[Federal Register Volume 85, Number 250 (Wednesday, December 30, 2020)]
[Rules and Regulations]
[Pages 86656-86754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26106]



[[Page 86655]]

Vol. 85

Wednesday,

No. 250

December 30, 2020

Part II





Department of Energy





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Federal Energy Regulatory Commission





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18 CFR Part 292





Qualifying Facility Rates and Requirements Implementation Issues Under 
the Public Utility Regulatory Policies Act of 1978; Final Rule

  Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / 
Rules and Regulations  

[[Page 86656]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 292

[Docket Nos. RM19-15-001 and AD16-16-001; Order No. 872-A]


Qualifying Facility Rates and Requirements Implementation Issues 
Under the Public Utility Regulatory Policies Act of 1978

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule; Order addressing arguments raised on rehearing and 
clarifying prior order in part.

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SUMMARY: In this Order, the Federal Energy Regulatory Commission 
addresses arguments raised on rehearing and clarifies, in part, its 
final rule adopting revisions to its regulations implementing sections 
201 and 210 of the Public Utility Regulatory Policies Act of 1978 
(PURPA). These changes will enable the Commission to continue to 
fulfill its statutory obligations under sections 201 and 210 of PURPA.

DATES: This rule is effective February 16, 2021.

FOR FURTHER INFORMATION CONTACT: 
Lawrence R. Greenfield (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6415, [email protected]
Helen Shepherd (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6176, [email protected]
Thomas Dautel (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6196, [email protected]

SUPPLEMENTARY INFORMATION: 

[[Page 86657]]



                            Table of Contents
 
                                                               Paragraph
 
I. Background...............................................           4
    A. Statutory Background.................................           4
    B. Final Rule's Updating of the PURPA Regulations.......          10
    C. Summary of Changes to the PURPA Regulations                    11
     Implemented by the Final Rule..........................
II. Discussion..............................................          23
    A. Threshold Issues.....................................          24
        1. Whether the Commission Appropriately Consulted             24
         With Representatives of Relevant State and Federal
         Agencies...........................................
            a. Requests for Rehearing.......................          24
            b. Commission Determination.....................          25
        2. Whether the PURPA Regulations Continue To                  27
         Encourage QFs......................................
            a. Requests for Rehearing.......................          27
            b. Commission Determination.....................          39
    B. QF Rates.............................................          46
        1. Overview.........................................          46
        2. LMP as a Permissible Rate for Certain As-                  53
         Available Avoided Cost Rates.......................
            a. Requests for Rehearing.......................          60
            b. Commission Determination.....................          63
        3. Tiered Avoided Cost Rates........................          66
            a. Request for Clarification....................          66
            b. Commission Determination.....................          72
        4. Providing for Variable Energy Rates in QF                  74
         Contracts Is Consistent With PURPA.................
            a. Whether the Current Approach Has Resulted in           84
             Payments to QFs in Excess of Avoided Costs.....
                i. Requests for Rehearing...................          95
                ii. Commission Determination................         104
            b. Whether the Proposed Change Would Violate the         114
             Statutory Requirement That the PURPA
             Regulations Encourage QFs and Do Not
             Discriminate Against QFs.......................
                i. Requests for Rehearing...................         118
                ii. Commission Determination................         134
            c. Effect of Variable Energy Rates on Financing.         145
                i. Requests for Rehearing...................         159
                ii. Commission Determination................         172
            d. Requested Clarification of the Final Rule....         178
                i. Commission Determination.................         179
        5. Consideration of Competitive Solicitations To             181
         Determine Avoided Costs............................
                i. Requests for Rehearing...................         203
                ii. Commission Determination................         214
    C. Rebuttable Presumption of Separate Sites.............         232
        1. Need for Reform..................................         235
            a. Requests for Rehearing.......................         236
            b. Commission Determination.....................         238
        2. Distance Between Facilities......................         246
            a. Requests for Rehearing.......................         250
            b. Commission Determination.....................         255
        3. Factors..........................................         261
            a. Requests for Rehearing.......................         265
            b. Commission Determination.....................         273
    D. QF Certification Process.............................         280
        1. Requests for Rehearing...........................         290
        2. Commission Determination.........................         306
    E. Corresponding Changes to the FERC Form No. 556.......         327
        1. Requests for Rehearing...........................         330
        2. Commission Determination.........................         331
    F. PURPA Section 210(m) Rebuttable Presumption of                334
     Nondiscriminatory Access to Markets....................
        1. Requests for Rehearing and Clarification.........         354
        2. Commission Determination.........................         360
    G. Legally Enforceable Obligation.......................         374
        1. Requests for Rehearing...........................         381
        2. Commission Determination.........................         384
III. Information Collection Statement.......................         389
    A. Request for Rehearing................................         392
    B. Commission Determination.............................         393
        1. QFs Submitting Self-Certifications...............         403
            a. Small Power Production Facility Greater Than          404
             1 MW, and Less Than One Mile From an Affiliated
             Small Power Production QF......................
            b. Small Power Production Facility Greater Than          405
             1 MW, and More Than One Mile but Less Than 10
             Miles From an Affiliated Small Power Production
             QF.............................................
            c. Small Power Production Facility Greater Than          406
             1 MW and 10 Miles or More From an Affiliated
             Small Power Production QF......................
        2. QFs Submitting Applications for Commission                407
         Certification......................................
            a. Small Power Production Facility Greater Than          408
             1 MW, and Less Than One Mile From an Affiliated
             Small Power Production QF......................
            b. Small Power Production Facility Greater Than          409
             1 MW, and More Than One Mile but Less Than 10
             Miles From an Affiliated Small Power Production
             QF.............................................

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            c. Small Power Production Facility Greater Than          410
             1 MW and 10 Miles or More From an Affiliated
             Small Power Production QF......................
        3. Calculations for Additional Burden and Cost......         411
IV. Environmental Analysis..................................         412
    A. No EIS or EA Is Required.............................         412
        1. NEPA Analysis Is Not Required Where Environmental         414
         Impacts Are Not Reasonably Foreseeable.............
            a. Requests for Rehearing.......................         420
            b. Commission Determination.....................         425
        2. A Categorical Exclusion Applies..................         436
            a. Exception to Categorical Exclusion...........         443
                i. Requests for Rehearing...................         443
                ii. Commission Determination................         444
            b. Applying a Categorical Exclusion for                  445
             Clarifying and Corrective Actions Is
             Appropriate....................................
                i. Requests for Rehearing...................         445
                ii. Commission Determination................         449
        3. That the Commission Prepared NEPA Analyses for            455
         the Promulgation of the Original PURPA Rule and
         Other Prior Rulemakings Does Not Mean That Such
         Analysis Was Possible or Required Here.............
            a. Requests for Rehearing.......................         462
            b. Commission Determination.....................         465
V. Regulatory Flexibility Act Certification.................         469
VI. Document Availability...................................         471
VII. Effective Dates and Congressional Notification.........         474
 

    1. On July 16, 2020, the Federal Energy Regulatory Commission 
(Commission) issued its final rule (final rule or Order No. 872) \1\ 
adopting revisions to its regulations (PURPA Regulations) \2\ 
implementing sections 201 and 210 of the Public Utility Regulatory 
Policies Act of 1978 (PURPA).\3\ Those regulations were promulgated in 
1980 and have been modified in only specific respects since then. On 
August 17, 2020, the Commission received requests for rehearing and/or 
clarification of the final rule from the following entities and 
individuals: (1) California Utilities; \4\ (2) Electric Power Supply 
Association (EPSA); (3) Northwest Coalition; \5\ (4) One Energy 
Enterprises; (5) Public Interest Organizations; \6\ (6) Solar Energy 
Industries Association (Solar Energy Industries); and (7) Thomas 
Mattson. On September 1, 2020, California Public Utilities Commission 
(California Commission) filed a response to California Utilities' 
request for clarification.
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    \1\ Qualifying Facility Rates and Requirements Implementation 
Issues Under the Public Utility Regulatory Policies Act of 1978, 
Order No. 872, 85 FR 54638 (Sep. 2, 2020), 172 FERC ] 61,041 (2020).
    \2\ 18 CFR part 292. In connection with the revisions to the 
PURPA Regulations, the Commission also revised its delegation of 
authority to Commission staff in 18 CFR part 375.
    \3\ 16 U.S.C. 796(17)-(18), 824a-3.
    \4\ California Utilities consist of Pacific Gas & Electric 
Company; San Diego Gas & Electric Company; and Southern California 
Edison Company.
    \5\ Northwest Coalition consists of Northwest and Intermountain 
Independent Power Producers Association; the Community Renewable 
Energy Association; the Renewable Energy Coalition; IdaHydro; Oregon 
Solar Energy Industries Association; and NewSun Energy LLC. 
Excluding IdaHydro and NewSun Energy LLC, the entities comprising 
Northwest Coalition filed comments referred to in Order No. 872 as 
``NIPPC, CREA, REC, and OSEIA.'' For ease of reference, in some 
instances below, we refer to Northwest Coalition below 
interchangeably with ``NIPPC, CREA, REC, and OSEIA.''
    \6\ Public Interest Organizations consist of Alabama Interfaith 
Power and Light; Appalachian Voices; Center for Biological 
Diversity; Environmental Law and Policy Center; Gasp; Georgia 
Interfaith Power and Light; Montana Environmental Information 
Center; Natural Resources Defense Council; North Carolina 
Sustainable Energy Association; Sierra Club; South Carolina Coastal 
Conservation League; Southern Alliance for Clean Energy; Southern 
Environmental Law Center; Southface Institute; Sustainable FERC 
Project; Tennessee Interfaith Power and Light; Upstate Forever; and 
Vote Solar. Some of these entities filed comments as ``Southeast 
Public Interest Organizations'' and some of these entities filed 
comments as ``Public Interest Organizations.'' For ease of 
reference, we refer below to these organizations on rehearing as 
``Public Interest Organizations,'' however, but when referring to 
the separate groups' comments in this rulemaking proceeding, we 
refer to their separate comments.
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    2. Pursuant to Allegheny Defense Project v. FERC,\7\ the rehearing 
requests filed in this proceeding may be deemed denied by operation of 
law. As permitted by section 313(a) of the Federal Power Act (FPA),\8\ 
however, we modify the discussion in the final rule and continue to 
reach the same result in this proceeding, as discussed below.\9\
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    \7\ 964 F.3d 1 (D.C. Cir. 2020) (en banc).
    \8\ 16 U.S.C. 825l(a) (``Until the record in a proceeding shall 
have been filed in a court of appeals, as provided in subsection 
(b), the Commission may at any time, upon reasonable notice and in 
such manner as it shall deem proper, modify or set aside, in whole 
or in part, any finding or order made or issued by it under the 
provisions of this chapter.'').
    \9\ Allegheny Def. Project, 964 F.3d at 16-17. The Commission is 
not changing the outcome of the final rule. See Smith Lake 
Improvement & Stakeholders Ass'n v. FERC, 809 F.3d 55, 56-57 (D.C. 
Cir. 2015).
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    3. Specifically, we either dismiss or disagree with most arguments 
raised on rehearing. We also provide further clarification on (1) 
states' use of tiered avoided cost pricing; (2) states' use of variable 
energy rates in QF contracts and availability of utility avoided cost 
data; (3) the role of independent entities overseeing competitive 
solicitations; (4) the circumstances under which a small power 
production qualifying facility (QF) needs to recertify; (5) application 
of the rebuttable presumption of separate sites for the purpose of 
determining the power production capacity of small power production 
facilities; and (6) the PURPA section 210(m) rebuttable presumption of 
nondiscriminatory access to markets and accompanying regulatory text, 
as further discussed below.

I. Background

A. Statutory Background

    4. PURPA section 210(a) requires that the Commission prescribe 
rules that it determines necessary to encourage the development of 
qualifying small power production facilities and cogeneration 
facilities (together, QFs).\10\ PURPA section 210(b) sets out the 
standards governing the rates purchasing utilities must pay to QFs.\11\ 
Sections 210(b)(1) and (b)(2) provide that QF rates ``shall

[[Page 86659]]

be just and reasonable to the electric consumers of the electric 
utility and in the public interest'' and ``shall not discriminate 
against qualifying cogenerators or qualifying small power producers.'' 
\12\
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    \10\ 16 U.S.C. 824a-3(a).
    \11\ 16 U.S.C. 824a-3(b).
    \12\ Id.
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    5. After establishing these standards, Congress then imposed 
statutory limits on the extent to which the PURPA Regulations may 
encourage the development of QFs pursuant to PURPA section 210(a), and 
also placed bounds on how the PURPA Regulations may implement the 
statutory provisions in PURPA section 210(b) governing QF rates.
    6. The first such statutory limit appears in the final sentence of 
PURPA section 210(b). There, Congress established a cap on the level of 
the rates utilities could be required to pay QFs: ``No such rule 
prescribed under subsection (a) shall provide for a rate which exceeds 
the incremental cost to the electric utility of alternative electric 
energy.'' \13\ As the Conference Report for PURPA (PURPA Conference 
Report) explains:
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    \13\ Id. (emphasis added). The statute defines an electric 
utility's ``incremental costs'' as ``the cost to the electric 
utility of the electric energy which, but for the purchase from such 
cogenerator or small power producer, such utility would generate or 
purchase from another source.'' 16 U.S.C. 824a-3(d); see also 18 CFR 
292.101(b)(6) (implementing same and defining such ``incremental 
costs'' as ``avoided costs'').

    [T]he utility would not be required to purchase electric energy 
from a qualifying cogeneration or small power production facility at 
a rate which exceeds the lower of the rate described above, namely a 
rate which is just and reasonable to consumers of the utility, in 
the public interest, and nondiscriminatory, or the incremental cost 
of alternate electric energy. This limitation on the rates which may 
be required in purchasing from a cogenerator or small power producer 
is meant to act as an upper limit on the price at which utilities 
can be required under this section to purchase electric energy.\14\
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    \14\ H.R. Rep. No. 95-1750, at 98 (1978) (Conf. Rep.) (emphasis 
added).

    7. Another way in which Congress set boundaries on the Commission's 
ability to encourage development of QFs was to define small power 
production facilities, one of the categories of generators that is to 
be encouraged under the statute. This statutory definition of small 
power production facilities applies to almost all renewable resources 
that wish to be QFs, requiring that those facilities have ``a power 
production capacity which, together with any other facilities located 
at the same site (as determined by the Commission), is not greater than 
80 megawatts.'' \15\ In order to comply with this statutory requirement 
that the capacity of all small power production facilities ``located at 
the same site'' not exceed 80 MW, the Commission is required to define 
what constitutes a ``site.'' In 1980, the Commission determined that, 
essentially, those facilities that are owned by the same or affiliated 
entities and using the same energy resource should be deemed to be at 
the same site ``if they are located within one mile of the facility for 
which qualification is sought.'' \16\ This approach, known as the 
``one-mile rule,'' interpreted Congress's limitation of 80 MW located 
at the same site to apply to those affiliated small power production 
qualifying facilities located within one mile of each other that use 
the same energy resource.
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    \15\ 16 U.S.C. 796(17)(A)(ii).
    \16\ 18 CFR 292.204(a)(ii).
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    8. Finally, Congress amended PURPA in 2005 to place further limits 
on the extent to which the PURPA Regulations may encourage QFs. 
Congress amended PURPA section 210 to, among other things, add section 
210(m), which provides for termination of the requirement that an 
electric utility enter into a new obligation or contract to purchase 
from a QF (frequently described as the ``mandatory purchase 
obligation'') if the QF has nondiscriminatory access to certain defined 
types of markets.\17\ This amendment reflected Congress's judgment that 
non-discriminatory access to these markets provided adequate 
encouragement for those QFs, such that the mandatory purchase 
obligation could be lifted.
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    \17\ See 16 U.S.C. 824a-3(m).
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    9. Congress directed the Commission to amend the PURPA Regulations 
to implement this new requirement, which the Commission did in Order 
No. 688. In that order, pursuant to PURPA section 210(m), the 
Commission identified markets in which utilities would no longer be 
subject to the PURPA mandatory purchase obligation because QFs have 
nondiscriminatory access to such markets.\18\ Although not required by 
PURPA section 210(m), the Commission also established a rebuttable 
presumption for small QFs, which the Commission determined at that time 
were QFs at or below 20 MW, because they may not have nondiscriminatory 
access to such markets.\19\ In creating this rebuttable presumption, 
the Commission made clear that ``we are not making a finding that all 
QFs smaller than a certain size lack nondiscriminatory access to 
markets.'' \20\
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    \18\ New PURPA Section 210(m) Regulations Applicable to Small 
Power Production and Cogeneration Facilities, Order No. 688, 117 
FERC ] 61,078, at PP 9-12 (2006), order on reh'g, Order No. 688-A, 
119 FERC ] 61,305 (2007), aff'd sub nom. Am. Forest & Paper Ass'n v. 
FERC, 550 F.3d 1179 (D.C. Cir. 2008) (AFPA v. FERC).
    \19\ 18 CFR 292.309(d)(1).
    \20\ Order No. 688, 117 FERC ] 61,078 at P 74.
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B. Final Rule's Updating of the PURPA Regulations

    10. In the final rule, the Commission amended the PURPA 
Regulations, principally with regard to the three statutory provisions 
described above: (1) The avoided cost cap on QF rates; (2) the 80 MW 
limitation applicable to the combined capacity of affiliated small 
power production QFs that use the same energy resource located at the 
same site; and (3) the termination of the mandatory purchase obligation 
for QFs with nondiscriminatory access to markets. The Commission stated 
that it was modifying the PURPA Regulations, based on demonstrated 
changes in circumstances that took place after the PURPA Regulations 
were first adopted, to ensure that the regulations continue to comply 
with PURPA's statutory requirements established by Congress.\21\
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    \21\ Order No. 872, 172 FERC ] 61,041 at P 20.
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C. Summary of Changes to the PURPA Regulations Implemented by the Final 
Rule

    11. In the final rule, the Commission revised the PURPA Regulations 
based on the record of this proceeding, including comments submitted in 
the technical conference in Docket No. AD16-16-000 (Technical 
Conference),\22\ the record evidence cited in the Notice of Proposed 
Rulemaking (NOPR),\23\ and the comments submitted in response to the 
NOPR.\24\ These changes, including modifications to the proposals made 
in the NOPR, are summarized below.
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    \22\ Supplemental Notice of Technical Conference, Implementation 
Issues Under the Public Utility Regulatory Policies Act of 1978, 
Docket No. AD16-16-000 (May 9, 2016). The Technical Conference 
covered such issues as: (1) Various methods for calculating avoided 
cost; (2) the obligation to purchase pursuant to a legally 
enforceable obligation (LEO); (3) application of the one-mile rule; 
and (4) the rebuttable presumption the Commission has adopted under 
PURPA section 210(m) that QFs 20 MW and below do not have 
nondiscriminatory access to competitive organized wholesale markets.
    \23\ Qualifying Facility Rates and Requirements, 84 FR 53246 
(Oct. 4, 2019), 168 FERC ] 61,184 (2019) (NOPR).
    \24\ Order No. 872, 172 FERC ] 61,041 at P 56.
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    12. First, the Commission granted states \25\ the flexibility to 
require that

[[Page 86660]]

energy rates (but not capacity rates) in QF power sales contracts and 
other LEOs \26\ vary in accordance with changes in the purchasing 
electric utility's as-available avoided costs at the time the energy is 
delivered. If a state exercises this flexibility, a QF no longer would 
have the ability to elect to have its energy rate be fixed but would 
continue to be entitled to a fixed capacity rate for the term of the 
contract or LEO.\27\
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    \25\ Nonregulated electric utilities implement the requirements 
of PURPA with respect to themselves. An electric utility that is 
``nonregulated'' is any electric utility other than a ``state 
regulated electric utility.'' 16 U.S.C. 2602(9). The term ``state 
regulated electric utility,'' in contrast, means any electric 
utility with respect to which a state regulatory authority has 
ratemaking authority. 16 U.S.C. 2602(18). The term ``state 
regulatory authority,'' as relevant here, means a state agency which 
has ratemaking authority with respect to the sale of electric energy 
by an electric utility. 16 U.S.C. 2602(17).
    \26\ The Commission has held that a LEO can take effect before a 
contract is executed and may not necessarily be incorporated into a 
contract. JD Wind 1, LLC, 129 FERC ] 61,148, at P 25 (2009), reh'g 
denied, 130 FERC ] 61,127 (2010) (``[A] QF, by committing itself to 
sell to an electric utility, also commits the electric utility to 
buy from the QF; these commitments result either in contracts or in 
non-contractual, but binding, legally enforceable obligations.''). 
For ease of reference, however, references herein to a contract also 
are intended to refer to a LEO that is not incorporated into a 
contract.
    \27\ Order No. 872, 172 FERC ] 61,041 at P 57.
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    13. Second, the Commission granted states additional flexibility to 
allow QFs to have a fixed energy rate and provided that such state-
authorized fixed energy rate can be based on projected energy prices 
during the term of a QF's contract based on the anticipated dates of 
delivery.\28\
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    \28\ Id. P 58.
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    14. Third, the Commission implemented a number of revisions 
intended to grant states flexibility to set ``as-available'' QF energy 
rates based on market forces. The Commission established a rebuttable 
presumption that the locational marginal price (LMP) established in the 
organized electric markets defined in 18 CFR 292.309(e), (f), or (g) 
represents the as-available avoided costs of energy for electric 
utilities located in these markets.\29\ With respect to QFs selling to 
electric utilities located outside of the organized electric markets 
defined in 18 CFR 292.309(e), (f), or (g), the Commission permitted 
states to set as-available energy avoided cost rates at competitive 
prices from liquid market hubs or calculated from a formula based on 
natural gas price indices and specified heat rates, provided that the 
states first determine that such prices represent the purchasing 
electric utilities' energy avoided costs.\30\
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    \29\ These are the markets operated by Midcontinent Independent 
System Operator, Inc. (MISO); PJM Interconnection, L.L.C. (PJM); ISO 
New England Inc. (ISO-NE); New York Independent System Operator, 
Inc. (NYISO); Electric Reliability Council of Texas (ERCOT); 
California Independent System Operator, Inc. (CAISO); and Southwest 
Power Pool, Inc. (SPP).
    \30\ Order No. 872, 172 FERC ] 61,041 at P 59.
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    15. The Commission granted states the flexibility to choose to 
adopt one or more of these options or to continue setting QF rates 
under the standards long established in the PURPA Regulations.\31\
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    \31\ Id.
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    16. Fourth, the Commission provided states the flexibility to set 
energy and capacity rates pursuant to a competitive solicitation 
process conducted under transparent and non-discriminatory procedures 
consistent with the Commission's Allegheny standard.\32\
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    \32\ Id. P 60 (referencing Allegheny Energy Supply Co., LLC, 108 
FERC ] 61,082, at P 18 (2004) (Allegheny Energy)).
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    17. Fifth, the Commission modified its ``one-mile rule'' for 
determining whether generation facilities are considered to be at the 
same site for purposes of determining qualification as a qualifying 
small power production facility. Specifically, the Commission allowed 
electric utilities, state regulatory authorities, and other interested 
parties to show that affiliated small power production facilities that 
use the same energy resource and are more than one mile apart and less 
than 10 miles apart actually are at the same site (with distances one 
mile or less apart still irrebuttably at the same site and distances 10 
miles or more apart irrebuttably at separate sites). The Commission 
also allowed a small power production facility seeking QF status to 
provide further information in its certification (whether a self-
certification or an application for Commission certification) or 
recertification (whether a self-recertification or an application for 
Commission recertification) to defend preemptively against subsequent 
challenges, by identifying factors affirmatively demonstrating that its 
facility is indeed at a separate site from other affiliated small power 
production qualifying facilities. The Commission added a definition of 
the term ``electrical generating equipment'' to the PURPA Regulations 
to clarify how the distance between facilities is to be calculated.\33\
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    \33\ Id. P 62.
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    18. Sixth, the Commission allowed an entity to challenge an initial 
self-certification or self-recertification without being required to 
file a separate petition for declaratory order and to pay the 
associated filing fee. However, the Commission clarified that such 
protests may be made to new certifications (both self-certifications 
and applications for Commission certification) but only to self-
recertifications and applications for Commission recertifications 
making substantive changes to the existing certification.\34\
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    \34\ Id. P 63.
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    19. Seventh, the Commission revised its regulations implementing 
PURPA section 210(m), which provide for the termination of an electric 
utility's obligation to purchase from a QF with nondiscriminatory 
access to certain markets. Under the PURPA Regulations before the final 
rule becomes effective, there is a rebuttable presumption that certain 
small QFs (i.e., those below 20 MW) may not have nondiscriminatory 
access to such markets. The Commission updated the rebuttable 
presumption threshold for small power production facilities (but not 
cogeneration facilities) from 20 MW to 5 MW and revised the PURPA 
Regulations to provide a nonexclusive list of examples of factors that 
QFs may cite to support an argument that they lack nondiscriminatory 
access to such markets.\35\
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    \35\ Id. P 64.
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    20. Finally, the Commission clarified that a QF must demonstrate 
commercial viability and a financial commitment to construct its 
facility pursuant to objective and reasonable state-determined criteria 
before the QF is entitled to a contract or LEO. The Commission 
prohibited states from imposing any requirements for a LEO other than a 
showing of commercial viability and a financial commitment to construct 
the facility.\36\
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    \36\ Id. P 65.
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    21. The Commission explained that these changes will enable the 
Commission to continue to fulfill its statutory obligations under PURPA 
sections 201 and 210. The Commission emphasized that these changes are 
effective prospectively for new contracts or LEOs and for new facility 
certifications and recertifications filed on or after the effective 
date of the final rule; the Commission stated that it does not by the 
final rule permit disturbance of existing contracts or LEOs or existing 
facility certifications.\37\
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    \37\ Id. P 66.
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    22. On August 17, 2020, (1) EPSA, California Utilities, Northwest 
Coalition, One Energy Enterprises, and Thomas Mattson filed timely 
requests for rehearing of the final rule; (2) One Energy Enterprises, 
Public Interest Organizations, and Solar Energy Industries filed timely 
requests for rehearing and clarification of the final rule; and (3) 
California Utilities filed a timely request for clarification of the

[[Page 86661]]

Final Rule. On September 1, 2020, California Public Utilities 
Commission (California Commission) filed an answer to California 
Utilities' request for clarification of the final rule.\38\
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    \38\ Because California Utilities requested clarification, and 
not rehearing, of the final rule, we accept California Commission's 
answer to California Utilities' request for clarification of the 
final rule. See 18 CFR 385.213(a)(3).
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II. Discussion

    23. In this order, we sustain the final rule. Specifically, we 
either dismiss or disagree with most arguments raised on rehearing. We 
also provide further clarification on (1) states' use of tiered avoided 
cost pricing; (2) states' use of variable energy rates in QF contracts 
and availability of utility avoided cost data; (3) the role of 
independent entities overseeing competitive solicitations; (4) the 
circumstances under which a small power production QF needs to 
recertify; (5) application of the rebuttable presumption of separate 
sites in PURPA 210(m) proceedings; and (6) the PURPA section 210(m) 
rebuttable presumption of nondiscriminatory access to markets and 
accompanying regulatory text, as further discussed below.

