2082Public Utility Regulatory Policies Act PURPA

This legislation was part of the 1978 National Energy Act and has had perhaps the most significant effect on the development of cogeneration and other forms of alternative energy production in the past decade. Certain provisions of PURPA also apply to the exchange of electric power between utilities and cogenerators.

PURPA provides a number of benefits to those cogenerators who can become Qualifying Facilities (QFs) under the act. Specifically, PURPA

• Requires utilities to purchase the power made available by cogenerators at reasonable buy-back rates. These rates are typically based on the utilities' cost.

• Guarantees the cogenerator or small power producer interconnection with the electric grid and the availability of backup service from the utility.

• Dictates that supplemental power requirements of cogenerator must be provided at a reasonable cost.

• Exempts cogenerators and small power producers from federal and state utility regulations and associated reporting requirements of these bodies.

In order to assure a facility the benefits of PURPA, a cogenerator must become a Qualifying

2Source: Georgia Cogeneration Handbook, published by the Governor's Office of Energy Resources.

Facility. To achieve Qualifying Status, a cogenerator must generate electricity and useful thermal energy from a single fuel source. In addition, a cogeneration facility must be less than 50% owned by an electric utility or an electric utility holding company. Finally, the plant must meet the minimum annual operating efficiency standard established by FERC when using oil or natural gas as the principal fuel source. The standard is that the useful electric power output plus one half of the useful thermal output of the facility must be no less than 42.5% of the total oil or natural gas energy input. The minimum efficiency standard increases to 45% if the useful thermal energy is less than 15% of the total energy output of the plant.

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