United States: Will FERC's New PURPA Regulations Have A Chilling Effect On Renewable Energy Development?

Last Updated: November 5 2019
Article by Patrick T. Metz

The Public Utility Regulatory Policies Act of 1978 ("PURPA") was enacted during the height of the energy crisis and was intended to reduce the country's dependence on oil and natural gas. Among its provisions is a requirement that electric utilities purchase energy and capacity generated by wind, solar, and other renewable generation technologies from so-called "qualifying facilities" ("QFs") at a rate less than the utility's "avoided cost" (i.e., the cost of its own generation that will be avoided if other generation comes on line). Seemingly overnight, in certain regions of the country, PURPA transitioned from being an afterthought to a key driver in renewable project development. Dramatic declines in utility-scale wind and solar costs over the last decade have permitted developers to offer rates below the utility's avoided cost, allowing them to secure long-term offtake contracts at fixed rates. These long-term offtake contracts proved critical to developers in securing financing for their renewable projects, particularly outside of the major regional energy markets and in states without renewable portfolio standards.

But while PURPA was a boon for renewable energy developers, utilities who were forced to buy power—rather than to build and own their own generation or sign power purchase agreements after competitive solicitations—began to criticize the "gaming" of PURPA by well-financed developers, such as those who use the so-called "one-mile rule" to build multiple solar farms just over one mile apart in order to evade regulatory size limitations on their PURPA-qualifying projects. Increasingly, utilities argued in state regulatory proceedings that energy procured through PURPA was raising rates for ratepayers and circumventing the utilities' resource planning and procurement processes. Several state commissions and legislatures responded by revising their states' interpretation of PURPA. Certain states passed reforms that effectively make it more difficult for QF developers to secure financing, such as shorter contract lengths, reduced maximum size limitations, and differing methods of calculating avoided cost, resulting in lower rates recovered by developers under offtake contracts. North Carolina, for example, passed a law that required facilities larger than one megawatt ("MW") to undergo competitive solicitation and limited offtake contracts to 10 years.

The Federal Energy Regulatory Commission ("FERC") recently entered the fray in this long-running fight between utilities and project developers by proposing to "modernize" its PURPA regulations. In its recent Notice of Proposed Rulemaking ("NOPR"), FERC set out a series of proposed reforms, many of which offer additional flexibility to state commissions as they implement PURPA. In determining the rates utilities are required to pay for energy generated by QFs, FERC proposed to permit states to base rates on the utility's avoided cost at the time of delivery or on projected energy prices at the time of delivery, and to allow states to set energy and capacity rates in competitive solicitations. FERC also proposed to require that states develop objective and reasonable criteria assessing a QF's commercial viability and financial commitment to construction before the QF is deemed to have a "legally enforceable obligation," which determines the date on which a QF can elect to have its avoided cost rate determined. The NOPR also offered new regulations on the one-mile rule that would permit third parties to challenge whether adjacent wind and solar facilities between one and 10 miles apart are a single facility for purposes of implementing size restrictions. FERC also proposed to provide utilities a rebuttable presumption that QFs as small as one MW (rather than 20 MW) have nondiscriminatory access to markets, which ultimately would require QFs to sell energy directly in regional markets rather than under a long-term contract with their host utilities.

In the face of these sweeping changes, however, FERC Commissioner Richard Glick issued a strident dissent, claiming that if adopted the NOPR would make it difficult (if not impossible) for QFs to obtain project financing. Further, Glick accused his fellow commissioners of "using the success of competition in certain parts of the country" (i.e., those with robust wholesale energy markets) "as a reason to scale back PURPA throughout the country" (i.e., in those regions without robust wholesale energy markets). In short, Glick opined that the NOPR "would effectively gut" PURPA and usurp the role of Congress in setting national energy policy.

What effect these proposals will ultimately have on PURPA and on renewable energy development remains to be seen at this point, as FERC's modernizing proposals are just that—proposals. FERC will accept comments on the NOPR until December 3, 2019, and may revise its proposals in light of such feedback. Thereafter, the new regulations will be subject to judicial review, and states will revise and apply their own rules. Nevertheless, if finalized and if Commissioner Glick's predictions come to pass, a niche but important means through which developers have secured offtake contracts and financed renewable energy projects could be eliminated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions