitive capacity and energy markets do 

not yet exist to support a generic finding that QFs in the four regional transmission 

organization/independent system operator (RTO/ISO) regions should lose the right to 

require electric utilities to purchase their electric output. At the other extreme are those 

who argue that the Commission, with limited exceptions, should eliminate the mandatory 

purchase requirement altogether. 

 

4. We do not believe that either extreme reflects the letter or the spirit of section 

210(m). The QFs who advocate that we may not or should not act at all by rulemaking 

fail to recognize that the Commission has broad latitude to act by either rulemaking or 

adjudication. Nowhere does section 210(m) preclude the Commission from acting by 

rulemaking. Moreover, where, as here, recurring and common issues of fact arise, acting 

by rulemaking is not only permissible, but provides more effective notice to and 

opportunity for participation by all affected parties. To some extent, generic findings 

about markets are inevitable, either by rulemaking or in the first utility specific filing 

concerning a specific market. Making generic findings by rulemaking provides affected 

entities, including QFs, a better opportunity to participate in the generic proceeding as 

well as the individual proceedings that will follow. Finally, the substantive arguments of 

 3

 Attached as Appendix A is a list of all commenters and the abbreviations that are 

used throughout the order to refer to the commenters. 
Docket No. RM06-10-000 - 4 -

these entities that underlie their procedural objections fail to recognize that Congress, in 

enacting section 210(m), explicitly recognized three different market structures and 

required the Commission to respect the differences in those markets when making 

determinations as to whether to rescind the purchase obligation. In essence, they are 

rearguing the very debates that Congress settled in adopting section 210(m). 

5. We also do not agree with the position of utilities that advocate we should 

terminate the purchase obligation in summary fashion in this rulemaking. Although our 

action today respects the choice of Congress in establishing different tests for different 

market structures, we do not, in this rulemaking, terminate the purchase obligation of any 

utility. In this respect, we modify our approach in the NOPR. In contrast to the NOPR, 

in this Final Rule we establish only rebuttable presumptions that the purchase obligation 

should be eliminated with respect to certain QFs, not final determinations. 

6. In sum, this Final Rule appropriately reflects Congressional intent in enacting 

section 210(m). It does not, as some commenters suggest, ignore the fact that Congress 

did not repeal PURPA section 210(a)’s directive that the Commission prescribe, and from 

time to time revise, such rules as it determines necessary to encourage cogeneration and 

small power production. Rather, it recognizes the fundamental change which Congress 

made to the statutory construct when it determined that “no electric utility shall be 

required . . . to purchase electric energy from” a QF if certain findings are made with 

respect to various markets. Our action properly implements Congressional intent in the 

new section 210(m) that the three different market structures present different 
Docket No. RM06-10-000 - 5 -

considerations in determining whether to relieve utilities of the purchase obligation. Our 

action also properly recognizes that smaller QFs can face more significant challenges 

than larger QFs in accessing competitive wholesale markets. Our action continues to 

support QF development by ensuring that, where the requirements of section 210(m) are 

met, QF development will, as determined by Congress, be stimulated by market forces, 

and that where those requirements have not been met, QF development will continue to 

be stimulated as it is today through the mandatory purchase obligation. Finally, nothing 

in this Final Rule affects any electric utility’s resource adequacy obligations, compliance 

with the Electric Reliability Organization’s reliability standards, prudent utility practice 

to build or purchase reliable power at the most economical price, or resource portfolio 

obligations under state law including obligations to purchase renewable energy. 

II. Executive Summary

7. This Final Rule amends the Commission’s regulations in Part 2924

 (pertaining to 

electric utilities’ requirement to purchase electric energy from or sell electric energy to a 

QF) to implement section 1253 of the EPAct 2005. As relevant here, section 1253 added 

a new section 210(m) to PURPA, which: 

A. Provides for the termination of the requirement that an electric utility enter into 

new contracts or obligations to purchase electric energy from a QF, after appropriate 

findings by the Commission; 

 4

 18 CFR part 292, subpart C, Arrangements Between Electric Utilities and 

Qualifying Cogeneration and Small Power Production Facilities Under section 210 of the 

Public Utility Regulatory Policies Act of 1978. 
Docket No. RM06-10-000 - 6 -

B. Preserves existing contracts and obligations to purchase electric energy or capacity 

from or to sell electric energy or capacity to a QF; 

C. Provides for the reinstatement of the requirement to purchase electric energy from 

a QF, upon a showing that the conditions for terminating the requirement are no longer 

met; and 

D. Provides for the termination of the requirement that an electric utility enter into 

new contracts to sell electric energy to QFs, after appropriate findings by the 

Commission. 

The Commission is amending its Part 292 regulations to address the above section 

210(m) provisions and also to provide a process for applying for the reinstatement of the 

requirement to sell electric energy to QFs upon a showing that the conditions for the 

removal of that requirement are no longer met. 

 A. Termination of the Mandatory Purchase Requirement that an Electric 

Utility Enter into a New Contract or Obligation to Purchase Electric Energy from

QFs

8. This Final Rule promulgates regulations that set forth the process by which 

electric utilities may apply to be relieved of the requirement that they enter into new 

contracts or obligations for the purchase of electric energy from QFs after August 8, 

2005. New § 292.309 of the Commission’s regulations describes the findings that the 

Commission must make to justify relieving an electric utility’s obligation to enter into 

new QF purchase contracts. If the Commission finds that the QF has nondiscriminatory 

access to one of three wholesale markets described in the statute, the requirement that the 
Docket No. RM06-10-000 - 7 -

electric utility enter into new contracts or obligations is terminated. These three 

wholesale markets, set forth in the statute in section 210(m)(1), and incorporated in the 

new Commission regulations at § 292.309, are: 

(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). 

We interpret section 210(m)(1) to require the Commission to eliminate the purchase 

obligation in markets which meet the criteria of section 210(m)(1)(A), (B) or (C) if QFs 

have nondiscriminatory access to such markets. These three wholesale markets are 

characterized in this rule in short-hand terms as “Day 2” markets (auction based dayahead and real-time markets), “Day 1” markets (auction based real-time markets but not 

auction based day-ahead markets), and comparable markets, respectively.5

 The Final 

Rule finds that the Midwest ISO, PJM, ISO-NE, and NYISO all meet the criteria of 

 5

 Reference to “Day 2” and “Day 1” and the corresponding parenthetical are meant 

to be descriptive and thus are not a recitation of the elements of section 210(m)(1)(A) or 

(B). 
Docket No. RM06-10-000 - 8 -

section 210(m)(1)(A). These RTOs are independently administered and offer auctionbased day ahead and real time wholesale markets for the sale of electric energy; and 

within the regions represented by these RTOs there is nondiscriminatory access to 

wholesale markets for long-term sales of capacity and electric energy. Therefore, except 

for the rebuttable presumptions set forth below, the member electric utilities of these four 

RTO/ISOs will be eligible for relief from the requirement to enter into new contracts for 

the purchase of QF electric energy. 

9. The Final Rule creates three rebuttable presumptions: 

(A) For all three of the above markets, with the exception of the 20 megawatt (MW) 

presumption discussed next, the Final Rule finds that the existence of an open access 

transmission tariff (OATT), or a reciprocity tariff filed by a non-jurisdictional utility, 

pursuant to the Commission’s open access regulations,6

 creates a rebuttable presumption, 

under section 210(m)(1), that QFs have “nondiscriminatory access to” the relevant 

wholesale markets.7

 

 6

 18 CFR 35.28(e). An OATT provides interconnection as well as transmission 

services on a nondiscriminatory basis. 

7

 To the extent that a QF raises issues about the adequacy of an electric utility’s 

implementation of an OATT, such issues are more properly addressed in a complaint 

proceeding and will not be considered in the context of petitions for the termination of 

mandatory purchase requirements. However, a QF may raise other issues, such as 

operational characteristics and transmission limitations, to attempt to rebut the 

presumption of market access when it files a response to an application submitted 

pursuant to section 210(m)(3) of PURPA and section 292.310 of our regulations. 
Docket No. RM06-10-000 - 9 -

(B) For all three of the above markets, the Final Rule establishes a rebuttable 

presumption that QFs with a net capacity no greater than 20 MW, do not have 

nondiscriminatory access to wholesale markets.8

 Unless an electric utility seeking the 

right to terminate its requirement to purchase small QF power specifically rebuts this 

small QF presumption, and that electric utility’s request is granted by the Commission, a 

small QF would be eligible to require the electric utility to purchase its electric energy. 

(C) The Final Rule finds that the four RTO/ISOs with “Day 2” markets, i.e., the 

Midwest ISO, PJM, ISO-NE, and NYISO, qualify as markets under section 210(m)(1)(A) 

and establishes a rebuttable presumption that these organizations provide large QFs 

(above 20 MWs net capacity) interconnected with member electric utilities with 

nondiscriminatory access to the “Day 2” wholesale markets set forth in section 

210(m)(1)(A). An electric utility member of one of these four RTO filing for relief from 

the requirement to purchase will need to refer to this rebuttable presumption in the Final 

Rule as part of its application. When it files an application for relief from the purchase 

requirement it must also submit certain information, including information about 

transmission constraints within its service territory, in order to give potentially affected 

QFs information that may be useful in rebutting the presumption that they have access to 

 8

 Herein referred to as small QFs. 
Docket No. RM06-10-000 - 10 -

all aspects of the applicable “Day 2” markets.9

 A QF above 20 MWs net capacity may 

rebut the presumption of nondiscriminatory access by showing that it in fact lacks access. 

10. The rule does not find that any markets meet the statutory criteria at this time other 

than the four listed RTO/ISOs (Midwest ISO, PJM, ISO-NE, and NYISO) and the 

Electric Reliability Council of Texas (ERCOT) (discussed below). There will be a 

rebuttable presumption that QFs above 20 MWs net capacity have nondiscriminatory 

access to these markets if they are eligible for service under a Commission-approved 

OATT or Commission-filed reciprocity tariff. 

11. With respect to the California Independent System Operator (CAISO), and the 

Southwest Power Pool (SPP), which have only “Day 1” markets, it would be premature 

to find now that the CAISO and SPP would meet the criteria of section 210(m)(1)(A) 

once their ongoing market redesigns become effective. However, we find that: the 

CAISO and SPP meet the section 210(m)(1)(B)(i) criterion because they are 

Commission-approved regional transmission entities that provide transmission and 

interconnection services pursuant to open access transmission tariffs that provide 

nondiscriminatory treatment to all customers. A member electric utility of the CAISO or 

SPP may rely on this finding in its application to be relieved of the obligation to enter 

into new contracts to purchase QF electric energy, but must make all the other showings 

required under section 210(m)(1)(B) before its request may be granted.

 9

 The electric utility would have to make additional showings if it wished to rebut 

the presumption that small QFs do not have nondiscriminatory access to its region’s “Day 

2” wholesale markets. 
Docket No. RM06-10-000 - 11 -

12. The Final Rule finds that ERCOT meets the criteria of section 210(m)(1)(C). 

ERCOT offers wholesale markets for the sale of capacity and electric energy that are of 

comparable competitive quality as the markets described in sections 210(m)(1)(A) and 

(C). Therefore, except for the rebuttable presumptions set forth herein, the member 

electric utilities of ERCOT will be eligible for relief from the requirement to enter into 

new contracts for the purchase of QF electric energy.

13. New § 292.310 of the Commission’s regulations sets forth the filing requirements 

for an application by an electric utility seeking to terminate its requirement to enter into 

new purchase contracts with QFs. Among other things, the regulations require the 

electric utility to list the names and addresses of all potentially affected QFs, existing or 

under development. After notice and comment, the Commission will issue an order 

making a final determination within 90 days of the application, as required by section 

210(m)(3). 

 B. Preservation of Existing Contracts 

14. The Final Rule preserves the rights or remedies of any party under existing 

contracts or obligations, in effect or pending approval before the appropriate state 

regulatory authority or non-regulated electric utility on or before August 8, 2005, to 

purchase electric energy from or to sell electric energy to a QF. This provision is stated 

in the new § 292.314 of the Commission’s regulations. The Final Rule defines the term 

“obligations” broadly to encompass any legally enforceable obligation established 

through a state’s implementation of PURPA. 
Docket No. RM06-10-000 - 12 -

 C. Reinstatement of the Mandatory Purchase Requirement

15. The Final Rule also sets forth a process by which a QF may seek the reinstatement 

of the requirement to purchase electric energy, by showing that the conditions necessary 

for the removal of the requirement to purchase are no longer met. After notice, including 

notice to the affected utilities, and comment, the Commission will issue an order within 

90 days of the application. This process is set forth in the new § 292.311 of the 

Commission’s regulations. A QF’s request may be specific (and limited) to itself alone, 

generic for the entire service territory of an electric utility, or regional in scope. The 

Commission will address the merits of each request as warranted by the circumstances 

presented in each case. 

 D. Termination of the Requirement to Sell Electric Energy to QFs

16. The Final Rule provides for applications to remove the requirement to enter into 

new contracts to sell electric energy to QFs. The statute provides that if the Commission 

finds that competing retail electric suppliers are willing and able to sell and deliver 

electric energy to a QF, and the electric utility is not required by state law to sell electric 

energy in its service territory, the requirement to sell should be terminated. The new 

§ 292.312 of the Commission’s regulations describes this process. The Final Rule makes 

no findings or presumptions with respect to an electric utility’s obligation to sell electric 

energy to QFs. 
Docket No. RM06-10-000 - 13 -

 E. Reinstatement of the Requirement to Sell Electric Energy to QFs

17. Finally, the Final Rule provides for applications to reinstate the requirement of an 

electric utility to sell electric energy to QFs, by showing that the conditions necessary for 

the removal of the requirement to sell are no longer met. After notice and comment, the 

Commission will issue an order within 90 days if the required showing is made. 

Applications for reinstatement are addressed in the new § 292.313 of the Commission’s 

regulations. 

 F. Recovery of Prudently Incurred Costs Relating to QF Power Purchases

18. The Final Rule does not adopt new regulations implementing section 210(m)(7), 

regarding an electric utility’s recovery of prudently incurred costs relating to purchases of 

electricity from QFs. 

III. Background

A. History of Section 210 of PURPA

19. When Congress enacted section 210 of PURPA, it required the Commission to 

prescribe such rules as the Commission determined necessary to encourage cogeneration 

and small power production, including rules requiring electric utilities to offer to 

purchase electric energy from and sell electric energy to QFs. Additionally, section 210 

of PURPA authorized the Commission to exempt QFs from certain federal and state laws 

and regulations if necessary to encourage cogeneration and small power production. 
Docket No. RM06-10-000 - 14 -

20. A cogeneration facility is defined in the Federal Power Act (FPA)10 as a facility 

which produces electric energy and steam or forms of useful energy (such as heat) which 

are used for industrial, commercial, heating, or cooling purposes.11 Thus, cogeneration 

facilities simultaneously produce two forms of useful energy, namely electric energy and 

heat. Cogeneration facilities can use significantly less fuel to produce electric energy and 

steam (or other forms of energy) than would be needed to produce the two separately. 

21. Small power production facilities, as defined in the FPA, use biomass, waste, or 

renewable resources, including wind, solar energy and water, to produce electric energy 

and have a power production capacity which, together with any other facilities located at 

the same site, is not greater than 80 megawatts.12 Reliance on these sources of energy 

can reduce the need to consume fossil fuels to generate electric power. 

22. Prior to the enactment of PURPA, a cogenerator or small power producer seeking 

to establish interconnected operation with a utility faced three major obstacles. First, 

utilities were not generally willing to purchase this electric output or were not willing to 

pay an appropriate rate for that output. Second, utilities generally charged 

discriminatorily high rates for back-up service to cogenerators and small power 

producers. Third, a cogenerator or small power producer which provided electric energy 

 10 16 U.S.C. 824 et seq. 

11 Id. 796(18). 

 12 Id. 796(17)(A)(i)-(ii). 
Docket No. RM06-10-000 - 15 -

to a utility's grid ran the risk of being considered a public utility and thus being subjected 

to extensive state and federal regulation. 

23. Section 210 of PURPA was designed to remove these obstacles. Each electric 

utility is required under section 210 to offer to purchase available electric energy from 

cogeneration and small power production facilities which obtain qualifying status. The 

rates for such purchases from QFs must be just and reasonable to the ratepayers of the 

utility, in the public interest, and must not discriminate against cogenerators or small 

power producers. Rates also must not exceed the incremental cost to the electric utility of 

alternative electric energy (also known as the electric utility’s “avoided costs”). Section 

210 also requires electric utilities to provide electric energy to QFs at rates which are just 

and reasonable, in the public interest, and which do not discriminate against cogenerators 

and small power producers. Rates for the purchase of energy from and the sale of energy 

to a QF are set by the appropriate state regulatory authority or non-regulated utility 

pursuant to the Commission’s regulations, 18 C.F.R. § 292.301-308 (2006). 

24. Since Congress enacted PURPA, electric utilities have complained that their 

requirement to purchase from and sell to QFs, as implemented by the Commission in 

18 C.F.R § 292.303(a)-(b), was not economically beneficial and that they were 

purchasing energy they did not need and selling energy they did not want to sell. In 

1995, the Commission clarified that determinations of the avoided-cost rate must take 

into account all alternative sources including third-party suppliers and an electric utility 
Docket No. RM06-10-000 - 16 -

does not pay for electric energy it does not need.13 In the past decade, with the 

development of exempt wholesale generators (EWGs) introduced by the Energy Policy 

Act of 1992,14 the implementation of open access transmission via Order No. 888, the 

advent of ISOs and RTOs and organized markets, the Commission’s new interconnection 

requirements, and increasing competition in wholesale electric markets as well as some 

retail electric markets, Congress has debated whether to repeal PURPA altogether, or to 

revise it. The result is new section 210(m), which is the subject of this rulemaking, and 

new section 210(n), which was addressed in Docket No. RM05-36-000.15 

 B. New Section 210(m) 

25. Section 210(m) of PURPA is titled “Termination of Mandatory Purchase and Sale 

Requirements.” The section revises the rights and obligations between electric utilities 

and QFs. Section 210(m)(1) requires the Commission to terminate the requirement of an 

electric utility to enter into a new contract or obligation with the QF if it finds that a QF 

has nondiscriminatory access to a market described in section 210(m)(1)(A), (B) or (C). 

 13 Southern California Edison Company and San Diego Gas & Electric Company, 

70 FERC ¶ 61,215 at 61,677-78, reconsideration denied, 71 FERC ¶ 61,269 at 62,078 

(1995) (finding that the determination of avoided cost must take into account “all 

sources”). 

14 Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776, (1993) (EPAct 

1992). EPAct 1992 added a new section 32 to the Public Utility Holding Company Act 

of 1935 (PUHCA) to permit a category of sellers called EWGs to be exempt from 

PUHCA. 

15 Revised Regulations Governing Small Power Production and Cogeneration 

Facilities, Order No. 671, 71 FR 7852 (Feb. 15, 2006), FERC Stats. & Regs. ¶ 31,203 

(2006), order on reh'g, Order No. 671-A, 71 FR 30585 (May 30, 2006), FERC Stats. 

& Regs. ¶ 31,219 (2006). 
Docket No. RM06-10-000 - 17 -

Section 210(m)(2) states that after the date of enactment, no utility will be required to 

enter into a contract to purchase from or sell to a new cogeneration facility, unless the 

facility meets the criteria for new cogeneration facilities established by the Commission 

in implementing section 210(n) of PURPA. Section 210(m)(3) provides that an electric 

utility may file “an application for relief from the mandatory purchase obligation” on a 

service territory-wide basis and provides that the Commission must make a final 

determination on such an application within 90 days of the application. Section 

210(m)(4) provides that a QF, a state agency, or other affected person may apply for an 

order reinstating the electric utility’s “obligation to purchase electric energy under this 

section” upon a change in the market. Section 210(m)(5) provides for the termination of 

the requirement that an electric utility enter into a new contract or obligation to sell 

electric energy to a QF upon a finding that specified competitive conditions exist. 

Section 210(m)(6) provides that nothing in section 210(m) affects the rights or remedies 

of any party under any contract or obligation in effect or pending approval before the 

appropriate state regulatory authority or nonregulated utility on the date of enactment of 

section 210(m). And finally, section 210(m)(7) provides that the Commission shall issue 

and enforce such regulations as are necessary to ensure that an electric utility that 

purchases electric energy or capacity from a QF in accordance with a legally enforceable 

obligation entered into or imposed under section 210 of PURPA recovers all prudently 

incurred costs associated with the purchase. 
Docket No. RM06-10-000 - 18 -

 C. NOPR

26. On January 19, 2006, the Commission issued a NOPR containing its proposal to 

implement section 210(m) of PURPA. Generally, the Commission proposed to 

incorporate the language of section 210(m) in its regulations. While section 210(m) 

permits electric utilities to file applications for relief from the mandatory purchase 

requirement, and requires the Commission to act on such applications within 90 days, the 

Commission determined in the NOPR that it is appropriate to act generically as much as 

possible. Specifically, section 210(m)(1)(A) is most suitable for such a generic 

implementation and the Commission proposed to make generic findings that certain 

markets meet the section 210(m)(1)(A) criteria. The NOPR concluded that the most 

reasonable interpretation of section 210(m)(1)(A) is that it was crafted to apply to regions 

in which ISOs and RTOs administer auction-based day ahead and real time wholesale 

markets for the sale of electric energy; and wholesale markets for long-term sales of 

capacity and electric energy are that these are available to participants/QFs in these 

markets.16 The Commission proposed in the NOPR that it would make a generic finding 

that the Midwest ISO, PJM, ISO-NE, and NYISO provide markets that meet the 

requirements of section 210(m)(1)(A) and therefore utilities that are members of those 

ISOs or RTOs meet the criteria for relieving those electric utilities of the requirement to 

enter into new contracts or obligations with QFs.17 Because the Commission proposed to 

make a generic finding with respect to 210(m)(1)(A), the Commission proposed that the 

 

16 NOPR at P 14. 

17 Id. at P 22-28. 
Docket No. RM06-10-000 - 19 -

electric utilities that are members of these four RTO/ISOs submit a compliance filing 

instead of filing applications for relief of the purchase requirement pursuant to 210(m)(3). 

In the compliance filing, the electric utility would demonstrate: (1) membership in the 

RTO/ISO; (2) that the Commission has made a final finding that the RTO/ISO it is a 

member of provides nondiscriminatory access to a section 210(m)(1)(A) market; (3) a list 

of all potentially affected QFs; and (4) the QFs have the rights to request service under 

the OATT.18 

27. The Commission concluded that QFs have nondiscriminatory access to 

transmission and interconnection if they have access to utilities providing service under 

an Order No. 888 OATT (or to utilities providing service under a Commission-accepted 

reciprocity tariff) and interconnection services pursuant to the Commission’s 

interconnection rules.19 The Commission also proposed, however, that there be a 

rebuttable presumption that a utility provides nondiscriminatory access if it has an open 

access transmission tariff in compliance with our pro forma OATT (or a Commissionapproved reciprocity tariff) and that QFs or any other affected party should be allowed to 

rebut that presumption, for example, by providing specific and credible evidence that the 

QF does not have nondiscriminatory access to wholesale markets.20 The Commission 

 18 Id. at P 40. We note that, since the time comments were filed in this proceeding, 

the Commission has issued a NOPR proposing amendments to the OATT. Preventing 

Undue Discrimination and Preference in Transmission Service, 71 FR 32636 (2006), 

FERC Stats. & Regs. ¶ 32,603 (2006). 

19 Id. at P 20. 

20 Id. at P 31. 
Docket No. RM06-10-000 - 20 -

noted that improper implementation of an OATT is more properly the subject of a 

complaint. 

28. Further, the Commission proposed in the NOPR that other markets, i.e., both nonauction-based markets and non-RTO/ISO markets described in section 210(m)(1)(B) and 

(C), would not be addressed generically in this rulemaking but would be addressed on a 

case-by-case basis in response to applications filed pursuant to the Commission’s 

implementation of section 210(m)(3) of PURPA, i.e., pursuant to the proposed § 292.310 

of the Commission’s regulations.21 The Commission proposed that subsequent changes 

to market conditions in all markets, i.e., markets described subparagraphs (A), (B) and 

(C) also would be handled on a case-by-case basis as well. Applications for termination 

of the requirement to enter into new contracts or obligations to purchase from QFs in 

markets described in subparagraphs (B) and (C) would be addressed pursuant to the 

proposed § 292.310 of the Commission’s regulations. An application to reinstate the 

requirement that a utility enter in the new contracts or obligations to purchase from QFs, 

alleging subsequent changes to market conditions, would be addressed pursuant to the 

proposed § 292.311 of the Commission’s regulations. The Commission noted that it 

must make a finding regarding an application for relief of the purchase requirement and 

that the finding must be made within 90 days of the date of such application. The 

 21 Id. at P 29-30. 
Docket No. RM06-10-000 - 21 -

Commission stated that it expected an application for relief to be fully supported by 

documentation upon which the required finding can be made. 22

29. Of the approximately 2,000 pages of comments the Commission has received to 

its NOPR, a large portion of the comments focused on the standards applicable to utilities 

within the “Day 2” RTO/ISOs and the procedures for utilities within “Day 2” markets to 

claim relief from the purchase requirement. Based on careful consideration of the 

comments submitted in response to the NOPR, the Commission adopts a Final Rule that 

makes certain modifications and clarifications to the approach in the NOPR. 

IV. Discussion

 A. Section 210(m)(1)

30. The new PURPA section 210(m)(1) amends the statutory requirement that electric 

utilities purchase electric energy from QFs and states that: 

. . . no electric utility shall be required to enter into a new contract or 

obligation to purchase electric energy from a qualifying cogeneration 

facility or a qualifying small power production facility under this section if 

the Commission finds that the qualifying cogeneration facility or qualifying 

small power production facility has nondiscriminatory access to – 

(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, 

 22 The Commission interprets the 90-day period to begin upon receipt of a 

completed application. 
Docket No. RM06-10-000 - 22 -

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).

