FERC Issues Proposed Rules Modifying Mandatory Purchase Obligation from Qualifying Facilities (QFs)

On January 19, 2006, FERC issued the latest of its proposed rules implementing the Energy Policy Act of 2005 (EPAct 2005). Section 1253 of EPAct 2005 added Section 210(m) to the Public Utility Regulatory Policies Act of 1978 (PURPA), and significantly altered the mandatory purchase obligation by utilities of power from qualifying small power production and cogeneration facilities (QFs). The EPAct 2005 amendments generally provide that when a competitive power market meeting certain standards exists, a utility could be relieved of its obligation to purchase power and capacity from and to sell power to QFs. FERC’s proposed rules provide details on the circumstances pursuant to which the mandatory purchase obligation can be terminated, and proposes blanket pre-approval for terminations in most of the existing Independent System Operator (ISO) and Regional Transmission Organization (RTO) control areas.