[Federal Register Volume 59, Number 152 (Tuesday, August 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19247]


[[Page Unknown]]

[Federal Register: August 9, 1994]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket No. RM94-17-000; Order No. 569]

 

Interpretation and Amendment Clarifying Exemption to Qualifying 
Facilities From the Federal Power Act

Issued August 2, 1994.

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule.

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SUMMARY: The Federal Energy Regulatory Commission is interpreting and 
amending its regulations on the exemption of certain qualifying 
facilities from the Federal Power Act to clarify the scope of this 
provision in light of recent amendments to the Federal Power Act (FPA) 
as enacted in the Energy Policy Act of 1992 (Energy Policy Act). 
Specifically, the Commission is interpreting and amending the 
regulations to clarify that qualifying cogeneration and small power 
production facilities (QFs) are not exempt from the provisions of the 
FPA added and revised by the Energy Policy Act to the extent QFs fall 
within those provisions.

EFFECTIVE DATE: The final rule is effective September 8, 1994.

FOR FURTHER INFORMATION CONTACT: Kimberly D. Bose, Federal Energy 
Regulatory Commission, Office of the General Counsel, 825 North Capitol 
Street, N.E., Washington, D.C. 20426, (202)208-2284.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the content of 
this document during normal business hours in Room 3104, at 941 North 
Capitol Street, N.E., Washington, DC 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397. To access CIPS, set your communications 
software to use 300, 1200, or 2400 bps, full duplex, no parity, 8 data 
bits and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing 
(202) 208-1781. The full text of this order will be available on CIPS 
for 30 days from the date of issuance. The complete text on diskette in 
WordPerfect format may also be purchased from the Commission's copy 
contractor, La Dorn Systems Corporation, also located in Room 3104, 941 
North Capitol Street, N.E., Washington, DC 20426.

I. Introduction

    The Federal Energy Regulatory Commission is issuing this final rule 
to clarify and amend the regulation in 18 CFR 292.601. That 
regulation--Exemption to qualifying facilities from the Federal Power 
Act--provides that most qualifying cogeneration and small power 
production facilities (QFs)1 under the Public Utility Regulatory 
Policies Act of 1978 (PURPA) are exempt from all sections of the 
Federal Power Act (FPA), with the exception of certain designated 
sections. That regulation was promulgated prior to enactment of the 
Energy Policy Act of 1992 (Energy Policy Act), which amended the FPA in 
certain respects.
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    \1\The exception is for a qualifying small power production 
facility with a power production capacity which exceeds 30 
megawatts, if such facility uses any primary energy source other 
than geothermal resources. 18 CFR 292.601(b).
    However, the Solar, Wind, Waste, and Geothermal Power Production 
Incentives Act of 1990, Pub. L. No. 101-575, 104 Stat. 2834 (1990), 
removes all size limitations on solar, wind, waste, and geothermal 
small power production facilities between 30 and 80 megawatts in 
size. See, e.g., Cambria Cogen Company, 53 FERC 61,459 (1990).
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    The purpose of this final rule is to clarify that QFs are not 
exempt from the sections of the FPA added and revised by the Energy 
Policy Act, to the extent QFs fall within those sections. Some of the 
added or revised sections of the FPA (sections 3, 211, 212, and 316A) 
under which QFs are not exempt from Commission regulation already are 
identified (implicitly in the case of section 316A) in the list of 
Sec. 292.601(c) exceptions to FPA exemptions; accordingly, no amendment 
to the regulatory text is necessary to reflect the clarification 
provided herein. Amendment is, however, necessary to reflect other 
sections of the FPA (sections 213 and 214) added by the Energy Policy 
Act which may be applicable to QFs.