 1. Three Standards for Relief

 a. NOPR

31. Section 210(m)(1) defines under what conditions the Commission must relieve an 

electric utility of the obligation to enter into a new contract or obligation to purchase 

electric energy from a QF. Essentially, section 210(m)(1) establishes three different 

standards for relief from the purchase requirement depending on whether: (1) electric 

utilities are members of “Day 2” RTO/ISOs; (2) electric utilities are members of “Day 1” 

RTO/ISOs; and (3) electric utilities are in neither “Day 2” nor “Day 1” RTO/ISOs. The 

NOPR interpreted the language of section 210(m)(1) as to what conditions must exist for 

the three types of markets and sought comments. 

32. The NOPR explained that the first standard for relief is established in section 

210(m)(1)(A) of section 210(m)(1), which applies to “Day 2” markets with wholesale 

bilateral long-term contracts for the sale of capacity and electric energy available to 

participants. The Commission indicated that, under section 210(m)(1)(A)(ii), there was 

no requirement, given the statutory language, to consider “evidence of transactions within 

the relevant market” when determining whether QFs have nondiscriminatory access to 
Docket No. RM06-10-000 - 23 -

“wholesale markets for long-term sales of capacity and electric energy.” The 

Commission suggested that Congress presumed QFs, which have “nondiscriminatory 

access to” ISO and RTO regions with auction-based day ahead and real time markets, 

have nondiscriminatory access to long-term sales of electric energy and capacity 

wholesale markets outside the interconnected utility. The Commission proposed to find 

that Midwest ISO, PJM, ISO-NE, and NYISO meet the requirements of section 

210(m)(1)(A). 

33. The second standard for relief is established in section 210(m)(1)(B), which the 

Commission found to be intended to apply in “Day 1” RTO/ISOs, i.e., those that do not 

have both auction-based day ahead and real time markets. Section 210(m)(1)(B) 

provides for termination of the requirement that an electric utility enter into a new 

contract or obligation to purchase electric energy from a QF so long as there is (i) a 

Commission-approved regional transmission entity providing nondiscriminatory 

transmission and interconnection services; and (ii) “competitive wholesale markets that 

provide a meaningful opportunity" to sell capacity and energy on both a short- and longterm basis and energy on a real-time basis (emphasis added) to buyers other than the 

utility to which the QF is interconnected. In the NOPR, the Commission stated that 

"meaningful opportunity" is to be determined by the Commission after considering, 

among other factors, "evidence of transactions within the relevant market." The 

Commission indicated that taken together, the terms “competitive,” “meaningful 

opportunity” and “evidence of transactions” suggest that Congress intended that 

termination of the purchase requirement in a “Day 1” market only if it could be 
Docket No. RM06-10-000 - 24 -

established that QFs had opportunities to make long-term and short-term sales of capacity 

and long-term, short-term and real-time sales of energy into competitive wholesale 

markets. 

34. The third standard for relief is established in section 210(m)(1)(C) of section 

210(m)(1). Under this standard, the purchase requirement is removed in 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). The 

Commission explained that although this provision is not clear on its face, its reference to 

subparagraphs (A) and (B) requires the Commission to be mindful, in interpreting the 

provision, of the two types of requirements that are embodied in those sections, i.e., 

(1) nondiscriminatory access to transmission and interconnection services, and 

(2) competitive short-term and long-term markets that provide a meaningful opportunity 

to sell to buyers other than the utility to which the QF is interconnected. 

 b. Comments

35. ELCON, AWEA, Caithness and Public Interest Organizations (PIOs),23 for 

example, state that Congress did not repeal the mandatory purchase requirement and that 

the Commission has a continuing obligation to promote QF development. This, they 

contend, can only be accomplished by assuring that markets meet criteria that guarantee 

 23 The PIOs filing these comments are the Center for Energy Efficiency & 

Renewable Technologies, Delaware Division of the Public Advocate, Environmental 

Law & Policy Center, Interwest Energy Alliance, Izaak Walton League of America, 

Natural Resources Defense Council, Northwest Energy Coalition, Office of the Ohio 

Consumers’ Counsel, Pace Energy Project, Project for Sustainable FERC Energy Policy, 

West Wind Wires, and Western Resource Advocates. 
Docket No. RM06-10-000 - 25 -

that QFs will enter into contracts with electric utilities of similar quality to those that they 

received prior to the enactment of section 210(m) of PURPA before the mandatory 

purchase obligation can be terminated. ELCON appears to suggest that there is only one 

standard for relief from the purchase requirement: “assurance of a competitive market.”24 

In essence, ELCON argues that sections 210(m)(1)(A), (B) and (C) establish a single 

standard for terminating the mandatory purchase obligation. ELCON states that section 

210(m) authorizes the Commission to grant relief from the purchase requirement “if and 

only if a viable market exists.”25 ELCON expresses its concern that because 

discrimination continues and the markets are flawed, competition and on-site generation 

will be discouraged. AWEA and Caithness state that the Commission should grant relief 

from the purchase requirement only in markets which are “sufficiently competitive.”26 

EPSA argues that the mandatory purchase requirement can be terminated only where the 

Commission finds that the “economic and technical equivalent to mandatory purchase is 

available through a competitive market.”27 PIOs argue that electric utilities have to 

demonstrate that QFs do, in fact, have physical and economic access to all of the required 

markets on a nondiscriminatory basis. The American Chemistry Council contends that 

the mandatory purchase requirement can be terminated only in those situations where 

 24 ELCON Comments at 8. 

25 Id.

26 AWEA Comments at 2. 

27 EPSA Comments at 9. 
Docket No. RM06-10-000 - 26 -

wholesale markets have evolved to ensure the long-term commercial viability of QFs 

which enables QFs to attract investment capital and facilitates QF development; the 

American Chemistry Council urges the Commission to interpret section 210(m)(1) in 

such a manner. 

36. NPRA reminds the Commission that the main purpose of cogeneration is not to 

serve the needs of an electric power grid or “market,” but, rather, it is to serve the 

interconnecting industrial thermal and electrical load. Consequently, NPRA argues that 

the operation of these facilities may require different market features than are required by 

utility electric generation or merchant generation. NPRA argues that Congress intended 

to terminate the “must take” requirement only when it can be demonstrated that an 

electric market supports not only the role of merchant power, but the retention and 

encouragement of cogeneration. In other words, while a market may prove an efficient 

and viable alternative for a merchant plant, it does not necessarily ensure that it is an 

efficient and viable alternative for sales of power by a cogeneration facility. 

 c. Commission Determination

37. We disagree with commenters’ interpretation of the statutory standard for relief 

from the requirement that an electric utility enter into a new contract or obligation to 

purchase electric energy from a QF. There is nothing in section 210(m) to suggest that 

Congress intended to ensure a QF’s commercial viability. Nor does the statute require 

the Commission to find that the “economic and technical equivalent to mandatory 

purchase is available through a competitive market” before it terminates the requirement 

that an electric utility enter into a new contract or obligation to purchase electric energy 
Docket No. RM06-10-000 - 27 -

from QFs. Although we certainly agree with the QF commenters that Congress did not 

repeal the mandatory purchase requirement in its entirety, Congress clearly left the 

Commission with no choice but to eliminate the mandatory purchase requirement for 

utilities operating in certain markets upon certain findings being made. The fact is that 

the language of section 210(m)(1) provides that an electric utility shall be relieved of the 

requirement to purchase from a QF if the Commission makes certain findings, which 

findings do not include a determination that the “economic and technical equivalent to 

mandatory purchase is available through a competitive market.” This is not what section 

210(m) says, nor would it make any sense to infer such an interpretation. Competitive 

markets do not, by definition, impose "mandatory" purchase obligations on buyers. 

Buyers choose among differing sellers based on their relative cost, reliability, etc. The 

QFs making this argument therefore ignore the relevant statutory language and, in doing 

so, reargue the debate before Congress when it enacted section 210(m). 

38. The most reasonable interpretation of section 210(m)(1) is that Congress, in 

setting forth discrete tests for three different types of markets, was requiring the 

Commission to differentiate among these markets, and the differing circumstances they 

present, in determining whether a utility must be relieved of the mandatory purchase 

obligation. Although the statute is ambiguous in certain respects, it clearly reflects 

Congressional intent that the Commission differentiate among these three markets in 

making its determination regarding whether to terminate the purchase obligation. This 

approach not only reflects a natural reading of the words of the statute, it also is 

reasonable given the nature of the determination being made. There is little debate in this 
Docket No. RM06-10-000 - 28 -

proceeding that Day 2 organized markets, as a general matter, provide greater 

opportunities for QFs (and other independent generators) to compete than unorganized 

markets because of the existence of day-ahead and real-time energy markets that allow all 

competing generators to submit bids to participate in the market on a nondiscriminatory 

basis. Although other markets – including “Day 1” markets and non-organized markets – 

also provide opportunities for independent generators to compete, it is not surprising that 

Congress would find that, as a general matter, they have less formalized structures for 

doing so and, hence, utilities seeking relief from the purchase obligation in those markets 

would bear a heavier evidentiary burden to obtain relief. The Commission cannot, as 

some commenters in effect ask us to do, simply collapse the three discrete tests into one 

test that requires an electric utility to demonstrate that a QF will remain economically 

viable if the purchase requirement is eliminated. This would make the three different 

statutory standards meaningless. 

 2. The Nondiscriminatory Access Requirement of Section 

210(m)(1) and the OATT

 a. NOPR

39. Section 210(m)(1) provides for termination of the requirement for an electric 

utility to enter into a new contract or obligation to purchase from a QF if the QF has 

“nondiscriminatory access” to a wholesale market described in section 210(m)(1)(A), 

(B), or (C). In the NOPR, the Commission proposed that there be a rebuttable 

presumption that a utility provides nondiscriminatory access if it has an Order No. 888 

OATT (or a utility providing service under a Commission-approved reciprocity tariff). 
Docket No. RM06-10-000 - 29 -

The Commission stated that QFs or any other party should be allowed to rebut that 

presumption, but that improper implementation of an OATT is more properly the subject 

of a complaint to ensure that the OATT is properly implemented. 

 b. Comments 

40. ELCON and virtually every other commenter from the QF industry argue that the 

Commission erred in the NOPR by proposing a rebuttable presumption that a utility 

provides “nondiscriminatory access” to the market conditions identified in section 

210(m)(1)(A), (B), or (C) if it has an OATT in compliance with the Commission’s pro 

forma OATT, or a Commission-approved reciprocity tariff. They argue that the proposal 

reflects an overly simplified interpretation of the statute’s “nondiscriminatory access” 

requirement and that the mere existence of transmission rights under an OATT does not 

necessarily ensure that QFs have nondiscriminatory access to markets. ELCON and the 

QF industry argue that barriers that discriminate against QFs could exist notwithstanding 

the adoption of an OATT. The California Cogeneration Council (CCC), for instance, 

states that these barriers could be present in ISO policies that make it more difficult or 

burdensome for QFs to participate in a market as compared with other types of generators 

or market participants. ELCON and the QF industry argue that section 210(m)(1) 

requires the Commission to consider such potential barriers, and to evaluate whether QFs 

truly have nondiscriminatory access to alternative markets, before concluding that the 

requirements of section 210(m)(1) have been met. 
Docket No. RM06-10-000 - 30 -

41. In addition, ELCON and the QF industry state that the Commission has 

recognized that the intent of Order No. 888 concerning nondiscriminatory access to 

transmission has not been fully realized; first in Order No. 200028 and more recently in 

the NOPR on Preventing Undue Discrimination and Preference in Transmission 

Service.29 

42. EPSA, Reliant and PIOs add that any tariff for transmission and interconnection 

services must incorporate changes consistent with the Commission’s pro-competitive 

policies of Order No. 2000 and any further improvements determined as part of the notice 

of inquiry (NOI). EPSA argues that only then will the transmission and interconnection 

services be provided on a nondiscriminatory, pro-competitive basis. 

43. Dow Chemical Company (Dow) states that there are numerous instances in which 

QFs effectively have no access to organized markets or to transmission services 

regardless of whether the utilities to which they are interconnected technically participate 

in organized markets or provide transmission and interconnection services on an open 

access basis. Dow states that instead, in such instances, the only entity physically 

capable of acquiring QF output is the utility with which the QF is interconnected. 

American Forest & Paper states that market rules designed for merchant generation are 

often highly discriminatory to QFs which, because of the thermal needs of a cogeneration 

 28 Regional Transmission Organizations, Order No. 2000, 65 FR 809 (Jan. 6, 

2000), FERC Stats. & Regs. P 31,089 (1999), order on reh'g, Order No. 2000-A, 65 FR. 

12,088 (Mar. 8, 2000), FERC Stats. & Regs. P 31,092 (2000), aff'd sub nom. Pub. Util. 

Dist. No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607 (D.C. Cir. 2001).

29 See supra note 15.
Docket No. RM06-10-000 - 31 -

QF’s thermal host, have limited dispatchability and must often be operated in base load 

configurations. American Forest & Paper states that market rules designed around the 

dispatchability of resources which do not have attendant manufacturing facility 

obligations may discriminate unnecessarily and unreasonably against QFs. Council of 

Industrial Boiler Owners (CIBO) state that by finding that an OATT is sufficient to 

ensure nondiscriminatory access to markets, the Commission fails to consider the 

operational differences faced by QFs. 

44. In addition, Commenters argue that the NOPR’s proposal that there be a rebuttable 

presumption that a utility provides nondiscriminatory access if it has an OATT is in 

essence an irrebuttable presumption. ELCON and the American Chemistry Council state 

that although the Commission characterizes the presumption as "rebuttable," it also states 

that the presumption "cannot be rebutted by an argument that the utility has not properly 

implemented or administered its OATT.” 

45. ELCON argues that it will be difficult for the Commission to sustain on judicial 

review an irrebuttable presumption that the OATT provides nondiscriminatory 

transmission access for all QFs when its own NOI recognizes the continuation of patterns 

of abuse -- if anything exacerbated as transmission owners feel the pressure of 

competition from independent generation. ELCON states that the concern over potential 

discrimination will only be exacerbated in a scenario like the Entergy Independent 

Coordinator of Transmission (ICT) where the utility and not the RTO provide service. 

ELCON states that while the problem of discrimination in transmission is pervasive, a 

fortiori, QFs of whatever size connected at distribution voltage do not have access to 
Docket No. RM06-10-000 - 32 -

markets. ELCON states that the scenario of QFs connected at distribution voltage and 

the circumstances of small QFs illustrate why generic conclusions are inappropriate. 

46. Further, Occidental Chemical Corporation (Occidental) argues that the 

Commission’s conclusion that a complaint, rather than the application proceeding, is the 

only vehicle available to address a QF’s concern that the OATT is being administered or 

implemented in a discriminatory manner is inconsistent with the plain language of the 

statute. Occidental states that a QF cannot provide meaningful comments on whether an 

electric utility’s application meets the nondiscriminatory showing required by statute, if 

the QF is barred from raising issues regarding discriminatory administration or 

implementation of the OATT and can only raise such issues in a separate complaint 

proceeding. In addition, Occidental argues that it is unclear how the Commission could 

make a determination that QFs have nondiscriminatory access under an electric utility’s 

OATT if the Commission bars, from the outset, all evidence that the OATT is being 

administered or implemented in a discriminatory manner. 

47. PJM is concerned with the Commission’s presumption for both section 

210(m)(1)(B) and (C) that having an Order No. 888 OATT on file is enough to establish 

a presumption of nondiscriminatory access to the grid. PJM states that rather, the 

Commission should analyze particular facts and circumstances relative to concerns raised 

with potential access to the marketplace for QFs. 

48. EEI, Allegheny Power, Alliant, Entergy, National Grid and PSNM/TNP agree 

with the NOPR’s proposal. EEI states that QF commenters raise no compelling evidence 

that access provided pursuant to Commission-approved OATTs is deficient. EEI states 
Docket No. RM06-10-000 - 33 -

that nondiscriminatory access is the standard set by Congress in EPAct 2005, and 

Congress was fully aware when it used this standard that the OATT is the mechanism for 

achieving nondiscriminatory access. Allegheny joins EEI in stating that the Commission 

should make a generic finding that QF access pursuant to a Commission-approved OATT 

meets the “nondiscriminatory access” test of section 210(m) for all markets, whether 

centrally organized and administered or not. 

49. EEI states that the fact that the Commission is considering updating Order No. 888 

through its ongoing NOI does not mean that reliance on the OATT as the current 

benchmark for nondiscriminatory access is inappropriate. EEI states that at this 

preliminary stage of the Commission’s inquiry into whether changes to the OATT should 

be required, it is premature to predict what the Commission may or may not finally 

conclude with respect to the OATT. EEI states that by basing so much of their argument 

on the Commission’s consideration of reforms to Order No. 888, QF commenters are in 

essence converting a Commission NOI into a Commission final rule. EEI states that even 

if the Commission fine tunes the OATT, it would not mean that existing open access 

practices pursuant to Commission-approved OATT are discriminatory. EEI states that if 

the Commission does ultimately require changes, QFs – like any other generator – will 

reap the benefit of those enhancements. 

50. EEI further argues that where issues regarding implementation or administration 

of a particular OATT arise, a complaint pursuant to section 206 of the FPA is the 

established mechanism available to QFs (or any other generator or transmission 

customer) to raise such concerns. It states that in a complaint proceeding, the 
Docket No. RM06-10-000 - 34 -

Commission has the ability to remedy any denial of open access that results from 

improper administration of an OATT, but that ability is not present under PURPA section 

210(m), where the Commission’s only authority is to reject an application for termination 

of the mandatory purchase requirement. 

51. EEI argues against the QFs’ claim that the Commission has made the presumption 

of nondiscriminatory access under an OATT essentially irrebuttable. It states that as the 

NOPR provides, QFs or any other party will be afforded the opportunity to provide 

“specific and credible evidence that the QF does not have nondiscriminatory access to 

wholesale markets.” 

 c. Commission Determination

52. Under section 210(m)(1), the Commission must find that the QF has 

“nondiscriminatory access” to the wholesale markets described in section 210(m)(1)(A), 

(B), or (C) in order to terminate the requirement that an electric utility enter into a new 

contract or obligation to purchase electric energy from a QF. The Commission proposed 

in the NOPR that there be a rebuttable presumption that a utility provides the 

nondiscriminatory access required in section 210(m)(1) if it has an open access 

transmission tariff in compliance with our pro forma OATT (or a Commission-approved 

reciprocity tariff). However, the Commission also proposed that QFs or any other 

affected party should be allowed to rebut that presumption, for example, by providing 

specific and credible evidence that the QF does not have nondiscriminatory access to 

wholesale markets. 
Docket No. RM06-10-000 - 35 -

53. The Commission reaffirms the determination in the NOPR that only issues not 

related to the provision of open access transmission under the OATT may be raised to 

rebut the nondiscriminatory access presumption. We disagree with arguments of ELCON 

and Occidental that a QF should be able to litigate open access implementation issues in 

the context of 90-day QF applications or that, as Occidental claims, use of complaint 

proceedings to address OATT implementation is inconsistent with the language of the 

statute. We also reject arguments that, because the Commission issued a NOPR to 

reform the OATT, that we can no longer adopt a presumption that a Commissionapproved OATT meets the requirements of section 210(m) regarding nondiscriminatory 

transmission access.30 As we have found in market-based rate proceedings and other 

contexts, a transmission owner that has an OATT on file has met the obligation set forth 

in Order No. 888 to provide nondiscriminatory transmission access. Until we issue a 

Final Rule in RM05-25-000 that modifies Order No. 888, no more is required. Further, 

the FPA provides specific mechanisms, complaints under FPA section 206 or 306, to 

address allegations that a particular utility is not properly administering the OATT. We 

take very seriously allegations that a transmission owner is violating its OATT, but there 

 30 In this regard we note that the rulemaking to reform the OATT is intended to 

remedy the “opportunity” for undue discrimination; the Commission did not base its 

institution of the rulemaking in Docket No. RM05-25-000 on any finding that the OATT 

allows actual discrimination. To the extent that ELCON argues that, through the NOPR 

process, the Commission has recognized “the continuation of patterns of abuse,” 

ELCON mischaracterizes the basis of the OATT rulemaking. 
Docket No. RM06-10-000 - 36 -

are established statutory procedures for addressing such allegations. PURPA section 

210(m) does not change this statutory framework.31

54. As to PJM’s argument that a filed Order No. 888 OATT is not enough to establish 

a presumption of nondiscriminatory access to the grid with respect to markets in 

subparagraphs (B) and (C) of section 210(m)(1), we find PJM to have misinterpreted the 

NOPR. Affected parties under subparagraphs (B) and (C) have the same opportunity to 

rebut the presumption of nondiscriminatory access as parties affected under subsection 

(A). We note that, in general, the evidentiary showings for relief from the requirement 

that an electric utility enter into a new obligation to purchase electric energy from a QF in 

section 210(m)(1)(B) are higher than the evidentiary showings in section 210(m)(1)(A), 

and the evidentiary showings in section 210(m)(1)(C) are higher than the evidentiary 

showings required in section 210(m)(1)(B). 

55. Comments discussed above that are raised in the context of open access service 

but also touch upon concerns with market rules and or operational issues, for example, 

are addressed further below. 

 

 31 In fact, PURPA section 210(m) provides a compressed 90-day time frame in 

which the Commission, after notice and opportunity for comment, must act on 

applications. This provides a clear indication that Congress did not intend hearing or 

lengthy proceedings in order to make a determination of whether the electric utility must 

be relieved of the mandatory purchase requirement. A QF may, of course, file a 

complaint with the Commission at any time, including a separate complaint in 

conjunction with its comments on an electric utility’s application for relief from the 

mandatory purchase requirement. 
Docket No. RM06-10-000 - 37 -

3. Other Market Access Issues under Section 210(m)(1)

56. The Commission explained in the NOPR, and has confirmed in this rule, that the 

OATT adopted in Order No. 888,32 and interconnection rules, adopted in Order Nos. 

200333 and 2006,34 are designed to eliminate undue discrimination in the provision of 

transmission and interconnection services. However, in the NOPR the Commission 

recognized that small QFs may be in a unique situation with respect to nondiscriminatory 

access because they interconnect with the interconnected utility at a distribution level.35 

In the NOPR, the Commission sought comment on whether the utilities' purchase 

obligation should be retained for small renewable projects. The Commission also sought 

comment on whether there may be other categories of QFs that lack nondiscriminatory 

 32 Promoting Wholesale Competition Through Open Access Non-discriminatory 

Transmission Services by Public Utilities and Recovery of Stranded Costs by Public 

Utilities and Transmitting Utilities, Order No. 888, 61 FR 21540 (1996), FERC Stats. & 

Regs. ¶ 31,036 (1996), Order No. 888-A, FERC Stats. & Regs. ¶ 31,048 (1997), order on 

reh'g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh'g, Order No. 888-C, 82 

FERC ¶ 61,046 (1998), aff'd in relevant part sub nom. Transmission Access Policy Study 

Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 

535 U.S. 1 (2002). 

33 Standardization of Generator Interconnection Agreements and Procedures, 

Order No. 2003, 68 FR 49845 (Aug. 19, 2003), FERC Stats. & Regs. ¶ 31,146 (2003), 

order on reh’g, Order No. 2003-A, 69 FR 15932 (Mar. 26, 2004), FERC Stats. & Regs. 

¶ 31,160 (2004), order on reh’g, Order No. 2003-B, 70 FR265 (Jan. 4, 2005), FERC 

Stats. & Regs. ¶ 31,171 (2004), order on reh’g, Order No. 2003-C, 70 FR 37661 

(June 30, 2005), FERC Stats. & Regs. ¶ 31,190 (2005). 

 

34 Standardization of Small Generator Interconnection Agreements and 

Procedures, Order No. 2006, 70 Fed. Reg. 34,100 (Jun. 13, 2005), FERC Stats. & Regs. 

¶ 31,180 at 31,406-31,551 (2005), order on reh’g, Order No. 2006-A, 70 Fed. Reg. 

71,760 (Nov. 30, 2005), FERC Stats. & Regs. ¶ 31,196 (2005). 

35 NOPR at P 20. 
Docket No. RM06-10-000 - 38 -

access to RTO/ISO short-term or long-term wholesale markets for which the Commission 

should retain the utilities' purchase obligation. With respect to whether the purchase 

obligation should be retained for small renewable projects, the Commission sought 

comments on how to define “small,” e.g., 5 MWs or below, 20 MWs or below.36

57. Commenters from the QF industry essentially argue that certain categories of QFs 

should be “exempt” from section 210(m)(1) because these QFs lack nondiscriminatory 

access to the markets described in section 210(m)(1)(A), (B), or (C). In general, they 

argue that QFs lack nondiscriminatory access if: (1) they are of a small size, (2) they 

have certain operational characteristics such that the QF cannot access a particular 

market, (3) they are interconnected at the distribution level, or (4) a combination of the 

above. As discussed further below, the comments we have received do not provide a 

justification for categorically exempting any category of QFs from any future orders 

which may terminate a utility’s requirement to enter into new contracts or obligations to 

purchase from QFs. No class of QFs has been shown to uniformly lack 

nondiscriminatory access based on a single factor. We also agree with commenters, such 

as AEP, Entergy, Missouri River, Montana-Dakota, PJM Transmission Owners, PPL, 

Progress Energy and Xcel, that section 210(m) does not give the Commission authority to 

categorically exempt certain QFs from statutory provisions. However, we believe the 

record does support creating a rebuttable presumption that certain QFs may not have 

nondiscriminatory access to markets because of their small size. 

