FERC to States: No QF Rates Higher than Avoided Cost

Fortnightly Magazine - February 15 1995
This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.
The Federal Energy Regulatory Commission (FERC) has ruled that states may not set rates higher than a utility's avoided cost for power purchases from qualifying facilities (QFs) (Docket Nos. EL93-55-000 and

EL87-53-003). The new rule comes as part of a case in which Connecticut Light and Power Co. (CL&P) challenged a state law requiring it to pay the same rate to purchase electricity from a municipal waste disposal QF as it charged the municipality for power.

The FERC said it could find no legal precedent for giving states independent authority to prescribe rates for bulk-power sales by QFs that exceed the avoided-cost cap contained in the Public Utilities Regulatory Policies Act (PURPA). The FERC added that mandating rates above avoided costs for a certain class of power suppliers runs counter to current policies in Congress and at the FERC that strongly favor competition among all bulk-power suppliers.

According to the FERC, wholesale QF rates cannot both be capped by full avoided cost (the federal statute) and exceed the avoided-cost cap in rates set at the state level. But the FERC will not entertain requests to overturn all state-imposed QF rates that exceed the federal cap. Utilities must have raised the issue at the time the contract was signed, not several years into a contract that has been satisfactory to both parties. (CL&P's complaint stemmed from 1987.) In the future, however, the FERC said it will treat new, nonconforming contracts as void ab initio.

This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.