II. Discussion

    Subpart F of Part 292 of the Commission's regulations provides for 
the exemption of certain QFs from certain federal and state laws and 
regulations. Section 292.601 provides for QF exemptions from Commission 
regulation under the FPA. It applies to all QFs, other than qualifying 
small power production facilities (not fueled primarily by geothermal 
resources) with power production capacities in excess of 30 megawatts. 
Section 292.601(c) further provides that any QF to which the section 
applies is exempt from all sections of the FPA, except the following:
    (1) Sections 1-18, and 21-30;
    (2) Sections 202(c), 210, 211, and 212;
    (3) Section 305(c); and
    (4) Any necessary enforcement sections of Part III of the FPA with 
regard to the sections listed in (1), (2) and (3).
    On October 24, 1992, the Energy Policy Act became effective and 
amended the FPA in several respects that affect the exemptions in and 
exceptions to Sec. 292.601. In relevant respects, the Energy Policy Act 
amended section 3 of the FPA to include in section 3(23), 16 U.S.C. 
796(23), a definition of a ``transmitting utility.'' The Energy Policy 
Act revised section 211 of the FPA, 16 U.S.C. 824j, concerning the 
conditions under which certain applicants may request that the 
Commission direct a ``transmitting utility'' to provide transmission 
services. The Energy Policy Act extensively revised section 212, 16 
U.S.C. 824k, concerning the rates, charges, terms and conditions for 
transmission services provided under section 211. The Energy Policy Act 
added section 213, 16 U.S.C. 824l, concerning information reporting 
requirements with respect to wholesale transmission services. The 
Energy Policy Act added section 214, 16 U.S.C. 824m, concerning sales 
by exempt wholesale generators. Finally, the Energy Policy Act added 
section 316A, 16 U.S.C. 825o-1, concerning enforcement penalties for 
violations of any of the provisions of sections 211 through 214 of the 
FPA.
    Each of these statutory amendments directly or indirectly affects 
the application of the Commission's rules and regulations concerning 
the scope of FPA exemptions for QFs.

A. Section 3 of the FPA--Transmitting Utility

    The definition of a ``transmitting utility'' has been added to 
section 3(23) of the FPA. It reads as follows: The term ``transmitting 
utility'' means any electric utility, qualifying cogeneration facility, 
qualifying small power production facility, or Federal power marketing 
agency which owns or operates electric power transmission facilities 
which are used for the sale of electric energy at wholesale.
    This definition allows eligible applicants under amended section 
211 of the FPA (discussed infra) to request wholesale transmission 
service under
the conditions enumerated in section 211 from QFs that fall within the 
definition of transmitting utility, i.e. which own or operate 
transmission facilities used for wholesale sales.
    The Commission has explained in several orders that a QF under 
PURPA may own and operate a transmission line and related facilities 
that are necessary to the operation of and integral to the 
facility.2 Indeed, the Commission has explained that more than one 
QF can own undivided interests in the same transmission line, if used 
solely to transmit power from the QF owners of the facilities to the 
purchasing utility.3 In these circumstances, the transmission 
facilities that are necessary to allow a QF to reach a utility-
purchaser may also subject the QF to applications for wholesale 
transmission services under section 211 of the FPA.
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    \2\See Clarion Power Company, 39 FERC 61,317 (1987); Oxbow 
Geothermal Corporation, 36 FERC 62,151 (1986).
    \3\See Oxbow Geothermal Corporation, 67 FERC 61,193 (1994); 
Gamma Mariah, Inc., 44 FERC 61,442 (1988).
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    A recent order of the Commission is particularly instructive in 
this regard. In Oxbow Geothermal Corporation (Oxbow), 67 FERC 61,193 
(1994), the Commission found that a QF that owns and operates a 214-
mile transmission line and related facilities is a ``transmitting 
utility'' within the meaning of section 3(23) of the FPA. The 
Commission also found, in response to a request for a disclaimer of FPA 
jurisdiction, that the QF operator is exempt from regulation under most 
of the sections of the FPA (as enumerated in Sec. 292.601) because the 
transmission line and related facilities are part of a QF. The 
Commission concluded that the QF does not lose any of its FPA 
exemptions, and does not become a ``public utility'' within the meaning 
of section 201(e) of the FPA, 16 U.S.C. 824(e), by virtue of its lease 
to another QF of an undivided interest in the transmission line and 
related facilities. (The Commission did, however, reserve judgment on 
whether the lessee interest of the other QF in the interconnection 
facilities was sufficient to bring it within the definition of a 
``transmitting utility.'')
    Accordingly, it must be clarified that QFs that own or operate 
transmission facilities can fall within the definition of a 
transmitting utility as defined in FPA section 3(23) and become subject 
to FPA regulation as specified above.