 36 Id. 
Docket No. RM06-10-000 - 39 -

a. Small Size

 i. Comments

58. CIBO argue that smaller QFs typically are less able to predict their generation and 

power export/import levels due to unpredictable demand fluctuations. They state that 

while larger facilities may face similar unpredictable situations, they may have more 

latitude in selecting and operating alternative equipment and that latitude could allow for 

a higher level of power flow control. CIBO also argue that because of a QF’s small size, 

the transmission charges involved in accessing the three markets described in section 

210(m)(1), including locational marginal pricing and transition charges, can place a small 

QF in a position where it cannot reach those markets. Also, CIBO, AWEA, and Granite 

State argue that certain markets may require membership fees in order to participate in 

the market. CIBO state that a sufficiently large QF may face similar problems, but it 

presumably has greater resources to address those problems, and sufficient economic 

interest in the success of the generator to bring those resources to bear on the problem. 

On the other hand, they argue that a small QF is more likely to lack the resources and to 

have less economic incentive to apply those resources to the problem, especially in light 

of the staying power of its competition. 

59. Granite State adds that most small QF hydroelectric plants, for example, are 

located in areas which do not provide direct access to RTO/ISOs. It states that small QF 

hydroelectric projects are generally located in areas remote from high voltage power 

lines, their locations being determined by the site of existing dams. Granite State states 

that the amount of generation from a small QF hydroelectric plant is dependent on the 
Docket No. RM06-10-000 - 40 -

amount of water flowing through the turbines on a particular hour. It states that they 

have limited resources and the staff employed by these projects are generally engaged in 

the day to day operation of the projects. Granite State states that developers of small 

hydroelectric plants do not have the software, computer and monitoring equipment to 

integrate to RTO/ISO operations and, in many regions, would not even be eligible to bid 

their energy into these markets because they are too small for the applicable minimum 

block. 

60. CIBO also argue that a small QF exemption, such as a MW limit, would provide 

an administrative advantage because it would be less likely to involve the QF and the 

Commission in additional proceedings and thus, avoid potential additional burden on 

parties and the Commission. 

61. Although not arguing for a size exemption, EEI states that it would be appropriate 

to allow affected small QFs in all markets, including “Day 2” organized markets, to have 

an opportunity to demonstrate that they effectively lack nondiscriminatory access to those 

markets, despite their legal right to such access under an OATT. 

62. EEI suggests that that the Commission could consider evidence of the following 

limited circumstances as a basis for finding that a small QF effectively may not have 

nondiscriminatory access to markets. One, where a small industrial cogenerator37 (with a 

 37 EEI does not expect that the Commission would extend the opportunity to 

demonstrate lack of access under this proposal to wind generators. EEI states that while 

electricity production from wind power is variable, wind generation is predictable in its 

variability, and the Commission has accommodated this variability through 

interconnection rules and other policies. EEI asserts that wind generators differ as well 

from small industrial cogenerators, whose primary purpose, in accordance with PURPA, 
Docket No. RM06-10-000 - 41 -

nameplate capacity of 5 MW or less) has: (a) highly variable thermal and electrical 

demand on a daily basis; (b) highly variable and unpredictable wholesale sales on a daily 

basis; and (c) no access to a mechanism to schedule transmission service or make sales in 

advance on a consistent basis, either because of the variability of its electricity production 

or because of market rules that prevent the QF from scheduling transmission service or 

participating in organized markets. Two, where a QF is very small,38 and cannot 

aggregate its electricity production with other nearby facilities, and can demonstrate that 

it is not directly or indirectly modeled in the energy management or market information 

system, cannot directly sell any product or service into the RTO or ISO market and 

appears to the RTO or ISO only as a reduction to load. 

63. AEP, Entergy, FirstEnergy, Missouri River and Montana-Dakota, PJM 

Transmission Owners, PPL, Progress Energy and Xcel argue that no exemption should be 

allowed because: (1) all QFs are eligible to receive transmission service under the pro

forma OATT, regardless of the level at which they are interconnected; (2) Congress has 

 

is not intended to be the production of electricity, while wind generators are exclusively 

electricity producers. 

38 EEI states that the size of a “very small” QF for purposes of its proposed 

exception to the termination of the mandatory purchase obligation is likely to vary among 

RTO/ISOs, based on factors such as operational requirements of the particular RTO, any 

threshold level for transactions that may be required in an RTO, any minimum size 

requirements for participation in the RTO market, or other factors specific to the 

RTO/ISO market involved. For example, EEI notes a “very small” QF for the NYISO 

market could be a QF less than 1 MW that has not been able to aggregate supply in order 

to participate at the 1 MW minimum transaction level established in the NYISO tariff. 

See NYISO FERC Electric Tariff, Original Volume No. 2 (“Services Tariff”), Sections 

4.1.4, 4.2.2(c)(1) and 5.12. 
Docket No. RM06-10-000 - 42 -

not given the Commission the authority to exempt QFs from the provisions of section 

210(m); and (3) an exemption could lead to uneconomic QF “gaming” strategies through 

dividing generating facilities so that they are under the size limit for the mandatory 

purchase obligation to kick-in. 

64. Other Commenters argue that no exemption should be granted in certain 

RTO/ISOs. PJM Transmission Owners and PPL Electric argue that PJM has developed 

special procedures to ensure that small generators, even those under 20 MW, have 

comparable access to energy and capacity markets. Specifically, the PJM Transmission 

Owners state that Subpart G of PJM’s tariff is dedicated to small generators to provide 

clear and concise rules for these power producers to ensure that they have comparable 

access to participate in energy and capacity markets allowing load to rely upon such 

resources. PJM notes that since 1999, PJM has successfully interconnected numerous 

small projects. These include 44 projects rated between 5–20 MW and 28 rated at 5MW 

or less. It further states that the majority of these projects are sponsored by developers 

unaffiliated with transmission or distribution system owners. Montana-Dakota adds that 

QFs have nondiscriminatory access to the Midwest ISO markets regardless of size. 

65. With regard to the Midwest ISO, several commenters such as Missouri River 

Energy and Montana-Dakota argue that no exemption is necessary for small QFs because 

small renewable projects have become very marketable given the current regulatory and 

political environment of increasing renewable portfolio standards. 
Docket No. RM06-10-000 - 43 -

66. As to NYISO and ISO-NE, National Grid states that they have generation 

interconnection policies in place for small as well as large generators. National Grid 

states that there are no minimum size requirements for a generator to join NEPOOL, and 

while the NYISO currently will not accept bids in the markets it administers from 

generators with 1 MW or less of capacity, that limitation is not immutable. It states that 

subject to that limitation, the market rules in ISO-NE and the NYISO allow settlement for 

all sizes of generators. NSTAR adds that there are sufficient privileges afforded to small 

renewable resources in NEPOOL, and regulatory requirements and monetary incentives 

in the New England states to sustain small renewable projects. The New York 

Transmission Owners argue that in NYISO, all facilities, including those with a capacity 

under 20 MW, have the same equal and nondiscriminatory access to all NYISO markets 

and all services offered by the NYISO under its tariffs. NYISO does not take a position 

on whether there should be an exemption. It states, however, that any unit, regardless of 

ownership or QF status, that has a generating capacity of two MWs or higher can bid 

directly into the NYISO markets. 

67. As to what QF size should be considered “small,” the proposals varied 

significantly from 1 MW to 80 MWs.39 However, in general, most of the QF industry 

supports a 20 MW exemption, utilities generally support no exemption, and some entities 

are willing to support an exemption for very small QFs (i.e., smaller than 1 MW) in 

 39 Industrial Boilers proposed 80 MW, UAE proposed 30 MW, AWEA and 

ELCON proposed 20, and EEI proposed 1 MW for cogeneration and 5 MW for small 

production. 
Docket No. RM06-10-000 - 44 -

specific service territories. Granite State and American Energy argue that a 20 MW 

demarcation strikes a reasonable balance between small and large projects. The 

nameplate capacity of many renewable technologies like wind and hydro do not 

accurately reflect the annual generating capacity of such units due to the lower capacity 

factor dictated by the variability in available river flow and wind. Granite State states 

that the 20 MW limitation would provide the needed flexibility to ensure that small 

projects are protected. 

68. In addition, ELCON, Granite State, AWEA, and Landfill Gas state that the 20 

MW demarcation is consistent with: (1) Order No. 671; and (2) the Standardization for 

Small Generation Interconnection Agreements and Procedures, Order Nos. 2006 and 

2006-A, which recognizes that small generators, i.e., 20 MW or below, should have 

different standards than large generators. AWEA also states that utilizing a 20 MW 

threshold for “small” generators will also avoid inconsistencies with state interconnection 

procedures which are designed around the current 20 MW threshold for “small” 

generators. Further, AWEA states that a 20 MW threshold will help prevent RTO/ISO 

market-participation costs from discouraging market participation and development of 

small generators. 

69. CIBO argue that “small” should be defined as 80 MW or less. They state that 

Congress already adopted 80 MW to reflect what is small in PURPA, which used 80 MW 

to treat as QFs small power production facilities with a net capacity of 80 MW or less 

that produce electricity from biomass, waste, renewable resources, geothermal resources, 

or any combination of these sources. In addition, CIBO argue that an 80 MW bright line 
Docket No. RM06-10-000 - 45 -

would also resolve a number of the operational concerns faced by QFs. They argue that a 

QF of greater than 80 MW is more likely to interconnect to the grid at higher voltages, 

and less likely to interconnect at distribution voltages, thereby addressing a number of the 

transmission access issues, including in particular the distribution facilities charges that 

lower voltage QFs will face. Regardless of the interconnection voltage, CIBO argue that 

a QF of greater than 80 MW will more likely have an economic interest sufficient to seek 

to participate in the market and the resources to participate. Further, CIBO argue that a 

QF of greater than 80 MW will probably have more latitude in selecting and operating 

alternative equipment and that latitude can allow for a higher level of power flow control. 

Finally, they argue that an 80 MW bright line will not undercut what they claim is the 

Commission's goal of limiting PURPA abuse and would ensure that units benefiting from 

the mandatory purchase and sale obligations will in fact be the QFs that Congress has 

wanted to protect. 

70. Granite State and USCHPA are open to a hybrid definition of “small” QF whereby 

small QFs with a nameplate capacity of 5 MW or less would automatically retain the 

right to make sales to their utilities at avoided cost rates. Those QFs with capacities of 

more than 5 MW and less than 20 MW would have the benefit of a rebuttable 

presumption in favor of retaining the utility’s mandatory purchase obligation. UAE 

simply states that it believes that a small QF should be defined as less than 30 MW 

without elaboration. 
Docket No. RM06-10-000 - 46 -

71. PJM agrees that EEI’s size limit exception (1 or 5 MWs) may be appropriate as 

applied to very small entities that do not aggregate their generation. PJM states, 

however, that in the PJM market resources rated below very small levels are permitted to 

aggregate for the purpose of submitting offers. Therefore, PJM concludes that a facility 

less than 100 kW may meet a “unique circumstances” standard. PJM states that it does 

not impose a size limit on modeling. PJM states that it requires that new resources rated 

higher than 10 MW, whether in the PJM market or behind the meter, as well as any new 

capacity resource intending to set real-time locational marginal pricing (LMP), must be 

explicitly modeled in the PJM Energy Management System network model. As to 

access, PJM states that the PJM market has a 100 kW minimum for offers to buy and sell 

in the Capacity and Day-Ahead Markets and 1 kW for offers in the Real-Time Market. 

 ii. Commission Determination

72. We believe that the record supports creating a rebuttable presumption40 that certain 

QFs may not have nondiscriminatory access to markets because of their small size. In 

addition, we find that a reasonable and administratively workable definition of “small” is 

20 MW. As a result, the Final Rule creates a rebuttable presumption that the requirement 

that an electric utility enter into new contracts or obligations to purchase from a QF 

remains in effect, in all markets, for QFs sized 20 MW net capacity41 or smaller.42 This 

 40 As we noted above in P 57, no class of QFs has been shown to uniformly lack 

nondiscriminatory access based on a single factor. Thus, we are not making a finding 

here but are establishing a rebuttable presumption. 

41 A QF, when it seeks certification, states what size it is. The size it is required to 

state is its “net capacity” which is its gross capacity, less station power. In the case of 
Docket No. RM06-10-000 - 47 -

rebuttable presumption will apply to applications in markets described in section 

210(m)(A), (B), or (C). To rebut this presumption, the filing electric utility will be 

required in its application to demonstrate, with regard to each small QF that it, in fact, has 

nondiscriminatory access to the market. 

73. The Commission finds persuasive commenters’ arguments that some QFs may not 

have nondiscriminatory access to one of the three markets described in section 

210(m)(1)(A), (B), or (C) because of their small size. There was agreement among 

commenters representing both QFs and utilities that small size could affect a QF’s ability 

to access markets. To varying degrees, the QF industry, EEI, and also PJM, recognized 

that small QFs may not have nondiscriminatory access to the three markets described in 

section 210(m)(1)(A), (B), or (C). There was not, however, consensus as to what 

constitutes “small” for purposes of identifying QFs that may not have nondiscriminatory 

access to markets. 

74. In determining what constitutes “small” for purposes of the rebuttable 

presumption, we are not making a finding that all QFs smaller than a certain size lack 

nondiscriminatory access to markets. Rather, utilities seeking to terminate the 

requirement that they enter into new contracts or obligations to purchase from small QFs 

 

Commission-certified facilities, the Commission certifies the QF at its net capacity; selfcertified facilities self-certify at net capacity. The Commission has been consistent over 

the years in requiring QFs to state their net capacity in the Form 556 which is the basis of 

both applications for Commission certification, and notices of self-certification. A QF’s 

Commission certified (or self-certified) net capacity would determine whether the QF 

qualifies for the “small size” rebuttable presumption in this Final Rule. 

42 Herein referred to as “small QF.” 
Docket No. RM06-10-000 - 48 -

will be required to rebut the presumption that QFs sized 20 MW net capacity or smaller 

do not have access. A utility’s demonstration must be filed as part of its application filed 

pursuant to section 292.310 of our regulations. 

75. Commenters suggested various sizes as the demarcation between QFs that can 

access markets. CIBO suggested 80 MW as the logical demarcation point, pointing to the 

definition of “small power production facilities” in PURPA. Granite State, AWEA and 

Landfill Gas suggest that the Commission use 20 MW as the demarcation pointing to the 

Commission’s use of 20 MW as being the demarcation between large and small 

generators for interconnection purposes and for purposes of QF exemption from sections 

205 and 206 of the FPA. 

76. Keeping in mind that we are creating a rebuttable presumption, and to include 

most small QFs that may lack nondiscriminatory access to markets within the 

presumption, we find that the 20 MW demarcation is reasonable. As pointed out by 

commenters, the Commission used 20 MW in Order No. 671 to exempt QFs that are 20 

MW or smaller from sections 205 and 206 of the FPA. The Commission also used the 20 

MW demarcation for eligibility for the interconnection rules contained in Order Nos. 

2006 and 2006-A, which recognize that small generators, i.e., 20 MW or below, should 

be subject to different standards than large generators.43 In adopting this 20 MW 

 43 Order No. 2006 defined a "Small Generating Facility" as a device used for the 

production of electricity having a capacity of no more than 20 MW. The Commission 

concluded in Order No. 2006 that general consistency between the Commission's 

interconnection procedures document and interconnection agreement adopted in that final 

rule and those of the states will be helpful to removing roadblocks to the interconnection 

of Small Generating Facilities. See Order No. 2006 at P 4. 
Docket No. RM06-10-000 - 49 -

demarcation in this proceeding, we recognize that no single per-MW demarcation is 

perfect. However, we believe that, in creating a rebuttable presumption, it is necessary to 

establish a clear demarcation and, as indicated, that 20 MW is appropriate for that 

purpose. We are influenced by the fact that the statute provides a very compressed 90-

day time frame in which parties may provide the record support for a determination of 

whether a utility must be relieved of the purchase obligation. The statute does not 

provide time for lengthy litigation. Unlike other provisions of the FPA, which require 

notice and an opportunity for “hearing,” section 210(m)(a)(3) provides for notice and 

opportunity for “comment” and a final decision within 90 days of filing. Thus, it is 

consistent with the statutory framework to provide clear demarcations that will permit the 

Commission to make reasoned determinations within the 90-day period. After balancing 

all relevant considerations, we therefore adopt a clear demarcation of "small QF" in this 

Final Rule. 

77. The Commission will not allow for gaming of this 20 MW rebuttable presumption. 

If parties are concerned that a QF has engaged in such gaming with regard to the 

certification or siting of a particular facility, we encourage those parties to bring their 

concerns to our attention. In any such proceeding, we will consider all relevant factors, 

including, but not limited to, ownership, proximity of facilities, and whether facilities 

share a point of interconnection. For purposes of evaluating proximity of facilities with 

regard to alleged gaming of this rebuttable presumption, we will not be bound by the onemile standard set forth in 18 C.F.R. § 292.204(a)(2). 
Docket No. RM06-10-000 - 50 -

78. In order to rebut the 20 MW presumption, an electric utility will have the full 

burden to show that small QFs have nondiscriminatory access to the market of which the 

electric utility is a member. We will not specify, in this Final Rule, what evidence would 

be sufficient, but note that relevant evidence may include the extent to which the QF has 

been participating in the market or is is owned by, or is an affiliate of, a entity that has 

been participating in the relevant market. 

 b. Operational Characteristics and Transmission 

 Constraints

 i. Comments

79. Many commenters argue that dispatchability and intermittent resource 

characteristics do not allow QFs to have nondiscriminatory access to the markets 

described in section 210(m)(1)(A), (B), or (C). Several commenters argue that before the 

purchase requirement is lifted the Commission must consider the unique generation 

operational differences of certain QFs that affect their nondiscriminatory access to 

competitive markets. For example, American Forest & Paper states that real-time and 

day-ahead, bid-based markets are, in themselves, inadequate to support baseload 

operations of QFs with limited dispatchability. American Forest & Paper states that 

bidding into an hourly energy market subjects QFs to unworkable dispatch risks which 

may require either: (1) bidding a price too low to support fixed cost recovery in order to 

ensure dispatch; or (2) jeopardizing industrial or other processes required to be primary 

under newly enacted section 210(n). Similarly, CIBO argues that the Commission should 

require an analysis of the operational issues, including, for example, the voltage level of 
Docket No. RM06-10-000 - 51 -

the interconnection between the QF and the grid, and the fact that cogeneration thermal 

host limits the ability to dispatch a QF. It states that the mandatory purchase obligation 

should only be removed if it is demonstrated that markets are truly accessible to QFs, 

taking into consideration QF operational issues, including size, in some cases 

interconnecting at distribution voltage (with the attendant costs of paying for distribution 

adders), the different efficiency and operational constraints of industrial boilers, the 

different efficiency and operational constraints caused by industrial cogeneration hosts, 

and the impact of transmission charges, including locational marginal pricing and 

transition charges, on economically marginal QF generation. 

80. Florida Industrial argues that the Commission should specifically retain the utility 

obligations to purchase for that category of “process-following” QFs that rely on a reject 

waste heat from an associated industrial manufacturing process for the production of 

electricity and thermal energy – and where the amount of reject waste heat varies with 

manufacturing production rates – such as in phosphate fertilizer manufacturing 

operations. It states that such process-following QFs generate at high efficiencies and 

consume little or no fossil fuels. However, because the rate of electric energy production 

varies (“follows”) in direct proportion to the underlying manufacturing processes, such 

QFs would find themselves at a significant and untenable disadvantage – especially with 

regard to deviation from schedule and energy imbalances, as well as other associated 

factors -- if PURPA’s mandatory purchase obligation were lifted in Florida. 
Docket No. RM06-10-000 - 52 -

81. In addition to EEI’s comments regarding a QF’s size as a contributor to a lack of 

nondiscriminatory access, EEI states that it would also be appropriate to allow affected 

QFs in all markets, including “Day 2” organized markets, to have an opportunity to 

demonstrate that they effectively lack nondiscriminatory access to those markets, despite 

their legal right to such access under an OATT where an existing QF44 is located in an 

area in which persistent transmission capacity constraints effectively cause the QF to 

have neither physical45 nor financial access46 to markets outside the persistently 

congested area and there is not a sufficient opportunity to relieve the transmission 

 44 An existing QF is one that is in existence as of the date the mandatory purchase 

obligation is terminated. 

45 EEI suggests that for purposes of this exception, a QF is prevented from having 

“physical access” outside its congested area when the QF is located in a “generation 

pocket.” EEI believes this means that during annual system peak conditions, the QF is 

unable (because of transmission congestion) to deliver the power it generates that is not 

consumed by local loads to the remainder of the relevant ISO’s or RTO’s control area, or 

to other areas if the QF is not located in an ISO or RTO control area. EEI concludes the 

geographic area that should be evaluated as a potential “generation pocket” is the area 

containing the QF and other generators that sufficiently contribute to the congestion on 

the transmission line, as defined by the ISO or RTO in its applicable resource adequacy 

deliverability analysis, if the QF is located in an ISO or RTO control area. See, e.g., 

CAISO Preliminary Deliverability Baseline Analysis Study Report, May 3, 2005, 

Appendix I. In addition, a given QF’s lack of physical access should be subject to annual 

review in order to determine whether the mandatory purchase obligation should continue. 

46 EEI states that existing “Day 2” organized markets rely on LMP and financial 

transmission rights rather than physical transmission rights. Where a financial right 

exists, a generator enjoys access to markets, regardless of whether a physical right exists. 
Docket No. RM06-10-000 - 53 -

constraint or to sell its output or capacity within the area on a short-term and long-term 

basis because of the transmission constraint. 

 ii. Commission Determination

82. While we agree with commenters that there may be factors unique to a QF that 

prevent its nondiscriminatory access to one of the three markets described in section 

210(m)(1), we do not believe that any factor, other than small size, has been shown in 

this rulemaking to be an appropriate basis on which the Commission can establish a 

rebuttable presumption of lack of nondiscriminatory access. Unlike the size limitation 

discussed above, operational characteristics and transmission limitations are not 

susceptible to a clear demarcation for purposes of establishing a rebuttable presumption. 

We do believe, however, that by establishing a rebuttable presumption based on size, we 

in effect capture some of the operational issues expressed by commenters. Accordingly, 

the final rule does not establish a rebuttable presumption specific to operational 

characteristics. 

83. However, with respect to the rebuttable presumption that QFs larger than 20 MW 

net capacity in the four listed RTO/ISOs do have access to markets, QFs larger than 20 

MW may seek to rebut this presumption in their response to applications pursuant to 

section 210(m)(3) of PURPA and § 292.310 of our regulations. The comments suggest 

that a QF may rebut the presumption by showing, for example, one or more of the 

following factors. Although we do not make any final determinations herein as to 

whether any such factor, standing alone, is sufficient to rebut the presumption of market 

access, we do agree with the commenters that these factors are relevant to the question of 
Docket No. RM06-10-000 - 54 -

whether the purchase obligation should be terminated and, upon an appropriate 

evidentiary showing, may be sufficient to rebut that presumption: 

(A) The QF has certain operational characteristics that effectively prevent the QF’s 

participation in a market. Such operational characteristics might include, but are not 

limited to: (a) highly variable thermal and electrical demand (from the QF host) on a 

daily basis, such that the QF cannot participate in a market; or (b) highly variable and 

unpredictable wholesale sales on a daily basis. 

(B) The QF has no access to a mechanism to schedule transmission service or make sales 

in advance on a consistent basis, either because of the variability of the QF’s electric 

energy production or because of market rules that prevent the QF from scheduling 

transmission service or participating in organized markets. Such operational 

characteristics might include, but are not limited to, dispatchability or some other 

characteristic. 

(C) A QF lacks access to markets due to transmission constraints. A QF may show that 

it is located in an area where persistent transmission constraints in effect cause the QF not 

to have access to markets outside a persistently congested area to sell the QF output or 

capacity. 

84. In evaluating transmission constraints, the Commission will consider, on a caseby-case basis, among other things, the opportunity for QFs, on a nondiscriminatory basis, 

to obtain transmission upgrades to relieve constraints and whether the structure of the 

relevant market provides for the opportunity for the QF to sell notwithstanding the 

constraint. 
Docket No. RM06-10-000 - 55 -

 c. Distribution Level

 i. Comments

85. AWEA and others point out that the problems for QFs connecting at the 

distribution level include: (1) wheeling charges over distribution to reach RTO/ISO 

markets; (2) costs associated with access to the RTO/ISO market; and (3) other costs and 

procedural barriers that can be unilaterally imposed by the distribution utility to deny or 

hinder access to the market. 

86. Many commenters including AWEA, argue that QFs are typically located in areas 

which do not provide direct access to competitive wholesale markets, such as RTO/ISO 

markets. AWEA states that, instead such facilities are forced to connect to the 

distribution market operated by competing utilities. AWEA states that utilities and state 

commissions -- not FERC or RTOs -- control who can interconnect at the distribution 

level and charge costs that are prohibitive for many QFs. AWEA states that because QFs 

cannot reach the RTO/ISO without incurring significant costs to interconnect at the 

distribution level, access is typically uneconomic for QFs. AWEA states that 

accordingly, these QFs have no opportunity to sell power in a competitive market. 

AWEA states that there is no way to ensure fair and nondiscriminatory treatment to QFs 

forced to interconnect with a competing utility. NPRA states that a competitive market in 

which the utility baseloads its own generation and seeks “competitive” solutions for 

peaking power may not fairly accommodate the sale of capacity and energy from nondispatchable QF generating facilities. 
Docket No. RM06-10-000 - 56 -

87. Other commenters disagree with the argument that the Commission should retain 

the mandatory purchase obligation for QFs interconnected at the distribution level. They 

argue that whether a QF interconnects at the distribution or transmission level is 

irrelevant because it has nondiscriminatory access to competitive markets through open 

access transmission and interconnection services. Central Vermont and Southern 

California Edison Company (SCE) state that under Order Nos. 2003-C and 2006-A all of 

the utility’s facilities, including its distribution facilities, that are used to implement a sale 

for resale or to transmit electricity in interstate commerce are subject to the 

nondiscriminatory requirements of the utility’s OATT. In addition, EEI and SCE state 

that QFs may take advantage of the interconnection provisions of section 210 of the FPA, 

under which they can obtain services at Commission-determined rates, terms and 

conditions. Also, EEI points out that section 1.11 of the pro forma OATT makes clear 

that a generator interconnected at the distribution level is entitled to request transmission 

service under the OATT. 