A. Threshold Issues

1. Whether the Commission Appropriately Consulted With Representatives 
of Relevant State and Federal Agencies
a. Requests for Rehearing
    24. Public Interest Organizations state that the final rule is 
flawed because the Commission failed to consult with state and federal 
officials as required by PURPA section 210(a).\39\ Public Interest 
Organizations argue that the Commission's actions to hold a technical 
conference and invite public comments, both of which involved 
participation from state and federal entities, are insufficient to meet 
this statutory requirement.\40\ Public Interest Organizations aver that 
these actions satisfy the statutory requirement to provide ``notice and 
reasonable opportunity for interested persons (including State and 
Federal agencies) to submit oral as well as written data, views, and 
arguments'' but that the Commission failed to satisfy what Public 
Interest Organizations claim is a separate and distinct requirement: To 
``consult[ ]'' with representatives of state and federal officials.\41\ 
Public Interest Organizations argue that Congress included the word 
``consultation'' in the statute to connote deliberations more formal 
and focused than the general notice and comment process and further 
assert that statutes and regulations routinely distinguish between the 
two.\42\ Public Interest Organizations contend that this lack of 
consultation has hamstrung the Commission and prevents the Commission 
from crafting informed policy.\43\
---------------------------------------------------------------------------

    \39\ Public Interest Organizations Request for Rehearing at 6, 
12-14.
    \40\ Id. at 13.
    \41\ Id. (citing 16 U.S.C. 824a-3(a)(2)).
    \42\ Id. at 13-14 (citing 50 CFR 402.14; Cooling Water Intake 
Structure Coal. v.  U.S. Envtl. Prot. Agency, 905 F.3d 49, 78 (2d 
Cir. 2018)).
    \43\ Id. at 14.
---------------------------------------------------------------------------

b. Commission Determination
    25. Public Interest Organizations' argument that the Commission 
failed to fulfill the consultation provision has no merit. First, we 
reemphasize the participation by state entities at the Commission's 
2016 Technical Conference. Upon the Commission's open invitation,\44\ 
several state entities participated in that conference and filed post-
conference comments, including members of state regulatory authorities 
and the president of the national association representing state 
commissions (NARUC).\45\ Second, several federal and state entities 
availed themselves of the opportunity to be heard via the NOPR's notice 
and comment process. More than 20 state entities, including state 
commissions, state consumer advocates, state attorneys general, 
governors, and others, submitted comments in response to the NOPR.\46\ 
In addition, NARUC submitted several filings throughout this process, 
and a group calling themselves State Entities--a diverse group 
including eight attorneys general and two state commissions--filed a 
combined comment on the PURPA NOPR; the NOPR was published in the 
Federal Register.\47\ Third, no state or federal entity has sought 
rehearing on this (or any other) basis.
---------------------------------------------------------------------------

    \44\ See Notice Inviting Post-Technical Conference Comments, 
Implementation Issues Under the Public Utility Regulatory Policies 
Act of 1978, Docket No. AD16-16-000 (Sept. 6, 2016); Supplemental 
Notice of Technical Conference, Implementation Issues Under the 
Public Utility Regulatory Policies Act of 1978, Docket No. AD16-16-
000 (Mar. 4, 2016) (announcing preliminary agenda and inviting 
interested speakers).
    \45\ Connecticut Public Utilities Regulatory Authority 
(Connecticut Authority) and Massachusetts Department of Public 
Utilities (Massachusetts DPU) Comments, Docket No. AD16-16-000 (Nov. 
7, 2016); Idaho Public Utilities Commission (Idaho Commission) 
Comments, Docket No. AD16-16-000 (Nov. 7, 2016); Commissioner Paul 
Kjellander, Idaho Commission Comments, Docket No. AD16-16-000 (June 
29, 2016); Commissioner Christine Raper, Idaho Commission Comments, 
Docket No. AD16-16-000 (June 29, 2016); Commissioner Travis Kavulla, 
Montana Public Service Commission (Montana Commission) and on behalf 
of NARUC Comments, Docket No. AD16-16-000 (June 29, 2016).
    \46\ Commissioner Anthony O'Donnell, Montana Commission 
Comments, Docket No. RM19-15-000 (Dec. 3, 2019); Arizona Commission 
Comments, Docket No. RM19-15-000 (Dec. 3, 2019); California Public 
Utilities Commission (California Commission) Comments, Docket No. 
RM19-15-000 (Dec. 3, 2019); District of Columbia Public Service 
Commission (DC Commission) Comments, Docket No. RM19-15-000 (Dec. 3, 
2019); Governor Brad Little (Idaho) Comments, Docket No. RM19-15-000 
(Dec. 2, 2019); Idaho Commission Comments, Docket No. RM19-15-000 
(Dec. 3, 2019); Kentucky Public Service Commission Comments, Docket 
No. RM19-15-000 (Dec. 3, 2019); Massachusetts Attorney General Maura 
Healey Comments, Docket No. RM19-15-000 (Dec. 3, 2019); 
Massachusetts DPU Comments, Docket No. RM19-15-000 (Dec. 3, 2019); 
Michigan Public Service Commission Comments, Docket No. RM19-15-000 
(Dec. 3, 2019); Montana Commission Comments, Docket No. RM19-15-000 
(Dec. 3, 2019); North Carolina Attorney General Comments, Docket No. 
RM19-15-000 (Dec. 3, 2019); North Carolina Public Service Commission 
Public Staff Comments, Docket No. RM19-15-000 (Dec. 3, 2019); 
Nebraska Power Review Board Comments, Docket No. RM19-15-000 (Nov. 
22, 2019); Ohio Consumers Counsel Comments, Docket No. RM19-15-000 
(Dec. 3, 2019); Oregon Public Utility Commission Comments, Docket 
No. RM19-15-000 (Dec. 3, 2019); Pennsylvania Public Utility 
Commission Comments, Docket No. RM19-15-000 (Dec. 3, 2019); Public 
Utility Commission of Ohio Federal Energy Advocate Comments, Docket 
No. RM19-15-000 (Dec. 3, 2019); South Dakota Public Utilities 
Commission Comments, Docket No. RM19-15-000 (Dec. 3, 2019).
    \47\ State Entities Comments, Docket No. RM19-15-000 (Dec. 3, 
2019) (filed on behalf of Massachusetts Attorney General, Delaware 
Attorney General, District of Columbia Attorney General, Maryland 
Attorney General, Michigan Attorney General, New Jersey Attorney 
General, North Carolina Attorney General, Oregon Attorney General, 
New Jersey Board of Public Utilities, Rhode Island Division of 
Public Utilities and Carriers); NARUC Comments, Docket No. RM19-15-
000 (Dec. 3, 2019); NARUC Supplemental Comments, Docket No. AD16-16-
000 (Oct. 17, 2018); see also NOPR, 168 FERC ] 61,184, (NOPR 
published in Federal Register).
---------------------------------------------------------------------------

    26. In sum, throughout this process, the Commission repeatedly 
sought information and input from state and federal entities. As 
explained above, numerous state entities submitted comments or 
otherwise participated in the process and other state and federal 
entities had the opportunity to participate in the process. The 
Commission fully satisfied its consultation obligations.
2. Whether the PURPA Regulations Continue To Encourage QFs
a. Requests for Rehearing
    27. Solar Energy Industries and Public Interest Organizations state 
that the Commission is required under PURPA section 210 to apply its 
regulations in a manner that encourages QFs and that it has failed to 
do so.\48\
---------------------------------------------------------------------------

    \48\ Public Interest Organizations Request for Rehearing at 8, 
43-60; Solar Energy Industries Request for Rehearing and/or 
Clarification at 2-4, 4-6, 8-9, 42-45.
---------------------------------------------------------------------------

    28. Solar Energy Industries argue that, in the final rule, the 
Commission failed

[[Page 86662]]

---------------------------------------------------------------------------
to meet this statutory requirement in the following ways:

    (1) Terminating a Qualifying Facility's right to elect a long-
term energy rate when delivering energy under a long-term contract; 
(2) revising the long-standing regulations providing that a 
Qualifying Facility is not ``at the same site'' so long as the 
facilities are located more than one mile apart; and (3) allowing 
utilities within the boundaries of [Regional Transmission 
Organization or an Independent System Operator (RTO/ISO)] to seek a 
waiver of the [obligation] to purchase from small power production 
Qualifying Facilities larger than 5 MW despite the fact that few, if 
any, of such facilities have meaningful access to organized 
wholesale markets.\49\
---------------------------------------------------------------------------

    \49\ Solar Energy Industries Rehearing Request at 4, 8-9.

    29. Solar Energy Industries claim that the Commission's assertion 
that the final rule ``continue[s] to encourage the development of QFs 
consistent with PURPA'' is unsupported by the record and erroneous.\50\ 
Solar Energy Industries argue that requiring utilities to interconnect 
with QFs and allowing QFs to purchase station power services is not new 
and is part and parcel of a utility's obligation to provide open access 
service today.\51\ Solar Energy Industries add that maintaining 
existing exemptions from the FPA and similar state and federal 
regulations is not helpful because other rule changes serve as severe 
obstructions to QF development in the first place.
---------------------------------------------------------------------------

    \50\ Id. at 6 (citing Order No. 872, 172 FERC ] 61,041 at P 78).
    \51\ Id.
---------------------------------------------------------------------------

    30. Public Interest Organizations assert that the Commission 
incorrectly framed this issue as a set of false choices between 
encouraging QFs or violating statutory limits and encouraging QFs or 
never modifying its 1980 regulations.\52\ Public Interest Organizations 
argue that the Commission has inappropriately focused on whether the 
final rule eliminates all encouragement, rather than whether the final 
rule advances the goal of encouraging QFs in comparison to a suite of 
alternatives that could be more favorable to QFs. Public Interest 
Organizations add that the Commission must give effect to every 
relevant clause and use the significant space between encouraging and 
exceeding other statutory mandates, rather than following the 
conclusion in the final rule that PURPA itself limits the extent to 
which PURPA Regulations can encourage QFs, which would create a false 
dichotomy between meeting the mandate that QFs be encouraged and 
violating Congressionally defined limits.\53\
---------------------------------------------------------------------------

    \52\ Public Interest Organizations Request for Rehearing at 43-
45.
    \53\ Id. at 44-46 (citing Order No. 872, 172 FERC ] 61,041 at P 
72).
---------------------------------------------------------------------------

    31. Public Interest Organizations contend that the Commission is 
acting arbitrarily and capriciously because the record fails to support 
the Commission's claim that the changes in the final rule encourage 
QFs.\54\ Public Interest Organizations point to the Commission's 
statements in the final rule that these revisions will ``lower payments 
from certain electric utilities to certain QFs,'' will result in 
additional filing burdens, and may result in more protests being filed 
in opposition to QF filings.\55\ Public Interest Organizations argue 
that the Commission implicitly admitted that the majority of the 
changes do not encourage QF development when the Commission stated that 
``several of the changes'' in the final rule provide encouragement.\56\
---------------------------------------------------------------------------

    \54\ Id. at 46-60.
    \55\ Id. at 46 (citing Order No. 872, 172 FERC ] 61,041 at PP 
553, 584, 587, 746).
    \56\ Id. at 46-47 (citing Order No. 872, 172 FERC ] 61,041 at P 
78).
---------------------------------------------------------------------------

    32. Public Interest Organizations argue that the final rule is not 
the product of reasoned decision-making because the Commission's 
assertions that these revisions encourage QFs are insufficient, even if 
true.\57\ Public Interest Organizations state that in Order No. 69 the 
Commission identified three major obstacles and crafted its rules to 
address these barriers. Public Interest Organizations aver that, in 
contrast, the Commission conducted no such inquiry here to identify 
whether those barriers persist or new ones exist.\58\
---------------------------------------------------------------------------

    \57\ Id. at 48-49 (citing Small Power Production and 
Cogeneration Facilities; Regulations Implementing Section 210 of the 
Public Utility Regulatory Policies Act of 1978, Order No. 69, 45 FR 
12214 (Feb. 25,1980), FERC Stats. & Regs. ] 30,128, at 30,863 
(cross-referenced 10 FERC ] 61,150), order on reh'g, Order No. 69-A, 
45 FR 33958 (May 21, 1980), FERC Stats. & Regs. ] 30,160 (1980) 
(cross-referenced at 11 FERC ] 61,166), aff'd in part & vacated in 
part sub nom. Am. Elec. Power Serv. Corp. v. FERC, 675 F.2d 1226 
(D.C. Cir. 1982), rev'd in part sub nom. Am. Paper Inst., Inc. v. 
Am. Elec. Power Serv. Corp., 461 U.S. 402 (1983) (API)).
    \58\ Id.
---------------------------------------------------------------------------

    33. Public Interest Organizations claim that the Commission ignored 
evidence in the record.\59\ Public Interest Organizations state that 
the Commission dismissed as beyond the scope of the rulemaking evidence 
that the PURPA Regulations in place since 1980 fail to encourage QFs, 
yet at the same time rely on the strength of those rules to support its 
claim that the PURPA Regulations continue to encourage QFs.\60\ Public 
Interest Organizations argue that the Commission avoided consideration 
of this evidence by making the following three claims: (1) Relaxing 
some standards may actually induce some states to more robustly 
implement the rules; (2) evidence claiming that existing rules fail to 
encourage QF development should be dismissed as overstated; and (3) any 
lack of implementation of PURPA speaks to states' failures to 
implement, rather than gaps in the PURPA Regulations themselves.\61\
---------------------------------------------------------------------------

    \59\ Id. at 49-57.
    \60\ Id. at 49.
    \61\ Id. at 49-50 (citing Order No. 872, 172 FERC ] 61,041 at PP 
43-46).
---------------------------------------------------------------------------

    34. Public Interest Organizations argue that examples of the 
Commission's failure to fully consider the record were that one of the 
commenters described the amendments to the Public Utility Holding 
Company Act of 1935 (PUHCA) in 2005 that effectively repealed that 
statute and that interconnection procedures stymie QF development. 
Public Interest Organizations argue that the Commission did not 
sufficiently consider this information in the record and, if it had, it 
would not have mistakenly asserted that related regulatory exemptions 
provided in the 1980 rules are sufficient to encourage QF 
development.\62\
---------------------------------------------------------------------------

    \62\ Id. at 51-52 (citing Harvard Electricity Law Initiative 
(Harvard Electricity Law) Comments, Docket No. RM19-15-000, at 19-21 
(Dec. 3, 2019); Solar Energy Industries Supplemental Comments, 
Docket No. AD16-16-000, at 16 (Aug. 28, 2019)).
---------------------------------------------------------------------------

    35. Public Interest Organizations contend that, because the 
Commission explicitly considered broad changes from Order No. 69 and 
addressed a broad range of topics in the final rule, the Commission 
improperly excluded consideration of evidence of barriers faced by QFs 
when it found that such evidence is outside the scope of this 
proceeding.\63\
---------------------------------------------------------------------------

    \63\ Id. at 52-53.
---------------------------------------------------------------------------

    36. Public Interest Organizations argue that the Commission was 
misguided in its reliance on U.S. Energy Information Administration 
(EIA) data showing that some states with the highest rates of QF 
penetration are located in non-RTO regions to support the claim that 
evidence of barriers to QFs in such regions are overblown.\64\ Public 
Interest Organizations aver that three states (North Carolina, Idaho, 
and Utah) skew the data with successful outcomes for QFs, while PURPA 
remains largely irrelevant in the 47 other states. Public Interest 
Organizations add that reliance even on these three states is in error 
because these states saw significant QF penetration due to long-term 
fixed energy rates, which the Commission is

[[Page 86663]]

now no longer requiring, claiming that, even in Idaho, barriers have 
since been erected with a subsequent cessation in QF development.\65\
---------------------------------------------------------------------------

    \64\ Id. at 53.
    \65\ Id. at 54.
---------------------------------------------------------------------------

    37. Public Interest Organizations assert that the Commission 
inappropriately dismissed barriers to QF development as matters only 
relevant to state implementation or PURPA enforcement dockets.\66\ 
Public Interest Organizations add that the Commission's claim that more 
relaxed standards will lead to more robust state implementation is 
speculative, internally contradictory, and ignores relevant 
evidence.\67\
---------------------------------------------------------------------------

    \66\ Id. at 55.
    \67\ Id. at 56.
---------------------------------------------------------------------------

    38. Public Interest Organizations argue that, even if the 
Commission properly considered the full record, the Commission's 
finding that the revised rules encourage QFs is arbitrary and 
capricious.\68\ Public Interest Organizations restate their concern 
that providing more flexibility will not lead to more robust PURPA 
implementation by states. Public Interest Organizations contend that 
the changes adopted in the final rule overwhelmingly cut in favor of 
utilities and against encouraging QFs and that none of the revisions 
require regulators to strengthen incentives or eliminate burdens on QF 
development.\69\ Public Interest Organizations aver that these changes 
amount to lowering the federal floor, therefore reducing QF bargaining 
power, even if state regulators implement the rules in good faith. 
Public Interest Organizations add that, contrary to the Commission's 
assertions in the final rule, leaving intact the requirement for full 
avoided costs is insufficient to continue to encourage QFs, especially 
in the face of new barriers erected by the final rule.\70\
---------------------------------------------------------------------------

    \68\ Id. at 57.
    \69\ Id. at 58-59.
    \70\ Id. at 59-60.
---------------------------------------------------------------------------

b. Commission Determination
    39. Contrary to claims that the PURPA Regulations as revised do not 
encourage QFs, the PURPA Regulations as revised in the final rule 
continue as a whole to encourage the development of QFs consistent with 
the statutory limits on such encouragement, as explained below.\71\
---------------------------------------------------------------------------

    \71\ In subsequent sections of this order, we address Solar 
Energy Industries' concerns that the PURPA Regulations, as revised, 
fail to encourage QFs due to the specific revisions (1) allowing 
states to set avoided energy costs using variable energy rates; (2) 
expanding the one-mile rule; and (3) lowering the threshold for 
presumptive nondiscriminatory access for facilities in competitive 
wholesale markets from 20 MW to 5 MW. See infra sections III.B.4, 
III.C, and III.F.
---------------------------------------------------------------------------

    40. Public Interest Organizations improperly frame the 
encouragement analysis. In Public Interest Organizations' view, the 
encouragement standard should be analyzed on the basis that a revision 
is inadequate in encouraging QFs if there exist alternative revisions 
that are more favorable to QFs.\72\ We reject this premise. PURPA 
requires the Commission's regulations to encourage QFs, but that is not 
all that PURPA says. PURPA also requires that the Commission prescribe 
no rule requiring that states set payments to QFs that exceed avoided 
costs and PURPA requires that qualifying small power production 
facilities do not exceed 80 MW. Furthermore, in the final rule, the 
Commission strikes a balance among the interests of all relevant 
stakeholders, including not just the selling QFs, but also the 
purchasing electric utilities and, moreover, consumers, consistent with 
PURPA.
---------------------------------------------------------------------------

    \72\ See Public Interest Organizations Request for Rehearing at 
46 (footnote omitted) (``There is significant space provided within 
the confines of the limitations Congress established to encourage 
QFs. FERC's reasoning that because it cannot encourage QFs by 
exceeding the bounds set by Congress it need not fully encourage QFs 
within the bounds of the statute fails to give effect to Congress' 
command to encourage QFs. The Commission can, and must, issue rules 
that support QF development while complying with the other statutory 
requirements and limits on the form of that support.'').
---------------------------------------------------------------------------

    41. Regarding QF rates, the final rule provides states further 
flexibility to better enable states to implement PURPA's statutory 
obligation that QF rates not exceed the purchasing electric utility's 
avoided costs. We acknowledge that different states have implemented 
PURPA differently, but such differences are not prohibited by the 
statute. If parties believe that a state has failed to implement the 
PURPA Regulations consistent with their terms, then these parties may 
bring an enforcement petition before the Commission or other fora.\73\ 
But just because parties are unsatisfied with some states' 
implementation of PURPA to date \74\ does not preclude the Commission 
from making the revisions to its PURPA Regulations adopted in the final 
rule.
---------------------------------------------------------------------------

    \73\ Order No. 872, 172 FERC ] 61,041 at P 359 (citing Policy 
Statement Regarding the Commission's Enforcement Role Under Section 
210 of the Public Utility Regulatory Policies Act of 1978, 23 FERC ] 
61,304 (1983)).
    \74\ See Public Interest Organizations Request for Rehearing at 
37-39.
---------------------------------------------------------------------------

    42. In the final rule, the Commission complied with PURPA's 
requirement that rates not exceed avoided costs by, for example, 
allowing states to implement variable avoided cost energy rates if they 
so choose.\75\ The Commission also continued to fulfill its obligation 
under PURPA to encourage the development of QFs. Specifically, with the 
additions from the final rule, the PURPA Regulations continue to 
encourage QFs by combining elements that include, among other things: 
(1) Providing the potential for increased transparency of avoided cost 
determinations under competitive solicitations or competitive market 
prices; (2) continuing to provide the ability for QFs to be exempt from 
most of the provisions of the FPA and PUHCA and certain state laws and 
regulations; (3) continuing to grant QFs special rights to 
supplementary and backup power; (4) providing extra benefits and rights 
for QFs 5 MW or smaller and especially those smaller than 100 kW; and 
(5) clarifying that states may only impose objective and reasonable 
criteria, limited to demonstrating commercial viability and financial 
commitment, as prerequisites to QF LEO formation that states may 
impose, which ensures that the purchasing utility does not unilaterally 
and unreasonably decide when its obligation arises.\76\ These elements 
of the PURPA Regulations, among others, will continue to provide rules 
that, as a whole, encourage QF development.
---------------------------------------------------------------------------

    \75\ Order No. 872, 172 FERC ] 61,041 at PP 232-360.
    \76\ In addition, the Commission in Order No. 872 kept intact 
the regulations issued to overcome the barriers to QFs identified in 
Order No. 69. Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,863; 
see also Order No. 872, 172 FERC ] 61,041 at PP 10, 28-41, 78.
---------------------------------------------------------------------------

    43. We disagree with Public Interest Organizations' assertion that 
there is insufficient evidence to support the Commission's conclusion 
that providing more flexibility to states may better enable states to 
encourage QF development. As one example, Idaho State Commissioner, 
Kristine Raper, stated during the 2016 Technical Conference that 
``[s]tate Commissions do not have enough tools in the toolbox'' and 
that this lack of flexibility caused Idaho to amend its regulations to 
award only two-year standard contracts for QFs, rather than twenty-year 
standard contracts with periodic updates to the avoided cost rate.\77\ 
Therefore, it was reasonable for the Commission to conclude that the 
new flexibility granted by the final rule may lead states to lengthen 
the contract period, which could encourage QF development. 
Additionally, the new competitive market price options should be less 
burdensome for all involved,

[[Page 86664]]

compared to the administrative determination of avoided cost rates, 
because the new options rely on transparent, publicly available 
competitive prices or transparent and non-discriminatory competitive 
solicitations.\78\ QFs may spend less time and money pursuing their 
interests in a competitive market price environment than they 
previously did in the administrative determination process. Finally, to 
the extent energy prices rise at some point in the future, QFs with 
variable rates would necessarily benefit.
---------------------------------------------------------------------------

    \77\ Technical Conference Tr. at 143-44 (Commissioner Kristine 
Raper, Idaho Commission).
    \78\ See Order No. 872, 172 FERC ] 61,041 at PP 30-32.
---------------------------------------------------------------------------

    44. We disagree with Public Interest Organizations' claim that the 
Commission has failed to adequately consider the evidence that states 
have achieved various levels of PURPA implementation. Public Interest 
Organizations have overly relied on the examples of North Carolina, 
Idaho, and Utah, which they contend have unusually high levels of QF 
development. We are committed to promoting PURPA's central feature of 
cooperative federalism.\79\ In the final rule, the Commission provided 
states further flexibility to implement this statutory obligation as 
most appropriate and consistent with the terms of the statute.
---------------------------------------------------------------------------

    \79\ See FERC v. Miss., 456 U.S. 742, 767 (1982) (internal 
quotations omitted) (stating that PURPA is a ``program of 
cooperative federalism that allows the States, within limits 
established by federal minimum standards, to enact and administer 
their own regulatory programs, structured to meet their own 
particular needs'').
---------------------------------------------------------------------------

    45. We disagree with Public Interest Organizations that retaining 
the exemption from PUHCA is unimportant or that PUHCA has been 
repealed. While now more focused on record-keeping obligations,\80\ 
PUHCA remains a regulatory obligation for entities, including entities 
that seek QF status retroactively. By granting QFs retroactive status 
when they had not yet certified but should have done so previously, the 
Commission has relieved those entities of PUHCA's record-keeping 
obligations (similar to other federal and state exemptions), thereby 
further encouraging the development of QFs.\81\ Similarly, contrary to 
Public Interest Organizations' request for rehearing, alleged 
deficiencies in state-administered QF interconnection procedures are 
not within the scope of this rulemaking.
---------------------------------------------------------------------------

    \80\ See 18 CFR 366.3(a)(1).
    \81\ See, e.g., GRE 314 East Lyme LLC, 171 FERC ] 61,199 (2020); 
Branch Street Solar Partners, LLC, 169 FERC ] 61,269 (2019); Zeeland 
Farm Servs., Inc., 163 FERC ] 61,115 (2018); Minwind I, 149 FERC ] 
61,109 (2014); Beaver Falls Mun. Auth., 149 FERC ] 61,108 (2014).
---------------------------------------------------------------------------

B. QF Rates

1. Overview
    46. PURPA requires the Commission to promulgate rules to be 
implemented by the states that ``shall insure'' that the rates electric 
utilities pay for purchases of electric energy from QFs meet the 
statutory criteria, including that ``[n]o such rule . . . shall provide 
for a rate which exceeds'' the purchasing utility's ``incremental cost 
. . . of alternative electric energy.'' \82\ Under PURPA, such rates 
must (1) be just and reasonable to the electric consumers of the 
electric utility and in the public interest; (2) not discriminate 
against qualifying cogenerators or qualifying small power producers; 
\83\ and, as noted above, (3) not exceed ``the incremental cost to the 
electric utility of alternative electric energy,'' \84\ which is ``the 
cost to the electric utility of the electric energy which, but for the 
purchase from such cogenerator or small power producer, such utility 
would generate or purchase from another source.'' \85\ The 
``incremental cost to the electric utility of alternative electric 
energy'' referred to in prong (3) above, which sets out a statutory 
upper bound on a QF rate, has been consistently referred to by the 
Commission and industry by the short-hand phrase ``avoided cost,'' \86\ 
although the term ``avoided cost'' itself does not appear in PURPA.
---------------------------------------------------------------------------

    \82\ 16 U.S.C. 824a-3(b).
    \83\ 16 U.S.C. 824a-3(b)(1)-(2).
    \84\ 16 U.S.C. 824a-3(b).
    \85\ 16 U.S.C. 824a-3(d) (emphasis added).
    \86\ See 18 CFR 292.101(b)(6) (defining avoided costs in 
relation to the statutory terms); see also Order No. 69, FERC Stats. 
& Regs. ] 30,128 at 30,865 (``This definition is derived from the 
concept of `the incremental cost to the electric utility of 
alternative electric energy' set forth in section 210(d) of PURPA. 
It includes both the fixed and the running costs on an electric 
utility system which can be avoided by obtaining energy or capacity 
from qualifying facilities.'').
---------------------------------------------------------------------------

    47. In addition, the PURPA Regulations in effect before the final 
rule provide a QF two options for how to sell its power to an electric 
utility. The QF could choose to sell as much of its energy as it 
chooses when the energy becomes available, with the rate for the sale 
calculated at the time of delivery (frequently referred to as a so-
called ``as-available'' sale).\87\ Alternatively, the QF could choose 
to sell pursuant to a LEO (such as a contract) over a specified 
term.\88\
---------------------------------------------------------------------------

    \87\ 18 CFR 292.304(d)(1).
    \88\ 18 CFR 292.304(d)(2)(i)-(ii); see also FLS Energy, Inc., 
157 FERC ] 61,211, at P 21 (2016) (FLS) (citing 18 CFR 292.304(d)). 
The LEO or contract is frequently referred to as a long-term 
transaction, when contrasted with an ``as available'' sale and rate.
---------------------------------------------------------------------------

    48. If the QF chooses to sell under the second option, the PURPA 
Regulations in effect before the final rule provide the QF the further 
option of receiving, in terms of pricing, either: (1) The purchasing 
electric utility's avoided cost calculated at the time of delivery; 
\89\ or (2) the purchasing electric utility's avoided cost calculated 
and fixed at the time the LEO is incurred.\90\
---------------------------------------------------------------------------

    \89\ 18 CFR 292.304(d)(2)(i).
    \90\ 18 CFR 292.304(d)(2)(ii). Rates calculated at the time of a 
LEO (for example, a contract) do not violate the requirement that 
the rates not exceed avoided costs if they differ from avoided costs 
at the time of delivery. 18 CFR 292.304(b)(5).
---------------------------------------------------------------------------

    49. In implementing the PURPA Regulations, the Commission 
recognized that a contract with avoided costs calculated at the time a 
LEO is incurred could exceed the electric utility's avoided costs at 
the time of delivery in the future, thereby seemingly violating PURPA's 
requirement that QFs not be paid more than an electric utility's 
avoided costs. The Commission reasoned, however, that the fixed avoided 
cost rate might also turn out to be lower than the electric utility's 
avoided costs over the course of the contract and that, ``in the long 
run, `overestimations' and `underestimations' of avoided costs will 
balance out.'' \91\ The Commission's justification for allowing QFs to 
fix their rate at the time of the LEO for the entire life of the 
contract was that fixing the rate provides ``certainty with regard to 
return on investment in new technologies.'' \92\
---------------------------------------------------------------------------

    \91\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,880; see 
also 18 CFR 292.304(b)(5) (``In the case in which the rates for 
purchases are based upon estimates of avoided costs over the 
specific term of the contract or other legally enforceable 
obligation, the rates for such purchases do not violate this subpart 
if the rates for such purchases differ from avoided costs at the 
time of delivery.''); Entergy Servs., Inc., 137 FERC ] 61,199, at P 
56 (2011) (``Many avoided cost rates are calculated on an average or 
composite basis, and already reflect the variations in the value of 
the purchase in the lower overall rate. In such circumstances, the 
utility is already compensated, through the lower rate it generally 
pays for unscheduled QF energy, for any periods during which it 
purchases unscheduled QF energy even though that energy's value is 
lower than the true avoided cost.'').
    \92\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,880.
---------------------------------------------------------------------------

    50. In the NOPR, the Commission proposed to revise its PURPA 
Regulations to permit states to incorporate competitive market forces 
in setting QF rates. Specifically, the Commission proposed to revise 
its PURPA Regulations with regard to QF rates to provide states with 
the flexibility to:
     Require that ``as-available'' QF energy rates paid by 
electric utilities

[[Page 86665]]

located in RTO/ISO markets be based on the market's LMP, or similar 
energy price derived by the market, in effect at the time the energy is 
delivered.
     Require that ``as-available'' QF energy rates paid by 
electric utilities located outside of RTO/ISO markets be based on 
competitive prices determined by (1) liquid market hub energy prices, 
or (2) formula rates based on observed natural gas prices and a 
specified heat rate.
     Require that energy rates under QF contracts and LEOs be 
based on as-available energy rates determined at the time of delivery 
rather than being fixed for the term of the contract or LEO.
     Implement an alternative approach of requiring that the 
fixed energy rate be calculated based on estimates of the present value 
of the stream of revenue flows of future LMPs or other acceptable as-
available energy rates at the time of delivery.
     Require that energy and/or capacity rates be determined 
through a competitive solicitation process, such as a request for 
proposals (RFP), with processes designed to ensure that the competitive 
solicitation is performed in a transparent, non-discriminatory 
fashion.\93\
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    \93\ NOPR, 168 FERC ] 61,184 at PP 32-33.
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    51. Although the Commission proposed to modify how the states are 
permitted to calculate avoided costs, it did not propose to terminate 
the requirement that the states continue to calculate, and to set QF 
rates at, such avoided costs.\94\
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    \94\ Order No. 872, 172 FERC ] 61,041 at P 101.
---------------------------------------------------------------------------

    52. In the final rule, the Commission adopted these proposals, with 
certain modifications.
2. LMP as a Permissible Rate for Certain As-Available Avoided Cost 
Rates
    53. In the final rule, the Commission revised 18 CFR 292.304 to add 
subsections (b)(6) and (e)(1). In combination, these subsections permit 
a state the flexibility to set the as-available energy rate paid to a 
QF by an electric utility located in an RTO/ISO at LMPs calculated at 
the time of delivery.\95\
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    \95\ Id. P 124.
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    54. The Commission adopted with one modification the NOPR proposal 
to allow LMP to be used as a measure of as-available energy avoided 
costs for electric utilities located in RTO/ISO markets.\96\
---------------------------------------------------------------------------

    \96\ Id. P 151.
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    55. The Commission found that (1) LMPs reflect the true marginal 
cost of production of energy, taking into account all physical system 
constraints; (2) these prices would fully compensate all resources for 
their variable cost of providing service; (3) LMP prices are designed 
to reflect the least-cost of meeting an incremental megawatt-hour of 
demand at each location on the grid, and thus prices vary based on 
location and time; and (4) unlike average system-wide cost measures of 
the avoided energy cost used by many states, LMP should provide a more 
accurate measure of the varying actual avoided energy costs, hour by 
hour, for each receipt point on an electric utility's system where the 
utility receives power from QFs.\97\
---------------------------------------------------------------------------

    \97\ See id. P 153 (citing NOPR, 168 FERC ] 61,184 at PP 44-45 
(citing SMUD, 616 F.3d at 524; FERC v. Elec. Power Supply Ass'n, 136 
S. Ct. at 768-69 (describing how LMP is typically calculated); Offer 
Caps in Markets Operated by Regional Transmission Organizations and 
Independent System Operators, Order No. 831, 81 FR 87770 (Dec. 5 
2016), 157 FERC ] 61,115, at P 7 (2016), order on reh'g and 
clarification, Order No. 831-A, 82 FR 53403 (Nov. 16, 2017), 161 
FERC ] 61,156 (2017))).
---------------------------------------------------------------------------

    56. The Commission recognized that an LMP selected by a state to 
set a purchasing utility's avoided energy cost component might not 
always reflect a purchasing utility's actual avoided energy costs. 
Accordingly, the Commission found that it is appropriate to modify the 
option for a state to set avoided energy costs using LMP from a per se 
appropriate measure of avoided cost to a rebuttable presumption that 
LMP is an appropriate means to determine avoided cost.\98\
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    \98\ Id. P 152.
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    57. The Commission disagreed with the arguments made by Union of 
Concerned Scientists,\99\ NIPPC, CREA, REC, and OSEIA,\100\ and Public 
Interest Organizations \101\ that LMP should not be used as a measure 
of avoided energy costs because LMP prices are depressed in many 
markets where self-scheduling rights and state cost-recovery mechanisms 
for fuel and operating costs create the opportunity for market 
participation at a loss. The Commission recognized that, all other 
things being equal, self-scheduling of resources may impact market 
clearing prices. The Commission found that this potential price effect, 
however, does not mean that the LMP is not an accurate measure of 
avoided energy costs. The Commission stated that, while self-scheduling 
or other factors may impact LMPs, in any case, an electric utility's 
purchases during periods when these price impacts are occurring would 
be made at the resulting LMPs, whatever those LMPs may be. Therefore, 
the Commission found that LMPs meet the Commission's long-standing 
definition of avoided costs for a purchasing electric utility, even if 
they happen to reflect price impacts from self-scheduling or other 
factors.\102\
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    \99\ Union of Concerned Scientists Comments, Docket No. RM19-15-
000, at 3-8 (Nov. 15, 2019).
    \100\ NIPPC, CREA, REC, and OSEIA Comments, Docket No. RM19-15-
000, at 52 (Dec. 3, 2019).
    \101\ Public Interest Organizations Comments, Docket No. RM19-
15-000, at 52-64 (Dec. 3, 2019).
    \102\ Order No. 872, 172 FERC ] 61,041 at PP 155-56.
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    58. The Commission rejected the related request for clarification 
made by Solar Energy Industries,\103\ i.e., that the flexibility to set 
QF payments for as-available energy at the applicable LMP should 
require an on-the-record determination that the purchasing utility 
procures incremental energy from the identified LMP market at those 
prices. The Commission found that, unless an aggrieved entity seeks to 
rebut this presumption in a state avoided cost adjudication, 
rulemaking, legislative determination, or other proceeding, that state 
would not need to make such an on-the-record determination before it 
decides to use LMP.\104\
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    \103\ Solar Energy Industries Comments, Docket No. RM19-15-000, 
at 27-28 (Dec. 3, 2019).
    \104\ Order No. 872, 172 FERC ] 61,041 at P 158.
---------------------------------------------------------------------------

    59. The Commission rejected the arguments made by NIPPC, CREA, REC, 
and OSEIA that, more generally, prices for long-term QF contracts 
should be set by reference to long-term price indices or other 
indicators that genuinely reflect the long-term costs of generation 
avoided by the purchasing utility.\105\ The Commission stated that it 
only addressed as-available energy and as-available energy prices by 
definition are short term.\106\
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    \105\ NIPPC, CREA, REC, and OSEIA Comments, Docket No. RM19-15-
000, at 53 (Dec. 3, 2019).
    \106\ Order No. 872, 172 FERC ] 61,041 at P 160.
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a. Requests for Rehearing
    60. Public Interest Organizations argue that it was erroneous for 
the Commission to make a ``rebuttable presumption'' that the state or 
nonregulated utility can use the LMP as ``a rate for as-available 
qualifying facility energy sales to electric utilities located in a 
market defined in [18 CFR] 292.309(e), (f), or (g).'' \107\ Public 
Interest Organizations claim that the Commission acted contrary to 
precedent that limits an administrative agency's authority to establish 
presumptions by creating a rebuttable presumption that LMP is the 
avoided cost price ``for as-available qualifying facility energy sales 
to electric utilities located in'' an organized market.\108\ Public 
Interest Organizations claim that the

[[Page 86666]]

presumption unlawfully shifts the burden under the statute and is not 
based on record evidence showing that avoided cost energy prices are 
necessarily the same as the LMP, adding that there are no alternative 
explanations for a utility ever to incur energy prices that exceed the 
LMP.\109\
---------------------------------------------------------------------------

    \107\ Public Interest Organizations Request for Rehearing at 60-
72 (citing 18 CFR 292.304(b)(6)).
    \108\ Id. at 62.
    \109\ Id.
---------------------------------------------------------------------------

    61. Public Interest Organizations argue that, because the final 
rule stated that ``an LMP selected by a state to set a purchasing 
utility's avoided energy cost component might not always reflect a 
purchasing utility's actual avoided energy costs,'' the Commission 
cannot make the necessary finding under the statute that the LMP is, 
per se, the full avoided energy cost.\110\ Public Interest 
Organizations contend that, to create the LMP presumption lawfully, the 
Commission must have substantial record evidence showing that ``a sound 
and rational connection between'' the LMP and the full avoided cost of 
each utility (as necessary to ensure full encouragement and 
nondiscrimination) is ``so probable that it is sensible and timesaving 
to assume'' it unless disproven, arguing that there are no alternative 
explanations for a conclusion contrary to the presumption.\111\ Public 
Interest Organizations maintain that the record contains numerous 
examples of instances in which a utility in an organized market incurs 
costs greater than the LMP.\112\
---------------------------------------------------------------------------

    \110\ Id. at 64 (citing Order No. 872, 172 FERC ] 61,041 at P 
52).
    \111\ Id. at 66 (citing Cablevision Sys. Corp. v. FCC, 649 F.3d 
695, 716 (D.C. Cir. 2011) (Cablevision); Nat'l Mining Ass'n v. Dep't 
of Interior, 177 F.3d 1, 6 (D.C. Cir. 1999)); Sec'y of Labor v. 
Keystone Coal Min. Corp., 151 F.3d 1096, 1100-01 (D.C. Cir. 1998)).
    \112\ Id. at 68 & n.200 (citing Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 47-54 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    62. Public Interest Organizations claim that the Commission relies 
on an implicit and absolute connection between price and cost by 
repeatedly conflating the cost to buy in the day ahead market with the 
cost of energy to the utility.\113\ Public Interest Organizations 
maintain that, even when a utility is simultaneously selling into and 
buying energy from the day ahead market, the utility's costs for energy 
are the higher of the market price or the cost to produce or procure 
the power it sells into the market. Public Interest Organizations refer 
for example to a utility that dispatches its own generation at $35/MWh, 
sells into the market at $20/MWh, and then buys back at $20/MWh to meet 
load; the LMP price is $20, but the cost to the utility for energy is 
$35.\114\
---------------------------------------------------------------------------

    \113\ Id. at 69.
    \114\ Id. at 69-72.
---------------------------------------------------------------------------

b. Commission Determination
    63. We reject the arguments against establishing the rebuttable 
presumption that LMP reflects avoided costs for as-available energy. We 
disagree with Public Interest Organizations that the relevant precedent 
prohibits establishing a rebuttable presumption. Indeed, the courts 
have made clear that ``[u]nder the APA, agencies may adopt evidentiary 
presumptions provided that the presumptions (1) shift the burden of 
production and not the burden of persuasion . . . and (2) are 
rational.'' \115\ The final rule did not shift the burden of 
persuasion, only the burden of production. We emphasize that LMP 
typically reflects a purchasing utility's actual avoided energy 
costs.\116\
---------------------------------------------------------------------------

    \115\ See Cablevision, 649 F.3d at 716 (citing 5 U.S.C. 556(d)).
    \116\ See Order No. 872, 172 FERC ] 61,041 at PP 153, 156.
---------------------------------------------------------------------------

    64. However, we also acknowledged in the final rule that there may 
be instances when LMP does not reflect a purchasing utility's avoided 
cost and that is why the Commission allowed the presumption to be 
challenged. Requiring an entity challenging the state's use of the 
presumption in the first instance to show why the state was wrong does 
not negate the legal requirement that, unless the parties agree to 
another rate, the rates for purchases in a QF contract must equal a 
purchasing utility's avoided costs. If so challenged, a state would 
need to address the challenging entity's arguments in order to 
demonstrate that LMP represents the purchasing utility's avoided costs. 
Therefore, the Commission did not change the burden of persuasion.\117\ 
Moreover, in the final rule, the Commission appropriately established a 
rebuttable presumption to frame how it (and, potentially, reviewing 
courts) would evaluate challenges to states setting avoided costs at 
LMP.\118\
---------------------------------------------------------------------------

    \117\ See id. P 152.
    \118\ See AFPA v. FERC, 550 F.3d at 1183 (permitting Commission 
to establish rebuttable presumption via rulemaking rather than case-
by-case adjudication in PURPA section 210(m) context).
---------------------------------------------------------------------------

    65. We also disagree with Public Interest Organizations' assertion 
that the Commission failed to provide adequate support for why the 
presumption is rational in organized markets. As explained in the final 
rule, the Commission relied on a variety of supporting facts, including 
the fact that LMP definitionally reflects the true marginal cost of 
production of energy, taking into account physical system constraints, 
and other listed benefits of LMP.\119\ Because LMP is likely to reflect 
the true marginal cost of energy in the vast majority of cases for the 
reasons discussed in the final rule, it is ``so probable that it is 
sensible and timesaving to assume'' \120\ that LMP for a particular 
utility is an appropriate measure of the utility's avoided costs for 
as-available energy, unless disproven in a particular case. We leave 
open for specific cases to determine the appropriateness of using a 
particular LMP such that a QF could rebut the presumption that LMP is 
appropriate.\121\ Regarding Public Interest Organizations' claims that 
numerous examples in the record support their argument that utilities 
often incur costs greater than the LMP, we disagree. Public Interest 
Organizations' assertion is based on the evidence of self-scheduling 
they supplied in NOPR comments, and their assertion that this self-
scheduling behavior is enabled by out-of-market subsidization through 
retail rate cost recovery.\122\ However, Public Interest Organizations 
have provided no proof that such out-of-market subsidization takes 
place and there are legitimate reasons for self-scheduling that are 
consistent with rational market participant behavior. For example,

[[Page 86667]]

generation units with start-up and shut-down sequences longer than a 
single market commitment period may decide to self-schedule at a loss 
in one period in order to earn profits in other periods that they 
expect to exceed the temporary loss. Absent proof that retail rate 
subsidization is the dominant driver for self-scheduling behavior, 
there is little evidence in the record that purchasing utilities often 
incur costs greater than the LMP. Nevertheless, entities may seek to 
rebut the presumption if, for example, the RTO/ISO market is affected 
by persistent price distortions that are not the result of legitimate 
market participant behavior (such as persistent self-scheduling at a 
loss that is proven to be the result of out-of-market subsidization, 
and thus demonstrates that the utility regularly incurs costs that 
exceed LMP).
---------------------------------------------------------------------------

    \119\ Order No. 872, 172 FERC ] 61,041 at P 153 (finding that 
``(1) LMPs reflect the true marginal cost of production of energy, 
taking into account all physical system constraints; (2) these 
prices would fully compensate all resources for their variable cost 
of providing service; (3) LMP prices are designed to reflect the 
least-cost of meeting an incremental megawatt-hour of demand at each 
location on the grid, and thus prices vary based on location and 
time; and (4) unlike average system-wide cost measures of the 
avoided energy cost used by many states, LMP should provide a more 
accurate measure of the varying actual avoided energy costs, hour by 
hour, for each receipt point on an electric utility's system where 
the utility receives power from QFs'') (citing NOPR, 168 FERC ] 
61,184 at PP 44-45 (citing FERC v. Elec. Power Supply Ass'n, 136 S. 
Ct. 760, 768-69 (2016) (describing how LMP is typically calculated); 
Sacramento Mun. Util. Dist. v. FERC, 616 F.3d 520, 524 (D.C. Cir. 
2010); Order No. 831, 157 FERC ] 61,115 at P 7).
    \120\ Nat'l Mining Ass'n v. U.S. Dep't of Interior, 177 F.3d at 
6.
    \121\ See Order No. 872, 172 FERC ] 61,041 at PP 155-71 
(discussing why LMP is presumptively an appropriate measure of 
avoided energy costs even if in particular circumstances it is not 
appropriate).
    \122\ See Public Interest Organizations Request for Rehearing at 
71 (footnote omitted) (citing Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 46-55 (Dec. 3, 2019)) (``[E]ven 
utilities that operate in organized markets acquire energy outside 
of the day ahead market or produce energy at variable costs that 
exceed the market price and sell at a loss to the day ahead market. 
Price suppression is thus one indicator of the larger problem that 
the day ahead market is not reflecting the actual cost of energy 
supply to utilities, which belies FERC's assumption that the LMP 
reflects all utilities' actual cost for all marginal energy.'').
---------------------------------------------------------------------------

3. Tiered Avoided Cost Rates
a. Request for Clarification
    66. California Utilities request that the Commission clarify that 
it is no longer the Commission's policy or intent to permit states to 
subsidize QFs by the use of ``tiered'' avoided costs.\123\ California 
Utilities request that the Commission find that avoided cost rates may 
not be based only on the costs of a subset of facilities from which a 
state has mandated purchases or only on facilities that meet state-
determined characteristics such as the facilities' use of a renewable 
fuel. As such, California Utilities further request that the Commission 
find that the United States Court of Appeals for the Ninth Circuit 
decision in CARE v. CPUC \124\ as well as certain aspects of the 
Commission's orders \125\ are no longer valid precedent.
---------------------------------------------------------------------------

    \123\ California Utilities Motion for Clarification at 1-2.
    \124\ Californians for Renewable Energy v. Cal. Pub. Utils. 
Comm'n, 922 F.3d 929 (9th Cir. 2019) (CARE v. CPUC).
    \125\ Cal. Pub. Utils. Comm'n, 133 FERC ] 61,059 (2010) (CPUC 
2010), clarification and reh'g denied, 134 FERC ] 61,044 (2011) 
(CPUC 2011).
---------------------------------------------------------------------------

    67. According to California Utilities, Commission precedent on 
avoided costs for tiered resources is as follows for the following 
periods:\126\
---------------------------------------------------------------------------

    \126\ California Utilities Motion for Clarification at 3-8.

    1978-2010: All resources must be used to set avoided costs.\127\
---------------------------------------------------------------------------

    \127\ Id. at 3 (citing S. Cal. Edison Co., 70 FERC ] 61,215 
(CPUC 1995 I), reconsideration denied, 71 FERC ] 61,269 (1995) (CPUC 
1995 II)).
---------------------------------------------------------------------------

    2010-2019: States were permitted to adopt tiered avoided costs 
based on the costs of specific types of QFs, if the state had an 
unmet purchase mandate.\128\
---------------------------------------------------------------------------

    \128\ Id. at 4 (citing CPUC 2010, 133 FERC ] 61,059 at P 30).
---------------------------------------------------------------------------

    April 2019-2020: Tiered avoided costs mandated within the Ninth 
Circuit if state procurement mandates are unmet.\129\
---------------------------------------------------------------------------

    \129\ Id. at 5 (citing CARE v. CPUC, 922 F.3d 929).
---------------------------------------------------------------------------

    2020: The Commission returns to an all-resource approach and 
rejects using PURPA to subsidize QFs that are not otherwise 
financeable.\130\
---------------------------------------------------------------------------

    \130\ Id. (citing Order No. 872, 172 FERC ] 61,041 at P 123).
---------------------------------------------------------------------------

    68. California Utilities request clarification for the following 
reasons: (1) The Commission's failure to state in the final rule that 
it is overruling the CPUC cases or CARE v. CPUC; (2) the need for the 
Commission to defend a change in policy before an appellate court that 
will ask why the Commission no longer supports the policy it espoused 
in CPUC 2010; (3) the regulation that lists the factors a state may 
consider in determining avoided cost (18 CFR 292.304, which have been 
moved to 18 CFR 292.304(e)(2)) have not changed, which leaves them open 
to misinterpretation; and (4) the words ``taking into account the 
operating characteristics of the needed capacity'' \131\ regarding 
competitive solicitations, although clarified by Paragraph 433 of the 
final rule, could be misread as allowing avoided costs for QFs with 
``operating characteristics'' such as renewable fuel, cogeneration 
technology, under a certain size, or at specific locations (i.e., 
located on the distribution system).\132\
---------------------------------------------------------------------------

    \131\ See new 18 CFR 292.304(d)(8)(i)(B).
    \132\ California Utilities Motion for Clarification at 9-10.
---------------------------------------------------------------------------

    69. California Utilities maintain that adding the following 
language after 18 CFR 292.304(b)(5) will ensure that states will not 
use tiered avoided cost rates under PURPA as a vehicle to subsidize 
certain state-favored resources: ``(6) Rates for purchases may not be 
based on an avoided cost set by determining the cost of procuring 
energy and/or capacity to fulfill a State regulatory authority or non-
regulated electric utility mandate to procure energy and/or capacity 
from resources using a specific fuel type, using a specific technology, 
of a particular size, and/or located only on local distribution 
systems.'' \133\
---------------------------------------------------------------------------

    \133\ Id. at 13-14.
---------------------------------------------------------------------------

    70. California Commission disagrees that the final rule overrules 
CPUC 2011 and the Commission's earlier precedent. California Commission 
contends that the Commission's 1995 precedent prohibits assuming that 
``the utility can provide the capacity and generate the energy itself 
(i.e., through the establishment of the utility benchmark price), only 
to exclude the utility, cogenerators, and other resources from 
ultimately being able to supply the capacity and energy, by segmenting 
the portfolio and permitting only certain QFs to bid in certain 
segments against the benchmark and ultimately produce a higher-than-
avoided-cost rate.'' \134\ California Commission interprets Commission 
precedent as permitting a state to determine what capacity a utility 
would be avoiding, to decide from which generators a utility could 
purchase to satisfy state programs, and to set tiered avoided cost 
rates based on those qualifying resources.\135\
---------------------------------------------------------------------------

    \134\ California Commission Answer at 4-5.
    \135\ Id. at 5-6.
---------------------------------------------------------------------------

    71. California Commission asserts that the final rule's requirement 
that competitive solicitations be open to all sources was intended to 
prevent discrimination against QFs and did not preclude states from 
using tiered avoided cost rates.\136\ California Commission argues 
that, contrary to California Utilities' assertion, the final rule does 
not treat tiered rates as impermissible subsidies to QFs. California 
Commission contends, instead, that the final rule permits states to 
continue recognizing non-energy benefits outside the context of PURPA 
payments.\137\ California Commission requests that, with respect to 
CARE v. CPUC's holding that a state that uses QFs to meet a renewable 
portfolio standard (RPS) must set avoided cost only on resources that 
could satisfy that RPS, the Commission clarify that ``operating 
characteristics that qualify a QF to meet a state's [RPS] are energy-
related benefits that can be the basis for determining avoided costs 
and multi-tier pricing, as opposed to benefits unrelated to their 
production of energy--akin to renewable energy credits--that may not be 
compensated by rates under PURPA.'' \138\
---------------------------------------------------------------------------

    \136\ Id. at 7-9.
    \137\ Id. at 9-11.
    \138\ Id. at 11-12.
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b. Commission Determination
    72. We deny California Utilities' request for clarification. 
Although Commission precedent does not allow the use of non-operational 
externalities, such as environmental benefits, in setting avoided cost 
rates, PURPA neither requires nor prohibits states from establishing 
tiered procurement (and thus tiered pricing), such as California does. 
California's tiered supply procurement requirements reflect decisions 
regarding utility generation procurement (e.g., by specific fuel type 
or technology) that are within the boundaries of a state's traditional 
authority. Once such tiered generation procurement requirements have 
been

[[Page 86668]]

established by a state, if a QF qualifies for a particular generation 
procurement tier, it is reasonable to assume that the mandatory QF 
purchase will displace resources otherwise in that tier; therefore, the 
rates for that tier are in fact the cost avoided by the purchasing 
utility when it instead purchases from that QF.
    73. We cannot overrule a Court of Appeals decision, as California 
Utilities suggest. In addition, California Utilities have not 
adequately supported that there is any conflict between the final rule 
and the precedent they cite.\139\ Therefore, we decline to add 
additional regulatory language to address the issues they raise.
---------------------------------------------------------------------------

    \139\ The Commission in the final rule addressed arguments that 
QFs provide non-energy benefits. The Commission stated that such 
benefits may be addressed by states outside of PURPA. Because tiered 
QF rates result from tiered procurement not limited to QFs, and are 
therefore established outside of PURPA, nothing in PURPA prohibits 
such tiered rates. See Order No. 872, 172 FERC ] 61,041 at P 123; 
see also CPUC 2010, 133 FERC ] 61,059 at P 31 (``[A]lthough a state 
may not include a bonus or an adder in the avoided cost rate unless 
it reflects actual costs avoided, a state may separately provide 
additional compensation for environmental externalities, outside the 
confines of, and, in addition to the PURPA avoided cost rate, 
through the creation of renewable energy credits. . . .'').
---------------------------------------------------------------------------

4. Providing for Variable Energy Rates in QF Contracts Is Consistent 
With PURPA
    74. As explained above, if a QF chooses to sell energy and/or 
capacity pursuant to a contract, the PURPA Regulations in effect before 
the final rule provide the QF the option of receiving the purchasing 
electric utility's avoided cost calculated and fixed at the time the 
LEO is incurred.\140\ The Commission's justification in Order No. 69 
for allowing QFs to fix their rate at the time of the LEO for the 
entire term of a contract was that fixing the rate provides certainty 
``with regard to return on investment in new technologies necessary for 
the QF to obtain financing'' \141\ The Commission stated that its 
regulations pertaining to LEOs ``are intended to reconcile the 
requirement that the rates for purchases equal the utilities' avoided 
costs with the need for qualifying facilities to be able to enter 
contractual commitments based, by necessity, on estimates of future 
avoided costs.'' \142\ Further, the Commission agreed with the ``need 
for certainty with regard to return on investment in new 
technologies,'' and stated its belief that any overestimations or 
underestimations ``will balance out.'' \143\
---------------------------------------------------------------------------

    \140\ 18 CFR 292.304(d)(2)(ii).
    \141\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,880 
(justifying the rule on the basis of ``the need for certainty with 
regard to return on investment in new technologies'').
    \142\ Id.
    \143\ Id.
---------------------------------------------------------------------------

    75. In the NOPR, the Commission proposed to revise 18 CFR 
292.304(d) to permit a state to limit a QF's option to elect to fix at 
the outset of a LEO the energy rate for the entire length of its 
contract or LEO, and instead allow the state the flexibility to require 
QF energy rates to vary during the term of the contract. However, under 
the proposed revisions to 18 CFR 292.304(d), a QF would continue to be 
entitled to a contract with avoided capacity cost rates (assuming there 
are avoided capacity costs) calculated and fixed at the time the 
contract or LEO is incurred. Only the energy rate in the contract or 
LEO could be required by a state to vary. Further, the NOPR did not 
propose to obligate states to require variable avoided cost energy 
rates; they would retain the ability to allow the QF's energy rate be 
fixed at the time the LEO is incurred.\144\
---------------------------------------------------------------------------

    \144\ NOPR, 168 FERC ] 61,184 at P 67.
---------------------------------------------------------------------------

    76. In the final rule, the Commission adopted without modification 
the NOPR variable rate proposal. The Commission found that setting QF 
avoided energy cost contract and LEO rates at the level of the 
purchasing utility's avoided energy costs at the time the energy is 
delivered is consistent with PURPA, which limits QF rates to the 
purchasing utility's avoided costs. The Commission explained that a 
variable avoided cost energy rate approach is a superior way to ensure 
that payments to QFs equal, but do not exceed, avoided costs.\145\ The 
Commission stated that it is inevitable that, over the life of a QF 
contract or other LEO, a fixed avoided cost energy rate, such as that 
used in past years, will deviate from actual avoided costs.\146\
---------------------------------------------------------------------------

    \145\ 16 U.S.C. 824a-3(b)(1).
    \146\ Order No. 872, 172 FERC ] 61,041 at P 253.
---------------------------------------------------------------------------

    77. The Commission found that the record justifies its conclusions 
that long-term forecasts of avoided energy costs are inherently 
imperfect and that states should be given the flexibility to rely on a 
more reliable variable avoided cost energy rate approach. Further, the 
Commission pointed to instances where overestimates and underestimates 
have not balanced out.\147\ The Commission found that, when that has 
occurred, consumers have borne the brunt of the overpayments, which 
subsidized QFs, in contravention of Congressional intent and the 
Commission's expectations. Given that PURPA section 210(b) prohibits 
the Commission from requiring QF rates in excess of avoided costs, the 
Commission explained that record evidence supports its decision to give 
the states the flexibility to require variable avoided cost energy 
rates in QF contracts and other LEOs to prevent QF rates from exceeding 
avoided costs.\148\
---------------------------------------------------------------------------

    \147\ See id. (citing Duke Energy Comments, Docket No. RM19-15-
000, at 6 (Dec. 3, 2019) (Duke's QF contracts cost $4.66 billion but 
its ``actual current avoided costs'' are $2.4 billion); Idaho Power 
Comments, Docket No. RM19-15-000, at 10-11 (Dec. 3, 2019) (``The 
cost of PURPA generation contained in Idaho Power's base rates, on a 
dollars per MWh basis, is not just greater than Mid-C market prices, 
it is greater than all the net power supply cost components 
currently recovered in base rates. Idaho Power's average cost of 
PURPA generation included in base rates is $62.49/MWh. At $62.49/
MWh, the average cost of PURPA purchases is greater than the average 
cost of FERC Account 501, Coal at $22.79/MWh; greater than FERC 
Account 547, Natural Gas at $33.57/MWh; greater than FERC Account 
555, Non-PURPA Purchases at $50.64/MWh; and significantly greater 
than what is being sold back to the market as FERC Account 447, 
Surplus Sales at $22.41/MWh.''); Portland General Comments, Docket 
No. RM19-15-000, at 5 (Dec. 3, 2019) (``for a typical 3 MW Solar QF 
project that incurred a LEO in 2016 and reaches commercial 
operations three years later, [Portland General's] customers would 
pay 67% more for the project's energy than if the 2019 avoided cost 
rate had been used. As a result of this lag, [Portland General's] 
customers would pay an additional $1.6 million more for the energy 
from the QF facility over the 15-year contract term.'')); see also 
NOPR, 168 FERC ] 61,184 at P 64 n.101 (citing Alliant Energy 
Comments, Docket No. AD16-16-000, at 5 (Nov. 7, 2016) (``Current 
market-based wind prices in the Iowa region of MISO are 
approximately 25% lower than the PURPA contract obligation prices 
[Interstate Power and Light Company] is forced to pay for the same 
wind power for long-term contracts entered into as of June 2016. As 
a result, PURPA-mandated wind power purchases associated with just 
one project could cost Alliant Energy's Iowa customers an 
incremental $17.54 million above market wind prices over the next 10 
years.'') (emphasis in original); Edison Electric Institute (EEI) 
Supplemental Comments, Docket No. AD16-16-000, attach. A at 3-4 
(June 25, 2018) (``On August 1, 2014, a 10-year fixed price contract 
at the Mid-Columbia wholesale power market trading hub was priced at 
$45.87/MWh. On June 30, 2016, the same contract was priced as 
$30.22/MWh, a decline of 34% in less than two years. However, over 
the next 10 years, PacifiCorp has a legal obligation to purchase 
51.9 million MWhs under its PURPA contract obligations at an average 
price of $59.87/MWh. The average forward price curve for the Mid-
Columbia trading hub during the same period is $30.22/MWh, or 50% 
below the average PURPA contract price that PacifiCorp will pay. The 
additional price required under long-term fixed contracts will cost 
PacifiCorp's customers $1.5 billion above current forward market 
prices over the next 10 years.''); Comm'r Kristine Raper, Idaho 
Commission Comments, Docket No. AD16-16-000, at 3-4 (June 30, 2016) 
(``Idaho Power demonstrated that the average cost for PURPA power 
since 2001 has exceed the Mid-Columbia (Mid-C) Index Price and is 
projected to continue to exceed the Mid-C price through 2032. 
Likewise, PacifiCorp's levelized avoided cost rates for 15-year 
contract terms in Wyoming shows a decrease of approximately 50% from 
2011 through 2015 (from approximately $60 per megawatt-hour to less 
than $30 per megawatt-hour).'')).
    \148\ Order No. 872, 172 FERC ] 61,041 at PP 254-55.
---------------------------------------------------------------------------

    78. The Commission found that the variable avoided cost energy rate 
provision is not based on any determination that the Commission's

[[Page 86669]]

rules no longer should encourage QF development. The Commission found, 
instead, that it was revising the PURPA Regulations by giving states 
the flexibility to require variable avoided cost energy rates in QF 
contracts and other LEOs in order to better comply with Congress's 
clear requirement in PURPA that the Commission may not require QF rates 
in excess of a purchasing utility's avoided costs.\149\
---------------------------------------------------------------------------

    \149\ Id. P 256.
---------------------------------------------------------------------------

    79. Opponents of variable avoided cost energy rates urged the 
Commission to continue placing this risk on the customers of electric 
utilities, as in the past, by retaining the option for QFs to fix their 
avoided cost energy rates in their contracts or LEOs notwithstanding 
record evidence that fixed energy rates compared to actual avoided 
costs have not balanced out over time. But, after consideration of the 
record, the Commission decided instead to allow states the flexibility 
to require variable avoided cost energy rates in QF contracts and LEOs 
and thereby reduce the risk to customers. The Commission found that its 
determination ensures that the PURPA Regulations continue to be 
consistent with the statutory avoided cost rate cap in PURPA section 
210(b), coupled with the directive in the PURPA Conference Report that 
customers of utilities not be required to subsidize QFs.\150\
---------------------------------------------------------------------------

    \150\ Id. P 258 (citing Conf. Rep. at 98 (emphasis added) (``The 
provisions of this section are not intended to require the rate 
payers of a utility to subsidize cogenerators or small power 
produc[er]s.'')).
---------------------------------------------------------------------------

    80. The Commission found that there is no merit to the contention 
that the PURPA Conference Report expresses Congressional intent that 
QFs are entitled to long-term fixed energy rates. The Commission found 
that, while Congress recognized that the better measure of avoided cost 
in certain scenarios might be the cost of the alternative fossil fuel 
unit that would not be run at that later date,\151\ nothing in the 
section of the PURPA Conference Report quoted by opponents of the 
variable energy rate proposal suggests that Congress intended the 
Commission to require that all avoided cost energy rates be fixed at 
the outset for the life of a QF contract or other LEO. The Commission 
further found that nothing in the revision being implemented in the 
final rule would prohibit a state from calculating a QF's avoided cost 
energy rate for a QF contract or LEO in the manner suggested in the 
PURPA Conference Report or, indeed, in the manner the Commission has 
long allowed, if a state determined that such an approach best reflects 
the purchasing electric utility's avoided costs.\152\
---------------------------------------------------------------------------

    \151\ Under the approach adopted in the final rule, with the 
flexibility granted to states to adopt--but not a mandate directing 
states to adopt--variable avoided cost energy rates for QF contracts 
and other LEOs, the Commission permitted states to adopt a pricing 
approach that best fits their circumstances, including adopting the 
pricing approach described by the PURPA Conference Report to address 
the circumstances described by the PURPA Conference Report. Id. P 
260 n.409.
    \152\ Id. P 260.
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    81. The Commission described the variable avoided cost energy rate 
provision as not running afoul of the Freehold Cogeneration and Smith 
Cogeneration cases cited by Harvard Electricity Law.\153\ The 
Commission described those decisions, which overturned state avoided 
cost determinations allowing for changes in QF rates, as based on the 
provision in the original PURPA Regulations giving QFs the option to 
select contracts with long-term fixed avoided cost rates.\154\ The 
Commission explained that neither decision suggests that PURPA would 
prevent the Commission from revising its regulations to allow states 
the flexibility to require variable avoided cost energy rates.
---------------------------------------------------------------------------

    \153\ Id. P 261 (citing Harvard Electricity Law Comments, Docket 
No. RM19-15-000, at 29 (Dec. 3, 2019) (citing Freehold Cogeneration 
Ass'n v. Bd. of Regulatory Comm'rs of State of N.J., 44 F.3d 1178, 
1193 (3d Cir. 1995) (Freehold Cogeneration); Smith Cogeneration 
Mgmt. v. Corp. Comm'n, 863 P.2d 1227, 1227 (Okla. 1993) (Smith 
Cogeneration))).
    \154\ Id. (citing Smith Cogeneration, 863 P.2d at 1241 (emphasis 
added) (holding that allowing reconsideration of established avoided 
costs ``makes it impossible to comply with PURPA and FERC 
regulations requiring established rate certainty for the duration of 
long term contracts for qualifying facilities that have incurred an 
obligation to deliver power''); Freehold Cogeneration, 44 F.3d at 
1193 (emphasis added) (relying on Smith Cogeneration analysis that 
``that PURPA and FERC regulations preempted the State Commission 
rule'')).
---------------------------------------------------------------------------

    82. The Commission found that it was not subjecting QFs to the same 
type of examination that is traditionally given to electric utility 
rate applications (e.g., cost-of-service rate regulation).\155\ Indeed, 
the Commission found that the regulation it adopted does not subject QF 
rates to any examination whatsoever of the costs incurred by QFs in 
producing and selling power. Rather, the Commission stated that the 
variable avoided cost energy rate provision applicable to QF contracts 
and other LEOs that the Commission adopted in the final rule sets QF 
rates based on the avoided costs of the purchasing utility. The 
Commission stated that this variable avoided cost energy rate provision 
cannot be characterized as imposing utility-style regulation on the QFs 
themselves.\156\
---------------------------------------------------------------------------

    \155\ Id. P 262.
    \156\ Id. P 263.
---------------------------------------------------------------------------

    83. Finally, the Commission determined that state regulators may 
not change rates in existing QF contracts or other existing LEOs.\157\ 
The Commission explained that, by its terms, the variable avoided cost 
energy rate provision applies only prospectively to new contracts and 
new LEOs entered into after the effective date of the final rule. The 
Commission emphasized that nothing in the final rule should be read as 
sanctioning the modification of existing fixed-rate QF contracts and 
LEOs.\158\
---------------------------------------------------------------------------

    \157\ Id. P 264 (citing Harvard Electricity Law Comments, Docket 
No. RM19-15-000, at 23 (Dec. 3, 2019) (citing API, 461 U.S. at 
414)).
    \158\ Id.
---------------------------------------------------------------------------

a. Whether the Current Approach Has Resulted in Payments to QFs in 
Excess of Avoided Costs
    84. In the final rule, the Commission gave states the flexibility 
to require variable energy pricing in QF contracts and other LEOs, 
instead of providing QFs the right to elect fixed energy prices, based 
on the Commission's concern that, at least in some circumstances, long-
term fixed avoided cost energy rates have been well above the 
purchasing utility's avoided costs for energy and that this was a 
result prohibited by PURPA section 210(b). The Commission found that 
the record evidence demonstrates that QF contract and LEO prices for 
energy can exceed and have exceeded avoided costs for energy without 
any subsequent balancing out. In addition to the examples presented in 
the record of the Technical Conference that were cited in the NOPR, the 
Commission noted that commenters have provided additional examples of 
such overpayments.\159\ The Commission explained that such evidence 
persuaded it that it is necessary to give states the flexibility to 
address QF contract and LEO rates for energy that exceed avoided costs 
for energy, while at the same time still allowing states the 
flexibility to continue requiring long-term fixed avoided cost energy 
rates in QF contracts and other LEOs when such treatment is 
appropriate.\160\
---------------------------------------------------------------------------

    \159\ Id. P 283 (citing Duke Comments, Docket No. RM19-15-000, 
at 6 (Dec. 3, 2019); Idaho Power Comments, Docket No. RM19-15-000, 
at 10-11 (Dec. 3, 2019); Portland General Comments, Docket No. RM19-
15-000, at 5 (Dec. 3, 2019); NOPR, 168 FERC ] 61,184 at P 64 n.101).
    \160\ Id.
---------------------------------------------------------------------------

    85. In the final rule, the Commission found, as acknowledged in 
Harvard Electricity Law's NOPR comments, that the examples of QF 
contract rates that exceed avoided costs that are in the record 
illustrate the general proposition that ``energy forecasts have a 
manifest

[[Page 86670]]

record of failure.'' \161\ The Commission explained that it was this 
``manifest record of failure'' including evidence in the record that 
the failure has been at the expense of consumers that motivated the 
Commission to make the change adopted in the final rule.\162\
---------------------------------------------------------------------------

    \161\ Id. P 284 (citing Harvard Electricity Law Comments, Docket 
No. RM19-15-000, at 24 (Dec. 3, 2019) (citing Vaclav Smil, Energy at 
the Crossroads: Global Perspectives and Uncertainties, Mass. Inst. 
Tech., 2003, at 121, 145-49)).
    \162\ Id.
---------------------------------------------------------------------------

    86. The Commission also found that challenges to the idea that 
fixed avoided cost energy rates in QF contracts and other LEOs have 
exceeded actual avoided costs largely either conceded that 
overestimations have occurred while arguing that such overestimations 
impacted purchasing electric utilities just as much as QFs or attempted 
to argue that such overestimations were temporary or unusual.\163\
---------------------------------------------------------------------------

    \163\ Id. P 285.
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    87. First, the Commission determined that the record evidence 
demonstrates that, contrary to the Commission's finding in 1980, 
overestimations and underestimations of future avoided costs may not 
even out.\164\ Consequently, the Commission found that its 
determination in 1980, based on the record at that time, does not 
preclude the Commission from relying on new record evidence showing a 
change in circumstances since 1980 to revise the 1980 rule.
---------------------------------------------------------------------------

    \164\ Id. P 286 (citing Duke Comments, Docket No. RM19-15-000, 
at 6 (Dec. 3, 2019); Idaho Power Comments, Docket No. RM19-15-000, 
at 10-11 (Dec. 3, 2019); Portland General Comments, Docket No. RM19-
15-000, at 5 (Dec. 3, 2019); NOPR, 168 FERC ] 61,184 at 64 n.101).
---------------------------------------------------------------------------

    88. The Commission agreed with Public Interest Organizations that 
the recent electricity price overestimations were not unique to QFs and 
can be explained by general declines in natural gas prices since the 
adoption of hydraulic fracturing and the 2007-2009 recession.\165\ But 
the Commission explained that these overestimations are precisely why 
the estimates of avoided costs reflected in the QF contracts and LEOs 
were incorrect and why the resulting fixed avoided cost energy rates 
reflected in such QF contracts and other LEOs resulted in QF rates well 
above utility avoided costs in violation of PURPA section 210(b); the 
precipitous decline in natural gas prices caused a corresponding 
reduction in utilities' energy costs, and thus in their avoided energy 
costs but this decline was not reflected in the QFs' fixed contract 
rates that remained at their previous levels.\166\
---------------------------------------------------------------------------

    \165\ Id. P 287 (citing Public Interest Organizations Comments, 
Docket No. RM19-15-000, at 47-50 (Dec. 3, 2019)).
    \166\ Id.
---------------------------------------------------------------------------

    89. Similarly, the Commission found that arguments that electric 
utilities also based resource acquisitions on incorrect forecasts of 
natural gas prices \167\ ignore a key distinction between utility rates 
and fixed QF rates. As the Commission explained, electric utilities may 
have relied on incorrect natural gas price forecasts to justify the 
timing and type of their resource acquisitions, as commenters assert. 
However, the Commission found that, once an electric utility resource 
decision was made, electric utilities' cost-based rate regimes 
typically obligated them eventually to pass through to customers any 
energy cost savings realized as a result of declining natural gas and 
other fuel prices, as well as any energy cost savings due to lower 
purchased power rates resulting from the decline in natural gas prices. 
The Commission found that, by contrast, once QF avoided cost energy 
rates were fixed based on now-incorrect (and now-high) natural gas 
price forecasts, those energy rates remained fixed for the term of the 
QFs' contracts and LEOs. Therefore, unlike fixed avoided cost energy 
rates in QF contracts and LEOs, the Commission determined that cost-
based electric utility energy rates declined as the cost of natural gas 
and other fuels and purchased power declined.\168\
---------------------------------------------------------------------------

    \167\ Id. P 288 (citing Electricity Consumers Resource Council, 
American Chemistry Council, and American Forest and Paper 
Association (ELCON) Comments, Docket No. RM19-15-000, at 22 (Dec. 3, 
2019); North Carolina Commission Staff Comments, Docket No. RM19-15-
000, at 2-3 (Dec. 3, 2019); NIPPC, CREA, REC, and OSEIA Comments, 
Docket No. RM19-15-000, at 31 (Dec. 3, 2019); Public Interest 
Organizations Comments, Docket No. RM19-15-000, at 40, 43 (Dec. 3, 
2019); Solar Energy Industries Comments, Docket No. RM19-15-000, at 
36-38 (Dec. 3, 2019)).
    \168\ Id.
---------------------------------------------------------------------------

    90. The Commission also disagreed with Public Interest 
Organizations' assertions that it was improper to have used competitive 
market hub prices to determine whether fixed QF contract and LEO prices 
resulted in overpayments as compared to electric utilities' actual 
avoided costs.\169\ The Commission recognized that the competitive 
market hub prices used in the comparisons may not have precisely 
reflected the avoided energy costs of all electric utilities located in 
the same region as the competitive market hub. However, the Commission 
found that competitive market prices in general should reflect the 
marginal avoided energy costs of utilities with access to such markets 
and that those markets generally reflect the marginal cost of energy in 
the region.\170\ The Commission further found that the magnitude of the 
differences between the market hub prices and the QF contract and LEO 
prices provides solid evidence that the QF contract and LEO prices used 
in the comparison were well above actual avoided energy costs at the 
time the energy was delivered by the QFs, even if the exact magnitude 
is unclear.\171\
---------------------------------------------------------------------------

    \169\ Id. P 289 (citing Public Interest Organizations Comments, 
Docket No. RM19-15-000, at 40-41 (Dec. 3, 2019)).
    \170\ Id. The Commission stated that a review of recent Mid-C 
Hub daily spot prices (from Intercontinental Exchange (ICE) https://www.eia.gov/electricity/wholesale/, indicates that they reflect the 
marginal cost of energy in that area since they are usually the 
result of a significant number of trades (averaging 54 per day), 
counterparties (averaging 16 per day), and trading volume (averaging 
26,714 MWh/day), which usually exceed those of the NP-15 trading 
hub, an active Western trading hub in Northern California in the 
CAISO footprint (averaging 6 trades per day, 4 counterparties per 
day, and 2,756/MWh per day). The Commission described prices for 
Mid-C as ranging between an average of approximately $16/MWh high 
price and $13/MWh low price during the recent spring (Mar 19-Jun 20, 
2020). During this period the index was reported for 65 trading days 
for Mid-C and 9 trading days for NP-15. Id.
    \171\ Id.
---------------------------------------------------------------------------

    91. The Commission acknowledged that energy prices may increase in 
the future but explained that giving states the flexibility to require 
variable avoided cost energy rates in QF contracts and in other LEOs 
will allow states to better ensure that avoided cost energy payments 
made to QFs will more accurately reflect the purchasing utility's 
avoided costs regardless of whether energy prices are increasing or 
declining. The Commission also noted that, if energy prices do in fact 
increase, variable avoided cost energy pricing would protect and even 
benefit the QF itself because it would not be locked into a fixed 
energy rate contract or LEO that would be below the purchasing electric 
utility's avoided energy cost.\172\
---------------------------------------------------------------------------

    \172\ Id. PP 290-91.
---------------------------------------------------------------------------

    92. The Commission noted that, although many commenters agreed that 
fixed QF energy rates were higher than actual avoided energy costs in 
at least some instances, challenges were raised against both Duke 
Energy's estimate that its fixed QF contract rates were $2.6 billion 
above market costs and the Concentric Report's comparison of QF fixed 
rates for wind and solar facilities with the cost of wind and solar 
projects with competitive, non-PURPA contracts.\173\
---------------------------------------------------------------------------

    \173\ Id. P 291.
---------------------------------------------------------------------------

    93. The Commission found that the expert testimony cited by the SC 
Solar Alliance, that the witness ``wouldn't put a whole lot of weight 
in [Duke's

[[Page 86671]]

estimate],'' \174\ does not address Duke's calculation of past 
overpayments. Rather, the Commission described the witness as answering 
a question regarding the potential for overpayments ``[f]or going 
forward solar,'' i.e., future overpayments as a result of the new fixed 
avoided cost rates being considered by the South Carolina Commission 
that were the subject of the expert witness' testimony.\175\ The 
Commission noted that the same witness acknowledged the past 
overpayments made by Duke Energy, which he attributed to ``drops in 
natural gas prices that no one could've foreseen.'' \176\ The 
Commission explained that it was these overpayments due to unforeseen 
declines in natural gas prices that formed an important basis for the 
Commission's determination in the final rule to now give states the 
flexibility to require variable avoided cost energy rates in QF 
contracts and LEOs.\177\
---------------------------------------------------------------------------

    \174\ Id. P 292 (citing SC Solar Alliance Comments, Docket No. 
RM19-15-000, at 7 (Dec. 3, 2019)).
    \175\ Id. (citing Public Service Commission of South Carolina, 
Docket No. 2019-185 & 186-E, Hearing Transcript Vol. 2, Tr. 596: 3-4 
(Horii Test.) (attached as Appendix 1 to SC Solar Alliance Comments, 
Docket No. RM19-15-000 (Dec. 3, 2019))).
    \176\ Id. (citing Horii Test. 593:21-22).
    \177\ Id.
---------------------------------------------------------------------------

    94. The Commission also emphasized that it did not rely on the 
Concentric Report to support the variable energy avoided cost provision 
adopted in the final rule. The Commission determined that it is not 
clear that the difference in costs identified by Concentric can be 
ascribed to the fixed rates in the QF contracts or rather to the fact 
that the avoided cost rates in the QF contracts were based on more 
expensive non-renewable capacity that was avoided by the purchasing 
utilities.\178\
---------------------------------------------------------------------------

    \178\ Id. P 293.
---------------------------------------------------------------------------

i. Requests for Rehearing
    95. EPSA argues that the Commission erred in relying on the idea 
that overestimates and underestimates have not balanced out because the 
Commission has neither validated these allegations, nor assessed 
whether the overestimations of avoided cost have, in fact, balanced 
out.\179\ Public Interest Organizations argue that the Commission's 
determination to permit variable energy rates to mitigate the risk of 
alleged overpayments to QFs is arbitrary and capricious and unsupported 
by substantial evidence.\180\ Likewise, Solar Energy Industries assert 
that there is a lack of evidence to conclude that protecting electric 
consumers warrants terminating the QF's right to elect long-term fixed 
energy rates.\181\ EPSA argues that over- and under-estimations over 
time is irrelevant absent evidence that avoided cost forecasts are 
inherently less accurate than the cost estimates used to set the 
purchasing utilities' own rates.\182\
---------------------------------------------------------------------------

    \179\ EPSA Request for Rehearing at 10.
    \180\ Public Interest Organizations Request for Rehearing at 9, 
84.
    \181\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 19.
    \182\ EPSA Request for Rehearing at 10.
---------------------------------------------------------------------------

    96. Public Interest Organizations contend that the Commission 
incorrectly defined avoided costs and incorrectly defined avoided costs 
with short run prices.\183\ Public Interest Organizations assert that 
the Commission did not respond to arguments that historic avoided cost 
rates ``have likely underestimated utilities' actual `but for' avoided 
costs, resulting in underpayment rather than overpayment to QFs.'' 
\184\ They also assert that ``there is no evidence in the record 
showing that utilities would have--as the Commission assumed--relied on 
short term energy markets rather than entering into long-term contracts 
based on similarly speculative avoided cost estimates or building new 
generating resources,'' and that ``utilities often build and operate 
generating resources at costs well above their purported avoided cost 
rate.'' \185\ Public Interest Organizations argue that the Commission 
incorrectly assumed that the cost for energy that a utility would incur 
``but for'' a QF is the short run cost and that utilities never lock in 
energy costs by constructing their own energy resources, executing long 
term fuel contracts or executing long term energy supply contracts. 
Public Interest Organizations claim that, if a utility ever locks in 
energy costs instead of relying on the short run energy or fuel markets 
for supply, a QF can displace those long-run costs rather than the 
short run cost, adding that, contrary to the Commission's assertions, 
avoided energy rates paid to QFs are significantly lower than 
utilities' true generation costs.\186\
---------------------------------------------------------------------------

    \183\ Public Interest Organizations Request for Rehearing at 84.
    \184\ Id. at 85.
    \185\ Id.
    \186\ Id. at 86.
---------------------------------------------------------------------------

    97. Public Interest Organizations argue that the overestimations 
upon which the Commission relied ``were incorrectly calculated based on 
long-run contract prices and short-run costs, rather than the long-term 
QF price and the cost of the resource that the utility would have 
acquired but for the QFs.'' \187\ Public Interest Organizations contend 
that the Commission assumed without any evidence that those utilities 
would have built their own energy resources, executed long term fuel 
contracts, or executed non-QF power purchase agreements without the QF 
purchases. Public Interest Organizations assert that, while QF 
contracts entered into before 2007-2009 might not have accounted for 
declining natural gas prices, which caused these contracts to be higher 
than short term market prices, alternative long-term commitments those 
utility might have made without QF purchases might also not have 
accounted for those natural gas price declines. Public Interest 
Organizations reason that avoided costs therefore should be based on 
those alternative sources that a utility would have purchased but for 
QF purchases rather than short run market prices and the Commission 
lacked evidence to assert that ``utilities' actual incremental cost of 
generating energy `but for' QF generation exceeds rates QFs have 
received through long-term fixed energy rate contracts.'' \188\
---------------------------------------------------------------------------

    \187\ Id. at 86-87.
    \188\ Id. at 87.
---------------------------------------------------------------------------

    98. Public Interest Organizations maintain that the Commission 
lacked evidence to assert that natural gas price declines would have 
decreased the prices of utility power purchase agreements, energy 
supply investments, fuel contracts and other long-term energy supply 
commitments. Public Interest Organizations contend that the failure to 
predict natural gas price declines did not entail any energy cost 
savings, yielded energy price increases passed along to customers, and 
rendered uneconomic utilities' long-term coal plant investments, coal 
contracts, and power supply contracts to ensure long term energy 
supply. Public Interest Organizations assert that the Commission's 
conflating short-run market prices with utility supply costs excludes 
supply beyond the day-ahead market and costs above market price. Public 
Interest Organizations claim that the Commission did not address 
concerns that vertically integrated utilities' monopoly status ensures 
that utilities operate their own plants at above-market prices and 
would have added their own new generation but for QF purchases. Public 
Interest Organizations assert that, even though QF prices may have been 
higher than market prices, that simply reflects foregone utility 
windfall profits and not

[[Page 86672]]

costs that customers would otherwise have paid.\189\
---------------------------------------------------------------------------

    \189\ Id. at 87-90.
---------------------------------------------------------------------------

    99. Public Interest Organizations argue that the Commission was 
internally inconsistent in defending its decision to presumptively 
consider competitive market prices like LMP equal to full avoided cost 
in conjunction with its determination to allow states to eliminate 
fixed energy rate contracts.\190\ Public Interest Organizations contend 
that, in permitting competitive market prices like LMP to set avoided 
costs, the Commission also inconsistently acknowledged that utilities 
incur long term energy costs that exceed those prices and that the 
competitive market prices are only being used to set the as-available 
short term avoided cost rates instead of long-run energy costs that can 
be avoided with long-term QF contracts.\191\ Public Interest 
Organizations claim that the Commission permitted a price determined at 
the time of delivery to set the price for long-term contracts, even 
though the Commission acknowledged that long term QF energy supply 
avoids alternative long term energy supply commitments and costs that 
are not reflected in the short run LMP or market hub price.\192\
---------------------------------------------------------------------------

    \190\ Id. at 9, 90.
    \191\ Id. at 90.
    \192\ Id. at 91-92.
---------------------------------------------------------------------------

    100. EPSA argues that the Commission's regulations and precedent 
contradict reliance on the idea that overestimates and underestimates 
have not balanced out.\193\ EPSA points out that 18 CFR 292.304(b)(5) 
expressly provides that, ``[i]n the case in which the rates for 
purchases are based upon estimates of avoided costs over the specific 
term of the contract or other legally enforceable obligation, the rates 
for such purchases do not violate this subpart if the rates for such 
purchases differ from avoided costs at the time of delivery.'' \194\
---------------------------------------------------------------------------

    \193\ EPSA Request for Rehearing at 14.
    \194\ Id. at 15 (citing 18 CFR 292.305(b)).
---------------------------------------------------------------------------

    101. EPSA asserts that, because the final rule did not modify, much 
less eliminate, 18 CFR 292.304(b)(5), which allows states to retain the 
fixed energy rate contract option, it is impossible to claim that the 
fixed energy rate contract option conflicts with the avoided cost cap 
and that the Commission cannot take a position that is at odds with the 
terms of its own regulations.\195\
---------------------------------------------------------------------------

    \195\ Id. at 14-15.
---------------------------------------------------------------------------

    102. According to Solar Energy Industries, there is no indication 
in the record that any retail rates paid by electric consumers 
fluctuate based on the purchasing utility's obligation to purchase from 
QFs. Solar Energy Industries also argue that, for utilities with stated 
retail rates, there is no evidence to suggest that these rates will be 
reduced in any manner in the event the state utilizes the 
``flexibility'' provided by revised Section 292.304(d), unless the 
Commission mandates otherwise.\196\ Solar Energy Industries add that 
the evidence in the record of alleged overpayments was both flawed and 
not adequately supported and thus does not support the contention that 
overpayments and underpayments did not balance out for an extended 
period of time.\197\
---------------------------------------------------------------------------

    \196\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 20.
    \197\ Id. at 21-23.
---------------------------------------------------------------------------

    103. Solar Energy Industries argue that, to the extent that 
existing methodologies in some states have produced inaccurate 
forecasts of long-run avoided costs, the solution is better 
methodologies--not an abandonment of long-run marginal costs.\198\
---------------------------------------------------------------------------

    \198\ Id. at 23.
---------------------------------------------------------------------------

ii. Commission Determination
    104. As an initial matter, it is beyond any reasonable question 
that the Commission's determination to give the states the flexibility 
to require variable energy rates in QF contracts is within the 
Commission's authority under PURPA. By definition, such a rate 
compensates the QF at a rate reflecting the energy costs avoided by the 
purchasing utility as a result of its purchase of energy from the QF. 
Moreover, a utility's avoided purchased energy costs constantly change 
over the term of a contract as the utility's marginal resource changes 
due to changes in load, changes in the availability of alternative 
resources, and changes in the availability of the marginal resource. 
The avoided energy cost also changes with fluctuations in fuel use at 
different loading levels and with changes in fuel costs. Consequently, 
a variable energy contract rate by definition would more accurately 
reflect the utility's avoided energy costs than a fixed contract that 
does not vary over the length of a multi-year contract.
    105. As a result, there is no question but that the Commission 
could have imposed a variable energy contract requirement when it 
promulgated the PURPA Regulations in 1980 instead of requiring fixed 
energy contract rates. The only question in this proceeding is whether 
the Commission has adequately supported its holding in the final rule 
to change the determination made in 1980 and instead give the states 
the flexibility to require variable energy contract rates.\199\ In 
addition, because the Commission's revision to the fixed energy rate 
requirement is based on changed circumstances since the issuance of the 
PURPA Regulations in 1980, we must provide ``a reasoned explanation . . 
. for disregarding facts and circumstances that underlay or were 
engendered by the prior policy.'' \200\ As we explain below, we 
disagree with assertions that we have not provided such an explanation.
---------------------------------------------------------------------------

    \199\ See, e.g., Motor Vehicle Mfrs. Assn. of United States, 
Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 42 (1983) 
(``An agency changing its course by rescinding a rule is obligated 
to supply a reasoned analysis for the change'').
    \200\ FCC v. Fox Television Stations, Inc., 556 U.S. 502, 516 
(2009).
---------------------------------------------------------------------------

    106. We disagree with the arguments raised on rehearing that there 
was insufficient evidence of overestimations. The Commission explained 
in the final rule why overestimations and underestimations of avoided 
costs had not balanced out.\201\ Broad price declines over time 
throughout the energy industry show that long-term fixed price QF 
contracts likely exceeded the avoided energy costs at the time of 
delivery for extended periods of time; thus, it is not necessary to 
confirm every allegation of a lack of balance in the past or every 
estimation of prices and costs.\202\ But even had there been less 
evidence of lack of balance over time,\203\ there was sufficient 
evidence for the Commission to conclude that the Commission's 
assumption in 1980 may not be the best way to ensure compliance with 
PURPA. Allowing a state to set a variable avoided cost energy rate 
could better avoid that outcome. In the context of long-term fixed QF 
rates, given evidence of overestimations, the statutory avoided cost 
cap may be better met if the rates may be varied over time to ensure 
they stay within the requirements of PURPA. Moreover, as stated in the 
final rule, to

[[Page 86673]]

the extent energy prices increase over time, QFs could benefit from 
that variability.\204\ Therefore, it was well within the Commission's 
authority under PURPA, and the Commission had sufficient evidence, to 
provide a tool states can use to ensure that the avoided cost rates 
stay within the requirements of the statute and not be based on an 
assumption that over-recoveries balance out with under-recoveries.
---------------------------------------------------------------------------

    \201\ See Order No. 872, 172 FERC ] 61,041 at PP 285-92.
    \202\ See id. P 287 (footnote omitted) (``We agree with Public 
Interest Organizations that the recent electricity price 
overestimations were not unique to QFs and can be explained by 
general declines in natural gas prices since the adoption of 
hydraulic fracturing and the 2007-2009 recession. But that is 
precisely why the estimates of avoided costs reflected in the QF 
contracts and LEOs were incorrect and why the resulting fixed 
avoided cost energy rates reflected in such QF contracts and other 
LEOs resulted in QF rates well above utility avoided costs in 
violation of PURPA section 210(b); the precipitous decline in 
natural gas prices caused a corresponding reduction in utilities' 
energy costs, and thus in their energy avoided costs but this 
decline was not reflected in the QFs' fixed contract rates that 
remained at their previous levels'').
    \203\ See, e.g., Public Interest Organizations Request for 
Rehearing at 85.
    \204\ See Order No. 872, 172 FERC ] 61,041 at P 290.
---------------------------------------------------------------------------

    107. States previously had little ability to address the potential 
for overestimations over the term of a QF contract, which caused some 
states to respond by adopting shorter contract terms. In the final 
rule, the Commission did not determine that any particular QF contracts 
violated the avoided cost cap and did not change its prior 
determination that PURPA does not ``require a minute-by-minute 
evaluation of costs which would be checked against rates established in 
long term contracts between qualifying facilities and electric 
utilities.'' \205\ Instead, the Commission acted reasonably to better 
ensure that, over the term of a contract, QF rates do not exceed a 
utility's avoided costs. The Commission achieved this goal by providing 
the states with a tool that allows them to address the potential that, 
over the term of a contract, contract rates may exceed a purchasing 
utility's avoided costs determined at the time of delivery. Providing 
this tool to the states ensures that they are not required to set rates 
that exceed avoided costs. Moreover, this tool gives effect to PURPA's 
requirement that rates paid to QFs be just and reasonable to the 
consumers of the electric utility and in the public interest.\206\
---------------------------------------------------------------------------

    \205\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,880.
    \206\ 16 U.S.C. 824a-3; see also Indep. Energy Producers Ass'n, 
Inc. v. Cal. Pub. Utils. Comm'n, 36 F.3d 848, 850 (9th Cir. 1994) 
(``Section 210(b) requires that Commission to promulgate regulations 
that ensure that the rates for these purchases `shall be just and 
reasonable to the electric consumers of the electric utility and in 
the public interest.' However, these rates may not exceed the 
incremental cost to the utility of purchasing alternative 
energy.''); Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d 380, 384 (5th 
Cir. 2014) (``While Congress sought to promote energy generation by 
Qualifying Facilities, it did not intend to do so at the expensive 
of the American consumer. PURPA thus strikes a balance between these 
two interests . . . PURPA requires utilities to purchase power 
generated by Qualifying Facilities, but also mandates that the rates 
that utilities pay for such power `shall be just and reasonable to 
the electric consumers of the electric utility and in the public 
interest.' ''); Conn. Valley Elec. Co. v. FERC, 208 F.3d 1037, 1045 
(D.C. Cir. 2000) (``PURPA expressly requires the Commission to 
balance the interests of consumers against those of producers. . . . 
''); see also Swecker v. Midland Power Co-op, 807 F.3d 883, 884 (8th 
Cir. 2015) (citing legislative history that PURPA is ``not intended 
to require the rate payers of a utility to subsidize cogenerators or 
small power producers'').
---------------------------------------------------------------------------

    108. The Commission emphasized that the final rule is prospective, 
thereby protecting existing contracts. We find no merit in EPSA's 
argument that the grant of flexibility to states in the final rule to 
set variable avoided cost energy rates is inconsistent with 18 CFR 
292.304(b)(5), which provides: ``In the case in which the rates for 
purchases are based upon estimates of avoided costs over the specific 
term of the contract or other legally enforceable obligation, the rates 
for such purchases do not violate this subpart if the rates for such 
purchases differ from avoided costs at the time of delivery.'' \207\
---------------------------------------------------------------------------

    \207\ EPSA Request for Rehearing at 15.
---------------------------------------------------------------------------

    109. Nothing in the final rule is inconsistent with this regulatory 
provision. The final rule gives states the flexibility to continue to 
require fixed energy rates for the term of a QF's contract, and this 
regulatory provision continues to be necessary to make clear that such 
rates are permitted. The provision does not apply to QF contracts where 
the energy rate is not fixed based on estimates of avoided costs but 
instead varies with estimates of avoided costs at the time of delivery.
    110. We also disagree with Public Interest Organizations that, in 
permitting states to set a variable avoided cost energy rate, the 
Commission ignored utilities' long-run avoided costs.\208\ The 
Commission has not assumed that utilities procure energy only through 
short-term contracts or never lock in their costs by constructing their 
own energy resources, executing long term fuel contracts, or executing 
long term energy supply contracts. In Order No. 69, the Commission 
defined ``energy'' costs as ``the variable costs associated with the 
production of electric energy (kilowatt-hours)'' and ``represent[ing] 
the cost of fuel, and some operating and maintenance expenses.'' \209\ 
By contrast, in Order No. 69, the Commission defined ``capacity'' costs 
as ``the costs associated with providing the capability to deliver 
energy; they consist primarily of the capital costs of facilities.'' 
\210\ The Commission has not changed these definitions; they still 
apply to both ``short-run'' (energy or non-firm power) and long-run 
(capacity or firm power) avoided costs.
---------------------------------------------------------------------------

    \208\ See Public Interest Organizations Request for Rehearing at 
87 (``FERC conflates short-run market prices with utilities' energy 
supply costs. . . . [T]he latter includes costs of supply other than 
the day ahead market and that impose costs above the market 
price'').
    \209\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,865; see 
also id. at 30,881-82 (also defining energy as ``non-firm power'' 
that entails ``the cost of operating [the seller's] generating units 
and administration'').
    \210\ Id. at 30,865; see also id. at 30,881-82 (also defining 
capacity as ``firm'' power that entails ``payments for the cost of 
fuel and operating expenses, and also for the fixed costs associated 
with the construction of generating units needed to provide power at 
the purchaser's discretion.'').
---------------------------------------------------------------------------

    111. While the final rule changed how states may calculate avoided 
energy costs (both pursuant to competitive market prices and variable 
rates), the Commission did not change the factors states must take into 
account, to the extent practicable, for setting fixed, avoided capacity 
costs; among these factors states must take into account, to the extent 
practicable, are the utility's own avoided cost data and the utility's 
deferral of capacity additions.\211\ Under this existing and unchanged 
framework, states already should take into account the long-run 
(capacity) and short-run (energy) incremental costs that utilities 
would incur but for their purchase from QFs.
---------------------------------------------------------------------------

    \211\ See 18 CFR 292.304(e); see also Order No. 69, FERC Stats. 
& Regs. ] 30,128 at 30,865 (``If a qualifying facility offers energy 
of sufficient reliability and with sufficient legally enforceable 
guarantees of deliverability to permit the purchasing electric 
utility to avoid the need to construct a generating unit, to build a 
smaller, less expensive plant, or to reduce firm power purchases 
from another utility, then the rates for such a purchase will be 
based on the avoided capacity and energy costs.'').
---------------------------------------------------------------------------

    112. As stated in the final rule, the difficulty in predicting 
prices necessarily also applies to predicting which costs a utility 
would incur from generating power itself or purchasing such power from 
another source over the term of a QF contract. Therefore, while there 
may be open questions over which costs a utility would incur from 
generating power itself or purchasing such power from another source in 
lieu of QF purchases, continuing to prohibit a state from allowing an 
energy rate to fluctuate would prevent states from choosing not to use 
unreliable price forecasts in setting avoided cost energy rates in QF 
contracts.
    113. Public Interest Organizations' characterization of 
overestimated energy costs as ``foregone windfall profits'' due to 
utilities' monopoly status not only is inapt,\212\ but it ignores that 
utility customers ultimately bore the cost of avoided cost estimates 
that ultimately exceeded avoided costs in a way that is inconsistent 
with PURPA's avoided cost cap. Likewise, Solar Energy Industries'

[[Page 86674]]

assertion that there is no evidence that states will lower retail rates 
if states require variable energy rates in QF contracts is irrelevant 
to whether the Commission may provide that flexibility under PURPA. The 
requirement found in PURPA is that the Commission cannot require that a 
rate paid to the QF exceed a certain amount.
---------------------------------------------------------------------------

    \212\ As explained in the final rule, electric utilities almost 
always are required to pass decreases in energy costs through to 
their retail customers, whereas QFs with fixed energy contract rates 
are not obligated to reduce their rates as avoided energy costs 
decline. Order No. 872, 172 FERC ] 61,041 at P 122.
---------------------------------------------------------------------------

b. Whether the Proposed Change Would Violate the Statutory Requirement 
That the PURPA Regulations Encourage QFs and Do Not Discriminate 
Against QFs
    114. In the final rule, the Commission determined, based on the 
record evidence, that it is not necessarily the case that 
overestimations and underestimations of avoided energy costs will 
balance out over time. The Commission concluded that a fixed energy 
rate in a QF contract or LEO potentially could violate the statutory 
avoided cost cap on QF rates.\213\
---------------------------------------------------------------------------

    \213\ Order No. 872, 172 FERC ] 61,041 at P 295.
---------------------------------------------------------------------------

    115. The Commission found that the PURPA Regulations continue to 
encourage the development of QFs by, among other things, allowing a 
state to vary the rate paid to the QF over time but in a way that 
satisfies the rate cap established in PURPA section 210(b). In this 
way, over time, the QF can obtain a higher rate when the utility's 
avoided costs increase, and ratepayers are not paying more than the 
utility's avoided costs when prices decrease. Furthermore, the 
Commission explained that allowing the use of variable energy rates may 
promote longer contract terms, which would help encourage and support 
QFs.\214\ The Commission concluded that it is consistent with PURPA 
section 210(b), as well as the obligation imposed by PURPA section 
210(a), to revise the PURPA Regulations ``from time to time,'' to 
provide the states the flexibility to require that QF contracts and 
other LEOs implement variable avoided cost energy rates in order to 
prevent payments to QFs in excess of the purchasing electric utility's 
avoided energy costs. The Commission noted that PURPA section 210(b) 
prohibits the Commission from requiring QF rates above avoided costs 
even if, according to some commenters, a fixed avoided cost energy rate 
above avoided costs would provide greater encouragement to QFs than a 
variable avoided cost energy rate.\215\
---------------------------------------------------------------------------

    \214\ Id. P 296.
    \215\ Id.
---------------------------------------------------------------------------

    116. The Commission described the discrimination claims as based on 
the incorrect assumption that electric utilities have not been required 
to lower their energy rates as prices have declined. The Commission 
found, to the contrary, that utilities typically charge their customers 
cost-based rates, and, as their fuel and purchased power costs have 
declined, they typically have been required to provide corresponding 
reductions in the energy portion of their rates to their customers. The 
Commission explained that requiring QF avoided cost energy rates to 
likewise change as purchasing electric utilities' avoided energy costs 
change does not create a discriminatory difference, but rather puts QF 
rates on par with utility rates.\216\
---------------------------------------------------------------------------

    \216\ Id. P 302.
---------------------------------------------------------------------------

    117. The Commission explained that it was not changing the 
requirement that QF avoided cost energy rates be set at the purchasing 
utility's full avoided energy costs. Rather, the Commission allowed the 
states the option to now choose to require QF avoided cost energy rates 
that vary with the purchasing utility's avoided costs of energy, rather 
than QF avoided cost energy rates that are fixed for the life of the 
QF's contract or LEO, to ensure the rates comply with PURPA.\217\
---------------------------------------------------------------------------

    \217\ Id. P 303.
---------------------------------------------------------------------------

i. Requests for Rehearing
    118. Solar Energy Industries argue that, by revoking the long-
standing regulations that provide a QF with the right to elect to be 
paid a long-term energy rate in a contract for long-term energy 
delivery, the Commission is actively discouraging the development of 
QFs in contravention of the statutory direction to encourage the 
development of such facilities.\218\ Solar Energy Industries describe 
as inaccurate the Commission's claim that this revocation is necessary 
to protect the consumers of electric utilities because inaccurate 
administratively-determined avoided costs can be fully mitigated when a 
state adopts the Commission's new competitive bidding framework.\219\
---------------------------------------------------------------------------

    \218\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 10.
    \219\ Id. at 10-11.
---------------------------------------------------------------------------

    119. Solar Energy Industries request that the Commission clarify 
several portions of the final rule. First, Solar Energy Industries 
request that the Commission clarify that the circumstances that do not 
allow QFs to have nondiscriminatory access to buyers other than the 
host utility are largely the same today as in 1980 when the Commission 
first implemented its PURPA Regulations.\220\ Second, Solar Energy 
Industries request that the Commission clarify that states must ensure 
that QFs receive comparable avoided cost calculations and rates, terms, 
and conditions.\221\ Solar Energy Industries contend, for example, that 
utilizing a 20-year depreciation schedule for an avoided unit to 
calculate the long-run marginal cost rate and then offering a QF a two-
year contract fails to ensure compatibility. Third, Solar Energy 
Industries request that the Commission clarify that it supports and 
renews its commitment to pursue enforcement actions when states 
discriminate against QFs.\222\
---------------------------------------------------------------------------

    \220\ Id. at 42.
    \221\ Id. at 43.
    \222\ Id. at 43-44.
---------------------------------------------------------------------------

    120. Northwest Coalition asserts that the final rule's change of 
the requirement that QFs be offered fixed prices for energy is 
arbitrary, capricious, and not in accordance with law. Northwest 
Coalition argues that, in a ``reversal'' of 40 years of precedent since 
enactment of PURPA, the final rule unlawfully ``guts'' the bedrock 
requirement that QFs be offered fixed energy rates, which have long 
been recognized as necessary for the development of QFs.\223\ Northwest 
Coalition adds that the right to secure fixed energy prices supports 
the continued operation of existing QFs upon the expiration of their 
existing contracts when substantial interconnection and other capital 
upgrades must typically be undertaken and that elimination of fixed 
prices is likely to result in loss of substantial existing QF 
capacity.\224\
---------------------------------------------------------------------------

    \223\ Northwest Coalition Request for Rehearing at 8 (citing 
Order No. 872, 172 FERC ] 61,041 at P 232).
    \224\ Id.
---------------------------------------------------------------------------

    121. Northwest Coalition claims that, despite the final rule's 
assertion that nothing in PURPA requires the Commission to ensure 
financeability of individual QFs, PURPA ``does require the Commission 
to encourage their development, which we have previously equated with 
financeability.'' \225\ Northwest Coalition argues that, under the 
final rule, QFs could face a world in which there is no minimum 
contract term, a payment of zero for their capacity, and an avoided 
cost energy price based on highly volatile and unpredictable short-term 
markets. Northwest Coalition contends that rendering many QFs not 
financeable or financeable only at extreme interest rates discourages 
QFs, which is contrary to what PURPA requires.\226\
---------------------------------------------------------------------------

    \225\ Id. at 9-10 (citing Order No. 872, 172 FERC ] 61,041 
(Glick, Comm'r, dissenting in part, at P 13)).
    \226\ Id. at 11.
---------------------------------------------------------------------------

    122. EPSA argues that, although the Commission cannot, in the name 
of remedying discrimination, require QF

[[Page 86675]]

rates that exceed avoided cost, allowing states to eliminate the fixed 
rate energy contract option does not result in QF rates that are non-
discriminatory to the maximum extent permitted by the avoided cost 
cap.\227\ EPSA reiterates that the statutory requirement in PURPA 
section 210(b)(1) that QF rates ``shall not discriminate against'' QFs 
is more restrictive than the FPA's prohibition against ``unduly 
discriminatory'' rates.\228\ EPSA asserts that this more restrictive 
requirement does not leave room for avoided cost rates that 
discriminate against QFs relative to purchasing electric utilities, 
even if the Commission finds the discrimination to be justified (i.e., 
not undue).\229\ EPSA argues that, subject to compliance with the 
avoided cost cap, the Commission cannot allow states to set 
discriminatory QF rates, even if the Commission determines those 
discriminatory rates are justified by differences between QFs and 
utilities or other policy goals, such as minimizing the burden of 
forecasting error on consumers.\230\
---------------------------------------------------------------------------

    \227\ EPSA Request for Rehearing at 5.
    \228\ Id. at 6.
    \229\ Id.
    \230\ Id.
---------------------------------------------------------------------------

    123. EPSA claims that, in the final rule, the Commission does not 
adequately address these arguments, which it had raised in its NOPR 
comments.\231\ EPSA contends that the Commission erred in relying on 
the idea that variable energy rate/fixed capacity rate contracts are 
standard in the electric industry because PURPA requires that avoided 
cost rates not discriminate against QFs relative to purchasing electric 
utilities, not that such rates conform to standard industry 
practices.\232\ EPSA describes the Commission's argument that 
eliminating fixed energy price contracts is not discriminatory as 
unsupported because of its assumptions about how fuel and purchased 
power adjustment clauses operate. EPSA reasons that a franchised 
utility's rates will be set based on costs they actually incur to 
produce electricity for their customers and that such costs would be 
the same energy costs that are used in determining the electric 
utilities' avoided costs that will, in turn, set the as-available 
avoided cost rates to be charged by QFs.\233\ In particular, EPSA 
claims that the Commission appears to assume that fuel and purchase 
power adjustment clauses will necessarily reflect short-term 
fluctuations in fuel and other energy-based costs, while, in a number 
of jurisdictions, these clauses also cover costs incurred under long-
term contracts, including long-term fuel supply contracts, long-term 
power purchase agreements, and equivalent financial instruments.\234\ 
EPSA argues that remedying alleged discrimination requires providing 
QFs with a degree of insulation from market volatility comparable to 
that afforded to utility investments with effectively guaranteed cost 
recovery in retail rates, which EPSA argues the fixed energy rate 
contract option accomplishes.\235\
---------------------------------------------------------------------------

    \231\ Id.
    \232\ Id. at 6-7.
    \233\ Id. at 7-8.
    \234\ Id. at 8-9.
    \235\ Id. at 9-10.
---------------------------------------------------------------------------

    124. EPSA asserts that it was legally incorrect to claim that a QF 
rate equal to the purchasing utility's avoided cost at the time of 
delivery by definition could not be discriminatory because the 
Commission's regulations and precedent leave no room for claims that, 
for purposes of PURPA's avoided cost cap, there is a single measure of 
avoided cost.\236\ EPSA claims that the Commission cannot avoid 
ensuring that QF rates are non-discriminatory on the basis that such 
rates are consistent with one measure of avoided costs if setting QF 
rates based on another permissible measure of avoided costs would 
eliminate some or all of the discrimination.\237\
---------------------------------------------------------------------------

    \236\ Id. at 16.
    \237\ Id. at 17.
---------------------------------------------------------------------------

    125. Public Interest Organizations argue that the Commission 
allowed states to set rates that discriminate against QFs in 
contravention of PURPA.\238\ Public Interest Organizations maintain 
that allowing avoided costs to be set at short-run prices discriminates 
against QFs and does not reflect utilities' avoided costs because 
utilities incur long-term energy supply costs that exceed short run 
costs. Public Interest Organizations assert that the Commission 
incorrectly defined discrimination as comparing the standard across the 
electric industry instead of how a specific purchasing electric utility 
treats similar generation. Public Interest Organizations contend that 
the Commission assumes without evidence that contracts whose energy 
prices are linked to short-term prices in a competitive market at the 
time of delivery is ``standard'' in long term contracts. Public 
Interest Organizations argue that, on the contrary, non-QF renewable 
generators are paid long-term fixed prices, including a fixed energy 
rate.\239\
---------------------------------------------------------------------------

    \238\ Public Interest Organizations Request for Rehearing at 9, 
92.
    \239\ Id. at 92-93.
---------------------------------------------------------------------------

    126. Public Interest Organizations claim that the Commission 
interpreted the statutory term ``discriminate'' incorrectly.\240\ 
Public Interest Organizations assert that, in the final rule, the 
Commission permitted states to deny QFs fixed energy pricing, ``even if 
alternative energy the utility would acquire from its own generation or 
non-QF power producers would be at fixed costs, based on the industry 
`standard' followed by other utilities to limit the price for all 
alternative energy (owned and third party) to the short run market 
price.'' \241\ Public Interest Organizations contend that, while 
discrimination is generally defined as a ``difference between the 
subject entity and a single similar entity that is more favorably 
treated,'' \242\ under PURPA, discrimination is not defined based on 
the industry standard but rather is defined ``on how the specific 
purchasing utility treats QFs compared to how it treats one or more 
similarly situated non-QFs, including the utility's own generation.'' 
\243\
---------------------------------------------------------------------------

    \240\ Id. at 10, 92.
    \241\ Id. at 94-95.
    \242\ Id. at 94 (citing FTC v. Burton, 363 U.S. 536, 550 (1960); 
Burton v. District of Columbia, 153 F. Supp. 3d 13, 67 (D.D.C. 
2015)).
    \243\ Id. (citing 16 U.S.C. 824a-3(b)).
---------------------------------------------------------------------------

    127. Public Interest Organizations argue that the Commission lacked 
evidence to support its assertion that short-term rates are not 
discriminatory because they are the industry norm.\244\ Public Interest 
Organizations contend that the Commission lacks evidence to assert that 
the electric industry standard entails variable energy prices in long 
term supply contracts, given that ``utilities make long-term 
investments for energy resources, enter long-term contracts for fuel 
for their own generation, [and] enter long term power purchase 
agreements with long-run energy prices (or blended energy and capacity 
prices).'' \245\ Public Interest Organizations claim that the 
Commission lacked evidence to assert that that utilities recovering 
cost-based rates must exclude long-term commitment costs such as rate-
based energy resources, fuel contracts, and power purchase contracts 
when the long term energy portion of those costs, such as power 
purchase agreement prices, later exceed short run energy costs like the 
hourly LMP of the delivered energy.\246\ Public Interest Organizations 
assert that the rate-based generation of

[[Page 86676]]

Alliant Energy, upon whose data the Commission relied, receives 
``advanced ratemaking principles'' that fix favorable rate treatment 
despite intervals when the short run price is less than the energy 
price assumed when long-term fixed price recovery for those the energy 
resources were approved. Public Interest Organizations contend that a 
QF displacing such utility investments causes the utility to avoid the 
long-term fixed cost of the utility investment rather than the short-
term day ahead or market hub price at the time energy is generated from 
it.\247\
---------------------------------------------------------------------------

    \244\ Id. at 10, 95.
    \245\ Id. at 95-96 & n.280 (citing National Association of 
Regulatory Utility Commissioners, Electric Utility Cost Allocation 
Manual, at 49-59 (July 1992)).
    \246\ Id. at 96-97.
    \247\ Id. at 96.
---------------------------------------------------------------------------

    128. Public Interest Organizations argue that, contrary to the 
Commission's assertions that long-term utility energy cost commitments 
may be disallowed or modified due to short run energy price when the 
energy is delivered, rate recovery is usually required for the cost of 
supply contracts regardless of whether the contract price later appears 
too high compared to prices when the power is delivered. Public 
Interest Organizations therefore reason that non-QF energy supply that 
utilities own themselves or purchase from another source are not 
limited to short run energy market prices.\248\
---------------------------------------------------------------------------

    \248\ Id. at 97 (citing FPC v. Sierra Pac. Power Co., 350 U.S. 
348 (1956); United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 
U.S. 332 (1956)).
---------------------------------------------------------------------------

    129. Public Interest Organizations similarly assert that the 
Commission selectively quoted Town of Norwood v. FERC for the 
proposition that long-term non-QF energy supply is limited to short-run 
market price at the time of delivery. Public Interest Organizations 
instead describe Town of Norwood as concerning a wholesale supply 
contract from a supplier's mix of resources to serve a retail utility 
instead of a power purchase agreement from a single generator 
comparable to a QF contract. Public Interest Organizations contend that 
the rate in Town of Norwood contained both energy pricing in two blocks 
``with the first priced at fixed embedded costs and charged based on a 
ratchetted demand and energy use, and the second block based on long 
run marginal costs.'' \249\
---------------------------------------------------------------------------

    \249\ Id. at 97-98 (citing Town of Norwood v. FERC, 962 F.2d 20, 
21, 24 (D.C. Cir. 1992)).
---------------------------------------------------------------------------

    130. Public Interest Organizations describe the Commission's 
justifications for its determination that Order No. 872 does not enable 
discrimination as poorly reasoned.\250\ Public Interest Organizations 
argue that treating QFs without discrimination does not require 
subjecting them to cost-of-service ratemaking in violation of PURPA but 
rather should be the same as how the utility determines costs for other 
purposes. Public Interest Organizations claim that the Commission's 
argument that it is not discriminating against QFs when it subjects 
them to short run energy prices because they still receive full avoided 
costs is circular.\251\
---------------------------------------------------------------------------

    \250\ Id. at 10, 98.
    \251\ Id. at 98-99.
---------------------------------------------------------------------------

    131. Northwest Coalition asserts that the final rule authorizes a 
discriminatory framework by eliminating the certainty of a predictable 
revenue stream afforded by fixed prices. Northwest Coalition argues 
that electric utilities can still rate-base long-term investments, 
thereby ensuring that they can recover their capital investments plus 
an authorized return, and then also recover their actual operating 
costs under traditional cost-of-service ratemaking. Northwest Coalition 
contends that, in contrast, the final rule's new framework authorizing 
variable energy pricing deprives QFs of even a reasonable ability to 
forecast avoided cost prices from which they must recover their 
investment, much less guarantee such recovery provided to the typical 
utility. Northwest Coalition asserts that this outcome places QFs on 
unequal footing and ensures that utilities continue to dominate the 
generation market. Northwest Coalition argues that, in sum, the new 
regime is discriminatory because it permits utilities to make 
acquisition decisions based on long-term cost forecasts, which contain 
inherent forecast risk, but ties QFs to unpredictable future changes in 
markets.\252\
---------------------------------------------------------------------------

    \252\ Northwest Coalition Request for Rehearing at 12.
---------------------------------------------------------------------------

    132. Northwest Coalition contends that the final rule fails to 
address the critical point that utilities obtain virtually guaranteed 
cost recovery and virtually absolute certainty that they will recover 
their costs plus a profit, whereas QFs now do not even receive 
certainty as to the prices they can rely upon if they are able to 
perform successfully under their contracts. Northwest Coalition claims 
that the discrimination is the failure to put QFs on reasonably equal 
footing to utilities by providing QFs with the certainty of the right 
to beat the utility's long-term marginal cost of generation, which 
typically is the same long-term cost estimate used to justify the 
utility's own rate-base acquisitions.\253\
---------------------------------------------------------------------------

    \253\ Id. at 13.
---------------------------------------------------------------------------

    133. Northwest Coalition argues that, although the discriminatory 
policy in Environmental Action \254\ regarded transmission access and 
not price certainty, the same principle applies equally here. Northwest 
Coalition asserts that the Commission's ``effort to place QFs on an 
essentially equal competitive footing with competing suppliers, . . . 
by giving such suppliers the access it denies to QFs would effect an 
administrative repeal of this congressional choice; by definition, this 
is not in the public interest.'' \255\ Northwest Coalition contends 
that, in this case, the Commission's alleged effort to place QFs on 
equal footing with incumbent utilities by giving such utilities the 
certainty of return on investment that will be denied to QFs is plainly 
discriminatory.\256\ Northwest Coalition adds that this interpretation 
of the anti-discrimination requirement is even supported by the Montana 
Public Service Commission in the context of price certainty and 
allocation of forecast risk, even though that state agency generally 
supported the Commission's proposed rule.\257\
---------------------------------------------------------------------------

    \254\ Id. at 14 (citing Envtl. Action v. FERC, 939 F.2d 1057, 
1061-62 (D.C. Cir. 1991) (Environmental Action)).
    \255\ Id. (citing Environmental Action, 939 F.2d at 1062).
    \256\ Id.
    \257\ Id. at 14-15.
---------------------------------------------------------------------------

ii. Commission Determination
    134. We disagree with the arguments raised on rehearing. To begin, 
it is incorrect to state that the final rule eliminated fixed rates for 
QFs. The final rule gave states the flexibility, if they choose to take 
advantage of this flexibility, to require that the avoided cost energy 
rates in QF contracts vary depending on avoided energy costs at the 
time of delivery. In the final rule, as described above, the Commission 
retained the QF's right for capacity rates to be fixed, which together 
with the flexibility adopted in the final rule to allow states to set 
avoided cost energy rates using competitive market forces should 
provide a more transparent way of determining avoided costs. Those 
capacity rates would still need to meet the standards of 18 CFR 
292.304(e), which together with more transparent energy rates 
determined pursuant to competitive market prices and the existing PURPA 
Regulations, encourages the development of QFs.\258\
---------------------------------------------------------------------------

    \258\ See supra PP 42-43.
---------------------------------------------------------------------------

    135. Further, in response to EPSA's and Public Interest 
Organizations' arguments that the final rule does not accurately 
describe how merchant generators are financed and protect QFs against 
volatility in fuel prices, the variable energy rate/fixed capacity rate 
construct is common among merchant generators for power sales 
agreements that include the sale of capacity, thus

[[Page 86677]]

demonstrating that other types of non-utility generation are able to 
raise useful financing under such an arrangement.\259\
---------------------------------------------------------------------------

    \259\ Order No. 872, 172 FERC ] 61,041 at PP 35-41, 336-45.
---------------------------------------------------------------------------

    136. We also disagree with arguments raised on rehearing regarding 
discrimination. We reiterate our holding in the final rule that PURPA 
does not require, and indeed prohibits, subjecting QFs to the same rate 
structures and procedures as utilities.\260\ Congress made this point 
clear when it enacted PURPA. ``The conferees recognize that 
cogenerators and small power producers are different from electric 
utilities, not being guaranteed a rate of return on their activities 
generally or on the activities vis-a-vis the sale of power to the 
utility and whose risk in proceeding forward in the cogeneration or 
small power production enterprise is not guaranteed to be 
recoverable.'' \261\ And the Supreme Court relied on this legislative 
history to conclude that ``The legislative history confirms, moreover, 
that Congress did not intend to impose traditional ratemaking concepts 
on sales by qualifying facilities to utilities.'' \262\
---------------------------------------------------------------------------

    \260\ Id. PP 85-88 (citing API, 461 U.S. at 414; Conf. Rep. at 
97-98).
    \261\ Conf. Rep. at 97-98 (emphasis added).
    \262\ API, 461 U.S. at 414.
---------------------------------------------------------------------------

