Opinion ID: 185132
Heading Depth: 2
Heading Rank: 1

Heading: Regulatory Background: Gross Versus Net Output

Text: 9 There are two ways of measuring the power production capacity of a QF: one looks to gross output, which is all electricity produced by the facility, the other to net output, which is gross output less the electricity used in the QF's own operations. The distinction is important because many QF's purchase their internal operating needs at tariffed rates from the electric utility to which they sell their output, which the utility is required to buy at the utility's full avoided cost. If the QF were allowed to sell its gross output to the electric utility at full avoided cost, then it would in effect be selling back at a significant markup the quantum of electricity it purchased from the utility for its internal operating needs. 10 In 1991, the Commission for the first time addressed whether a facility that sold its gross output would lose its status as a QF because it would no longer be, as required by S 3(17)(C)(ii), 1 not primarilyengaged in the generation or sale of electric power (other than electric power solely from cogeneration facilities or small power production facilities).Turners Falls Ltd. Partnership, 55 FERC p 61,487. The Commission began by recognizing that S 3(17)(C)(ii) is ambiguous: If a utility provides a QF with power for its operations through one line, and the QF provides its gross output back to the utility through a separate line, then in one sense (namely, the physical) the QF is selling only electricity solely from cogeneration or small power production facilities and the requirement of S 3(17)(C)(ii) is satisfied; in another (namely, the economic) sense, however, the QF is selling back to the utility electricity that was generated by the utility, in violation of that section. See id. at 62,668. 11 In light of this ambiguity and the broad discretion the Congress granted the Commission in S 3 of the FPA to determine the requirements for QF certification, the Commission concluded that it could lawfully interpret the statute either to allow or to preclude a QF's sale of its gross output. See id. at 62,669. In the end, however, the Commission decided that the policies of the PURPA are served better if the statute is read to say that a facility that sells its gross output is not a QF. See id. at 62,671. 12