88. PJM states that regardless of whether a resource interconnects at the transmission 

or distribution level, it is entitled in PJM to obtain interconnection service and openaccess delivery service. SCE argues that if the Commission does not adopt a generic 

finding that generators have open access on a nondiscriminatory basis to the local 

distribution facilities of all Commission-regulated utilities, there is support for such a 

finding as to the State of California, given the existence of Wholesale Distribution Access 

Tariffs. 
Docket No. RM06-10-000 - 57 -

 ii. Commission Determination

89. The connection of a QF to distribution-level facilities can present two different 

issues: (i) whether the utility owning the distribution facilities will permit the QF to have 

access to markets and (ii) if that access is granted, whether any associated distribution 

charges are sufficient to negate that access for purposes of applying section 210(m). As 

to the first question, we agree that a denial of actual access to distribution facilities for 

purposes of selling power into the wholesale market would constitute sufficient evidence 

to find that section 210(m) has not been satisfied (and hence to retain the mandatory 

purchase obligation). We recognize that open access transmission service, adopted in 

Order No. 888,47 and interconnection rules, adopted in Order Nos. 200348 and 2006,49 are 

designed to eliminate undue discrimination in the provision of transmission and 

interconnection services but do not address certain distribution level issues. Indeed, the 

Commission does not have jurisdiction over all distribution level facilities, 50 and thus 

QFs interconnected to those facilities face access issues that are different from the access 

issues that are faced by QFs interconnected directly to RTO/ISO facilities.51 Although 

 47 Supra note 32. 

48 Supra note 33. 

 

49 Supra note 34. 

50 See, e.g., PJM Interconnection, LLC, 114 FERC ¶ 61,191, order on reh’g, 

116 FERC ¶ 61,102 (2006). 

51 The Small Generator Interconnection Procedures (SGIP) and the Small 

Generator Interconnection Agreement (SGIA) outlined in Orders Nos. 2006 and 2006-A, 

include separate definitions for "Transmission System" and "Distribution System" to 
Docket No. RM06-10-000 - 58 -

we do not believe the record supports any generic findings that QFs interconnected at a 

distribution level do not have non-discriminatory access to markets, a QF may be able to 

show, based on its specific circumstances, that it does not have such access to markets as 

a result of not being able to obtain non-discriminatory access to distribution facilities. 

Thus, for purposes of the rebuttable presumption that QFs above 20 MWs in the four 

ISOs/RTOs (ISO-NE, NYISO, PJM and Midwest ISO) have non-discriminatory access to 

markets, QFs may be able to rebut the presumption by, e.g., demonstrating a denial of 

actual access to distribution facilities for the purposes of selling power to the wholesale 

market. Moreover, we note that, for small QFs (many of whom may be connected at 

distribution level), the utility must also overcome the rebuttable presumption that such 

small QFs do not have sufficient access to markets to satisfy section 210(m). 

90. With respect to the second issue, we find that the imposition of a charge for access 

to the distribution system does not mean that the QF does not have "access" to 

competitive markets. A QF wishing to access competitive markets is expected to pay the 

reasonable charges, whether for transmission or distribution facilities, that are associated 

 

account for the distinct engineering and cost allocation implications of an interconnection 

with a Distribution System. Order No. 2006 states that use of the term "Distribution 

System" has nothing to do with whether the facility is under this Commission's 

jurisdiction; some "distribution" facilities are under our jurisdiction and others are "local 

distribution facilities" subject to state jurisdiction. Further Order No. 2006 applies only 

to interconnections to facilities that are already subject to a jurisdictional OATT at the 

time the interconnection request is made and that will be used for purposes of 

jurisdictional wholesale sales. Order No. 2006 explains that because of this limited 

applicability, and because the majority of small generators interconnect with facilities 

that are not subject to an OATT, Order No. 2006 will not apply to most small generator 

interconnections. See Order No. 2006 at P 6, 7 and 8. 
Docket No. RM06-10-000 - 59 -

with such action. There is nothing in section 210(m) that suggests otherwise. Thus, the 

requirement to pay an interconnection charge, transmission charge, or distribution charge, 

in and of itself, is not an indication that a QF does not have nondiscriminatory access to a 

market. 

 4. Burden of Proof

 a. NOPR

91. In the NOPR, the Commission proposed to make generic findings that certain 

markets satisfy the conditions of section 210(m)(1)(A). In addition, the Commission 

proposed to create a rebuttable presumption that the Order No. 888 OATT provides 

nondiscriminatory access to markets. 

 b. Comments

92. American Chemistry Council, Caithness, American Forest & Paper, CCC, CIBO, 

Occidental, PIOs, Dow, and ELCON argue that the burden of establishing that the section 

210(m) criteria are met is placed squarely on the electric utility seeking relief from the 

must purchase requirement. Several of these commenters argue that the Commission 

erred in making generic determinations for section 210(m)(1)(A). All of these 

commenters argue that section 210(m)(3) shows Congressional intent that electric utilities 

can be relieved only after careful consideration on a utility-specific service territory basis 

– not on a broader region-wide basis. ELCON and many others claim that the 

Commission has a statutory obligation to make facility-specific determinations that 

nondiscriminatory access to long-term markets truly exists. Industrial Energy Consumers 

add that the statute requires that the utility make a specific showing, supported by 
Docket No. RM06-10-000 - 60 -

evidence, about the existence of and nondiscriminatory access to long-term markets. 

ELCON and others contend that the statute does not provide the Commission with the 

discretion or legal authority to abandon this QF-level analysis in favor of a generic 

analysis. Granite State is concerned that a generic finding will adversely affect small 

developers because they would not receive actual notice of the elimination of the 

mandatory purchase requirement. 

93. The CCC argues that section 210(m) requires utilities to make principal showings 

demonstrating that market conditions justifying removal of the mandatory purchase 

requirement exist. It states that QFs then have the ability to rebut the utilities’ 

presentations. The CCC states that the NOPR turns this scheme on its head by making 

initial, unsupported conclusions regarding the existence of market opportunities for QFs 

without any utility submission or evidence, and then shifting the burden to QFs to rebut 

the NOPR’s conclusions. 

94. CIBO argue that placing the burden on industrial QFs is arbitrary, because 

industrial QFs generally lack the resources and Commission regulatory expertise to 

participate in litigation before the Commission. In addition, it argues that such a shifting 

of the burden of proof is contrary to 5 U.S.C. 556(d) and contrary to the structure of 

section 1253, which envisions that the Commission will act on applications submitted by 

the utility and supported by a demonstration made by the utility. Finally, the Council 

argues that it creates a disincentive for its members and other industrial QFs, who 

generally lack the resources and regulatory expertise to bear that burden. 
Docket No. RM06-10-000 - 61 -

95. Occidental adds that section 210(m)(3) provides the single mechanism by which 

an electric utility can eliminate its mandatory purchase requirement. It argues that the 

statute does not permit the Commission to relieve the applicants’ burden to demonstrate 

the “factual basis” of their requested relief by rulemaking. 

96. EEI states in its reply comments that it strongly believes the four RTO/ISOs 

provide nondiscriminatory access to all generators, operate competitive wholesale 

markets meeting the criteria in section 210(m)(1)(A)(i), and afford opportunities for longterm sales of capacity and energy within the meaning of section 210(m)(1)(A)(ii). EEI 

states that the Commission is correct to make generic findings regarding these markets. 

EEI states that to do otherwise would compel the Commission to re-litigate the same 

issues time and time again to reach the identical determination. 

97. EEI states that only QFs will have the evidence necessary to demonstrate that they, 

in fact, lack access and thereby to rebut the presumption and that the Commission is not 

reversing the burden of proof, but placing it where it belongs. EEI states that the 

opportunity to rebut this presumption generally will be available to QFs in their 

comments to applications for relief filed pursuant to section 210(m)(3). 

 c. Commission Determination

98. Commenters, in response to the NOPR’s proposal to find that the markets of the 

four RTO/ISOs satisfy section 210(m)(1)(A), raise essentially the same issue from two 

different perspectives: (1) the Commission’s authority to make generic findings; and 

(2) section 210(m)(3) places the burden of proof on the electric utility, not the QF. 
Docket No. RM06-10-000 - 62 -

99. We have previously discussed the rebuttable presumptions being adopted herein – 

in favor of electric utilities with respect to “large”QFs in the four organized markets and 

in favor of “small” QFs in all markets. Several parties challenge our ability to make any 

such determinations on a generic basis in this rulemaking. We disagree. First, we have 

broad discretion to adopt generic policy or make generic findings through either 

rulemaking or adjudication.52 We believe doing so through this rulemaking provides all 

affected entities – including both utilities and QFs – a reasonable opportunity to be heard 

on common issues that arise in various market structures and for classes of QFs. It makes 

little sense to adopt such generic determinations in the first case to present them, thereby 

effectively denying the vast majority of utilities and QFs the ability to comment on those 

policies or findings before they are adopted for the first time. To some extent, generic 

findings about certain aspects of “Day 2” markets are inevitable, either by rulemaking or 

in the first utility specific filing in each “Day 2” market. Making generic findings by 

rulemaking provides affected QFs better notice. 

100. Second, we are not persuaded that the issues relevant to the findings and rebuttable 

presumptions we adopt here vary so significantly in each case that they must be resolved 

only on a case-by-case basis. For example, the issue of whether the four “Day 2” markets 

satisfy section 210(m)(1)(A) is one that can be resolved generically. We find no merit in 

the contention that we should relitigate that issue hundreds of times for every QF located 

in “Day 2” organized markets. Our approach here is consistent with the language of the 

 52 See SEC v. Chenery, 332 U.S. 194, 202-03, reh’g denied, 332 U.S. 747 (1947). 
Docket No. RM06-10-000 - 63 -

statute. Section 210(m)(1)(B) provides for the submission of “evidence of transactions 

within the relevant market.” Because this language is not included in section 

210(m)(1)(A), our approach providing for findings and rebuttable presumptions is 

consistent with the statute. Finally, we note that, unlike the NOPR, we are only 

establishing rebuttable presumptions of access to markets, not final determinations. 

These rebuttable presumptions are not only reasonable because they address common, 

recurring issues, but also will permit better processing of applications under the 

compressed 90-day timeframe required by statute.53

101. We also note that certain QFs recognize our authority to make generic findings. 

PIOs implicitly acknowledge the Commission’s authority to make generic findings in 

supplemental comments filed on August 25, 2006. In those comments, PIOs urged the 

Commission to find that certain classes of QFs should retain the right to require electric 

utility purchases regardless of the state of the markets on the ground that certain classes 

of QFs lack access to markets. 

102. As noted, while the Commission is making a finding in this rulemaking that four 

markets satisfy the market criteria of section 210(m)(1)(A) of PURPA, and is establishing 

a rebuttable presumption that QFs above 20 MWs have nondiscriminatory access to those 

markets, electric utilities within those markets will nevertheless have to file an 

application pursuant to our regulations implementing section 210(m)(3) of PURPA, that 

 53 We note in this regard that section 210(m) of PURPA requires the Commission 

to act on an application, within 90 days of such application, “after notice . . . and an 

opportunity for comment.” This contrasts with the requirement of sections 205 and 206 

of the FPA that the Commission act after a “hearing,” not just after an opportunity to 

comment. See 16 USC 824d, e. 
Docket No. RM06-10-000 - 64 -

is pursuant to section 292.310 of the Commission’s regulations, for relief from the 

requirement to enter into new contracts or obligations with QFs. An electric utility 

member of one of these four RTO/ISOs filing for relief from the obligation to purchase 

will need to refer to this finding in the Final Rule as part of its application. When it files 

for relief from the purchase obligation it must also submit information about transmission 

constraints within its service territory in order to give potentially affected QFs 

information that may be relevant to rebutting the presumption that they have access to all 

aspects of the applicable “Day 2” market. A QF 20 MW or smaller located within the 

Midwest ISO, PJM, ISO-NE, and NYISO will be presumed not to have 

nondiscriminatory access to these wholesale markets.54 A QF larger than 20 MW located 

within the Midwest ISO, PJM, ISO-NE, and NYISO will be presumed to have 

nondiscriminatory access to these wholesale markets. A QF larger than 20 MW may 

rebut that presumption by showing that it in fact lacks access. 

103. A similar process will be used in cases for utilities located in “Day 1” or other 

markets. However, in those markets, other than ERCOT, there will be no presumption 

that a market that satisfies section 210(m)(1)(B) or (C) criteria for termination of the 

purchase obligation exists. The utility seeking relief will have to make that showing. In 

addition to providing evidence that such markets satisfy the criteria of subsections (B) 

and (C) generally, a utility will have to submit evidence sufficient to overcome the 

presumption that a QF of 20 MWs net capacity or below does not have nondiscriminatory 

 54 The electric utility would have to make additional showings if it wished to rebut 

the presumption that small QFs do not have nondiscriminatory access to its region’s Day 

2 wholesale markets, and to long term capacity and energy markets. 
Docket No. RM06-10-000 - 65 -

access to those markets . Further, as indicated, there will be no presumption regarding 

QFs above 20 MWs for markets covered by sections 210(m)(1)(B) and (C). 

104. The result of this procedural process is that, before the Commission relieves an 

electric utility of its requirement to enter into a new contract or obligation to purchase 

electric energy from any QF, the Commission will have made a facility-specific 

determination that the QF has nondiscriminatory access to a section 210(m)(1)(A), (B) or 

(C) market. It is true that the process utilizes certain rebuttable presumptions. But as 

discussed above, we believe that there is a reasonable basis for the presumptions we are 

establishing, and we stress that all of the presumptions being established are rebuttable. 

We also believe that the use of the presumptions will assist the parties – QFs as well as 

electric utilities – and the Commission to more readily process applications for 

termination of the purchase requirement consistent with the statute and within the 90-day 

timeframe required by section 210(m)(1)(3) of PURPA. Finally, we recognize concerns 

that QFs may not have access to the level of information that electric utilities have and 

that some QFs lack the resources and expertise to participate in Commission litigation. 

The creation of the rebuttable presumption in favor of small QFs, as well as the 

information requirements we are imposing on electric utilities as part of their 

applications, should help QFs in this regard. Thus, we believe that the procedures we are 

creating for processing applications to terminate the requirement that an electric utility 

purchase electric energy from a QF are consistent with the requirement in section 

210(m)(3) of PURPA that: (1) QFs be given sufficient notice; (2) a utility set forth the 
Docket No. RM06-10-000 - 66 -

factual basis on which relief is requested; and (3) a utility describe why the conditions set 

for in sections 210(m)(1)(A), (B) or (C) have been met. 

105. As to the arguments that QFs do not have sufficient notice of the Commission’s 

generic conclusions, we disagree. As indicated above, these parties have it backwards. 

We are providing greater, not lesser, notice of our conclusions regarding these issues by 

addressing them in a proposed rulemaking, rather than in individual adjudications. 

Moreover, every potentially affected QF will be given notice of the proceedings filed 

under § 292.310 of our regulations and will, in those proceedings, have the opportunity to 

rebut the generic findings made in this Final Rule. 

 B. Section 210(m)(1)(A) of PURPA

 1. Midwest ISO, PJM, ISO-NE, and NYISO

 a. NOPR

106. Section 210(m)(1)(A) of PURPA requires the Commission to terminate an electric 

utility’s obligation to purchase from QFs if QFs have nondiscriminatory access to (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. 

107. In the NOPR, the Commission interpreted section 210(m)(1)(A) to apply in 

regions in which ISOs and RTOs administer day-ahead and real-time markets, and 

bilateral long-term contracts for the sale of capacity and electric energy are available to 

participants/QFs in these markets. These are commonly known as “Day 2” RTO/ISOs. 

The Commission proposed to find that the Midwest ISO, PJM, ISO-NE, and NYISO 
Docket No. RM06-10-000 - 67 -

satisfy the requirements of section 210(m)(1)(A).55 The Commission stated in the NOPR 

that these entities are Commission approved ISOs or RTOs that provide 

nondiscriminatory open access transmission services and independently administer 

auction-based wholesale markets for day-ahead and real-time energy sales. The 

Commission stated in the NOPR that additionally, with respect to subparagraph (A)(ii), 

the existence of bilateral long-term contracts for long-term sales of capacity and energy 

indicates that there is a market. The Commission stated that it is reasonable to conclude 

that the second prong of section 210(m)(1)(A) is met because bilateral long-term 

contracts are available to participants in the footprints of the Midwest ISO, PJM, ISONE, and NYISO. Therefore, the Commission proposed to find that electric utilities that 

are members of the Midwest ISO, PJM, ISO-NE, and NYISO would meet the 

requirements for relief from the mandatory purchase requirement.56

 b. Comments

108. The American Chemistry Council, American Energy, American Forest & Paper, 

CCC, and Midwest Transmission Customers disagree with the Commission's finding and 

argue that Midwest ISO, PJM, ISO-NE, and NYISO do not meet section 210(m)(1)(A). 

Several commenters argue that the Commission's proposed findings with respect to the 

 55 In the NOPR the Commission noted that while SPP and the CAISO, 

respectively are a Commission-approved RTO and ISO, they do not satisfy the 

requirements of section 210(m)(1)(A) because neither has day-ahead markets. The 

Commission stated, however, that any utility within SPP and CAISO may file an 

application with the Commission to seek relief from the mandatory purchase requirement 

under section 210(m)(1)(B) or (C), on a case-by-case basis. 

56 NOPR at P 22. 
Docket No. RM06-10-000 - 68 -

Midwest ISO, PJM, ISO-NE, and NYISO markets are insufficiently supported by record 

evidence. In addition, the American Chemistry Council and CCC argue that these 

markets are premature. 

109. Wisconsin Industrial Energy Group, Inc. argues that the Commission’s proposed 

findings with respect to Midwest ISO are premature because a viable competive market 

does not exist in the Midwest ISO footprint and because QF owners and operators do not 

have nondiscriminatory access to the Midwest ISO market. Midwest Transmission 

Customers argue that Midwest ISO markets are still not sufficiently mature to justify the 

Commission terminating the PURPA purchase obligation in Midwest ISO. The 

American Chemistry Council and CCC argue that there is no evidentiary basis that shows 

bilateral contracts for long-term sales of capacity are available to QFs on a 

nondiscriminatory basis or that there is a "market" for such contracts. These commenters 

argue that the NOPR offers no qualitative analysis of the bilateral markets that are 

presumed to exist. ELCON argues that a QF-specific review would establish that, in 

many cases, QFs do not have nondiscriminatory access to long-term bilateral markets 

whether in RTOs or otherwise. ELCON states that considerable evidence establishes that 

markets either are in their infancy (e.g., Midwest ISO), or are not functioning vis-à-vis 

long-term sales of capacity or energy. ELCON states that it will be difficult for the 

Commission to sustain on judicial review a generic finding that ISOs and RTOs offer 

long-term markets for power when the Commission's own recent rulemaking announcing 

financial transmission rights (FTRs) is predicated on the need for FTRs to jump start 

long-term power markets specifically in regions with ISOs and RTOs. ELCON takes 
Docket No. RM06-10-000 - 69 -

issue with the assertion that PJM operates an open, competitive market, citing the State of 

Delaware as an example. ELCON states that according to a recent report by the 

Delaware Cabinet Committee on Energy, competitive markets are not working in 

Delaware.57

110. Deere & Company (Deere) states that open access transmission service presumes 

the existence of bilateral sale and purchase parties separate from the transmitting utility, 

with the transmitting utility providing the transmission service to either the seller or the 

buyer. Deere. states that that does not mean that there is nondiscriminatory access to the 

long-term sale and purchase market. Deere states that one buyer for all long-term sellers 

in a market would mean that there is a monopsony, and through the exercise by the single 

buyer of its monopsony “market power,” manifested in the form of a refusal to deal, a 

new seller would not have any access to the long-term sale and purchase market. 

111. Caithness argues that sections 210(m)(1)(A) and (B) both require that there be 

markets for long-term wholesale sales of energy and capacity before the must-purchase 

requirement can be terminated. The American Chemistry Council argues that in trying to 

make sense of the fact that section 210(m)(1)(B) contains a directive to "consider 

evidence of transactions in the relevant market," while section 210(m)(1)(A) contains no 

such directive, the Commission's proposed interpretation effectively reads an essential 

element of section 210(m)(1)(A) -- namely, the existence of "wholesale markets for longterm sales of capacity and electric energy" -- out of the statute. The American Chemistry 

 57 ELCON’s August 25, 2006 Supplemental Comments at 8-9. 
Docket No. RM06-10-000 - 70 -

Council states that for this reason, the Commission's proposed interpretation contravenes 

the clear language of section 210(m)(1)(A). 

112. American Forest & Paper states that bilateral contracts have always existed, but 

the Commission has never determined that the mere existence of bilateral contracts 

constituted a market, particularly, where those contracts are mostly between utilities and 

their affiliates. 

113. The CCC states that the Commission must require an affirmative showing that 

buyers other than the utility are willing to purchase QF energy and capacity on a shortterm and long-term basis, including through long-term purchases of capacity before the 

purchase obligation is lifted. 

114. EEI, PJM, Constellation, Exelon, FirstEnergy, Montana-Dakota, National Grid, 

PJM Transmission Owners, and PPL support the Commission’s preliminary finding that 

QFs interconnected with utilities that are members of the Midwest ISO, PJM, ISO-NE 

and NYISO have nondiscriminatory access to those markets and that those markets 

readily satisfy the section 210(m)(1)(A) criteria for removing the PURPA section 210 

purchase obligation. EEI states that additional evidence of the scope of market 

opportunities for QFs is seen in the increasing number of QFs filing for authority to sell 

at market-based rates in response to the Commission’s recent Order No. 671.58 EEI states 

that the QF's argument against the Commission's proposal in essence is that markets must 

assure QFs will receive the same amount of revenues that they would receive from 

mandatory utility sales at avoided cost rates before the mandatory purchase requirement 

 58 Supra note 15. 
Docket No. RM06-10-000 - 71 -

may be lifted. Exelon believes that the PJM markets are effective and offer 

nondiscriminatory opportunities for QFs and small power producers to sell their output to 

entities other than the interconnecting utility. To facilitate these small generators 

participating in the RTO markets in the absence of a mandatory purchase requirement, 

Exelon suggests that the Commission encourage utilities to work with the QFs and small 

power producers that qualify under state renewable resource programs to develop and 

implement a voluntary standard offer contract. 

115. EEI, PJM, Constellation, Exelon, FirstEnergy, Montana-Dakota, National Grid, 

PJM Transmission Owners, and PPL also support the NOPR's finding regarding bilateral 

contracts for long-term sales of energy and capacity. PJM states that the Commission 

reasonably concludes that the existence of organized and transparent competitive markets 

for capacity and energy provide a platform for the development of competitive bilateral 

contracts in satisfaction of section 210(m)(1)A(ii) of EPAct 2005. EEI states that the test 

of section 210(m)(1)(A)(ii) can be and is met by markets that provide opportunities for 

long term sales pursuant to bilateral transactions – markets which flourish in all the “Day 

2” RTOs. 

 c. Commission Determination

116. Under section 210(m)(1)(A), the Commission must terminate the requirement that 

an electric utility enter a new contract or obligation to purchase electric energy from a QF 

if the QF has nondiscriminatory access to (i) independently administered, auction-based 
Docket No. RM06-10-000 - 72 -

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. 

117. We find that the Midwest ISO, PJM, ISO-NE, and NYISO satisfy section 

210(m)(1)(A)(i) because the markets administered by these RTO/ISOs are, as required by 

subparagraph (A)(i), independently administered, auction-based day-ahead and real-time 

wholesale markets for the sale of electric energy. With respect to section 

210(m)(1)(A)(ii) and the requirement for wholesale markets for long-term sales of 

capacity and electric energy, we find that, as proposed in the NOPR, the existence of 

bilateral long-term contracts for long-term sales of capacity and energy is a sufficient 

indication of a market. As the Commission explained in the NOPR, it is reasonable to 

conclude that subparagraph (A)(ii) is met because bilateral long-term contracts are 

available to participants in the footprints of the Midwest ISO, PJM, ISO-NE, and NYISO. 

Although there is no formalized market for such long-term contracts, nothing in the 

statute requires such an organized market. Rather, the only requirement for organized 

markets relates to subparagraph A(i), and the requirement that there be auction-based 

day-ahead and real-time markets. 

118. We disagree with those who argue that because these markets are premature or in 

their infancy, the Commission cannot relieve utilities of the purchase obligations. The 

relevant issue under the statute is whether these markets satisfy the requirements 

enumerated above, not whether they are "perfect" today or are undergoing reforms as 

they develop. Again, nothing in the statutory language suggests such a test, nor have its 

proponents provided us with any clear demarcation to determine when such a market is 
Docket No. RM06-10-000 - 73 -

too “premature” to qualify under section 210(m)(A). Further, we note that the Midwest 

ISO has been an RTO since 2001 and began “Day 2” operations (i.e., auction-based, dayahead markets) in 2005. PJM has been an RTO since 2001 and began “Day 2” 

operations in 2000. ISO-NE has been an RTO since 2004 and began “Day 2” operations 

in 2003. NYISO has been an ISO since 1998 and began “Day 2” operations in 1999. 

These RTOs and ISOs are established and operate “Day 2” wholesale markets, as 

required by subparagraph (A)(i), in their respective regions. 