    137. Moreover, EPSA, Northwest Coalition, Public Interest 
Organizations, and Solar Energy Industries miss the mark when they 
argue that it would be discriminatory to permit states to require 
variable energy rates in QF contracts if the energy the utility 
otherwise would acquire from its own generation or non-QF power 
producers would be at a fixed cost. These entities assert that, to 
prevent such discrimination, the Commission must require fixed energy 
rates in order to ensure comparable terms and conditions in QF 
contracts. However, in the unlikely event that all of a purchasing 
utility's other, non-QF resources happen to be long-term purchases with 
fixed capacity and energy rates, such a utility's avoided capacity and 
energy costs would not vary significantly over time. In that case, a 
variable energy rate set at the utility's avoided costs at the time of 
delivery would be based on the utility's essentially unchanging avoided 
costs and thus would not change significantly over time.\263\
---------------------------------------------------------------------------

    \263\ We note that this situation of the variable energy avoided 
cost rate not changing significantly over time would also address 
rehearing arguments that the final rule impedes QF financeability.
---------------------------------------------------------------------------

    138. We find that Public Interest Organizations and Solar Energy 
Industries conflate the variable rate issue with the contract length 
issue in asserting that the final rule discriminates against QFs. 
Although the Commission changed the extent to which a QF is entitled to 
a fixed avoided cost energy rate, the Commission did not change the 
requirement that a capacity rate should account for longer-term costs 
(i.e., longer than as-available) associated with providing the 
capability to delivery energy.\264\ A QF contract or LEO with a 
variable energy rate should reflect a purchasing electric utility's 
avoided energy costs estimated at the time of delivery. It is 
irrelevant for calculating a purchasing electric utility's avoided 
energy costs whether a purchasing electric utility makes purchases of 
long-term capacity in non-QF bilateral agreements because a QF remains 
entitled to a fixed capacity rate. In the final rule, as described 
above, states must take into account the existing factors for setting 
fixed avoided cost capacity rates, QFs are able to require that avoided 
cost capacity rates in their contracts and LEOs be fixed, and QFs may 
continue to bring enforcement petitions before the Commission if states 
are failing to take into account those factors when setting avoided 
cost capacity rates. In response to Solar Energy Industries' request 
that the Commission clarify its intent to pursue enforcement against 
states in setting avoided cost rates, if a QF believes that its fixed 
capacity rate in a contract does not fully reflect the long-term 
capacity avoided costs of the purchasing utility because of the length 
of the QF contract, that QF may pursue a claim under the statutory 
provisions for the enforcement of PURPA.
---------------------------------------------------------------------------

    \264\ See Windham Solar, 157 FERC ] 61,134, at P 4 (2016) 
(``[S]ection 292.304(d)(2) of the Commission's regulations addresses 
the option to sell energy or capacity pursuant to a legally 
enforceable obligation over a specified term'' and ``provides (at 
the QF's option) for pricing based on either avoided costs 
calculated at the time of delivery or at the time the obligation is 
incurred.'').
---------------------------------------------------------------------------

    139. Solar Energy Industries request that the Commission clarify 
that where QFs continue to lack nondiscriminatory access to buyers 
other than the host utility, the circumstances have not changed since 
1980.\265\ It is not apparent what Solar Energy Industries asks the 
Commission to clarify. But to the extent that this is a criticism of 
the final rule, the final rule continues to require that state 
determinations of avoided costs reflect the purchasing utility's 
avoided costs and that QFs have the right to sell to directly and 
indirectly interconnected utilities.\266\
---------------------------------------------------------------------------

    \265\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 42.
    \266\ See 18 CFR 292.303(a)(1)-(2), (d) (QFs have right to sell 
to directly and indirectly interconnected utilities).
---------------------------------------------------------------------------

    140. We disagree with Public Interest Organizations' and Northwest 
Coalition's assertions that the variable rate option overemphasizes the 
avoided cost rate cap and underemphasizes the prohibition on 
discrimination against the QF and the requirement to encourage QF 
development.\267\ PURPA specifically states that ``[n]o such rule 
prescribed under subsection (a) shall provide for a rate which exceeds 
the incremental cost to the electric utility of alternative electric 
energy.'' \268\ Thus, the Commission's actions to better ensure that it 
has not prescribed a rule requiring that the rates paid to QFs not 
exceed the purchasing utility's avoided costs reflect Congress's 
priorities in enacting PURPA and give meaning to all provisions of the 
statute.\269\
---------------------------------------------------------------------------

    \267\ See Northwest Coalition Request for Rehearing at 19; 
Public Interest Organizations Request for Rehearing at 44-46.
    \268\ 16 U.S.C. 824a-3(b).
    \269\ See In re W. States Wholesale Nat. Gas Antitrust Litig., 
715 F.3d 716, 731 (9th Cir. 2013) (Western States Wholesale Natural 
Gas Antitrust Litigation) (``[S]tatutory provisions should not be 
read in isolation, and the meaning of a statutory provision must be 
consistent with the structure of the statute of which it is a 
part.''), aff'd sub nom. Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 
(2015); Brazos Elec. Power Co-op. v. FERC, 205 F.3d 235, 250 (5th 
Cir. 2000) (Brazos) (``[I]f PURPA speaks clearly on the precise 
issue in question, that plain meaning must govern; however, if 
PURPA's application to a particular issue is ambiguous, FERC's 
interpretation will be upheld so long as it is a `permissible 
construction' of the statute.'').
---------------------------------------------------------------------------

    141. We disagree with Northwest Coalition that the final rule 
discriminates against QFs by failing to put them on a competitive 
footing with utilities in violation of Environmental Action.\270\ In 
that case, the D.C. Circuit discussed PURPA's prohibition on 
discriminating against QFs in connection with PURPA's mandatory 
purchase obligation. The D.C. Circuit stated that ``[a] QF may force a 
sale only at the purchasing utility's avoided cost . . . . If the QF is 
less efficient (i.e., has higher costs) than its competitors, its 
guaranteed ability to sell power only at a price below its cost will 
not cause its competitors any loss of sleep.'' \271\ But, in contrast, 
if a ``QF is more efficient [than the purchasing electric utility], 
then the preference it receives is not a threat to, but only a 
redundant (legal) guarantee of, the competitive (economic) outcome. In 
fact, the principal effect of the preference seems

[[Page 86678]]

to be to ensure that large power producers do not discriminate against 
QFs.'' \272\ Thus the court confirmed that QFs are not guaranteed to 
recover their costs and they must take the risk of being unable to make 
a profit selling at the purchasing utility's avoided costs. Contrary to 
Northwest Coalition's assertions, this case hardly suggests that fixed 
energy avoided cost rates are necessary to place QFs on a competitive 
footing with utilities or that therefore the Commission must provide 
QFs the same rate structure or rate recovery as a utility.
---------------------------------------------------------------------------

    \270\ Northwest Coalition Request for Rehearing at 13-14 (citing 
Environmental Action, 939 F.2d at 1061-62).
    \271\ Environmental Action, 939 F.2d at 1061.
    \272\ Environmental Action, 939 F.2d at 1061-62.
---------------------------------------------------------------------------

    142. Public Interest Organizations cite Commission and federal 
district court decisions to argue that the Commission's final rule 
results in discrimination.\273\ But those cases do not address how 
PURPA's nondiscrimination standard relates to the avoided cost cap, and 
Order No. 872 provides that QFs are still entitled to a fixed avoided 
cost capacity rate.\274\ Similarly, Congress and the Supreme Court both 
recognized that PURPA treats QFs differently from purchasing utilities, 
rendering QFs not similarly situated to non-QF resources.\275\
---------------------------------------------------------------------------

    \273\ Public Interest Organizations Request for Rehearing at 94 
& n.279 (``Under PURPA, Congress provided that discrimination is 
determined based on how the specific purchasing utility treats QFs 
compared to how it treats one or more similarly situated non-QFs, 
including the utility's own generation.'').
    \274\ See, e.g., Morgantown Energy Assocs. v. Pub. Serv. Comm'n 
of W. Virginia, No. 2:12-CV-6327, 2013 WL 5462386, at *25 (S.D. W. 
Va. Sept. 30, 2013) (discrimination under PURPA is measured ``with 
respect to a similarly situated non-QF''); Pioneer Wind Park I, LLC, 
145 FERC ] 61,215, at P 37 (2013) (curtailment of QFs compared to 
utility resources is discriminatory under PURPA); Entergy Servs. 
Inc. Gen. Coal. v. Entergy Servs., Inc., 103 FERC ] 61,125, at PP 
27-29 (2003) (finding utility discriminated against QFs compared to 
other independent generators when it imposed certain fees on QFs but 
not on other generators)).
    \275\ See API, 461 at 413 (emphasis added) (``[T]he full-
avoided-cost rule plainly satisfies the nondiscrimination 
requirement. . . . [W]e would be reluctant to infer that Congress 
intended the terms `just and reasonable,' which are frequently 
associated with cost-of-service utility ratemaking, . . . to adopt a 
cost-of-service approach in the very different context of 
cogeneration and small power production by nontraditional 
facilities. The legislative history confirms, moreover, that 
Congress did not intend to impose traditional ratemaking concepts on 
sales by qualifying facilities to utilities.''); Conf. Rep. at 97-98 
(emphasis added) (``The conferees recognize that cogenerators and 
small power producers are different from electric utilities, not 
being guaranteed a rate of return on their activities generally or 
on the activities vis-a-vis the sale of power to the utility and 
whose risk in proceeding forward in the cogeneration or small power 
production enterprise is not guaranteed to be recoverable.'').
---------------------------------------------------------------------------

    143. We also disagree with Public Interest Organizations that the 
final rule's reference to Town of Norwood does not justify use of 
variable energy rates. The Commission cited Town of Norwood for the 
proposition that ``variable energy rate/fixed capacity rate construct 
is . . . the standard rate structure used throughout the electric 
industry for power sales agreements that include the sale of 
capacity.'' \276\ The D.C. Circuit in Town of Norwood explained that 
the rate construct at issue in that case had separate fixed demand and 
variable energy charges.\277\ The final rule does not state that this 
rate construct necessarily represented a particular generator's 
agreement nor did it need to do so to justify granting states 
flexibility to use fixed capacity/variable energy avoided cost rates: 
PURPA is only concerned with the purchasing electric utility's avoided 
costs.\278\ Indeed, the rate construct in Town of Norwood was a 
marginal cost rate structure, which resembles the definition of avoided 
costs under PURPA. Therefore, the Commission properly referenced the 
utility rate structure in Town of Norwood for the proposition that a 
purchasing utility has a fixed capacity/variable energy rate structure.
---------------------------------------------------------------------------

    \276\ Order No. 872, 172 FERC ] 61,041 at P 38 (citing Town of 
Norwood, 962 F.2d at 21, 24).
    \277\ Town of Norwood, 962 F.2d at 21.
    \278\ 16 U.S.C. 824a-3(b) (emphasis added) (``No such rule 
prescribed under subsection (a) shall provide for a rate which 
exceeds the incremental cost to the electric utility of alternative 
electric energy.''); see also Order No. 69, FERC Stats. & Regs. ] 
30,128 at 30,866 (``If the Commission required electric utilities to 
base their rates for purchases from a qualifying facility on the 
high capital or capacity cost of a base load unit and, in addition, 
provided that the rate for the avoided energy should be based on the 
high energy cost associated with a peaking unit, the electric 
utilities' purchased power expenses would exceed the incremental 
cost of alternative electric energy, contrary to the limitation set 
forth in the last sentence of section 210(b).'').
---------------------------------------------------------------------------

    144. Furthermore, PURPA gives the Commission (and the states) 
discretion to implement all the requirements applicable to QF rates in 
a manner that gives all the requirements meaning. The Commission's 
interpretation in the final rule is a reasonable one that gives effect 
to all relevant statutory provisions by encouraging QF development and 
preventing discrimination against QFs, while respecting the avoided 
cost rate cap.\279\ In contrast, petitioners' interpretations do not 
give appropriate effect to all provisions of the statute because they 
fail to give full effect to the requirement that QF rates cannot exceed 
the avoided cost rate cap. Together with the greater transparency the 
final rule permits with respect to competitive market prices and 
competitive solicitations and greater clarity with regard to LEOs, the 
final rule has implemented all provisions of the statute consistent 
with Congress's intent in passing PURPA.
---------------------------------------------------------------------------

    \279\ Cf. Western States Wholesale Natural Gas Antitrust 
Litigation, 715 F.3d at 731 (``[S]tatutory provisions should not be 
read in isolation, and the meaning of a statutory provision must be 
consistent with the structure of the statute of which it is a 
part.''); Brazos, 205 F.3d at 250 (``[I]f PURPA speaks clearly on 
the precise issue in question, that plain meaning must govern; 
however, if PURPA's application to a particular issue is ambiguous, 
FERC's interpretation will be upheld so long as it is a `permissible 
construction' of the statute.'').
---------------------------------------------------------------------------

c. Effect of Variable Energy Rates on Financing
    145. In the final rule, the Commission agreed with commenters that 
PURPA does not guarantee QFs a rate that, in turn, guarantees 
financing. The Commission stated that, although PURPA requires the 
Commission to adopt rules that encourage the development of QFs, PURPA 
does not provide a guarantee that any particular QF will be developed 
or profitable.\280\
---------------------------------------------------------------------------

    \280\ Order No. 872, 172 FERC ] 61,041 at P 335.
---------------------------------------------------------------------------

    146. Notwithstanding that PURPA does not guarantee QF 
financeability, the Commission stated its belief that the variable 
avoided cost energy rate option implemented by the final rule will 
still allow QFs to obtain financing.\281\
---------------------------------------------------------------------------

    \281\ Id. P 336.
---------------------------------------------------------------------------

    147. The Commission reiterated that it is not eliminating fixed 
rate pricing for QFs. The Commission explained that, under the final 
rule, QFs will be able to require that avoided cost capacity rates in 
their contracts and LEOs be fixed. The Commission further explained 
that capacity costs, as relevant here, include the cost of constructing 
the capacity being avoided by purchasing utilities as a consequence of 
their purchases from QFs. The Commission stated that a combination of 
fixed avoided cost capacity rates and variable avoided cost energy 
rates can provide important revenue streams that can support the 
financing of QFs.\282\
---------------------------------------------------------------------------

    \282\ Id. at P 337.
---------------------------------------------------------------------------

    148. Furthermore, the Commission found that merely because QFs have 
had access to fixed avoided cost energy rates does not mean that QFs 
must have access to such rates to obtain future financing. The 
Commission explained that, up to now, QFs have had the right under the 
PURPA Regulations to both fixed capacity and fixed energy rates, and we 
understand that most QFs executing long-term contracts have exercised 
this right. The Commission described commenters insisting that the 
Commission cannot allow states the option to impose variable avoided 
cost energy rates without evidence that QFs have obtained financing 
under such contract structures as attempting to

[[Page 86679]]

impose a standard that could never be satisfied.\283\
---------------------------------------------------------------------------

    \283\ See id. P 338 (citing Solar Energy Industries Comments, 
Docket No. RM19-15-000, at 28 (Dec. 3, 2019); NIPPC, CREA, REC, and 
OSEIA Comments, Docket No. RM19-15-000, at 29, 46 (Dec. 3, 2019); 
Harvard Electricity Law Comments, Docket No. RM19-15-000, at 22, 25-
27 (Dec. 3, 2019); Public Interest Organizations Comments, Docket 
No. RM19-15-000, at 6-7, 33-35 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    149. In response, the Commission cited to ample evidence 
demonstrating that generation projects that are similar to QFs (i.e., 
independent power producers) with fixed capacity rate-variable energy 
rate contracts are financeable.\284\
---------------------------------------------------------------------------

    \284\ Id. P 339.
---------------------------------------------------------------------------

    150. The Commission found that the record showed that, even without 
the right to require long-term fixed energy rates, non-QF independent 
power producers have been able to obtain financing for large amounts of 
generation capacity, including from renewables. Based on this data, the 
Commission found that the right to require counterparties to pay fixed 
energy rates is not essential for the financing of independent power 
generation capacity.\285\
---------------------------------------------------------------------------

    \285\ Id. P 340.
---------------------------------------------------------------------------

    151. The Commission acknowledged that a number of different 
financing mechanisms were used for this independent generation 
capacity, not all of which may be available to QFs. Nevertheless, the 
Commission understood that a standard rate structure employed in the 
electric industry is a fixed capacity rate-variable energy rate 
structure and that many independent power production facilities have 
been financed based on this structure.\286\ Accordingly, the Commission 
found that record evidence and historical data regarding the financing 
and construction of significant amounts of independent power production 
facilities supports the Commission's conclusion that a fixed capacity 
rate-variable energy rate structure--which will apply in those states 
choosing the variable avoided cost energy rate option--also will 
support financing of QFs.
---------------------------------------------------------------------------

    \286\ Id. P 341 (citing American Public Power Association, How 
New Generation is Funded (Aug. 29, 2018), https://www.publicpower.org/blog/how-new-generation-funded (``Beginning in 
2015, merchant generation [in RTOs/ISOs markets] began to increase 
dramatically from prior years, amounting to 19.3 percent of new 
capacity in 2015, 7.2 percent in 2016, and 29.1 percent in 2017.''). 
The Commission noted that, in RTOs and ISOs with capacity markets, 
merchant generators are compensated through variable energy rates 
and fixed capacity rates, along with whatever ancillary service 
revenues they can earn. Id. P 341 n.550.
---------------------------------------------------------------------------

    152. The Commission did not find compelling the concerns expressed 
by some commenters that a fixed capacity rate-variable energy rate 
construct may not work for solar and wind resources, which have high 
fixed capacity costs and minimal variable energy costs.\287\ Similarly, 
the Commission was not persuaded by comments that point out that energy 
rates in typical independent power production contracts are designed to 
recover the cost of a facility's fuel, whereas variable energy rates 
would provide no such guarantee.\288\
---------------------------------------------------------------------------

    \287\ See id. P 342 (citing Harvard Electricity Law Comments, 
Docket No. RM19-15-000, at 26 (Dec. 3, 2019); Public Interest 
Organizations Comments, Docket No. RM19-15-000, at 33-34 (Dec. 3, 
2019); Solar Energy Industries Comments, Docket No. RM19-15-000, at 
30 (Dec. 3, 2019)).
    \288\ See id. (citing NIPPC, CREA, REC, and OSEIA Comments, 
Docket No. RM19-15-000, at 42-43 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    153. The Commission found that the record demonstrated that the 
amount of renewable resources being developed outside of PURPA greatly 
exceeds the amount of renewable resources developed as QFs. The 
Commission reasoned that the fact that renewable resources were able to 
develop outside of PURPA showed that they were able to obtain financing 
despite lacking the legal right to fixed energy rates.\289\
---------------------------------------------------------------------------

    \289\ See id. P 343.
---------------------------------------------------------------------------

    154. The Commission also disagreed with those commenters who 
asserted that the Commission should ``require[] the variable energy 
component to be structured in a way that removes market risk from the 
QF.'' \290\ The Commission found that this argument is contrary to one 
of the fundamental premises of PURPA, which is that QFs must accept the 
market risk associated with their projects by being paid no more than 
the purchasing utility's avoided cost, thereby preventing utility 
retail customers from subsidizing QFs.\291\ The Commission described 
concerns regarding the alleged mismatch between avoided costs and the 
costs of renewable technologies as collateral attacks on the 
requirements of PURPA itself, not our proposed implementation of it.
---------------------------------------------------------------------------

    \290\ Id. P 344 (citing NIPPC, CREA, REC, and OSEIA Comments, 
Docket No. RM19-15-000, at 43 (Dec. 3, 2019)).
    \291\ See id. (citing Conf. Rep. at 97-98 (stating that the 
``risk in proceeding forward in the [QF] enterprise is not 
guaranteed to be recoverable''); API, 461 U.S. at 416 (holding that 
QFs ``would retain an incentive to produce energy under the full-
avoided-cost rule so long as their marginal costs did not exceed the 
full avoided cost of the purchasing utility'')).
---------------------------------------------------------------------------

    155. The Commission acknowledged those comments explaining that 
hedging tools increase project expense and may not be available to all 
QFs.\292\ However, the Commission stated that it never intended to 
suggest that hedging is cost-free or that it would be appropriate for 
all QFs.
---------------------------------------------------------------------------

    \292\ Id. P 345 (citing NIPPC, CREA, REC, and OSEIA Comments, 
Docket No. RM19-15-000, at 45-46 (Dec. 3, 2019); Resources for the 
Future Comments, Docket No. RM19-15-000, at 6-7 (Dec. 2, 2019); 
Solar Energy Industries Comments, Docket No. RM19-15-000, at 30 
(Dec. 3, 2019)).
---------------------------------------------------------------------------

    156. The Commission found that testimony that Public Interest 
Organizations cited from the Technical Conference, which indicated that 
Southern Company has negotiated non-QF renewable contracts with fixed 
energy rates rather than variable energy rates, did not support the 
contention that the Commission must provide for fixed avoided cost 
energy rates for QF contracts and other LEOs.\293\
---------------------------------------------------------------------------

    \293\ Id. P 346 (citing Public Interest Organizations Comments, 
Docket No. RM19-15-000, at 33-34 (Dec. 3, 2019) (citing NOPR, 168 
FERC ] 61,184 at P 70 n.114)).
---------------------------------------------------------------------------

    157. In the NOPR comments, certain commenters expressed concern 
that, when a purchasing electric utility is not avoiding the 
construction or purchase of capacity as a consequence of entering into 
a contract with a QF, under the NOPR's proposed rules a state could 
limit the QF's contract rate to variable energy payments.\294\ The 
Commission found that, in that event, the only costs being avoided by 
the purchasing electric utility would be the incremental costs of 
purchasing or producing energy at the time the energy is 
delivered.\295\ The Commission stated that nothing in PURPA or the 
legislative history of PURPA suggests that the Commission should set QF 
rates so as to facilitate the financing of new QF capacity in locations 
where no new capacity is needed.
---------------------------------------------------------------------------

    \294\ Id. P 347 (citing CARE Comments, Docket No. RM19-15-000, 
at 4 n.7 (Dec. 3, 2019); EPSA Comments, Docket No. RM19-15-000, at 
12 (Dec. 3, 2019)).
    \295\ Id. (citing City of Ketchikan, 94 FERC ] 61,293, at 62,061 
(2001) (``[A]voided cost rates need not include the cost for 
capacity in the event that the utility's demand (or need) for 
capacity is zero. That is, when the demand for capacity is zero, the 
cost for capacity may also be zero.'')).
---------------------------------------------------------------------------

    158. The Commission recognized that there is some evidence that 
variable avoided cost energy rates in contracts and LEOs could result 
in longer-term contracts.\296\ The Commission did not find that the 
variable avoided cost energy rate provision in the final rule will 
necessarily lead to longer term contracts and LEOs in every state, nor 
did its decision to adopt this provision rely on such a finding.\297\ 
However, the

[[Page 86680]]

Commission found that the record supports the conclusion that the 
variable avoided cost energy rate provision could lead to longer term 
contracts in at least some states and that likelihood provides support 
for the conclusion that QFs will be able to obtain financing for their 
projects under this provision if their costs are indeed below the 
purchasing utility's avoided costs.\298\
---------------------------------------------------------------------------

    \296\ Id. P 349 (citing NOPR, 168 FERC ] 61,184 at 5 n.5; Idaho 
Commission Comments, Docket No. RM19-15-000, at 4 (Dec. 3, 2019) 
(allowing states to set variable QF energy avoided costs ``would 
allow states to consider longer term contracts without putting 
ratepayers at risk'')).
    \297\ Id. The Commission did not find that variable avoided cost 
energy rates would be appropriate only if they cause states to 
require longer term contracts, and the Commission did not adopt the 
suggestion made by certain commenters that the Commission order 
states to require longer contract terms. See id. P 349 n.566 (citing 
NIPPC, CREA, REC, and OSEIA Comments, Docket No. RM19-15-000, at 47-
48 (Dec. 3, 2019); Public Interest Organizations Comments, Docket 
No. RM19-15-000, at 6-7 (Dec. 3, 2019); sPower Comments, Docket No. 
RM19-15-000, at 11 (Dec. 3, 2019)).
    \298\ Id. P 349.
---------------------------------------------------------------------------

i. Requests for Rehearing
    159. Public Interest Organizations argue that the Commission 
ignored evidence showing that allowing states to eliminate fixed energy 
rate contracts discourages QF development.\299\ Public Interest 
Organizations assert that the Commission ignored evidence that fixed 
energy rates are important to QF development. Similarly, Public 
Interest Organizations claim that the Commission ignored evidence that 
(1) allowing states to adopt variable energy rate contracts will 
violate PURPA and (2) states allowing only variable energy rate QF 
contracts have experienced little or no renewable QF development and QF 
development fell in states that switched from fixed price contracts to 
variable price contracts.\300\ For support, Public Interest 
Organizations point to the following: (1) Alabama offers standard 
contracts with only QF rates that vary based on month and time of day 
received and in 2018 Alabama's cumulative solar capacity was less than 
300 MW; (2) Georgia Power's standard offer for solar QF contracts 
offered only a variable hourly avoided energy cost rate and there are 
about nine solar participants in this program with a total of less than 
500 kW capacity; (3) Wisconsin utilities offer only short term variable 
pricing at LMP and no QFs have been developed in response, in contrast 
to neighboring states with fixed price contracts and substantial QF 
development; and (4) QF development related to fixed rate contracts in 
Idaho stopped after the Idaho Commission required variable energy rate 
contracts that reset every two years.\301\
---------------------------------------------------------------------------

