Elements of PURPA

PURPA legislation encouraged on-site generation systems, principally by improving project economics. To some extent, it also encouraged electric utilities to improve their own system efficiency and use least-cost planning to remain competitive.

PURPA required utilities to:

• Purchase electricity from on-site generating facilities at a just and reasonable price.

• Sell electricity to such producers at rates available to customers with similar load characteristics.

• Allow all QFs to interconnect.

FERC instituted a series of regulations to implement this legislation, which went into effect in 1981. In addition to mandating non-discriminatory practices, FERC regulations eliminated the cumbersome petition process for IPPs and required state regulatory authorities and utilities to establish reasonable interconnection standards based on system safety and reliability.

PURPA QF Criteria

The FERC rules implementing PURPA define cogeneration as the combined production of electric power and useful thermal energy by sequential use of energy from one source of fuel. FERC prescribed three criteria that must be met by a qualifying cogenerator. The qualification test includes an ownership standard, an operating standard, and an efficiency standard. Under the ownership standard, electric utilities may participate in joint ventures, but may own no more than 50% equity in a QF. [Refer to Chapter 21 for additional detail on FERC QF criteria for cogenerators.]

Small power producers are defined as facilities with a capacity of 80 MW or less that use biomass, waste, or renewable resources to produce electricity. These facilities include solar, wind, geothermal, hydroelectric, biomass, and municipal solid waste systems. These systems must have a maximum fossil fuel input of 25% of the total input. All small power producer facilities of 30 MW or less are exempt from FPA, PUHCA, SEC, and state utility regulations. Only biomass and geothermal systems, however, can qualify at capacities above 30 MW FERC rules, issued in 1981, permitted unlimited utility ownership of geothermal facilities.

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