119. CCC and the American Chemistry Council argue that the Commission's proposed 

findings with respect to the Midwest ISO, PJM, ISO-NE, and NYISO markets are 

insufficiently supported by record evidence. We find this argument without merit. The 

day ahead and real time markets are precisely those contemplated by the words of section 

210(m)(A)(i) and, indeed, there is no real dispute that they are Commission approved 

independently administered entities,59 and that they operate auction-based day-ahead and 

real-time wholesale markets for the sale of electric energy as represented pursuant to their 

respective, Commission approved, tariffs.60 

 59 See Midwest Independent Transmission System Operator, Inc., 97 FERC 

¶ 61,326 (2001) order on reh’g, 103 FERC ¶ 61,169 (2003); PJM Interconnection, L.L.C., 

96 FERC ¶ 61,061 (2001). On December 20, 2002, in PJM Interconnection, L.L.C., 

101 FERC ¶ 61,345 (2002), PJM was granted full, rather than provisional, RTO status. 

Independence was one of the matters considered in the 2002 Order; ISO New England, 

Inc., 106 FERC 61,280 (2004); Central Hudson Gas & Electric Co., 83 FERC ¶ 61,352 

(1998), order on reh'g, 87 FERC ¶ 61,135 (1999). 

60 See Midwest Independent Transmission System Operator, Inc., 108 FERC 

¶ 61,163 (Midwest ISO, FERC Electric Tariff, Third Revised Volume No. 1, Module C), 

order on reh'g, 109 FERC ¶ 61,157 (2004), order on reh'g, 111 FERC ¶ 61,043 (2005), 
Docket No. RM06-10-000 - 74 -

120. With respect to bilateral markets in these ISOs/RTOs, i.e., section 210(m)(A)(ii), 

no party argues that long-term contracts do not exist in these markets or that QFs are 

precluded from entering into them with willing buyers. 61 The transmission access 

offered by RTOs allows suppliers (including QFs) the opportunity to enter into long-term 

bilateral contracts in a competitive wholesale market. RTOs have no incentive to favor 

one set of suppliers over others in providing transmission access. RTO footprints 

encompass many different wholesale buyers, thus proving significant opportunity for 

sellers to reach many different wholesale buyers. In addition, the organized markets 

operated by RTOs facilitate long-term bilateral contracts between sellers (including 

qualifying facilities) and wholesale buyers. First, organized markets provide transparent 

spot energy prices that can serve as a reference in negotiating longer term contract prices. 

Second, organized markets reduce the costs to suppliers of making long-term bilateral 

supply commitments. That is because whenever a supplier is unable to produce the 

energy required under the bilateral contract (for example, because of an outage), the 

supplier can easily acquire replacement energy from the organized market at a transparent 

and competitive price. Moreover, even when the supplier is physically capable of 

producing its contractually-required energy, the supplier can acquire the energy from the 

RTO’s market whenever it is cheaper to do so. Both of these factors reduce the cost to a 

 

PJM Interconnection, L.L.C., FERC Electric Tariff, Sixth Revised Volume No. 1; New 

York Independent System Operator, Inc., FERC Electric Tariff Original Volume No. 2. 

61 We also know from electric quarterly report (EQR) filings by public utilities that 

there are long-term contracts for long-term sales of capacity and energy in each of the 

markets; those data are available on the Commissions website. 

http://www.ferc.gov/docs-filing/eqr/data.asp. 
Docket No. RM06-10-000 - 75 -

supplier of entering into a long-term bilateral contract. Furthermore, our approach is 

consistent with the language of section 210(m)(1)(A)(ii). As discussed above, section 

210(m)(1)(B) provides for the submission of “evidence of transactions within the relevant 

market.” Because this language is not included in section 210(m)(1)(A), our finding with 

respect to section 210(m)(1)(A)(ii) is consistent with the statute. We, therefore, find it 

reasonable to conclude that Day 2 markets provide an opportunity to make long-term 

sales of capacity and electric energy and meet the criteria of section 210(m)(1)(A)(ii) as 

well as section 210(m)(1)(A)(i). 

121. As to ELCON’s citation to a study by the State of Delaware finding that 

competitive electric energy markets are not working well in Delaware, we find it 

inapposite. The issue under the statute is not whether these organized markets are perfect 

or, alternatively, could be improved. As we stated above, all that is required by section 

210(m)(A)(ii) is the presence of “wholesale markets for long-term sales of capacity and 

electric energy.” The Delaware report does not demonstrate that such a market does not 

exist. 

 2. Whether Membership in an RTO/ISO is Necessary to Invoke 

 the Rebuttable Presumption of Acess to “Day 2”Markets 

 

 a. NOPR

122. In the NOPR, the Commission concluded that QFs interconnected with electric 

utilities that are members of Midwest ISO, PJM, ISO-NE, and NYISO have 

nondiscriminatory access to markets described in section 210(m)(1)(A). 
Docket No. RM06-10-000 - 76 -

 b. Comments

123. Missouri River Energy Services (MRES), a municipal, and the NRECA seek 

clarification as to which entities are eligible for the exemption from the mandatory 

purchase requirement. For example, MRES states that not all entities within the Midwest 

ISO footprint are transmission-owning electric utility members of Midwest ISO. MRES 

states that it is currently a market participant in the Midwest ISO, but not a member. 

MRES states that in addition, MRES has assumed the section 210 mandatory purchase 

requirement on behalf of its members, many of which are located within the Midwest 

ISO footprint. 

124. Progress states that while a case-by-case analysis may be appropriate, it believes 

that utilities such as CP&L, that have Commission-approved OATTs and are adjacent to 

and directly connected with a “Day 2” RTO (such as PJM), should obtain a rebuttable 

presumption that the second prong of the test is met. Progress states that there is no 

difference between a QF located within PJM and a QF located within CP&L's service 

territory with respect to access to short-term and long-term capacity and energy 

wholesale markets. 

 c. Commission Determination

125. The statute is clear that the obligation to purchase and thus relief of the obligation 

resides with the electric utility. For purposes of establishing a rebuttable presumption 

that QFs interconnected with certain utilities have access to “Day 2” markets, we think 

that a reasonable line to draw is with the member utilities of the “Day 2” RTO/ISOs. 

These utilities have turned over the operation of their transmission facilities to an 
Docket No. RM06-10-000 - 77 -

independent entity that has no stake in the marketplace and will ensure that all users of 

the transmission system are treated on a nondiscriminatory basis and are provided access 

to markets. We recognize that other electric utilities may provide nondiscriminatory 

access to the “Day 2” markets. But for purposes of applying a rebuttable presumption 

that QFs have nondiscriminatory access to the “Day 2” markets, we believe that it is 

reasonable to draw the line with members of the Midwest ISO, PJM, ISO-NE, or NYISO. 

Nevertheless, entities that are not members of the Midwest ISO, PJM, ISO-NE, or 

NYISO may seek relief from the purchase obligation pursuant to either section 

210(m)(1)(B) or (C) pursuant to the procedures contained in § 292.310 of the 

Commission’s regulations. Such applications will be reviewed on an electric utility-byelectric utility basis pursuant to the procedures contained in § 292.310 of the 

Commission’s regulations. A utility making such an application will have the burden of 

showing that all elements necessary for granting relief exist. 

 3. Compliance Filing 

 a. NOPR

126. The Commission proposed that to claim relief from the purchase obligation, 

electric utilities that are members of Midwest ISO, PJM, ISO-NE, and NYISO will need 

to make compliance filings pursuant to section 210(m)(3). 

 b. Comments 

127. AEP and PJM Transmission Owners argue that the Commission should remove 

the obligation to require a compliance filing for utilities located in one of the exempted 

RTO/ISOs. PJM Transmission Owners argue that it is not apparent that Congress 
Docket No. RM06-10-000 - 78 -

intended the Commission only to grant relief from such mandatory purchase 

requirements upon receipt of an application. AEP and PJM Transmission Owners 

contend there is nothing prohibiting the Commission from granting blanket relief for all 

electric utilities in a particular RTO/ISO that meets the requirements of section 210(m). 

PJM Transmission Owners request, if compliance filings are ultimately required, to be 

allowed to make one filing on behalf of all the electric utilities in PJM. 

128. EEI states that, instead of compliance filings by utilities located within the four 

“Day 2” markets, the Commission may wish to require utilities to apply for relief from 

the mandatory purchase requirement, in accordance with section 210(m)(3) of PURPA. 

EEI states that utilities applying for relief would be entitled to rely on generic 

Commission findings (as the Commission has proposed in the NOPR) that the four “Day 

2” markets meet the tests established in section 210(m)(1)(A) and that a Commissionapproved OATT is evidence of nondiscriminatory access to these markets under section 

210(m)(1). 

 c. Commission Determination

129. In light of the comments filed, we conclude that utilities in "Day 2" RTO/ISO 

markets should file applications pursuant to section 210(m)(3), instead of the 

"compliance filings" proposed in the NOPR. We believe that this will be more consistent 

with the statute than the compliance filings proposed in the NOPR. In the section 

210(m)(3) application, a utility within a “Day 2” RTO/ISO will be required to: (a) show 

that it is a member of a “Day 2” RTO; (b) provide information to enable QFs larger than 

20 MW to seek to rebut the presumption that they have nondiscriminatory access to the 
Docket No. RM06-10-000 - 79 -

market; such information will be a description of transmission constraints not otherwise 

publicly available, and if publicly available, provide a specific link to such information; 

and (c) provide a list of affected interconnected QFs. With respect to the section 

210(m)(A) “Day 2” RTO/ISO markets, these applications, in conjunction with the 

generic findings and rebuttable presumptions adopted in this Final Rule and discussed 

elsewhere, will allow us to timely and fairly process applications within the 90-day time 

period intended by Congress. 

 C. Section 210(m)(1)(B)

 1. Definition of “regional” for purposes of section 210(m)(1)(B)(i)

 a. NOPR

130. Section 210(m)(1)(B) requires the Commission to make a finding, among other 

things, that a QF has nondiscriminatory access to transmission and interconnection 

services provided by a Commission-approved “regional transmission entity.” In the 

NOPR, the Commission noted that amended section 210 does not contain any express 

definition of “regional transmission entity.” The Commission therefore explained in the 

NOPR that we have discretion in interpreting section 210(m)(1)(B)(i) to deem an entity 

to be “regional.” The Commission listed factors, such as sufficient regional scope or 

configuration of the multiple discrete transmission systems the regional transmission 

entity controls, to be considered when determining a “regional transmission entity.”62

 

 62 NOPR at P 16. 
Docket No. RM06-10-000 - 80 -

 b. Comments

131. American Forest & Paper, LEUG, and NISCO offer suggestions as to how the 

Commission should define “regional” as it is used in section 210(m)(1)(B). LEUG 

suggests that the Commission should use a similar standard in defining the term 

"regional" as it used in Order No. 2000. American Forest & Paper believes that the 

Commission should exercise the discretion it has under section 210 in conformance with 

its observations, concerns and findings regarding the scope and independence of RTOs 

and ISOs necessary to assure nondiscriminatory access and independence. American 

Forest & Paper states that the Commission has extensive jurisprudence regarding its 

concerns surrounding the scope and the level of independence necessary to assure 

nondiscriminatory and independent administration, and should rely on this existing body 

of precedent when making determinations pursuant to newly enacted section 210(m). 

Occidental argued that the NOPR incorrectly suggests that the Commission has discretion 

to deem an entity to be a "Commission-approved regional transmission entity" solely in 

the context of a determination that the QF is provided nondiscriminatory access in 

accordance with section 210(m)(1)(B)(i). It requests the Commission to clarify, at a 

minimum, that "Commission-approved regional transmission entity" does not include 

stand-alone electric utilities or Entergy's ICT. 

 c. Commission determination

132. In determining whether a transmission entity is “regional,” we will not rely solely 

on the “scope and regional configuration” standard as discussed in Order No. 2000 as one 

commenter suggests. Section 210(m)(1)(B) does not tie "regional" to Order No. 2000 but 
Docket No. RM06-10-000 - 81 -

rather leaves to the Commission's discretion whether to deem an entity "regional" and we 

will make that determination on a case-by-case basis in response to applications filed by 

electric utilities pursuant to § 292.310 of the Commission’s regulations. Accordingly, we 

will not make a finding that Entergy’s ICT or a stand-alone electric utility would not be 

deemed a “regional transmission entity” at this time. The NOPR laid out some of the 

factors the Commission may consider in its determination, such as sufficient regional 

scope or configuration or the multiple discrete transmission systems and electric utility 

controls. In this Final Rule, an electric utility claiming relief pursuant to section 

210(m)(1)(B) must set forth the reasons that it meets the requirements of section 

210(m)(1)(B)(i) in an application made pursuant to § 292.310 of the Commission’s 

regulations. 

 2. Section 210(m)(1)(B)(ii)

 a. NOPR

133. Section 210(m)(1)(B)(ii) requires QFs to have access to competitive wholesale 

markets that provide a meaningful opportunity to sell capacity and energy on both a 

short- and long-term basis and energy on a real-time basis to a buyer other than the utility 

to which the QF is interconnected. The Commission is to consider, among other factors, 

evidence of transactions within the relevant market in determining “meaningful 

opportunity.” The Commission stated that, taken together, the terms “competitive,” 

“meaningful opportunity,” and “evidence of transactions” suggest that Congress intended 

waiver to occur in a non-auction based market only if it could be established that QFs had 

the opportunity to sell their output into competitive wholesale markets to buyers other 
Docket No. RM06-10-000 - 82 -

than the utility to which the QF is interconnected. In the NOPR, the Commission sought 

comment on ways that section 210(m)(1)(B)(ii) could be satisfied. The Commission 

asked if a demonstration that an organized power procurement process exists in which 

QFs can participate would satisfy. 

 b. Comments

134. AES Shady Point, Deere, Energy Producers of California, Utah Association of 

Energy Users (UAE), and Solid Waste of Palm Beach believe that the existence of an 

organized power procurement process does not indicate the presence of a competitive 

wholesale market. Occidental argues that the Commission’s reference to a generic 

“organized procurement process” lacks the specificity required in order to analyze 

whether it would satisfy any element of section 210(m)(1)(B)(ii) and omits the statutory 

requirement that QFs have a meaningful opportunity to sell to “buyers other than the 

utility to which the qualifying facility is interconnected.” ELCON states that the critical 

question is whether potential suppliers have access to other potential buyers apart from 

the monopsony buyer holding the request for proposals (RFP). ELCON states that the 

Commission should seek a demonstration of contractual sales of capacity or energy to 

utilities other than the interconnected utility in response to RFPs. The UAE argues that 

an organized procurement process does not ensure fairness since utilities often control 

their own procurement processes and can affect the outcome. The lack of an 

independently administered market makes it easy for a utility to select its own resource or 
Docket No. RM06-10-000 - 83 -

a resource that it prefers. UAE also states that QF resources are likely to be eliminated in 

early rounds of the procurement process by unreasonably stringent credit requirements. 

135. Entergy and EEI contend that a procurement process should constitute ample 

evidence that QFs have access to competitive wholesale energy markets. EEI states that 

the Commission would be correct in finding that QFs with opportunities to participate in 

organized power procurement processes have access to short-term and long-term markets 

for the sale of energy and capacity. EEI states that roughly nineteen states already 

require some form of competitive power procurement process. 63 EEI states that QF 

commenters have submitted no evidence to disprove their ability to participate in these 

state-overseen processes. EEI states that competitive procurements also are a feature of 

retail access programs and state renewable or resource portfolio programs. 

136. Pacific Gas and Electric Company (PG&E) suggests the Commission should adopt 

a rebuttable presumption of a “competitive wholesale market” in which an organized 

power procurement process exists in which QFs can participate. PG&E notes that the 

California legislature established a comprehensive procurement process to be 

administered and overseen by the California Public Utilities Commission (CPUC). 

PG&E states that load serving entities must prepare a procurement plan which contains a 

process for utility procurement and CPUC approval of procurement strategies. PG&E 

claims that California’s procurement process ensures QFs have fair access to this process. 

SCE argues that QFs have robust opportunities to compete in competitive solicitations 

issued by IOUs. SCE notes that its power procurement solicitations that are conducted 

 63 EEI Initial Comments at 44. 
Docket No. RM06-10-000 - 84 -

pursuant to California’s Renewable Portfolio Standard are open to generators as small as 

one megawatt. 

137. SCE suggests the Commission should make a generic finding that if the 

Commission has authorized market-based rate authority for any seller in a market then 

that market should be competitive enough to satisfy subparagraph (B)(ii). Several 

commenters oppose SCE’s market-based rate proposal and request that the Commission 

reject it. The CCC argues that SCE’s arguments focus solely on the issue of whether 

sellers in a given market are able to exercise market power and fails to address the extent 

to which utilities are able to exercise monopsony buying power given their role as the 

only load serving entities (LSEs) with the ability and potential willingness to buy power 

on a long-term basis or in significant quantities. Deere contends that market-based rate 

authority is focused on the seller and its attributes, whereas section 210(m) is focused on 

the QF and its ability to access a market. Occidental adds that such a finding would 

render the distinction between “competitive wholesale markets,” as used in subparagraph 

(B)(ii), and “wholesale markets,” as used in subparagraphs (B) and (C), meaningless 

because the Commission has authorized market-based sales in every region of the 

continental United States. 

 c. Commission determination

138. The Commission in the NOPR set forth its interpretation of the statute and sought 

comments on ways section 210(m)(1)(B)(ii) could be satisfied. Specifically, the 

Commission asked if an organized procurement process would meet the requirements of 

section 210(m)(1)(B)(ii). After reviewing the comments received, we have decided not 
Docket No. RM06-10-000 - 85 -

make any generic findings concerning whether procurement processes might satisfy 

section 210(m)(1(B)(ii). Reflecting on parties’ comments and the Commission’s own 

experience with utilities’ procurement processes leads us to conclude that the processes 

are complex and not uniform. Thus, we cannot find that simply requiring an organized 

procurement process without elaboration would meet the requirements of the statute. 

Accordingly, we will not make a generic finding nor establish a rebuttable presumption, 

as PG&E and SCE suggest. As discussed in a later section, the Commission will 

entertain applications for relief of the mandatory purchase requirement pursuant to 

section 210(m)(1)(B) on a case-by-case basis pursuant to the procedures specified in 

section 292.310 of the Commission’s regulations. The only rebuttable presumption that 

will apply in the context of applications under section 210(m)(1)(B) (as well as (C)) is the 

presumption that QFs 20 MWs or below do not have nondiscriminatory access to the 

relevant markets. 

139. The Commission, however, will not rule out the possibility of an organized 

procurement process satisfying some or all of the requirements of section 

210(m)(1)(B)(ii). Should an electric utility seek such a finding in its application, it is 

incumbent upon the utility to fully demonstrate that the procurement process satisfies one 

or all of the elements of section 210(m)(1)(B)(ii).64 The utility must support its 

application with a detailed description of how the procurement process is designed, how 

 64 All the elements of section 210(m)(1)(B)(ii) must be satisfied whether it is 

through an organized procurement process or by some other means or a combination. 
Docket No. RM06-10-000 - 86 -

winning bids are selected, evidence of past solicitations and winning bids,65 solicitation 

characteristics,66 and any other information about the procurement process. This list is 

not meant to be exhaustive, but rather provides examples of the type of information the 

Commission needs in order to make a finding. 

140. SCE argues that the “competitive” element of section 210(m)(1)(B)(ii) could be 

met if the Commission has authorized market-based rate authority to the utility seeking 

relief from the mandatory purchase requirement. We will not make a generic finding as 

suggested by SCE. When the Commission grants an applicant market-based rate 

authority, it examines an applicant's generation market power potential. The competitive 

element of section 210(m)(1)(B)(ii) is not concerned with how much generation a utility 

owns or its ability to exercise generation seller market power, but rather, whether the 

wholesale market provides a meaningful opportunity for a QF to sell its capacity and 

energy to a buyer other than the utility to which the QF is interconnected. 

 3. Case-by-Case Determinations for Subparagraphs (B) and (C)

 a. NOPR

141. In the NOPR, the Commission proposed to determine on a case-by-case basis, 

rather than generically, whether a utility has met the requirements of sections 

210(m)(1)(B) and 210(m)(1)(C) for relief from its mandatory purchase requirement. The 

Commission also proposed to allow joint applications to be filed by several utilities in a 

 65 The Commission would be particularly interested in whether QFs have 

participated in the solicitations and whether QFs have been selected as a winning bidder. 

66 Solicitation characteristics refers to the contract term, type of service requested, 

dispatchability, the power terms and conditions, the non-power terms and conditions, etc. 
Docket No. RM06-10-000 - 87 -

region if the applications for relief present common issue of law and fact. The NOPR 

concluded that utilities would be required to file such applications for relief with the 

Commission pursuant to section 210(m)(3), which the Commission proposed to 

implement in section 292.310 of its regulations. 

 b. Comments

142. No comments were filed opposing the NOPR’s proposal. Constellation seeks 

clarification as to how the Commission will treat current Day 1 or non-RTO markets 

which may, in the future, become “Day 2” markets. Constellation wants any future “Day 

2” market to be analyzed on a case-by-case basis pursuant to section 210(m)(3). 

143. EPSA supports a case-by-case approach for subparagraphs (B) and (C) provided 

that an individual QF can rebut utility’s application. EPSA also argues that utilities 

should be required to file specific contract information that would support the premise 

that there are “competitive wholesale markets that provide a meaningful opportunity to 

sell capacity, including long-term, short-term and real-time sales to buyers other than the 

utility to which the qualifying facility is interconnected.” 

144. LEUG, NISCO, and Occidental seek clarification in the Final Rule that Entergy's 

ICT does not satisfy the requirements of section 210(m)(1)(B). These commenters state 

that access to section 210(m)(1)(B) markets does not exist in Louisiana today, and will 

not result from Entergy's ICT and weekly procurement process proposals. The 

commenters state that an ICT can not satisfy section 210(m)(1)(B)(i) because Entergy's 
Docket No. RM06-10-000 - 88 -

ICT proposal calls for Entergy to remain the owner and operator of the transmission 

system and continue to have ultimate responsibility for providing transmission service. 

 c. Commission determination

145. The Commission adopts the NOPR’s proposal to determine on a case-by-case 

basis in response to applications filed pursuant to section 292.310 of the Commission’s 

regulations whether an electric utility has met the requirements of sections 210(m)(1)(B) 

and 210(m)(1)(C) for relief from its mandatory purchase requirement. We clarify for 

EPSA that individual QFs may file comments opposing a utility’s section 210(m)(3) 

application for relief pursuant to subparagraphs (B) and (C).67 We will also clarify for 

Constellation that any current “Day 1” market or non-RTO market that becomes a “Day 

2” market after issuance of this Final Rule will not be addressed generically in a 

rulemaking but will be addressed on a case-by-case basis. This is consistent with what 

the Commission proposed in the NOPR. The Commission proposed, and we adopt here, 

that all issues relating to non-RTO/ISOs and RTO/ISOs that do not have both auctionbased real-time and day-ahead markets will be addressed on a case-by-case basis, 

pursuant to section 210(m)(3) as implemented by the Commission in § 292.310 of the 

Commission’s regulations. The only generic finding in this Final Rule that will apply to 

case-by-case determinations are the rebuttable presumptions that the OATT and 

interconnection rules provide nondiscriminatory access to markets, and that QFs 20 MWs 

or below do not have nondiscriminatory access to markets. 

 67 This also applies to section 210(m)(3) applications for relief pursuant to section 

210(m)(1)(A), which is discussed in another part of the Final Rule. 
Docket No. RM06-10-000 - 89 -

146. While we will not institute another rulemaking to address whether a new “Day 2” 

RTO/ISO satisfies the statutory criteria for a utility to claim relief from the requirement 

that it enter into new contracts or obligations with QFs within the markets, we note that 

the 90-day proceedings provided for in section 210(m)(3) of PURPA and § 292.310 of 

our regulations, provide a very compressed period for making the complex 

determinations that a regional market satisfies the statutory criteria. Accordingly, for 

utilities that wish to obtain a regional generic determination that a market satisfies the 

criteria of section 210(m)(1)(A), we will entertain declaratory orders to make such 

determinations. If a generic determination is made in a declaratory order context, the 

utility members of the market would then be obligated to file for relief from the 

requirement that they purchase from QFs on a utility specific basis pursuant to section 

292.310 of our regulations before the Commission would terminate the requirement that 

the electric utility purchase electric energy from QFs. 

147. For purposes of obtaining regulatory certainty earlier rather than later, it is also 

possible that a QF may want to seek a declaratory order that, based on its specific 

circumstances, it does not have nondiscriminatory access to markets. We will entertain 

such declaratory order requests. If a QF obtains such an advance declaratory order, it 

may file the order in response to a utility’s application to be relieved of the mandatory 

purchase obligation under section 292.310 of the Commission’s regulations. 

148. We will not grant the three commenters’ request that we clarify in the Final Rule 

that Entergy’s ICT does not satisfy the requirements of section 210(m)(1)(B). Rather, 

consistent with the approach adopted herein, we will consider Entergy’s ICT on a case-
Docket No. RM06-10-000 - 90 -

by-case basis should Entergy decide to file an application for relief pursuant to section 

210(m)(3) and § 292.310 of the Commission’s regulations. 

 D. Section 210(m)(1)(C) – Nonpublic Utilities

 1. NOPR

149. The NOPR proposed that there be a rebuttable presumption that a utility provides 

nondiscriminatory access if it has an Order No. 888 OATT on file with the Commission 

or a Commission-approved reciprocity tariff. 

