FERC Issues Order Defining Limits on State Feed-In Tariffs

On July 15, 2010, the Federal Energy Regulatory Commission (FERC) issued its first major ruling on state feed-in tariffs, partially rejecting a California Public Utilities Commission (CPUC) decision which would have required investor-owned utilities to offer to purchase, at prices set by the CPUC, electricity generated by eligible combined heat and power (CHP) generators using solar and other renewable energy sources. In California Public Utilities Commission, 132 FERC ¶61,047 (Docket Nos. EL10-64-000 and EL10-66-000), FERC ruled that the CPUC's decision constituted impermissible wholesale rate-setting by the CPUC and was preempted by the Federal Power Act (FPA). However, the order also defined certain limits within which a state could establish a feed-in tariff that would not be preempted by federal law and FERC regulations.