B. Section 211--Transmission Access to Entities Generating Electric 
Energy for Resale

    Section 211 of the FPA has been amended by the Energy Policy Act to 
allow any electric utility, federal power marketing agency, or any 
other person generating electric energy for sale for resale to apply to 
the Commission for an order requiring a transmitting utility to provide 
transmission service to the applicant. The Commission may, but is not 
required to, issue such an order if it finds that the order is in the 
public interest, would not impair the continued reliability of electric 
systems affected by the order, would not result in the displacement of 
electric energy required to be provided under contract, and meets all 
of the requirements of section 212 (discussed below). Further, the 
applicant must have requested transmission service from the 
transmitting utility at least 60 days prior to filing its application.
    As explained above, a QF may be a ``transmitting utility'' and, 
accordingly, may be the recipient of a request for wholesale 
transmission service under section 211. Alternatively, a QF, as a 
result of the Energy Policy Act, now can apply to the Commission for 
transmission services under revised section 211 to the extent it 
engages in wholesale sales.
    Although revised section 211 contains a broad and expanded class of 
entities whom the Commission can order to provide transmission 
services, it does not otherwise expand the Commission's FPA 
jurisdiction over those entities. The Commission may order transmitting 
utilities to provide transmission services under section 211 and must 
set the rates for such services in accordance with the procedures and 
conditions enumerated in section 212. However, the Commission continues 
not to have jurisdiction over voluntary transmission services by 
transmitting utilities that are not FPA public utilities, as well as 
over sales of electricity by such entities or corporate regulation of 
them.
    To date, the Commission has not been presented with a section 211 
application requesting transmission services by or on behalf of a QF.

C. Section 212--Rates, Charges, Terms, and Conditions for Wholesale 
Transmission Services

    Section 212 of the FPA, as revised by the Energy Policy Act, 
governs the rates, charges, terms, and conditions for wholesale 
transmission services ordered under section 211 (discussed above). 
Section 212 also governs the procedures the Commission must follow 
before issuing orders under section 211 or section 210 (involving 
interconnections). Because, as explained above, QFs can fall within the 
definition of a transmitting utility, and may be the subject of a 
Commission order under section 211 of the FPA, QFs cannot be considered 
exempt from the provisions of section 212.

D. Section 213--Information Requirements With Respect to Wholesale 
Transmission Services

    Section 213, as added by the Energy Policy Act, is an entirely new 
section. Section 213(a) requires that if a transmitting utility does 
not agree to provide transmission services in accordance with the 
specific rates, terms and conditions of a good faith request by the 
applicant, the transmitting utility must, within 60 days or other 
mutually- agreed upon period, give the applicant a written explanation, 
including the basis for the transmitting utility's proposed rates, 
terms, and conditions and its analysis of any physical or other 
constraint.4 Section 213(b) requires that the Commission issue 
within one year of enactment a rule requiring transmitting utilities to 
submit annual information concerning potentially available transmission 
capacity and known constraints.5
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    \4\See Policy Statement Regarding Good Faith Requests for 
Transmission Services and Responses by Transmitting Utilities Under 
Sections 211(a) and 213(a) of the Federal Power Act, as Amended and 
Added by the Energy Policy Act of 1992, III FERC Stats. & Regs. 
30,975 (1993).
    \5\See Order No. 558, New Reporting Requirement Implementing 
Section 213(b) of the Federal Power Act and Supporting Expanded 
Regulatory Responsibilities Under the Energy Policy Act of 1992, and 
6Conforming and Other Changes to Form No. FERC-714, III FERC Stats. 
& Regs. 30,980, order on reh'g, Order No. 558-A, 65 FERC 61,324 
(1993).
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    Section 213, like sections 211 and 212, refers specifically to 
transmitting utilities. As explained above, QFs may be transmitting 
utilities, and thus may be subject to the provisions of section 213. 
Accordingly, QFs cannot be exempt from the provisions of this FPA 
section.

E. Section 214--Sales by Exempt Wholesale Generators

    Section 214, as added by the Energy Policy Act, applies to sales by 
exempt zwholesale generators (EWGs), as determined pursuant to section 
32 of the Public Utility Holding Company Act of 1935 (PUHCA), as 
amended. Section 214 provides that rates and charges received by an EWG 
for the sale of electric energy are not lawful if they are the result 
of any undue preference or advantage from an electric utility which is 
an associate company or an affiliate of the EWG.
    In Richmond Power Enterprise, L.P., et al., 62 FERC 61,157 (1993), 
the Commission explained that an EWG may own a QF, and that a 
generating facility simultaneously may be both an eligible facility 
(within the meaning of section 32 of PUHCA) and a QF (under PURPA). 
Because of the possibility of such dual status, a QF might become 
subject to the provisions of section 214. Accordingly, QFs cannot be 
exempt from the provisions of this FPA section.

F. Section 316A--Enforcement of Certain FPA Provisions

    Finally, section 316A, as added by the Energy Policy Act, provides 
for civil penalties in the event that any person violates any provision 
of sections 211 through 214 of the FPA, or violates any rule or order 
issued under any of these FPA sections. Because, as explained above, 
QFs are subject to the provisions of these sections, QFs cannot be 
exempt from the provisions of section 316A of the FPA.