 2. Comments

150. NRECA states that some non-public utility cooperatives do not have reciprocity 

tariffs, however, a number of these non-public electric utilities have adopted OATTs 

based on the Commission’s pro forma OATT, and have provided nondiscriminatory 

access to third parties for years. NRECA states that they too should be deemed to 

provide nondiscriminatory access on a case-by-case basis, or they should at least be 

accorded a rebuttable presumption that they provide such service. 

 3. Commission Determination

151. We decline to establish a rebuttable presumption of nondiscriminatory access here 

for non-public utilities which may have adopted transmission tariffs that are based on the 

Commission’s pro forma OATT but are not on file with the Commission. The statute 

clearly states that the Commission must find that the QF has nondiscriminatory access to 

specific markets before the purchase obligation may be lifted. While the Commission 

appreciates that some non-public cooperatives have adopted OATTs based on the 

Commission’s pro forma OATT, the Commission has not had opportunity to review these 
Docket No. RM06-10-000 - 91 -

nor has the public, including any affected QF. We therefore believe that it is more 

appropriate for the Commission to evaluate whether QFs interconnected with such 

utilities have nondiscriminatory access to a market defined by section 210(m)(1)(A), (B), 

or (C) on a case-by-case basis. Non-public utilities seeking relief from the mandatory 

purchase requirement may file an application pursuant to § 292.310 of the Commission’s 

regulation and may include their tariffs in support of their applications. 

 E. California Independent System Operator Corporation

 1. NOPR

152. In the NOPR, the Commission did not make a preliminary finding that the 

California region operated by the CAISO met the requirements of PURPA section 

210(m)(1). The Commission did recognize that the CAISO is a Commission-approved 

ISO, but that the requirements of section 210(m)(1)(A) have not been satisfied because 

the CAISO does not have a day-ahead market. The Commission noted that any utility 

within the CAISO footprint may file an application with the Commission to seek relief 

from the mandatory purchase requirement pursuant to sections 210(m)(1)(B) or (C). 

 2. Comments

153. SCE and PG&E submitted comments requesting that the Commission find that the 

CAISO will meet the requirements of section 210(m)(1)(A) once the CAISO’s Market 

Redesign and Technology Upgrade Tariff (MRTU Tariff) is effective.68 SCE and PG&E 

 68 The CAISO filed its proposed MRTU Tariff on February 9, 2006, in Docket No. 

ER06-615-000, and requested an effective date of November 1, 2007. The Commission 

conditionally accepted MRTU on September 21, 2006. California Independent System 

Operator Corporation, 116 FERC ¶ 61,274 (2006). 
Docket No. RM06-10-000 - 92 -

note that the MRTU Tariff filing demonstrates that the CAISO region will have the 

requisite features to satisfy section 210(m)(1)(A)(i), specifically a day-ahead market. 

SCE argues that the features described in the MRTU Tariff compare with those of other 

regions for which the Commission is prepared to make generic findings. SCE also states 

there are bilateral long-term contracts in the CAISO region today. Therefore, the CAISO 

region meets section 210(m)(1)(A)(ii). The California Public Utilities Commission 

(CPUC) and PG&E also request a finding that once the Commission has determined that 

CAISO has met the requirements of section 210(m)(1)(A), utilities participating in 

CAISO need only make a ministerial filing to be granted a waiver by the Commission. 

154. PG&E, SCE and the EEI request a generic finding that the CAISO satisfies section 

210(m)(1)(B)(i), and thus, a utility interconnected to the CAISO meets section 

210(m)(1)(B)(i). EEI notes that the Commission has ruled that the CAISO Tariff 

provides nondiscriminatory access to the ISO controlled grid. 

155. The CCC objects to the NOPR’s suggestion that California could qualify for 

termination of the PURPA purchase obligation once a day-ahead market starts operating. 

It argues that such a suggestion ignores the realities of the California market. CCC 

contends that QFs continue to have difficulty finding meaningful opportunities to sell 

their output in California due to utilities’ general reluctance to execute contracts with QFs 

and a lack of viable alternatives to the utility purchaser. It states that merely adding an 

organized day-ahead market will not resolve these problems. The CCC points to a 

California Energy Commission’s 2005 Integration Energy Policy Report (Energy Report) 

as support for the position that QFs do not have meaningful opportunities to sell their 
Docket No. RM06-10-000 - 93 -

power in California. According to CCC, the Energy Report finds that cogenerators have 

few opportunities to sell their power in the existing wholesale markets and a lack of a 

robust, functioning wholesale market in California discourages cogenerators from 

installing new generation. SCE disputes CCC’s representation of the Energy Report. 

156. Independent Energy Producers Association of California (Independent Energy 

Producers) states that the MRTU has yet to be implemented let alone analyzed to ensure 

it is operating as designed and in a manner that the CAISO itself has determined 

sufficient to remedy the market deficiencies it has identified. Independent Energy 

Producers also notes that the California market cannot provide the nondiscriminatory 

access required because projects smaller than 1 MW are excluded by rule from 

participation. Independent Energy Producers further notes CAISO’s intent to subject 

existing QFs with existing interconnections to renewed interconnection studies. 

 3. Commission Determination

157. Certain commenters request that the Commission make a generic finding that the 

CAISO will meet the requirements of section 210(m)(1)(A) once the CAISO’s MRTU 

Tariff filing becomes effective. According to the CAISO, the MRTU Tariff provides for 

operation of a day-ahead market, which is the missing element in meeting the 

requirements of section 210(m)(1)(A). It would be premature for the Commission to 

make such a generic finding in this rulemaking proceeding. The CAISO filed its 

proposed MRTU Tariff on February 9, 2006, in Docket No. ER06-615-000, and 

requested an effective date of November 1, 2007. While the Commission conditionally 
Docket No. RM06-10-000 - 94 -

approved CAISO’s MRTU Tariff on September 21, 2006,

69 the tariff will not become 

effective until November 1, 2007, as requested. Until there is a functioning “Day 2” 

RTO/ISO in California, the Commission is unable to make the findings required by 

section 210(m)(1)(A) for termination of the mandatory purchase requirement. However, 

for utilities that wish to obtain a regional generic determination that a market satisfies the 

criteria of section 210(m)(1)(A), we will entertain requests for declaratory orders to make 

such determinations. 

158. Certain commenters request that the Commission make a finding that the CAISO 

satisfies section 210(m)(1)(B)(i). Section 210(m)(1)(B)(i) requires a QF to have 

nondiscriminatory access to 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. 

In the NOPR, the Commission interpreted section 210(m)(1)(B)(i) to mean that QFs must 

have access to transmission and interconnection service pursuant to a Commissionapproved OATT and interconnection rules and provided by an entity that is regional in 

scope.70 The CAISO has a Commission-approved OATT that has been amended to 

incorporate the interconnection requirements of Order No. 2003. Thus, in order to make 

a finding that the CAISO satisfies section 210(m)(1)(B)(i), the Commission would have 

to find that the CAISO is a “regional transmission entity.” We noted in the NOPR that 

amended PURPA section 210 does not define “regional transmission entity,” and 

 69 Supra note 67.

70 NOPR at P 16. 
Docket No. RM06-10-000 - 95 -

therefore, the Commission has discretion to deem an entity to be “regional” based on 

factors such as sufficient regional scope or configuration of the multiple discrete 

transmission systems it controls. The CAISO offers transmission and interconnection 

services throughout the state of California over the transmission systems of several 

electric utilities. We find that California is large enough in size and configures several 

discrete transmission systems for the CAISO to be considered a “regional transmission 

entity.” Accordingly, the Commission finds that the CAISO satisfies section 

210(m)(1)(B)(i). A member electric utility of the CAISO may rely on this finding in its 

application to be relieved of the obligation to enter into new contracts to purchase QF 

electric energy. We will not, however, make any findings with regard to section 

210(m)(1)(B)(ii). Thus, electric utilities that are members of the CAISO seeking relief 

from the mandatory purchase requirement will need to file an application pursuant to 

section 210(m)(3) and § 292.310 of the Commission’s regulations with the Commission 

and make the showings required by section 210(m)(1)(B)(ii) in order to be relieved of the 

PURPA purchase obligation. The presumption that QFs 20 MWs or below do not have 

nondiscriminatory access to markets will apply. 

 F. Southwest Power Pool

 1. NOPR

159. In the NOPR, the Commission did not make a preliminary finding that the region 

operated by the SPP meets the requirements of PURPA section 210(m)(1). The 

Commission did recognize that the SPP is a Commission-approved RTO, but that the 

requirements of section 210(m)(1)(A) have not been satisfied because the SPP does not 
Docket No. RM06-10-000 - 96 -

operate a day-ahead market. The Commission noted that any utility within the SPP 

footprint may file an application with the Commission to seek relief from the mandatory 

purchase requirement pursuant to sections 210(m)(1)(B) or (C). 

 2. Comments

160. OG&E requests the Commission find that utilities located in the SPP satisfy 

section 210(m)(1)(A). OG&E notes that the SPP filed revisions to its OATT to 

implement a real-time imbalance market (EIS Market). The EIS Market will enable 

market participants to undertake both day-ahead and real-time transactions. 

161. OG&E and AEP also request the Commission find that SPP utilities satisfy section 

210(m)(1)(B). The SPP is a Commission-approved RTO and the SPP OATT affords all 

customers with nondiscriminatory treatment and complies with all currently-effective 

Commission policies and regulations as they apply to the development of an OATT. 

Therefore, OG&E and AEP ask the Commission to find that the SPP OATT satisfies the 

criteria of section 210(m)(1)(B)(i). OG&E states that section 210(m)(1)(B)(ii) is satisfied 

because load serving entities in SPP actively solicit power supplies using competitive 

bidding procedures. OG&E notes that the Oklahoma Corporation Commission requires 

electric public utilities providing retail service in Oklahoma to procure long-term electric 

generation through competitive bidding. AEP notes that Louisiana established 

competitive bidding rules that require a utility to follow a formal RFP process for the 

acquisition of generation resources and for purchases of capacity and/or energy of more 

than one year in duration. Based on these aspects, OG&E and AEP argue that the SPP 

region satisfies section 210(m)(1)(B). 
Docket No. RM06-10-000 - 97 -

162. Deere disagrees with OG&E and AEP and argues that the SPP market has not yet 

satisfied the criteria for relief from the PURPA mandatory purchase requirement. Deere 

notes that SPP’s EIS Market implementation has been delayed until at least October 

2006, and therefore, it has not been “road tested.” 

 3. Commission Determination

163. Similar to the determination we made for the CAISO, the Commission will not 

make the findings required by section 210(m)(1)(A) for termination until there is a 

functioning “Day 2” market. The Commission, on September 26, 2006, acted on 

rehearing requests concerning SPP’s proposed tariff revisions to implement an imbalance 

market,71 which will not be functional until December 1, 2006, at the earliest. Thus, it 

would be premature for the Commission to make such a finding in this rulemaking 

proceeding. Once SPP’s market is operational, electric utilities who are members of SPP 

may file, individually or jointly, an application for relief of the PURPA purchase 

obligation pursuant to section 210(m)(3) and section 292.310 of the Commission’s 

regulations. 

164. OG&E and AEP also request the Commission to make a determination that 

electric utilities operating in the SPP satisfy section 210(m)(1)(B). These commenters 

also request a finding that the SPP OATT satisfies the requirements of section 

210(m)(1)(B)(i). With regard to the latter request, section 210(m)(1)(B)(i) requires a QF 

to have nondiscriminatory access to transmission and interconnection services that are 

 71Southwest Power Pool, Inc., 116 FERC ¶ 61,289 (September 26, 2006). 
Docket No. RM06-10-000 - 98 -

provided by a Commission-approved regional transmission entity and administered 

pursuant to an OATT that affords nondiscriminatory treatment to all customers. In the 

NOPR, the Commission interpreted section 210(m)(1)(B)(i) to mean that QFs must have 

access to transmission and interconnection service pursuant to a Commission-approved 

OATT and interconnection rules provided by an entity that is regional in scope.72 SPP 

provides transmission and interconnection service pursuant to a Commission-approved 

OATT that has been amended to incorporate the interconnection requirements of Order 

No. 2003. As noted above, SPP is a Commission-approved RTO, and, therefore, SPP 

satisfies the “regional transmission entity” requirement of section 210(m)(1)(B)(i). 

Accordingly, the Commission finds that SPP meets the criteria of section 

210(m)(1)(B)(i). A member electric utility of the SPP may rely on this finding in its 

application to be relieved of the obligation to enter into new contracts to purchase QF 

electric energy. 

165. Turning our attention to whether electric utilities operating in the SPP market 

satisfy section 210(m)(1)(B), we decline to make such a finding in this rulemaking 

proceeding. As an initial matter, the Commission does not have the evidence of 

transactions, as required by the statute, to make the requisite finding that QFs in the SPP 

market have nondiscriminatory access to “competitive” wholesale markets that provide a 

“meaningful opportunity” to make sales to buyers other than the electric utility to which 

the QFs are interconnected. 

 72 NOPR at P 16. 
Docket No. RM06-10-000 - 99 -

166. Moreover, as discussed above, the Commission will make determinations on a 

case-by-case basis, rather than generically, for utilities seeking relief from the mandatory 

purchase requirement pursuant to sections 210(m)(1)(B) and (C). Accordingly, OG&E, 

AEP, or any other electric utility may file with the Commission an application for relief 

pursuant to section 210(m)(3) of PURPA and § 292.310 of the Commission’s regulations 

and make the showings required by section 210(m)(1)(B)(ii) in order to be relieved of the 

PURPA purchase obligation. The rebuttable presumption that QFs 20MW or below do 

not have nondiscriminatory access to markets will apply. 

 G. ERCOT

 1. Comments

167. Reliant, TXU Energy, Power and Wholesale Companies (TXU) and the Public 

Utility Commission of Texas (PUCT) request that the Commission extend its 

preliminary finding regarding approved RTO/ISOs to include ERCOT through a generic 

finding under section 210(m)(1)(C) of section 210(m) rather than requiring case-by-case 

review. Direct Energy filed reply comments in support of this request. 

168. Reliant explains that, while the ERCOT ISO does not meet all the criteria under 

section 210(m)(1)(A), the region is competitive in compliance with Texas law under the 

Public Utility Regulatory Act (PURA) and was certified as an ISO by the Public Utilities 

Commission of Texas. PURA provided for the creation of a regional independent 

organization to perform key functions to facilitate wholesale and retail competition 

similar to those the Commission prescribed for RTOs in Order No. 2000. 
Docket No. RM06-10-000 - 100 -

169. Reliant describes the features of the ERCOT market without explicitly suggesting 

that it meets the criteria of section 210(m)(1)(A). Reliant notes that ERCOT is 

independently administered. While it does not administer a centralized day-ahead market 

or forward market, ERCOT has a real-time market sufficient to support a robust marketbased day-ahead market for sales of electricity. The ERCOT ISO supports the scheduling 

of bilateral capacity and energy contracts (both short- and long-term) by qualified 

scheduling entities and conducts day-ahead auctions for ancillary services. 

170. Reliant asserts that the ERCOT region meets the criteria for electric utility relief 

from the purchase obligation under 210(m)(1)(C) because access to a sufficiently 

competitive market for QFs to sell their power currently exists in ERCOT and has been 

affirmed by the PUCT. Reliant contends that this access parallels the nondiscriminatory 

access to competitive markets in Commission-approved RTOs and ISOs. It believes that 

the PUCT’s certification of ERCOT as a competitive market and the “operational reality” 

of a robust wholesale and retail market in ERCOT further support this conclusion. 

171. Reliant argues that the most administratively efficient application of section 

210(m)(1) would be to extend the Commission’s preliminary finding regarding its 

approved RTOs or ISOs to the ERCOT region through a generic finding under section 

210(m)(1)(C). This would allow ERCOT entities to submit ministerial applications under 

this section and to have the application treated as a compliance filing under § 292.310(a) 

of the proposed rule. It would allow the Commission to avoid the filing of separate 

applications from electric utilities located in a region that has robust wholesale and retail 

competition. Reliant states that extension of the Commission’s finding is appropriately 
Docket No. RM06-10-000 - 101 -

based on the demonstrated competitive market conditions existing in the ERCOT region, 

in which QFs have the opportunity to sell energy and capacity to buyers other than the 

utilities to which they are interconnected. TXU supports Reliant’s positions for the same 

reasons. 

172. The PUCT adds that wholesale competition has been in effect in ERCOT under 

open-access rules prescribed by the PUCT since 1996. It states that, on January 1, 2002, 

retail competition in the electric market began for all customers of investor-owned 

utilities in the ERCOT region. The PUCT also states that, as of October 2004, there were 

85 retail electric providers certified by the PUCT, with 55 of those actively serving 

customers. 

 2. Commission Determination 

173. The information Reliant provides with regard to ERCOT supports a finding that 

QFs have access to the transmission and distribution systems so that they have access to 

markets in ERCOT; the information also supports a findingthat the markets in ERCOT 

satisfy the criteria of section 210(m)(1)(C) in that they are of comparable competitive 

quality as the markets described in section 210(m)(1)(A). 

174. The PUCT states that wholesale competition has been in effect in ERCOT under 

open-access rules prescribed by the PUCT since 1996. According to the PUCT, these 

open access rules ensure access to the transmission and distribution systems for all buyers 

and sellers of electricity on nondiscriminatory terms. PUCT states that the ERCOT 

system is administered independently of any individual market participant. Utility and 
Docket No. RM06-10-000 - 102 -

non-utility sellers have nondiscriminatory access to wholesale transmission service. 

Scheduling protocols afford non-discriminatory access to all customers. In ERCOT, 

there is no “native load preference,” and thus QFs receive the same quality of access to 

ERCOT markets as all other market participants. In addition, ERCOT uses a marketbased congestion management system. ERCOT’s zonal model uplifts local congestion 

costs system-wide, while directly assigning the cost of relieving inter-zonal congestion. 

ERCOT conducts auctions that allow market participants to hedge their risk by buying 

financial transmission rights on commercially significant flowgates. 

175. On January 1, 2002, retail competition in the electric market began for all 

customers of investor-owned utilities (IOU) in the ERCOT region. As of October 2004, 

there were 85 retail electric providers (REPs) certified by the PUCT. The PUCT states 

that with the numerous REPs in the ERCOT market place QFs have ample opportunity, 

equal to that of all other generators in the marketplace, to competitively procure contracts 

for the output of their facilities. 

176. According to the PUCT, QFs in ERCOT have ample opportunity to sell both firm 

and non-firm power. Power is sold to REPs in the ERCOT market primarily through 

bilateral contracts of varying lengths of time. While, ERCOT operates a real-time 

balancing energy market, bilateral transactions permit a buyer and seller to come to 

mutually agreed to terms with a greater degree of price certainty than in the balancing 

market and the majority of transactions in ERCOT take place pursuant to bilateral 

transactions. 
Docket No. RM06-10-000 - 103 -

177. In ERCOT, QFs have the opportunity to sell in an organized energy market. 

ERCOT’s balancing energy market is an independently administered, aution-based, real 

time market and provides cogeneration QFs an opportunity to sell in the electric market 

while fulfilling contractual obligations to provide steam to their thermal hosts. QFs, as 

well as others, may use the balancing energy market to sell energy in the real-time at the 

market clearing price of energy. In addition, ERCOT operates a day-ahead and real-time 

market for ancillary services. ERCOT does not administer a centralized day-ahead 

market for energy, but Reliant submitted testimony that ERCOT’s real-time market has 

been sufficient to support a robust market-based (as opposed to administratively-created) 

day-ahead market for sale of electricity. 

178. As part of its filing, Reliant submitted the ERCOT protocols to support its claim 

that QFs have nondiscminatory access to markets that are of equal competitive quality to 

section 210(m)(1)(A) markets. These protocols are not a FERC tariff. They are, 

however, approved by the PUCT. 73 In its comments, the PUCT states that the market 

that has developed in ERCOT is sufficiently robust that QFs operating within ERCOT 

now rely on the market to make sales and no longer rely on the PURPA purchase 

obligation to make sales. 

 73 Texas State law requires states: “The commission shall ensure that an electric 

utility or transmission and distribution utility provides nondiscriminatory access to 

wholesale transmission service for qualifying facilities, exempt wholesale generators, 

power marketers, power generation companies, retail electric providers, and other utilities 

or transmission and distribution utilities.” Public Utility Regulatory Act, TEX. UTIL. 

CODE ANN. 35.0004 (PURA). 
Docket No. RM06-10-000 - 104 -

179. As noted above, Reliant, TXU and the PUCT have asked that the Commission 

make a generic finding that QFs in ERCOT have nondiscriminatory access to markets 

that satisfy section 210(m)(1)(C). No commenters have opposed this request. Based on 

our review of the ERCOT protocols, the support of the PUCT for termination of the 

purchase obligation in ERCOT, and the lack of opposition to our making a generic 

finding, the Commission finds that: (1) there is a rebuttable presumption that QFs larger 

than 20 MW operating in ERCOT have nondiscriminatory access to markets,74 and 

(2) the markets in ERCOT satisfy the criteria of section 210(m)(1)(C) in that they are 

markets of comparative competitive quality to markets described in section 

210(m)(1)(A). 

180. Electric utilities operating within ERCOT may make a filing to be relieved of the 

purchase obligation pursuant to section 292.310 of the regulations. The rebuttable 

presumption that QFs 20 MW or smaller lack nondiscriminatory access shall be 

applicable to QFs in ERCOT. Electric utilities may rebut that presumption on the same 

grounds as electric utilities in other markets rebut the presumption. 

 74 QFs may rebut this presumption by making a demonstration by making a 

demonstration that: (i) The QF has certain operational characteristics that effectively 

prevent the QF’s participation in a market; or (ii) a QF lacks access to markets due to 

transmission constraints. An existing QF can show that it is located in an area where 

persistent transmission constraints in effect cause the QF to have neither physical nor 

financial access to markets outside a persistently congested area and there is not a 

sufficient opportunity to redispatch around the constraint or to sell the QF output or 

capacity within the area on a short-term and/or long-term basis because of the constraint. 
Docket No. RM06-10-000 - 105 -

 H. Section 210(m)(2) – Revised Purchase and Sale Obligation for New 

 Cogeneration Facilities

181. Section 210(m)(2)(A) reads: 

REVISED PURCHASE AND SALE OBLIGATIONS FOR NEW 

FACILITIES – (A) After the date of enactment of this subsection, no 

electric utility shall be required pursuant to this section to enter into a new 

contract or obligation to purchase from or sell electric energy to a facility 

that is not an existing qualifying cogeneration facility unless the facility 

meets the criteria for qualifying cogeneration facilities established by the 

Commission pursuant to the rulemaking required by subsection (n). 

182. In the NOPR the Commission stated that this provision reinforces the requirement 

that new qualifying cogeneration facilities must satisfy the section 210(n) criteria for new 

qualifying cogeneration facilities. The Commission proposed to include this language in 

§ 292.309(d) of the proposed regulations. There were no comments objecting to this 

proposal, and the Commission will adopt the NOPR’s proposal. The language proposed 

by the Commission is adopted in this Final Rule as § 292.309(h) of the Commission’s 

regulations. 

183. Section 210(m)(1)(B) defines the term “existing qualifying cogeneration facility.” 

The Commission proposed a definition of “existing qualifying cogeneration” in § 

292.309(b)(1) of the proposed regulations. There were no comments objecting to the 

proposal. The proposed language is adopted in this Final Rule as § 292.309(i). 
Docket No. RM06-10-000 - 106 -

 I. Section 210(m)(3) – Commission Review

 1. Sufficient Notice

 a. NOPR

184. Section 210(m)(3) states, in relevant part, that “after notice, including sufficient 

notice to potentially affected [QFs], and an opportunity for comment, the Commission 

shall make a final determination within 90 days of such application regarding whether the 

conditions set forth in subparagraph (A), (B), or (C) of paragraph (1) have been met”75 

Prior to the issuance of the NOPR, the Commission dealt with two section 210(m)(3) 

applications.76 In Alliant, the Commission explained its interpretation and application of 

“notice, including sufficient notice to potentially affected [QFs].” The Commission 

clarified that an applicant would be required to identify all potentially affected QFs in any 

section 210(m)(3) application. The Commission also listed five categories of facilities 

that would constitute “all potentially affected QFs.” In the NOPR, the Commission 

proposed to incorporate this interpretation of “sufficient notice” and “all potentially 

affected QFs” in new § 292.310(b) and (c) of the Commission’s regulation. 

 

 75 16 U.S.C. 824a-3(m)(3) (emphasis added). 

76 See Alliant Energy Corporate Services, Inc., 113 FERC ¶ 61,024 (2005) 

(Alliant); Montana-Dakota Utilities Co., 113 FERC ¶ 61,045 (2005) (Montana-Dakota). 
Docket No. RM06-10-000 - 107 -

 b. Comments

185. PSNM is concerned with requiring notice by applicants seeking relief from the 

purchase obligation to developers of facilities that have pending state avoided cost 

proceedings and any other QFs that the applicant reasonably believes to be affected by its 

petition. Specifically, it states that the applicant seeking relief may not necessarily be 

aware of the all the entities falling within these classifications. PSNM recommends that 

the Commission revise the proposed § 292.310(c)(4) to state: “developers of facilities 

that have pending state avoided cost proceedings involving the applicant.” 

186. SCE is concerned with proposed § 292.310(b), (c)(2) and (c)(5). It states that 

these categories may capture too broad a category of entities and thus lead to needless 

debates over the scope of notice provided. It states that in any case uncertified QFs and 

certified QFs not in the service territory of the applicant, as well as all other interested 

parties will receive sufficient notice through the Federal Register notice process. SCE 

argues that the relevant statute requires sufficient notice, not actual notice. 

 c. Commission Determination

187. The Commission will adopt the NOPR’s proposal to incorporate its interpretation 

of “sufficient notice” and “all potentially affected QFs” as described in Alliant with one 

modification. PSNM points out that an applicant may not be aware of state avoided cost 

proceedings that do not involve the applicant and recommends adding “involving the 

applicant” to proposed § 292.310(c)(4). We agree that an applicant would not necessarily 

know about QF developers that have initiated state avoided cost proceedings that do not 

involve the applicant. Nor did we intend for applicants in this situation to identify such 
Docket No. RM06-10-000 - 108 -

QF developers. We find PSNM’s proposed revision adds clarity to § 292.310(c)(4) and it 

is consistent with the Commission’s interpretation of “all potentially affected QFs.” 

