The U.S. Court of Appeals for the Third Circuit has ruled that the New Jersey Board of Public Utilities (BPU) is preempted under the federal Public Utility Regulatory Policies Act (PURPA) from ordering a qualifying facility (QF) and an electric utility to renegotiate or settle on a buy out of a previously approved purchased-power agreement. The QF, Freehold Cogeneration Associates, L.P. had refused to alter its contract with Jersey Central Power & Light Co. despite BPU directives.
The court found that while PURPA grants state regulators the authority to implement the Federal Energy Regulatory Commission's QF regulations, the BPU's authority ended when it approved the Freehold contract. It ruled that further review is exactly the "utility-type" regulation from which QFs are immune under section 210(e) of PURPA. According to the court, PURPA bars the BPU from reconsidering its prior approval of the agreement, absent some basis in contract law (em such as allegations of fraud or mutual mistake of fact in the negotiation and execution of the agreement. It rejected Jersey Central's claim that a "regulatory-out" clause in the purchased-power agreement granted the BPU continuing jurisdiction over rates, finding that the clause was "unambiguous and merely described what would happen" if Jersey Central lost its rights to pass power costs on to ratepayers. Freehold Cogeneration Associates, L.P. v. New Jersey Board of Regulatory Commissioners, No. 94-5168, Jan. 9, 1995 (3rd Cir.).
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