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.
Contemporaneously with the CL&P decision, the FERC issued an order vacating prior orders and dismissing an ongoing complaint by Orange & Rockland Utilities, Inc. (O&R) challenging a New York state law establishing a minimum rate of six cents per kilowatt-hour for QF sales of electricity to utilities (Docket No. EL87-53-003). It said that the O&R case now was moot because New York had largely repealed the six-cent minimum, with two exceptions.
Commissioner Donald F. Santa, Jr. said the cases represent the "tip of the iceberg" on the bigger questions of whether PURPA is consistent with the Energy Policy Act of 1992, and whether rates above avoided costs comport with the competition to be achieved in the electric market. Santa added that the FERC likely will be asked to revisit the issue.
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