Accordingly, we will modify § 292.310(c)(4) to state: “(4) The developers of facilities 

that have pending state avoided cost proceedings involving the applicant; and”. 

188. We disagree with SCE’s notion that “all potentially affected QFs” will receive 

sufficient notice through the Federal Register notice process. While the statutory 

language does not explicitly state that the “notice, including sufficient notice” shall be 

actual notice, the Commission nonetheless believes its statutory requirement is best met 

by providing all potentially affected QFs, many of which are small entities that do not 

regularly read the Federal Register, with actual notice. 

 2. Filing Fee

 a. NOPR

189. Section 210(m)(3) states, in relevant part, that any electric utility may file an 

application for relief from the mandatory purchase requirement. In the NOPR, the 

Commission proposed that utilities seeking relief from the mandatory purchase 

requirement would need to file an application pursuant to section 210(m)(3). 
Docket No. RM06-10-000 - 109 -

 b. Comments

190. SCE seeks confirmation that an application filed pursuant to section 210(m)(3) is 

not subject to Rule 207.77 SCE argues that the statute indicates that the filing is an 

“application” and thus should be subject to Rule 204,78 which does not require the 

payment of a fee. 

 c. Commission Determination

191. SCE is the only commenter to seek clarification on whether or not a filing fee is 

associated with a section 210(m)(3) application. We find that no filing fee shall apply to 

section 210(m)(3) applications. 

 J. Section 210(m)(4) – Reinstatement of Obligation to Purchase

192. In the NOPR, the Commission proposed § 292.311 to the Commission’s 

regulations which is identical to statutory language of section 210(m)(4). The 

Commission viewed section 210(m)(4) as an opportunity for a QF, a state agency, or any 

affected person to seek to reinstate the purchase obligation should there be a material 

change in the circumstances under which the Commission granted relief. The 

Commission noted that the applicant bears the burden to “set forth the factual basis” upon 

which the application is based. The Commission further stated that the requirement for a 

“factual basis” indicates that allegations of a change in the conditions upon which relief 

 77 18 CFR 385.207. 

78 18 CFR 385.204. 
Docket No. RM06-10-000 - 110 -

was granted must be supported with evidence. The Commission proposed to consider 

these applications on a case-by-case basis.79

193. No adverse comments were filed in response to the Commission’s proposal. 

Therefore, the Commission will adopt § 292.311 to the Commission’s regulations, as 

proposed. 

 K. Section 210(m)(5) – Obligation to Sell

 1. NOPR

194. Section 210(m)(5) of PURPA removes the requirement that an electric utility sell 

electric energy to any QF if the Commission finds that: “competing retail electric 

suppliers are willing and able to sell and deliver electric energy to the qualifying 

cogeneration facility or qualifying small power production facility; and the electric utility 

is not required by State law to sell electric energy in its service territory.” In the NOPR, 

the Commission proposed to incorporate the statutory language into its regulations. 

 2. Comments

195. ACC, American Iron and Steel Institute, ELCON and Midwest ISO Transmission 

Customers argue that by simply importing into its regulations the statutory standard in 

section 210(m)(5), the Commission provides no assurance that it will continue to protect 

the rights of QFs to receive standby and backup power at just, reasonable, and 

nondiscriminatory rates. They argue that no such finding can be made unless the 

 79 In the NOPR, the Commission also stated that, consistent with our interpretation 

of “notice” under section 210(m)(3), the Commission will require an applicant to identify 

all potentially affected utilities in the application so that the Commission will be able to 

meet its statutory requirement to provide sufficient notice and an opportunity for 

comment. 
Docket No. RM06-10-000 - 111 -

Commission conducts an investigation to assure itself that there is sufficient competition 

among suppliers that market power will not be exercised in the sale of power. For 

instance, ELCON and American Forest & Paper suggest that the Commission require 

QFs have available at least two competing suppliers who are not affiliated with the utility 

before relieving the utility of its sales obligations under section 210(m)(5). They assert 

that this is required by the statutory language referring to "competing retail electric 

providers" in the plural. Moreover, the Coalition of CIBO argue that the utility be 

required to demonstrate that all of the services are competitively available. 

196. In addition, CCC, EPSA, Florida Industrial, Energy Consumers, Solid Waste 

Authority request that the Commission clarify that lifting of the PURPA obligation to 

purchase QF electricity for a particular utility does not relieve such utility of its 

obligation to sell supplemental, backup, standby and maintenance power to the QF at fair, 

reasonable and nondiscriminatory rates. 

197. Also, the CCC argues that the statute requires that the competing supplier must be 

able to “deliver” as well as “sell” the backup and standby power and that the Commission 

must make certain that the utility cannot use its monopoly over retail delivery (i.e., 

distribution) service to impede the development of QF projects. 

198. Further, the CCC states that the Commission should recognize that in addition to a 

showing of an alternative retail supplier of electricity, the statute requires a second 

showing that the utility no longer has any state law obligation to serve retail customers in 

its service territory. ELCON and American Forest & Paper add that the Commission 

should interpret this second prong to require any utility that has an obligation to provide 
Docket No. RM06-10-000 - 112 -

Standard Offer or Default service is "required by state law to sell electric energy in its 

service territory." They state that typically the state has imposed such obligations where 

necessary to achieve just and reasonable rates or adequate, reliable service. ELCON and 

American Forest & Paper state that QFs should not be deprived of any benefit that the 

state has determined to be appropriate for retail customers. 

199. In response to the arguments for the Commission to retain a utility obligation to 

supply backup power at just and reasonable rates, EEI argues that as backup power is a 

retail electric service, it is beyond the Commission’s jurisdiction to determine the justness 

and reasonableness of such retail rates. It argues that the most the Commission can find, 

as the statute makes clear, is that competing retail suppliers are willing and able to sell to 

the QF, and that there is no applicable state obligation to serve. 

 3. Commission Determination

200. We clarify that lifting of the PURPA obligation to purchase QF electricity for a 

particular utility does not relieve such utility of its obligation to sell supplemental, 

backup, standby and maintenance power to the QF. Any finding under section 210(m)(5) 

which would relieve the utility from selling to a QF would be made under a separate 

standard and in a separate proceeding pursuant to § 292.312 of the Commission’s 

regulations. We agree, with EEI, however, that it is beyond the Commission’s 

jurisdiction to determine the justness and reasonableness of retail rates. 

201. Also, we agree with ELCON and American Forest & Paper that the language in 

section 210(m)(5), "competing retail electric providers," requires that QFs have available 

at least two competing suppliers who are not affiliated with the utility before relieving the 
Docket No. RM06-10-000 - 113 -

utility of its sales obligations under section 210(m)(5). We emphasize that during a 

section 210(m)(5) proceeding, the Commission will strictly interpret the statutory 

language. We note that the Commission’s regulations provide that a utility must 

interconnect with a QF, and nothing in section 210(m) of PURPA terminates that 

obligation. 

202. As to the CCC’s argument that section 210(m)(5) has an additional state law prong 

that has to be met, we agree. Whether a utility that has an obligation to provide Standard 

Offer or Default service is "required by state law to sell electric energy in its service 

territory" is an issue that invokes consideration of particular state laws or state regulatory 

authority actions. Accordingly, the Commission believes that the issue is more 

appropriately addressed on a case-by-case basis in proceedings under § 292.312 of the 

Commission’s regulations rather than generically in this rulemaking. 

 L. Section 210(m)(6) – No Effect on Existing Rights and Remedies

 1. NOPR

203. Section 210(m)(6) protects the right and remedies under a contract or obligation in 

effect or pending approval before the state regulatory authority. In the NOPR, the 

Commission clarified that the protections provided for in section 210(m)(6) are triggered 

regardless of the stage of construction of a facility that may be the subject of the contract 

or obligation. The Commission proposed to adopt the language of the statute and 

solicited comments on whether further or different language and/or clarifications other 

than those proposed here should be incorporated into our regulations. 
Docket No. RM06-10-000 - 114 -

 2. Comments

204. Most of the comments received regarding the Commission’s interpretation of 

section 210(m)(6) were focused on the terms “contract” and “obligation.” EEI and 

PG&E argue that the terms “contract” and “obligation” are synonymous and that an 

“obligation” within the meaning of PURPA section 210(m)(6) thus refers to a specific 

legal arrangement between specific parties that establishes all the relevant and material 

rates, terms and conditions under which power will be bought and sold. They contend 

that “obligation” must provide the same level of certainty as a contract, even though a 

contract per se may not actually be formed until regulatory approval is obtained. They 

further argue that the only obligations that were preserved under the savings clause were 

those obligations that (1) contain the mutual commitments of specific buyers and sellers 

of QF-generated electricity; (2) define all the relevant and material rates, terms and 

conditions of the sales; and (3) were in effect or pending regulatory approval on 

August 8, 2005. 

205. SCE supports EEI and argues that “obligation” should refer only to mutual 

arrangements that were sufficiently developed to include all relevant terms and mutual 

commitments of the parties and were in effect, or awaiting state commission approval, as 

of August 8, 2005. 

206. Midwest Renewable Energy Products argues that the Commission should clarify 

that any QF that was certified under 18 CFR 292.206 and made a filing with the relevant 

state regulatory authority before August 8, 2005 (to implement the mandatory purchase 
Docket No. RM06-10-000 - 115 -

requirement) falls under the protection of the savings clause in section 210(m)(6), as 

having an “obligation” in effect as of August 8, 2005. 

207. Deere argues that EEI and SCE ignore that there can be non-contractual legally 

enforceable obligations, created pursuant to a state’s PURPA implementing scheme, 

which do not necessarily involve a single writing completely containing all material 

terms. Deere also argues that they ignore the new act’s express mention of “contracts” 

separate from “obligations,” using the disjunctive “or.” It states that equating 

“obligations” to contracts would make it superfluous, contrary to the rules of statutory 

construction. Deere also states that Congress recognized that PURPA’s purchase 

obligation is effectuated not only through contracts, but through obligations created by 

non-contractual mechanisms, such as a state regulatory process. 

208. ELCON and American Forest & Paper state that the Commission should 

emphasize that even where mandatory purchase requirements are terminated as to new 

contracts, existing contracts and obligations may not be reopened. 

 3. Commission Determination

209. The Commission will adopt the statutory language of section 210(m)(6) into its 

regulations. Based on the comments received, it is evident that the term “obligation” as it 

is used in section 210(m)(6) and section 210(m)(1) needs to be clarified. Section 

210(m)(6) reads, in relevant part, that “Nothing in this subsection affects the rights and 

remedies of any party under any contract or obligation, in effect or pending approval 
Docket No. RM06-10-000 - 116 -

before the appropriate State regulatory authority . . . .”80 Section 210(m)(1) states, in 

relevant part, that “no electric utility shall be required to enter into a new contract or 

obligation to purchase electric energy . . . .”81 Because the term “obligation” appears in 

two distinct subsections of amended section 210(m), we believe it necessary to clarify 

how the Commission will interpret the term “obligation.” 

210. The Commission has previously addressed the meaning of section 210(m)(6) in 

Midwest Renewable Energy Projects, LLC.

82 In Midwest Renewable, we rejected the 

notion offered here by EEI and PG&E that “contract” and “obligation” are synonymous 

terms. We stated that such an interpretation would render the term “obligation” 

superfluous because then section 210(m)(6) would only apply to existing contracts. Had 

Congress intended section 210(m)(6) to apply to only existing contract, it would not have 

included the term “obligation.” Thus, we found Congress intended there to be a 

distinction between “contract” and “obligation.” 

211. In Midwest Renewable, we also disagreed with the theory offered by EEI and 

PG&E in this proceeding that an “obligation” within the meaning of PURPA section 

210(m)(6) refers to a specific legal arrangement between specific parties that establishes 

all the relevant and material rates, terms and conditions under which power will be 

bought and sold. As we stated in Midwest Renewable: 

 80 16 U.S.C. 824a-3(m)(3) (emphasis added). 

81 16 U.S.C. 824a-3(m)(6) (emphasis added). 

82 Midwest Renewable Energy Projects, LLC, 116 FERC ¶ 61,017 (2006) 

(Midwest Renewable). 
Docket No. RM06-10-000 - 117 -

While there appears to be some ambiguity surrounding the term 

“obligation” in 210(m)(6), we find that the reading favored by protestors 

would eliminate the term “or pending approval” from the statutory 

language, and would be contrary to the well-established rule of statutory 

construction that every clause and word of a statute be given effect and that 

no clause or word be interpreted so as to render it superfluous, redundant, 

void or insignificant. To the contrary, we find the phrase “or pending 

approval” to be quite significant, as it ensures that contracts or obligations 

that had not yet been entered into but were being pursued in the context of 

the state commission proceedings that were pending on the date of 

enactment of EPAct 2005 will fall within savings clause.[83] 

212. When a utility refuses to enter into a contract with a QF and the QF seeks state 

regulatory authority help to enforce its PURPA regulations, a non-contractual legally 

enforceable obligation may be created pursuant to the state’s implementation of PURPA. 

Such obligations do not necessarily involve a single writing completely containing all 

material terms. How QFs initiate the PURPA process varies from state to state. Thus, to 

narrowly define “obligation” to encompasses only a specific legal arrangement with all 

the relevant and material rates, terms and conditions established may be at odds with a 

state’s implementation of PURPA. Accordingly, the Commission views the term 

“obligation” as a “legally enforceable obligation” which is established through a state’s 

implementation of PURPA. A QF that had initiated, prior to August 8, 2005, a state 

PURPA proceeding that may result in a contract or legally enforceable obligation would 

be considered to have triggered an “obligation” with the electric utility regarding section 

210(m)(6). 

 83 Midwest Renewable at P 14. 
Docket No. RM06-10-000 - 118 -

213. With regard to section 210(m)(1), “obligation” will be viewed as a “legally 

enforceable obligation” and a QF that has initiated a state’s PURPA proceeding that may 

result in a legally enforceable contract or obligation prior to the applicable electric utility 

filing its petition for relief pursuant to § 292.310 of the Commission’s regulations will be 

considered to have triggered an “obligation” with the electric utility. Whether or not the 

utility’s date of filing a petition for relief pursuant to § 292.310 of the Commission’s 

regulations becomes the end date for the mandatory purchase requirement depends on 

whether the Commission makes a final determination that the criteria for granting relief 

have been satisfied, and the Commission terminates the mandatory purchase requirement. 

 M. Section 210(m)(7) – Recovery of Costs

 1. NOPR

214. In the NOPR the Commission stated that it did not believe that regulations are 

necessary at this time to ensure that an electric utility that purchases electric energy or 

capacity from a QF recovers all prudently incurred costs associated with the purchase as 

described in section 210(m)(7). Nonetheless, the Commission requested comments on 

whether there is a need for the Commission to consider such a regulation. 

 2. Comments

215. EEI, Allegheny, Alliant, Montana-Dakota, PSNM and TNMP state that the 

Commission should adopt the statutory language in section 210(m)(7) into its regulations 

and provide for case-by-case relief where required. Central Vermont and Progress 

Energy argue that the Commission should establish wholesale and retail riders to permit 

consistent, complete and timely recovery of the utility’s prudently-incurred QF purchase 
Docket No. RM06-10-000 - 119 -

costs. They state that the states and the Commission often use different methodologies 

for allocating costs between the jurisdictions and the fact that utilities do not traditionally 

have general rate cases before the Commission and the state commissions every year. 

Therefore, when a QF purchase is made in a year without a general rate case at wholesale 

and retail, those costs are not recovered via the utility’s retail or wholesale rates. 

 3. Commission Determination

216. We adopt our proposal in the NOPR. We do not find Central Vermont and 

Progress Energy’s argument persuasive. No evidence has been presented that utilities 

will not be able to recover costs associated with purchases of electric energy or capacity 

from a QF. Until such time, we are reluctant to review an issue that should be handled by 

the states in the first instance. Therefore, we see no reason to act now. 

 N. Other Issues

 1. Contract Termination

 a. NOPR

217. In the NOPR, the Commission proposed to find that when a contract terminates by 

its own accord, an electric utility is not compelled to enter into a new, successor contract 

with the QF if the Commission has made a finding that section 210(m)(1) has been 

satisfied. The Commission further clarified that QF status does not mean that an electric 

utility has an “obligation” to purchase from the QF in perpetuity, or that a QF has the 

right to demand that the utility purchase at avoided-cost rates in perpetuity. 

 
Docket No. RM06-10-000 - 120 -

 b. Comments

218. AEP, Deere, EEI, Entergy, Occidental, PPL, and PSNM agree with the NOPR’s 

position. AEP and Occidental seek clarification or expansion of the NOPR’s position. 

AEP believes that “terminates by its own accord” should also include the fact that a 

contract may terminate mutually between the parties and the electric utility would not be 

compelled to enter into another contract with that QF. Occidental seeks clarification that 

the proposed rules do not abrogate existing contracts. As such, Occidental wants the 

terms “terminates by its own accord” clarified to mean “expires by its own terms.” 

 c. Commission Determination

219. The Commission will adopt the NOPR’s proposal regarding contract termination 

in the context of finding made pursuant to section 210(m)(1). Two commenters, AEP 

and Occidental, seek clarification of the phrase “terminates by its own accord.” AEP 

points out that some contracts may be terminated by mutual agreement between the 

parties to the contract and believes this type of contract termination should also be 

included in the Commission’s interpretation of “terminates by its own accord.” As long 

as there is mutual agreement between a QF and the electric utility to terminate a contract, 

then the Commission finds that the electric utility is not compelled to enter into a new, 

successor contract with the QF. Occidental requests clarification that the NOPR does not 

abrogate existing contracts and thus wants the phrase “terminates by its own accord” to 

be clarified to mean “expires by its own terms.” We will also clarify that the proposed 

rules adopted in this Final Rule do not abrogate existing contracts. Thus, under the Final 

Rule, a QF contract is to remain in effect until it terminates by mutual agreement or by its 
Docket No. RM06-10-000 - 121 -

own terms. We note, however, that there may be contracts that contain provisions that 

legislation, such as EPAct 2005, or a Final Rule, such as this one, trigger a termination 

clause in the contract. To the extent that the parties to a contract cannot agree whether a 

termination clause has been triggered, the issue will be best determined in an individual 

case-specific proceeding in which the particulars of the contract can be examined. 

 2. Effective Date of Contracts

 a. NOPR

220. In the NOPR, the Commission proposed to find that if a contract is entered into 

after August 8, 2005, the date of EPAct 2005 enactment, but before the Commission has 

determined that an electric utility is entitled to relief from the mandatory purchase 

requirement, the contract already entered into will be treated as though it was in effect on 

August 8, 2005 for purposes of section 210(m)(1). 

 b. Comments

221. EEI, SCE, and PG&E disagree with the Commission’s proposed statutory 

construction. They argue that once a utility is granted relief from the PURPA purchase 

obligation, it should not be required to honor any QF contracts entered into after 

August 8, 2005. EEI, SCE, and PG&E argue that this is the only determination that is 

consistent with the clear intent and express language of EPAct 2005, setting August 8, 

2005 as the end date of the PURPA purchase obligation for utilities in appropriate 

markets. They state that this finding is also critical to preventing a QF “gold rush,” i.e., 

QFs with expiring contracts and/or new QFs may seek to obtain a contract prior to the 
Docket No. RM06-10-000 - 122 -

Commission making the requisite finding under section 210(m)(1) that would relieve 

electric utilities like SCE and PG&E from the mandatory purchase requirement. 

222. In the alternative, SCE and PG&E state that if the Commission believes that some 

contracts entered into after August 8, 2005 must be honored, it should adopt a rule that 

ensures that electric utilities either: (1) are not compelled by their state commissions to 

enter into new contracts or extend existing contracts after a petition for relief is filed 

pursuant to section 210(m) (PURPA Petition) until and unless the PURPA Petition is 

denied; or (2) are not required to honor contracts (or contract extensions) entered into 

after a PURPA Petition is filed, if the PURPA Petition is subsequently granted. Under 

this approach, contracts entered into between August 8, 2005, and the filing of a PURPA 

Petition would be honored, but there would be no “gold rush” incentive created by the 

filing of the utility’s PURPA Petition. 

223. OG&E proposes that when a QF attempts to establish a contract or obligation after 

August 8, 2005, a utility should have a reasonable opportunity to demonstrate in a filing 

at the Commission that the utility satisfies one of the tests set forth in section 210(m)(1). 

A QF attempting to establish a new obligation would be required to provide the utility 

with formal notice. Within 60 days of such notice, the utility could file a PURPA 

Petition if it believed the requisite market conditions existed. 

224. The CCC, and the APPA and LPPC argue that the language is clear that the ability 

of a utility to have its mandatory purchase requirement terminated is dependent on a 

Commission determination that a nondiscriminatory market satisfying the statutory 

conditions exists. Until this determination is made, the mandatory purchase requirement 
Docket No. RM06-10-000 - 123 -

remains in effect. Deere adds that generation project financing is long-term in nature, 

and contractual and non-contractual legally enforceable obligations are typically for up to 

20 years or longer so as to support the long-term financing. The possibility of a new QF 

contract or obligation being negated, either ab initio or at the time of a section 210(m) 

order, would leave the remaining term of the financing arrangements unsupported. 

225. The CPUC states that should the Commission adopt a rule as suggested by SCE 

and PG&E, the rule should affirm that state commissions retain oversight of such 

terminable contracts to ensure utilities afford equal treatment of all QF contracts. 

 c. Commission Determination

226. Section 210(m)(1) states, in relevant part, that, after August 8, 2005, no electric 

utility shall be required to enter into a new contract or obligation to purchase electric 

energy from QFs if the Commission finds that the QF has nondiscriminatory access to 

either section 210(m)(1)(A), (B), or (C). The Commission’s interpretation of this 

statutory language, as expressed in the NOPR, was to treat new contracts or obligations 

entered into after August 8, 2006, but before the Commission makes a finding, as 

contracts or obligations in effect prior to August 8, 2005. This interpretation is consistent 

with the Commission’s policy of not abrogating contracts. Moreover, this is consistent 

with the statute. Under the statue, the purchase obligation is not terminated on August 8, 

2005, but only when the Commission terminates the obligation, after an electric utility 

filing. Until an electric utility makes a filing pursuant to the regulations, and the 

Commission makes the required findings, the purchase obligations remains in effect. A 
Docket No. RM06-10-000 - 124 -

different statutory interpretation, such as the one advocated by EEI, would lead to QF 

contracts being abrogated potentially several years after execution. We believe Congress 

did not intend for this after-the-fact abrogation of contracts to occur. Thus, we believe 

the NOPR’s interpretation of this statutory language is reasonable. 

227. Nonetheless, some of EEI, SCE, and PG&E’s arguments are compelling. The 

Commission’s interpretation could potentially lead to what these commenters describe as 

a “gold rush” of QFs seeking contracts once an electric utility files for relief. Since the 

Commission has 90 days in which to render a finding, QFs would be able to seek new 

contracts or obligations from the electric utility upon learning of the electric utility’s 

relief application until the Commission makes a finding, and the electric utility would be 

subject to the mandatory purchase requirement even if the Commission eventually made 

a finding removing the mandatory purchase requirement. We believe this possibility 

would undermine and circumvent the intent of section 210(m)(1). 

228. In order to prevent the possibility of a “gold rush,” the Commission will modify its 

proposed interpretation. Rather than treat new contracts and obligations entered into after 

a PURPA petition is filed but before the Commission renders a finding as in effect prior 

to August 8, 2005, the Commission will temporarily suspend an electric utility’s 

obligation to enter into new contracts and obligations upon the filing of its PURPA 

petition. When an electric utility files its PURPA petition, that electric utility will not be 

obligated to enter into new contracts or obligations with QFs as of the date its PURPA 

petition is filed. If the Commission finds that section 210(m)(1) has been met, then the 

mandatory purchase requirement for that electric utility ends as of the date of the PURPA 
Docket No. RM06-10-000 - 125 -

petition. However, if the Commission finds that the requirements of section 210(m)(1) 

have not been met, then the electric utility’s obligation to enter into new contracts or 

obligations is reinstated as of the date of a Commission order and a QF seeking a new 

contract or obligation shall not be denied. As such, a new contract or obligation in this 

situation will be treated as in effect prior to August 8, 2005. We believe this modification 

will remove any “gold rush” incentive QFs may have and preserves the integrity of the 

mandatory purchase requirement and contracts entered into between QFs and electric 

utilities. We note, however, that to the extent that a QF had a contract or obligation 

pending approval before an appropriate state regulatory authority, or non-regulated utility 

on August 8, 2005, a finding by that state regulatory authority or non-regulated utility 

that an electric utility has an obligation to purchase or must enter into a contract is 

binding. 

229. The Commission recognizes that there is a possibility of electric utilities filing 

PURPA Petitions one right after another in order to invoke the temporary suspension 

period of the mandatory purchase requirement. Repeated section 210(m)(3) applications 

by utilities intended will not be tolerated and the Commission will take appropriate action 

if utilities abuse the process. 

V. Information Collection Statement

 The following collections of information referenced in this Final Rule have been 

submitted to the Office of Management and Budget (OMB) for review under section 
Docket No. RM06-10-000 - 126 -

3507(d) of the Paperwork Reduction Act of 1995.84 OMB’s regulations require OMB to 

approve certain information collection requirements imposed by agency rule.85 Upon 

approval of a collection of information, OMB will assign an OMB control number and 

expiration date. Respondents subject to the filing requirements of this Final Rule will not 

be penalized for failing to respond to these collections of information unless the 

collections of information display a valid OMB control number or the Commission had 

provided a justification as why the control number should be displayed. 