III. Conclusion

    As explained above, QFs that fall within the definition of 
transmitting utility are subject to the provisions of sections 3(23), 
211, 212, 213, 214, and 316A of the FPA, as amended or added by the 
Energy Policy Act. Accordingly, it is necessary to clarify that QFs are 
not exempt from these FPA sections, and to make necessary amendments to 
Sec. 292.601 of the Commission's regulations, to the extent QFs 
undertake any actions that fall within the scope of these sections. The 
Commission is not assuming additional FPA jurisdiction over the 
activities of QFs to the extent they operate outside the scope of these 
sections.

IV. Environmental Statement

    Commission regulations require that an environmental assessment or 
an environmental impact statement be prepared for any Commission action 
that may have a significant adverse effect on the human 
environment.6 The Commission has categorically excluded certain 
actions from this requirement as not having a significant effect on the 
human environment. As explained above, this rule is clarifying in 
nature. It interprets several amendments made to the FPA by the Energy 
Policy Act, and clarifies the applicability of these FPA amendments to 
QFs. Accordingly, no environmental consideration is necessary.7
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    \6\Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs., Regulations Preambles 1986-90  30,783 (1987) (codified at 18 
CFR Part 380).
    \7\See 18 CFR Sec. 380.4(a)(2)(ii).
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V. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act8 requires rulemakings either to 
contain a description and analysis of the impact the rule will have on 
small entities or a certification that the rule will not have a 
substantial economic impact on a substantial number of small entities. 
Many, if not most, QFs to which this rule would apply do not fall 
within the definition of small entities.9 Further, this rule does 
not establish any new reporting requirements and merely clarifies the 
applicability of certain sections of the FPA, as amended or added by 
the Energy Policy Act, to QFs. Consequently, the Commission certifies 
that this rule will not have ``a significant economic impact on a 
substantial number of small entities.'' Accordingly, no regulatory 
flexibility analysis is required.
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    \8\5 U.S.C. Secs. 601-612.
    \9\See 5 U.S.C. 601(3), citing to section 3 of the Small 
Business Act, 15 U.S.C. 632, which defines ``small business 
concern'' as a business that is independently owned and operated and 
that is not dominant in its field of operation.
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VI. Information Collection Statement

    The Office of Management and Budget's (OMB) regulations10 
require that OMB approve certain information collection requirements 
imposed by the agency's rule. However, this rule neither contains new 
information collection requirements nor modifies any existing 
information collection requirements in the Commission's regulations. 
Therefore, this final rule is not subject to OMB approval.
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    \1\05 CFR 1320.
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VII. Administrative Findings and Effective Date

    The Administrative Procedure Act (APA)11 requires rulemakings 
to be published in the Federal Register. The APA also mandates that an 
opportunity for comment be provided when an agency promulgates 
regulations. However, notice and comment are not required under the APA 
when the agency for good cause finds that notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest.12 The Commission finds that notice and comment are 
unnecessary for this rulemaking. As explained above, the Commission 
merely is clarifying the scope of certain sections of the FPA added or 
amended by the Energy Policy Act to QFs and, where necessary, amending 
section 292.601 of the Commission's regulations to reflect this 
clarification.
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    \1\15 U.S.C. Secs. 551-559.
    \1\25 U.S.C. 553b(B).
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    This rule is effective September 8, 1994.

List of Subjects in 18 CFR Part 292

    Electric power plants, Electric Utilities.

    By the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.

    In consideration of the foregoing, the Commission amends part 
292, subpart F of chapter I, title 18 of the Code of Federal 
Regulations as set forth below.

PART 292--REGULATIONS UNDER SECTIONS 201 AND 210 OF THE PUBLIC 
UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO SMALL POWER 
PRODUCTION AND COGENERATION

    1. The authority citation for Part 292 continues to read as 
follows:

    Authority: 16 U.S.C. 791a-824r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352.

    2. Section 292.601(c) is revised to read as follows:


Sec. 292.601   Exemption to quality facilities from the Federal Power 
Act.

* * * * *
    (c) General Rule. Any qualifying facility described in paragraph 
(a) of this section shall be exempt from all sections of the Federal 
Power Act, except:
    (1) Section 1-18, and 21-30;
    (2) Sections 202(c), 210, 211, 212, 213, and 214;
    (3) Sections 305(c); and
    (4) Any necessary enforcement provision of Part III with regard to 
the sections listed in paragraphs (c)(1), (2) and (3) of this section.

[FR Doc. 94-19247 Filed 8-8-94; 8:45 am]
BILLING CODE 6717-01-P