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What Are the Benefits of QF Status?


QFs may enjoy certain benefits under Federal, State and local laws. The benefits that are conferred upon QFs by Federal law generally fall into three categories: (1) the right to sell energy or capacity to a utility, (2) the right to purchase certain services from utilities, and (3) relief from certain regulatory burdens.

Right to Sell QF Energy or Capacity to a Utility
QFs have the right to sell energy and capacity to a utility (see 18 C.F.R. 304 External Link), provided the purchasing utility has not been relieved from its QF purchase obligation (see 18 C.F.R. 309-311 External Link). With limited exceptions, QFs generally have the option of selling to a utility either at the utility's avoided cost or at a negotiated rate. Avoided cost is the incremental cost to an electric utility of electric energy or capacity which, but for the purchase from the QF, such utility would generate itself or purchase from another source (see 18 C.F.R. 292.101(b)(6) External Link). QFs also generally have the option to sell energy either "as-available" (i.e., as the QF determines such energy to be available for such purchases) or as part of a legally enforceable obligation for delivery of energy or capacity over a specified term.

Right to Purchase Certain Services from Utilities
QFs have the right to purchase supplementary power, back-up power, maintenance power, and interruptible power at rates which are just and reasonable, based on accurate data and consistent system-wide costing principles, and that apply to the utility's other customers with similar load or cost-related characteristics (see 18 C.F.R. 292.305 External Link), provided the selling utility has not been relieved from its QF sales obligation (see 18 C.F.R. 312 - 313 External Link). QFs also have the right to interconnect with a utility by paying a nondiscriminatory interconnection fee approved by the State regulatory authority or a nonregulated electric utility (see 18 C.F.R. 292.306 External Link).

Relief from Regulatory Burdens
The following categories of QFs are exempt from the Public Utility Holding Company Act of 2005 (PUHCA) (see 18 C.F.R. 292.602 External Link):

  • Cogeneration facilities of any size;
  • Small power production facilities 30 MW or smaller;
  • Geothermal and biomass small power production facilities of any size; and
  • Small power production facilities of any size that are designated as "eligible" under section 3(17)(E) of the Federal Power Act (FPA).

The following categories of QFs are exempt from State laws and regulations respecting the rates and financial and organizational aspects of utilities (see 18 C.F.R. § 292.602 External Link):

  • Cogeneration facilities of any size;
  • Small power production facilities 30 MW or smaller;
  • Geothermal and biomass small power production facilities of any size; and
  • Small power production facilities of any size that are designated as "eligible" under section 3(17)(E) of the FPA.

The following categories of QFs are largely exempt from most sections (not including sections 205, 206 and certain other sections) of the FPA (see 18 C.F.R. 292.601 External Link ):

  • Cogeneration facilities of any size;
  • Small power production facilities 30 MW or smaller;
  • Geothermal small power production facilities of any size; and
  • Small power production facilities of any size that are designated as "eligible" under section 3(17)(E) of the FPA.

Energy and capacity sales made by the following categories of QFs are exempt from scrutiny under sections 205 and 206 of the FPA (see 18 C.F.R. 292.601 External Link):

  • QFs 20 MW or smaller;
  • QFs making sales pursuant to a contract executed on or before March 17, 2006; and
  • QFs making sales pursuant to a state regulatory authority's implementation of section 210 of PURPA.


CONTACT
Technical
Donna Stratton
Telephone: 202-502-8396
Email: donna.stratton@ferc.gov

Legal
S.L. Higginbottom
Telephone: 202-502-8561
Email: samuel.higginbottom@ferc.gov
 
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Updated: February 3, 2012