In the NOPR the Commission provided the following burden estimates for complying 

with the rule as follows: 

Data Collection 

FERC-556 

Number of 

Respondents 

Number of 

Responses 

Hours Per 

Response 

Total Annual 

Hours 

§292.310 230 1 2 460 

§292.312 230 1 2 460 

§292.313 630 1 3 1,890 

Totals 860 1 2,810 

Information Collection Costs: Because of the regional differences and the various 

staffing levels that have been involved in preparing the documentation (legal, technical 

and support) the Commission is using the hourly rate of $150 to estimate the costs for 

 84 See 44 U.S.C. 3507(d). 

85 5 CFR 1320.11. 
Docket No. RM06-10-000 - 127 -

filing and other administrative processes (reviewing instructions, searching data sources, 

completing and transmitting the collection of information). The estimated cost is 

anticipated to be $421,500. 

 In response to the NOPR, the Commission received no comments concerning its 

estimates for burden and costs and will use those estimates here in the final rule. Where 

commenters believed that a disproportionate amount of burden had been placed on 

certain entities in order to meet statutory criteria, the Commission has addressed this 

issue elsewhere in the rule and will not repeat its responses here. The actions taken in the 

Final Rule should ameliorate their concerns of a significant shift in the burden. 

Title: FERC-556 “Small Power Production and Cogeneration Facilities” 

Action: Proposed collections. 

OMB Control Nos.: 1902-0075. 

Respondents: Businesses or other for profit. 

Frequency of responses: Annually and on occasion. 

Necessity of the Information: The Commission amends its regulations to implement 

Section 210(m) of PURPA which was enacted in Section 1253 of the EPACT 2005 to 

implement a process by which electric utilities may apply for removal of the requirement 

that they enter into new contracts or obligations for the purchase of electric energy from 

qualifying facilities (QFs) after August 8, 2005. The Final Rule is in response to a 

Congressional mandate that addresses complaints of electric utilities of having to pay 

contractually high prices for power they did not need. In adding Section 210, Congress 
Docket No. RM06-10-000 - 128 -

described a standard of relief for the requirement that electric utilities enter into new 

obligations to purchase electric power from QFs. 

Interested persons may obtain information on the reporting requirements by 

contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE, 

Washington, D.C. 20426 [Attention: Michael Miller, Office of the Executive Director, 

Phone (202)502-8415, fax: (202)273-0873, e-mail: michael.miller@ferc.gov ] 

For submitting comments concerning the collection of information(s) and the associated 

burden estimates, please send your comments to the contact listed above and to the Office 

of Management and Budget, Office of Information and Regulatory Affairs, Washington, 

D.C. 20503, Attention: Desk Officer for the Federal Energy Regulatory Commission; 

Phone: (202)395-4650, fax: (202)395-7285. 

VI. Environmental Analysis

230. 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. 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 is clarifying in nature. It interprets several 

amendments made to PURPA by EPAct 2005, and clarifies the applicability of these 

amendments to electric utilities and QFs; it does not substantially change the effect of the 

legislation. Accordingly, no environmental consideration is necessary. 
Docket No. RM06-10-000 - 129 -

VII. Regulatory Flexibility Act Certification

231. The Regulatory Flexibility Act of 1980 (RFA)86 generally requires a description 

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

of small entities and where notice and comment rulemaking is required. Certain rules are 

exempt from notice and comment from the RFA requirements; exempt rules include 

interpretative rules, general statements of policy, or rules of agency organization 

procedure or practice.87 Interpretative rules “generally interpret the intent expressed by 

Congress, where an agency does not insert its own judgments or interpretations in 

implementing a rule and simply regurgitates statutory language.”88 The rule we are 

proposing in this docket is mostly an interpretative rule and thus, does not require a 

regulatory flexibility analysis. The exception, however, is the Commission’s 

establishment of a rebuttable presumption that small QFs, with a net capacity no greater 

than 20 MW, do not have nondiscriminatory access to wholesale markets described in 

section 210(m)(1)(A), (B), or (C). Unless an electric utility seeking the right to terminate 

its requirement to purchase small QF power specifically rebuts this small QF 

presumption, and that electric utility’s request is granted by the Commission, a small QF 

would continue to be eligible to require the electric utility to purchase its electric energy. 

With this 20 MW rebuttable presumption the Commission reduces the burden, i.e., the 

 86 5 U.S.C. 601-12. 

87 5 U.S.C. 553(b)(A). 

88 “How to Comply with the Regulatory Flexibility Act: A Guide for Government 

Agencies”, Small Business Administration, Office of Advocacy, P.5, May 2003. 
Docket No. RM06-10-000 - 130 -

cost of participating in termination proceedings, of small QFs to participate in the section 

210(m)(3) proceedings. In fact, the Commission is being generous in allowing small QFs 

up to 20 MWs to have a rebuttable presumption given that the Small Business 

Administration considers “small” to mean 4 MW or less. 

VIII. Document Availability

232. 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 FERC's Home Page 

(http://www.ferc.gov) and in FERC'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. 

233. From FERC's Home Page on the Internet, this information is available on 

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. 

234. User assistance is available for eLibrary and the FERC's website during normal 

business hours from our Help line at (202)502-8222 or the Public Reference Room at 

(202) 502-8371 Press 0, TTY (202)502-8659. E-Mail the Public Reference Room at 

public.referenceroom@ferc.gov. 
Docket No. RM06-10-000 - 131 -

IX. Effective Date 

235. These regulations are effective [insert date 60 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 defined in section 251 of the Small Business Regulatory 

Enforcement Fairness Act of 1996. The Commission will submit the Final Rule to both 

houses of Congress and the General Accounting Office. 

List of subjects in 18 CFR Part 292

Electric power, Electric power plants, Electric utilities, 

By the Commission. 

( S E A L ) 

 Magalie R. Salas, 

 Secretary. 
Docket No. RM06-10-000 - 132 -

 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. Section 292.303 is amended to read as follows: 

§ 292.303 Electric utility obligations under this subpart. 

 (a) Obligation to purchase from qualifying facilities. Each electric utility shall 

purchase, in accordance with § 292.304, unless exempted by § 292.309 and § 292.310, 

any energy and capacity which is made available from a qualifying facility: 

 (1) Directly to the electric utility; or 

 (2) Indirectly to the electric utility in accordance with paragraph (d) of this 

section. 

 (b) Obligation to sell to qualifying facilities. Each electric utility shall sell to 

any qualifying facility, in accordance with § 292.305, unless exempted by § 292.312, 

energy and capacity requested by the qualifying facility. 

 (c) Obligation to interconnect. (1) Subject to paragraph (c)(2) of this section, 

any electric utility shall make such interconnections with any qualifying facility as may 
Docket No. RM06-10-000 - 133 -

be necessary to accomplish purchases or sales under this subpart. The obligation to pay 

for any interconnection shall be determined in accordance with § 292.306. 

 (2) No electric utility is required to interconnect with any qualifying facility if, 

solely by reason of purchases or sales over the interconnection, the electric utility would 

become subject to regulation as a public utility under Part II of the Federal Power Act. 

 (d) Transmission to other electric utilities. If a qualifying facility agrees, an 

electric utility which would otherwise be obligated to purchase energy and capacity from 

such qualifying facility may transmit the energy or capacity to any other electric utility. 

Any electric utility to which such energy or capacity is transmitted shall purchase such 

energy or capacity under this subpart as if the qualifying facility were supplying energy 

or capacity directly to such electric utility. The rate for purchase by the electric utility to 

which such energy is transmitted shall be adjusted up or down to reflect line losses 

pursuant to § 292.304(e)(4) and shall not include any charges for transmission. 

 (e) Parallel operation. Each electric utility shall offer to operate in parallel 

with a qualifying facility, provided that the qualifying facility complies with any 

applicable standards established in accordance with § 292.308. 

3. Sections 292.309 through 292.314 are added to read as follows: 

 § 292.309 Termination of obligation to purchase from qualifying facilities. 

 (a) After August 8, 2005, an electric utility shall not be required, under this 

part, to enter into a new contract or obligation to purchase electric energy from a 

qualifying cogeneration facility or a qualifying small power production facility if the 
Docket No. RM06-10-000 - 134 -

Commission finds that the qualifying cogeneration facility or qualifying small power 

facility production has nondiscriminatory access to: 

 (1)(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

 (2)(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 

 (3) Wholesale markets for the sale of capacity and electric energy that are, at a 

minimum, of comparable competitive quality as markets described in paragraphs (a)(1) 

and (a)(2) of this section. 

 (b) For purposes of § 292.309(a), a renewal of a contract that expires by its 

own terms is a “new contract or obligation” without a continuing obligation to purchase 

under an expired contract. 

 (c) For purposes of § 292.309(a)(1), (2) and (3), with the exception of 

paragraph (d) of this section, there is a rebuttable presumption that a qualifying facility 
Docket No. RM06-10-000 - 135 -

has nondiscriminatory access to the market if it is eligible for service under a 

Commission-approved open access transmission tariff or Commission-filed reciprocity 

tariff, and Commission-approved interconnection rules. If the Commission determines 

that a market meets the criteria of § 292.309(a)(1), (2) or (3), and if a qualifying facility 

in the relevant market is eligible for service under a Commission-approved open access 

transmission tariff or Commission-filed reciprocity tariff, a qualifying facility may seek 

to rebut the presumption of access to the market by demonstrating, inter alia, that it does 

not have access to the market because of operational characteristics or transmission 

constraints. 

 (d)(1) For purposes of § 292.309(a)(1), (2), and (3), there is a rebuttable 

presumption that a qualifying facility with a capacity at or below 20 megawatts does not 

have nondiscriminatory access to the market. 

 (2) For purposes of implementing paragraph (d)(1) of this section, the 

Commission will not be bound by the one-mile standard set forth in § 292.204(a)(2). 

 (e) Midwest Independent Transmission System Operator (Midwest ISO), PJM 

Interconnection, L.L.C. (PJM), ISO New England, Inc. (ISO-NE), and New York 

Independent System Operator (NYISO) qualify as markets described in 

§ 292.309(a)(1)(i) and (ii), and there is a rebuttable presumption that qualifying facilities 

with a capacity greater than 20 megawatts have nondiscriminatory access to those 

markets through Commission-approved open access transmission tariffs and 

interconnection rules, and that electric utilities that are members of such regional 

transmission organizations or independent system operators (RTO/ISOs) should be 
Docket No. RM06-10-000 - 136 -

relieved of the obligation to purchase electric energy from the qualifying facilities. A 

qualifying facility may seek to rebut this presumption by demonstrating, inter alia, that: 

 (1) The qualifying facility has certain operational characteristics that 

effectively prevent the qualifying facility’s participation in a market; or 

 (2) The qualifying facility lacks access to markets due to transmission 

constraints. The qualifying facility may show that it is located in an area where persistent 

transmission constraints in effect cause the qualifying facility not to have access to 

markets outside a persistently congested area to sell the qualifying facility output or 

capacity. 

 (f) The Electric Reliability Council of Texas (ERCOT) qualifies as a market 

described in § 292.309(a)(3), and there is a rebuttable presumption that qualifying 

facilities with a capacity greater than 20 megawattss have nondiscriminatory access to 

that market through Public Utility Commission of Texas (PUCT) approved open access 

protocols, and that electric utilities that operate within ERCOT should be relieved of the 

obligation to purchase electric energy from the qualifying facilities. A qualifying facility 

may seek to rebut this presumption by demonstrating, inter alia, that: 

 (1) The qualifying facility has certain operational characteristics that 

effectively prevent the qualifying facility’s participation in a market; or 

 (2) The qualifying facility lacks access to markets due to transmission 

constraints. The qualifying facility may show that it is located in an area where persistent 

transmission constraints in effect cause the qualifying facility not to have access to 

markets outside a persistently congested area to sell the qualifying facility output or. 
Docket No. RM06-10-000 - 137 -

 (g) The California Independent System Operator and Southwest Power Pool, 

Inc. satisfy the criteria of § 292.309(a)(2)(i). 

 (h) No electric utility shall be required, under this part, to enter into a new 

contract or obligation to purchase from or sell electric energy to a facility that is not an 

existing qualifying cogeneration facility unless the facility meets the criteria for new 

qualifying cogeneration facilities established by the Commission in § 292.205. 

 (i) For purposes of § 292.309(h), an “existing qualifying cogeneration facility” 

is a facility that: 

 (1) Was a qualifying cogeneration facility on or before August 8, 2005; or 

 (2) Had filed with the Commission a notice of self-certification or selfrecertification, or an application for Commission certification, under § 292.207 prior to 

February 2, 2006. 

 (j) For purposes of § 292.309(h), a “new qualifying cogeneration facility” is a 

facility that satisfies the criteria for qualifying cogeneration facilities pursuant to 

§ 292.205. 

§ 292.310 Procedures for utilities requesting termination of obligation to purchase 

from qualifying facilities. 

 (a) An electric utility may file an application with the Commission for relief 

from the mandatory purchase requirement under § 292.303(a) pursuant to this section on 

a service territory-wide basis. Such application shall set forth the factual basis upon 

which relief is requested and describe why the conditions set forth in § 292.309(a)(1), 

(2) or (3) have been met. After notice, including sufficient notice to potentially affected 
Docket No. RM06-10-000 - 138 -

qualifying cogeneration facilities and qualifying small power production facilities, and an 

opportunity for comment, the Commission shall make a final determination within 90 

days of such application regarding whether the conditions set forth in § 292.309(a)(1), 

(2) or (3) have been met. 

 (b) Sufficient notice shall mean that an electric utility must identify with names 

and addresses all potentially affected qualifying facilities in an application filed pursuant 

to paragraph (a). 

 (c) All potentially affected qualifying facilities shall include: 

 (1) Those qualifying facilities that have existing power purchase contracts with 

the applicant; 

 (2) Other qualifying facilities that sell their output to the applicant or that have 

pending self-certification or Commission certification with the Commission for 

qualifying facility status whereby the applicant will be the purchaser of the qualifying 

facility’s output; 

 (3) Any developer of generating facilities with whom the applicant has agreed 

to enter into power purchase contracts, as of the date of the application filed pursuant to 

this section, or are in discussion, as of the date of the application filed pursuant to this 

section, with regard to power purchase contacts; 

 (4) The developers of facilities that have pending state avoided cost 

proceedings, as of the date of the application filed pursuant to this section; and 

 (5) Any other qualifying facilities that the applicant reasonably believes to be 

affected by its application filed pursuant to paragraph (a) of this section. 
Docket No. RM06-10-000 - 139 -

 (d) The following information must be filed with an application: 

(1) Identify whether applicant seeks a finding under the provisions of 

§ 292.309(a)(1), (2), or (3). 

 (2) A narrative setting forth the factual basis upon which relief is requested and 

describing why the conditions set forth in § 292.309(a)(1), (2), or (3) have been met. 

Applicant should also state in its application whether it is relying on the findings or 

rebuttable presumptions contained in § 292.309(e), (f) or (g). To the extent applicant 

seeks relief from the purchase obligation with respect to a qualifying facility 20 

megawatts or smaller, and thus seeks to rebut the presumption in § 292.309(d), applicant 

must also set forth, and submit evidence of, the factual basis supporting its contention 

that the qualifying facility has nondiscriminatory access to the wholesale markets which 

are the basis for the applicant’s filing. 

 (3) Studies, including the applicant’s long-term transmission plan, conducted 

by applicant, or the RTO, ISO or other relevant entity, that show: 

 (i) Transmission constraints by path, element or other level of comparable 

detail that have occurred and/or are known and expected to occur, and any proposed 

mitigation including transmission construction plans; 

 (ii) Levels of congestion, if available; 

 (iii) Relevant system impact studies for the generation interconnections, already 

completed; 

 (iv) Other information pertinent to showing whether transfer capability is 

available; and 
Docket No. RM06-10-000 - 140 -

 (v) The appropriate link to applicant’s OASIS, if any, from which a qualifying 

facility may obtain applicant’s available transmission capacity (ATC) information. 

(4) Describe the process, procedures and practices that qualifying facilities 

interconnected to the applicant’s system must follow to arrange for the transmission 

service to transfer power to purchasers other than the applicant. This description must 

include the process, procedures and practices of all distribution, transmission and 

regional transmission facilities necessary for qualifying facility access to the market.. 

(5) If qualifying facilities will be required to execute new interconnection 

agreements, or renegotiate existing agreements so that they can effectuate wholesale sales 

to third-party purchasers, explain the requirements, charges and the process to be 

followed. Also, explain any differences in these requirements as they apply to qualifying 

facilities compared to other generators, or to applicant-owned generation. 

(6) Applicants seeking a Commission finding pursuant to § 292.309(a)(2) or 

(3), except those applicants located in ERCOT, also must provide evidence of 

competitive wholesale markets that provide a meaningful opportunity to sell capacity, 

including long-term and short-term sales, and electric energy, including long-term, shortterm and real-time sales, to buyers other than the utility to which the qualifying facility is 

interconnected. In demonstrating that a meaningful opportunity to sell exists, provide 

evidence of transactions within the relevant market. Applicants must include a list of 

known or potential purchasers, e.g., jurisdictional and non-jurisdictional utilities as well 

as retail energy service providers. 
Docket No. RM06-10-000 - 141 -

(7) Signature of authorized individual evidencing the accuracy and authenticity 

of information provided by applicant. 

(8) Person(s) to whom communications regarding the filed information may be 

addressed, including name, title, telephone number, and mailing address. 

§ 292.311 Reinstatement of obligation to purchase. 

 At any time after the Commission makes a finding under §§ 292.309 and 292.310 

relieving an electric utility of its obligation to purchase electric energy, a qualifying 

cogeneration facility, a qualifying small power production facility, a State agency, or any 

other affected person may apply to the Commission for an order reinstating the electric 

utility's obligation to purchase electric energy under this section. Such application shall 

set forth the factual basis upon which the application is based and describe why the 

conditions set forth in § 292.309(a), (b) or (c) are no longer met. After notice, including 

sufficient notice to potentially affected electric utilities, and opportunity for comment, the 

Commission shall issue an order within 90 days of such application reinstating the 

electric utility's obligation to purchase electric energy under this section if the 

Commission finds that the conditions set forth in § 292.309(a), (b), or (c) which relieved 

the obligation to purchase, are no longer met. 

§ 292.312 Termination of obligation to sell to qualifying facilities. 

 (a) Any electric utility may file an application with the Commission for relief 

from the mandatory obligation to sell under this section on a service territory-wide basis 

or a single qualifying facility basis. Such application shall set forth the factual basis upon 

which relief is requested and describe why the conditions set forth in paragraphs (b)(1) 
Docket No. RM06-10-000 - 142 -

and (b)(2) of this section have been met. After notice, including sufficient notice to 

potentially affected qualifying facilities, and an opportunity for comment, the 

Commission shall make a final determination within 90 days of such application 

regarding whether the conditions set forth in paragraphs (b)(1) and (b)(2) of this section 

have been met. 

 (b) After August 8, 2005, an electric utility shall not be required to enter into a 

new contract or obligation to sell electric energy to a qualifying small power production 

facility, an existing qualifying cogeneration qualifying facility, or a new qualifying 

cogeneration facility if the Commission has found that; 

 (1) Competing retail electric suppliers are willing and able to sell and deliver 

electric energy to the qualifying cogeneration facility or qualifying small power 

production facility; and 

 (2) The electric utility is not required by State law to sell electric energy in its 

service territory. 

§ 292.313 Reinstatement of obligation to sell. 

 At any time after the Commission makes a finding under § 292.312 relieving an 

electric utility of its obligation to sell electric energy, a qualifying cogeneration facility, a 

qualifying small power production facility, a State agency, or any other affected person 

may apply to the Commission for an order reinstating the electric utility’s obligation to 

purchase electric energy under this section. Such application shall set forth the factual 

basis upon which the application is based and describe why the conditions set forth in 

Paragraph (b)(1) and (b)(2) of this section are no longer met. After notice, including 
Docket No. RM06-10-000 - 143 -

sufficient notice to potentially affected utilities, and opportunity for comment, the 

Commission shall issue an order within 90 days of such application reinstating the 

electric utility’s obligation to sell electric energy under this section if the Commission 

finds that the conditions set forth in paragraphs (b)(1) and (b)(2) of this section are no 

longer met. 

§ 292.314 Existing rights and remedies

Nothing in this section affects the rights or remedies of any party under any contract or 

obligation, in effect or pending approval before the appropriate State regulatory authority 

or non-regulated electric utility on or before August 8, 2005, to purchase electric energy 

or capacity from or to sell electric energy or capacity to a qualifying cogeneration facility 

or qualifying small power production facility under this Act (including the right to 

recover costs of purchasing electric energy or capacity).
Docket No. RM06-10-000 - 144 -

NOTE: THE FOLLOWING APPENDIX WILL NOT BE PUBLISHED IN THE CODE 

OF FEDERAL REGULATIONS. 

Appendix A: List of Petitioners Requesting Clarification or Submitting Comments 

AES Shady Point, LLC (AES Shady Point) 

Albers, John D. (Mr. Albers) 

Allegheny Power (Allegheny) 

Alliant Energy Corporate Services, Inc. (Alliant) 

American Chemistry Council 

American Electric Power Service Corporation (AEP) 

American Energy Company 

American Forest and Paper Association (American Forest & Paper) 

American Iron and Steel Institute 

American Petroleum Institute 

American Public Power Association and Large Public Power Council (APPA) 

American Wind Energy Association (AWEA) 

Caithness Energy, LLC (Caithness) 

California Cogeneration Council (CCC) 

California Independent System Operator Corporation (CAISO) 

Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New 

York, Inc., LIPA, New York Power Authority, New York State Electric & Gas 

Corporation, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric 

Corporation (New York Transmission Owners) 

Central Vermont Public Service Corporation and Green Mountain Power Corporation 

(Central Vermont) 

Coalition of Midwest Transmission Customers (Midwest Transmission Customers) 

Cogeneration Association of California and Energy Producers and Users Coalition 

(Cogeneration Association of California) 

Cogeneration Coalition of Washington 

Congressmen Boucher, Brown and Pickering 

Consolidated Edison Company of New York, Inc. (ConEd) 

Constellation Energy Group, Inc. (Constellation) 

Council of Industrial Boiler Owners (CIBO) 

Deere & Company (Deere) 

Direct Energy Services, LLC (Direct Energy) 

Dow Chemical Company (Dow) 

Edison Electric Institute (EEI) 

Electricity Consumers Resource Council (ELCON) 

Electric Power Supply Association (EPSA) 

 Entergy Services, Inc. (Entergy) 

Environmental Law and Policy Center 
Docket No. RM06-10-000 - 145 -

Exelon Corporation (Exelon) 

The Fertilizer Institute 

FirstEnergy Corp. (FirstEnergy) 

Florida Industrial Cogeneration Association (Florida Industrial Cogeneration) 

Granite State Hydropower Association, Inc. and Vermont Independent Power Producers 

Association (Granite State) 

Independent Energy Producers Association of California (Independent Energy Producers) 

Industrial Energy Consumers of America (Industrial Energy Consumers) 

Landfill Gas Coalition 

Louisiana Energy Users Group (LEUG) 

 Midwest Renewable Energy Projects, LLC (Midwest Renewable Energy Projects) 

Missouri River Energy Services (Missouri River) 

 Midwest Transmission Customers 

Modesto Irrigation District (Modesto Irrigation) 

Montana-Dakota Utilities Co. (Montana-Dakota) 

National Grid USA (National Grid) 

National Petrochemical & Refiners Association (NPRA) 

National Rural Electric Cooperative Association (NRECA) 

Nelson Industrial Steam Company’s Industrial Participants (NISCO) 

New York Independent System Operator, Inc. (NYISO) 

NSTAR Electric & Gas Corporation (NSTAR) 

Occidental Chemical Corporation (Occidental) 

Oklahoma Corporation Commission 

Oklahoma Gas and Electric Company (OG&E) 

Ottinger, Richard L. (Mr. Ottinger) 

Pacific Gas and Electric Company (PG&E) 

PacifiCorp 

PJM Interconnection, LLC (PJM) 

PJM Transmission Owners 

PPL Electric Utilities Corporation (PPL) 

Progress Energy, Inc. (Progress Energy) 

Public Interest Organizations (PIOs)(Center for Energy Efficiency & Renewable 

Technologies, Delaware Division of the Public Advocate, Environmental Law & 

Policy Center, Interwest Energy Alliance, Izaak Walton League of America, Natural 

Resources Defense Council, Northwest Energy Coalition, Office of the Ohio 

Consumers’ Counsel, Pace Energy Project, Project for Sustainable FERC Energy 

Policy, West Wind Wires, and Western Resource Advocates) 

Public Interest and Renewable Energy Organizations 

Public Power Council 

Public Service Company of New Mexico (PSNM) jointly with Texas-New Mexico Power 

Company (TNP) 

Public Utilities Commission of the State of California (CPUC) 

Public Utility Commission of Texas (PUCT) 
Docket No. RM06-10-000 - 146 -

Reliant Energy, Inc. (Reliant) 

Senators Alexander, Carper and Collins 

Solid Waste Authority of Palm Beach, Florida (Solid Waste Authority) 

Southeast Electricity Consumers Association (SeECA) 

Southern California Edison Company (SCE) 

Swecker, Gregory (Mr. Swecker) 

Transmission Agency of Northern California (TANC) 

TXU Energy, Power and Wholesale Companies (TXU) 

U.S. Combined Heat & Power Association (USCHPA) 

Utah Association of Energy Users (UAE) 

Wisconsin Industrial Energy Group, Inc. 

Xcel Energy Services Inc. (Xcel)