    \299\ Public Interest Organizations Request for Rehearing at 9, 
72.
    \300\ Id. at 73-74.
    \301\ Id. at 74-75.
---------------------------------------------------------------------------

    160. Public Interest Organizations argue that large, non-QF 
development and nuclear plant power purchase agreements also rely on 
fixed price contracts. Public Interest Organizations maintain that, 
even if non-QFs relied on variable- instead of fixed-energy price 
contracts, the Commission has not shown that renewable projects that 
are QFs can be developed under similar contract terms. Public Interest 
Organizations represent that renewable QFs have only been developed 
where contracts provide long-term price certainty (e.g., in Idaho, QF 
development ceased when states provide only variable energy pricing 
(even with fixed capacity rates), which is contrary to the Commission's 
unfounded assertion that QF development would increase with variable 
rates).\302\
---------------------------------------------------------------------------

    \302\ Id. at 75-76.
---------------------------------------------------------------------------

    161. Public Interest Organizations argue that the Commission relies 
on speculation that QFs could be developed without fixed energy rates 
and that the Commission lacks evidence to argue that long-term price 
certainty is not material to QFs' ability to obtain financing. Public 
Interest Organizations assert that the Commission's citation to 
testimony from Southern Company about a hypothetical bilateral contract 
with an independent natural gas power producer does not show how 
renewable generators that could qualify as QFs using different 
financing structures, using different fuels, and at much smaller 
capacities could be developed. Public Interest Organizations contend 
that the Commission could point to no renewable QF that could be 
developed without long-term energy price certainty. Public Interest 
Organizations similarly assert that the Commission misconstrued 
testimony from Solar Energy Industries in suggesting that a fixed 
energy price was unnecessary to encourage QF development.\303\
---------------------------------------------------------------------------

    \303\ Id. at 76-78.
---------------------------------------------------------------------------

    162. Public Interest Organizations argue that, contrary to the 
Commission's assertions, there is no evidence that bilateral energy 
transactions to hedge energy price risk as used in large gas plant 
transactions are sufficient without fixed energy rates for lenders to 
finance new wind and solar QF development. Public Interest 
Organizations claim that the Commission has no evidence that financial 
hedge products exist for QFs for a sufficient period of time and at a 
reasonable price to permit financing.\304\ Public Interest 
Organizations assert that, because the Commission has provided no 
evidence that any QFs, renewable projects the size of QFs, or non-QF 
renewables were developed without fixed price energy contracts, the 
Commission's assertions that new generation was developed without 
PURPA's avoided cost provisions are irrelevant.\305\
---------------------------------------------------------------------------

    \304\ Id. at 78.
    \305\ Id. at 78-79.
---------------------------------------------------------------------------

    163. Public Interest Organizations argue that the Commission 
ignored evidence showing the fixed capacity rates alone will not 
encourage renewable energy development.\306\ Public Interest 
Organizations claim that the Commission ignored evidence showing that, 
in vertically integrated markets like the Southeast, several utilities 
have eliminated or dramatically lowered capacity payments to QFs and 
that QFs cannot use financing arrangements available to non-QFs, such 
as independent natural gas generators, to be viable. Public Interest 
Organizations assert that, because the capacity price for a QF may be 
zero, no QFs were effectively developed after Dominion Energy South 
Carolina's capacity rates were set at zero and QF development is 
minimal in Alabama due to Alabama Power's zero price capacity rates. 
Therefore, Public Interest Organizations maintain that the Commission 
has no evidence to support its contention that a fixed capacity rate 
should be sufficient to recover QF capacity costs and enable QF 
financing.\307\
---------------------------------------------------------------------------

    \306\ Id. at 9, 78-79.
    \307\ Id. at 79-82.
---------------------------------------------------------------------------

    164. Public Interest Organizations argue that renewable QFs have 
different financing needs than non-QF independent natural gas 
generators and that the Commission lacked evidence to support applying 
the variable energy/fixed capacity rate construct to QFs.\308\ 
Specifically, Public Interest Organizations represent that ``wind and 
solar QFs have higher capital costs, lower operating costs, and provide 
energy intermittently--characteristics that may present different 
financing challenges as compared to non-QF natural gas fired 
capacity.'' \309\ Public Interest Organizations state that even RTO/ISO 
capacity markets, which they note many QFs do not have access to, ``are 
implicitly biased in favor of resources with low capital costs, such as 
natural gas plants, and may be ``ill-suited to finance'' renewable 
resources with high-fixed costs and near-zero operating costs.'' \310\
---------------------------------------------------------------------------

    \308\ Id. at 82-83.
    \309\ Id. at 83 (citing Harvard Electricity Law Comments, Docket 
No. RM19-15-000, at 17-19 (Dec. 3, 2019)).
    \310\ Id. (citing Harvard Electricity Law Comments, Docket No. 
RM19-15-000, at 17-19 (Dec. 3, 2019)).

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[[Page 86681]]

    165. Solar Energy Industries contend that, while securing financing 
based on an as-available energy rate and a fixed capacity rate may be a 
rare possibility in a few locations across the country, there is no 
evidence in the record that financing is generally available in such 
circumstances.\311\ Solar Energy Industries claim that, therefore, 
long-term contracts are necessary to finance new non-utility generation 
because capital providers will not finance a project without a 
reasonable expectation of the revenue the project expects to generate 
over its useful life.\312\ Solar Energy Industries conclude that, if 
the purchasing electric utility does not offer the QF a forecasted 
energy rate over the life of a long-term contract and the QF is not 
otherwise able to compete for a long-term contract through a 
competitive bidding program, then the QF will not be able to obtain 
financing in the capital markets.\313\
---------------------------------------------------------------------------

    \311\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 9, 12.
    \312\ Id. at 9.
    \313\ Id. at 10.
---------------------------------------------------------------------------

    166. Solar Energy Industries further argue that there is no 
credible evidence in the record that even merchant generation projects 
are financed on variable energy rate contracts.\314\ Solar Energy 
Industries provide examples where such generators have sought longer-
term contracts as a means to support capital market financing.\315\ 
Solar Energy Industries further argue that merchant natural gas 
generators have relatively low capital costs and are thus able to rely 
on the fuel products markets to mitigate the risk of variable energy 
pricing, whereas fuel-less QFs do not have a similar ability, and thus 
bear the entire risk of volatile market prices.\316\ Solar Energy 
Industries provide examples of industry studies that they claim have 
consistently shown that only very small portions of new capacity 
additions have been financed with variable energy rates.\317\
---------------------------------------------------------------------------

    \314\ Id. at 12.
    \315\ Id. at 12-13.
    \316\ Id. at 14.
    \317\ Id. at 14-15 (citing Power Plants are Not Built on Spec, 
2014 Update, American Public Power Association (Oct. 2014), https://hepg.hks.harvard.edu/files/hepg/files/94_2014_power_plant_study.pdf?m=1523366757).
---------------------------------------------------------------------------

    167. Solar Energy Industries also assert that the Commission acted 
arbitrarily and capriciously in failing to consider the fact that many 
states do not offer QFs a fixed price for capacity that is sufficient 
to support financing.\318\ Solar Energy Industries argue that, when 
purchasing electric utilities do not provide for fixed capacity 
payments over the term of the QF contract, the Commission should not 
provide a state flexibility to terminate the QF's right to elect a 
long-term energy rate in a long-term contract.\319\ Solar Energy 
Industries contend that it would be arbitrary and capricious, for 
example, to allow New Mexico the flexibility to terminate the QF's 
right to elect a long-term energy rate because Public Service Company 
of New Mexico (PNM) does not compensate QFs for capacity despite the 
fact that PNM has announced it is replacing all of the capacity from 
its San Juan Generating Station with renewables.\320\
---------------------------------------------------------------------------

    \318\ Id. at 16.
    \319\ Id.
    \320\ Id. at 16-17.
---------------------------------------------------------------------------

    168. Finally, Solar Energy Industries claim that the final rule's 
reliance on the prospects for QFs' ability to leverage the use of 
financial products (i.e., a hedge) when offered a variable energy rate 
contract is without any factual basis, adding that, even when hedges 
are made available, many hedge providers decline to work with small 
projects because they are not cost effective and have higher risk 
profiles.\321\
---------------------------------------------------------------------------

    \321\ Id. at 18.
---------------------------------------------------------------------------

    169. Northwest Coalition argues that the Commission's assumption 
that QFs will be able to secure financing without fixed energy prices 
is not supported by sufficient evidence and ignores extensive evidence 
to the contrary. Northwest Coalition asserts that the Commission's 
conclusion that QFs can be financed using contracts with variable 
energy rates is without evidentiary support and arbitrarily ignores or 
misconstrues evidence from different sources demonstrating that 
exposing generation projects to unpredictable market risks makes 
financing QFs impossible. Northwest Coalition contends that, although 
the Commission relies on evidence that non-QF renewable energy projects 
have grown in recent years, it cites no underlying contract terms and 
ignores that these projects have largely been built on the strength of 
fixed price contracts. Northwest Coalition claims that the Commission 
takes evidence out of context and ignores real-world evidence that 
attempts to develop generation based on short-term prices have failed 
\322\ and that short-term prices do not represent utility avoided costs 
for long-term energy.\323\
---------------------------------------------------------------------------

    \322\ Northwest Coalition Request for Rehearing at 4-5.
    \323\ Id. at 5 (citing Transmission Access Pol'y Grp. v. FERC, 
225 F.3d 667, 688 (D.C. Cir. 2000)).
---------------------------------------------------------------------------

    170. Northwest Coalition argues that the Commission relies on 
arbitrary reasoning to support the decision to reverse 40 years of 
precedent, holding that fixed-price contracts are necessary to 
encourage QFs and support financing of QFs, to authorize states to 
deprive QFs of fixed energy prices. Northwest Coalition asserts that 
the Commission failed to respond to legitimate objections raised by 
commenters opposing the proposal, ignores evidence that QFs require a 
substantial minimum term to support financing, and fails to establish 
any minimum contract term, despite well-established precedent requiring 
contract terms long enough to support financing and substantial 
evidence that states have undermined PURPA by imposing unreasonably 
short contract terms.\324\
---------------------------------------------------------------------------

    \324\ Id. (citing PPL Wallingford Energy LLC v. FERC, 419 F.3d 
1194, 1198 (D.C. Cir. 2005) (PPL Wallingford); Ne. Md. Waste 
Disposal Auth. v. EPA, 358 F.3d 936, 949 (D.C. Cir. 2004)).
---------------------------------------------------------------------------

    171. Northwest Coalition claims that there is no guarantee that the 
long-term avoided capacity payment will be sufficient to support a QF's 
financing and permitting avoided cost energy payments to vary with 
volatile short-term market prices forces QFs to bear the risks of 
market volatility.\325\
---------------------------------------------------------------------------

    \325\ Id. at 16-17.
---------------------------------------------------------------------------

ii. Commission Determination
    172. We disagree with the arguments raised on rehearing. First, in 
enacting PURPA, Congress made clear that QFs' ``risk in proceeding 
forward in the cogeneration or small power production enterprise is not 
guaranteed to be recoverable.'' \326\ The Commission determined, based 
on record evidence described in the final rule and below, that 
significant amounts of generation capacity, including renewable 
resource capacity, have obtained financing without a regulatorily-
required fixed energy rate. But to the extent that a state determines 
that a variable energy rate is required to ensure that the QF's rate 
does not exceed avoided costs, then PURPA prevents the Commission from 
requiring that the state award the QF with a fixed energy rate to 
ensure that the QF obtains financing.
---------------------------------------------------------------------------

    \326\ Conf. Rep. at 97-98 (emphasis added).
---------------------------------------------------------------------------

    173. We also reiterate that the Final Rule did not eliminate fixed 
rates for QFs. The final rule gives states the flexibility, if they 
choose to take advantage of this flexibility, to require that the 
avoided cost energy rates in QF contracts vary depending on the 
purchasing utility's avoided energy costs at the time of delivery. 
However, in the final rule, the Commission did not alter QFs' right to 
require capacity rates to be fixed for the length of the QF's contract. 
Those capacity rates would still need to meet the standards of 18 CFR 
292.304(e). Furthermore,

[[Page 86682]]

because those rates must continue to be set at a purchasing utility's 
full avoided costs, a particular QF's inability to be developed under 
that rate does not mean that rate violates PURPA.
    174. Further, as stated in the final rule, the variable energy 
rate/fixed capacity rate construct is common among merchant generators 
for power sales agreements that include the sale of capacity, which 
demonstrates that other types of non-utility generation are able to 
raise useful financing under such an arrangement.\327\ As Finadvice, a 
commenter with experience in project finance observed in its NOPR 
comments, given the mandatory purchase obligation,
---------------------------------------------------------------------------

    \327\ See Order No. 872, 172 FERC ] 61,041 at PP 30-31, 35-41, 
336-345.

QFs utilizing a variety of standard hedging and risk management 
tools, provide sufficient comfort to facilitate the financing of 
variable priced PPAs. Having a fixed capacity rate, as proposed by 
the Commission will help attract capital and reduce the cost of 
financing in this regard, but is not a necessary prerequisite.\328\
---------------------------------------------------------------------------

    \328\ Finadvice Comments, Docket No. RM19-15-000, at 2 (Dec. 3, 
2019); see also Ohio Commission Energy Advocate Comments, Docket No. 
RM19-15-000, at 3-4 (Dec. 3, 2019 (``[O]rganized wholesale markets 
such as PJM have successfully attracted new supplies and ensured 
resource adequacy through a combination of fixed capacity rates and 
variable energy rates such as the Commission is proposing here. 
Fixing both the energy and the capacity components of the QF power 
sales contract is not necessary to attract new resources or to 
appropriately compensate qualifying facilities.'').

    175. Moreover, many QFs do share significant characteristics with 
other types of independent, non-utility generation; thus, it is 
reasonable to assume that they would be able to raise useful financing 
under such a financing arrangement.\329\ It is not necessary to prove 
that all potential QFs would be able to raise useful financing under 
such an arrangement, particularly where a state has determined that 
mandating variable as-available QF energy rates is necessary to respect 
the statutory avoided cost cap on QF rates.\330\
---------------------------------------------------------------------------

    \329\ See Order No. 872, 172 FERC ] 61,041 at P 340.
    \330\ Cf. Environmental Action, 939 F.2d at 1064 (``[I]t is 
within the scope of the agency's expertise to make such a prediction 
about the market it regulates, and a reasonable prediction deserves 
our deference notwithstanding that there might also be another 
reasonable view.'').
---------------------------------------------------------------------------

    176. While independent non-QFs are not subject to the same limits 
as QFs (i.e., avoided cost caps, 80 MW limit), these resources have 
been developed, likely with financing, despite lacking the 
encouragement provided by PURPA (i.e., mandatory purchase obligation, 
interconnection rights, exemption from state and federal regulations). 
While the Commission has indicated that hedging and other financial 
instruments can be helpful for QFs to obtain financing, the Commission 
did not suggest that all QFs need such instruments to obtain 
financing.\331\
---------------------------------------------------------------------------

    \331\ See Order No. 872, 172 FERC ] 61,041 at P 345 (footnote 
omitted) (``[T]he Commission never intended to suggest that hedging 
is cost-free or that it would be appropriate for all QFs. The 
commenters all agree that hedging is available for at least some 
QFs. For such QFs, hedging can help provide energy rate certainty if 
such certainty is required for financing. To the extent that 
certainty is required, then the cost of hedging is a part of the 
cost of financing the project that PURPA requires QFs to bear.'').
---------------------------------------------------------------------------

    177. We are not persuaded by Public Interest Organizations' 
argument that states' use of variable energy rates is a dispositive 
cause of a drop in QF development in particular states; it is possible 
that such a decrease in QF development was due to a variety of reasons, 
such as non-PURPA-related permitting, or PURPA-related reasons that 
preceded the final rule, such as the avoided capacity costs equaling 
zero, which has been permissible under Commission precedent.\332\ While 
we do not in this proceeding invalidate any state actions taken thus 
far, the final rule and this order provide greater emphasis that QFs 
are entitled to a fixed capacity rate if the purchasing utility's 
avoided capacity costs exceed zero. If a QF believes that a state is 
not implementing these rules, then that QF may seek relief in the 
appropriate forum, which could include any one or more of the 
following: (1) Initiating or participating in proceedings before the 
relevant state commission or governing body; (2) filing for judicial 
review of any state regulatory proceeding in state court (under PURPA 
section 210(g)); or, alternatively, (3) filing a petition for 
enforcement against the state at the Commission and, if the Commission 
declines to act, later filing a petition against the state in U.S. 
district court (under PURPA section 210(h)(2)(B)).\333\
---------------------------------------------------------------------------

    \332\ Public Interest Organizations Request for Rehearing at 73-
74.
    \333\ See Policy Statement Regarding the Commission's 
Enforcement Role Under Section 210 of the Public Utility Regulatory 
Policies Act of 1978, 23 FERC ] 61,304.
---------------------------------------------------------------------------

d. Requested Clarification of the Final Rule
    178. If the Commission does not grant rehearing, Solar Energy 
Industries request that the Commission clarify that such 
``flexibility'' offered by revised 18 CFR 292.304(d) is not available 
to any state unless the purchasing electric utility (1) has separately-
stated avoided energy and capacity rates on-file and (2) is complying 
with the data reporting requirements of 18 CFR 292.302.\334\
---------------------------------------------------------------------------

    \334\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 11.
---------------------------------------------------------------------------

i. Commission Determination
    179. We grant Solar Energy Industries' request for clarification 
that a state may only use variable rates to set avoided energy costs if 
the utility has fulfilled its obligations to disclose avoided cost data 
under 18 CFR 292.302. We do not find the disclosure of such information 
unreasonable as the Commission's PURPA Regulations already require its 
disclosure.\335\ In addition, although electric utilities are required 
to disclose this data generally, it is especially important when a 
state has selected the fixed capacity/variable energy rate construct to 
ensure that QFs have this data from the purchasing electric utility to 
provide transparency with regard to a utility's avoided costs, i.e., to 
understand what a utility's cost are to generate itself or purchase 
from another source. Particularly in the context of a state selecting a 
variable energy rate that can change over the term of a QF contract, 
ensuring that QFs have access to such avoided cost data encourages QF 
development.\336\
---------------------------------------------------------------------------

    \335\ See 18 CFR 292.302.
    \336\ See Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,868 
(``[I]n order to be able to evaluate the financial feasibility of a 
cogeneration or small power production facility, an investor needs 
to be able to estimate, with reasonable certainty, the expected 
return on a potential investment before construction of a facility. 
This return will be determined in part by the price at which the 
qualifying facility can sell its electric output. Under 292.304 of 
these rules, the rate at which a utility must purchase that output 
is based on the utility's avoided costs, taking into account the 
factors set forth in paragraph (e) of that section. Section 292.302 
of these rules is intended by the Commission to assist those needing 
data from which avoided costs can be derived.'').
---------------------------------------------------------------------------

    180. We deny Solar Energy Industries' additional request that a 
utility must have separately-stated avoided energy and capacity rates 
on-file in order for a state to set variable energy rates in QF 
contracts. Solar Energy Industries has not shown how having such rates 
on file necessarily encourages the development of QFs and, as explained 
below, likely would be inconsistent with the authority that PURPA 
grants the states.\337\ Under PURPA, states are permitted to determine 
avoided cost rates differently among themselves (i.e., through 
adjudication, rulemaking, or legislation).\338\ Requiring each utility 
to

[[Page 86683]]

have a stated rate on file (beyond standard rates \339\) may interfere 
with states' rights to determine a rate and the flexibility provided in 
Order No. 872 to set such rates. However, as noted above, we are 
requiring the disclosure of the data that would allow QFs to review any 
rate that is set by a state, and the disclosure of such data should 
encourage the development of QFs.
---------------------------------------------------------------------------

    \337\ While we do not require this here, states may choose to 
require that rates are on file.
    \338\ See FERC v. Miss., 456 U.S. at 751 (``[A] state commission 
may comply with the statutory requirements [of PURPA section 210] by 
issuing regulations, by resolving disputes on a case-by-case basis, 
or by taking any other action reasonably designed to give effect to 
FERC's rules.'').
    \339\ See 18 CFR 292.304(c).
---------------------------------------------------------------------------

5. Consideration of Competitive Solicitations To Determine Avoided 
Costs
    181. In the NOPR, the Commission proposed to revise the PURPA 
Regulations in 18 CFR 292.304 to add subsection (b)(8). In combination 
with new subsection (e)(1), this subsection would permit a state the 
flexibility to set avoided cost energy and/or capacity rates using 
competitive solicitations (i.e., requests for proposals or RFPs), 
conducted pursuant to appropriate procedures.\340\
---------------------------------------------------------------------------

    \340\ NOPR, 168 FERC ] 61,184 at P 82.
---------------------------------------------------------------------------

    182. The Commission recognized that one way to enable the industry 
to move toward more competitive QF pricing is to allow states to 
establish QF avoided cost rates through a competitive solicitation 
process. The Commission previously has explored this issue. In 1988, 
the Commission issued a notice of proposed rulemaking proposing to 
adopt regulations that would allow bidding procedures to be used in 
establishing rates for purchases from QFs.\341\ That rulemaking 
proceeding, along with several related proceedings, ultimately was 
withdrawn as overtaken by events in the industry.\342\
---------------------------------------------------------------------------

    \341\ Regulations Governing Bidding Programs, 53 FR 9324 
(Mar.22, 1988), FERC Stats. & Regs. ] 32,455 (1988) (cross-
referenced at 42 FERC ] 61,323) (Bidding NOPR); see also 
Administrative Determination of Full Avoided Costs, Sales of Power 
to Qualifying Facilities, and Interconnection Facilities, 53 FR 9331 
(Mar.22, 1988), FERC Stats. & Regs. ] 32,457 (1988) (cross-
referenced at 42 FERC ] 61,324) (ADFAC NOPR).
    \342\ See Regulations Governing Bidding Programs, 64 FERC ] 
61,364 at 63,491-92 (1993) (terminating Bidding NOPR proceeding); 
see also Administrative Determination of Full Avoided Costs, Sales 
of Power to Qualifying Facilities, and Interconnection Facilities, 
84 FERC ] 61,265 (1998) (terminating ADFAC NOPR proceeding).
---------------------------------------------------------------------------

    183. Since then, in 2014, the Commission held, with respect to a 
particular competitive solicitation, that an electric utility's 
obligation to purchase power from a QF under a LEO could not be 
curtailed based on a failure of the QF to win an only occasionally-held 
competitive solicitation.\343\ In a separate proceeding involving a 
different competitive solicitation, the Commission declined to initiate 
an enforcement action where the state competitive solicitation was an 
alternative to a PURPA program.\344\
---------------------------------------------------------------------------

    \343\ See, e.g., Hydrodynamics, Inc., 146 FERC ] 61,193, at PP 
31-35 (2014) (Hydrodynamics). Competitive solicitation processes 
have been used more recently in a number of states, including 
Georgia, North Carolina, and Colorado. Georgia's competitive 
solicitation process is described at Ga. Comp. R. & Regs. 515-3-
4.04(3) (2018). North Carolina's competitive solicitation process is 
described at 4 N.C. Admin. Code 11.R8-71 (2018). Colorado's 
competitive solicitation process is described at sPower Development 
Co., LLC v. Colorado Pub. Utils. Comm'n, 2018 WL 1014142 (D. Colo. 
Feb. 22, 2018).
    \344\ Winding Creek Solar LLC, 151 FERC ] 61,103, 
reconsideration denied, 153 FERC ] 61,027 (2015). But see Winding 
Creek Solar LLC v. Peterman, 932 F.3d 861 (9th Cir. 2019).
---------------------------------------------------------------------------

    184. Given this precedent, in the NOPR, the Commission proposed to 
amend its regulations to clarify that a state could establish QF 
avoided cost rates through an appropriate competitive solicitation 
process. Consistent with its general approach of giving states 
flexibility in the manner in which they determine avoided costs, the 
Commission did not propose in the NOPR to prescribe detailed criteria 
governing the use of competitive solicitations as tools to determine 
rates to be paid to QFs, as well as to determine other contract terms. 
The Commission stated that states arguably may be in the best position 
to consider their particular local circumstances, including questions 
of need, resulting economic impacts, amounts to be purchased through 
auctions, and related issues.\345\
---------------------------------------------------------------------------

    \345\ NOPR, 168 FERC ] 61,184 at P 86.
---------------------------------------------------------------------------

    185. Nevertheless, in considering what constitutes proper design 
and administration of a competitive solicitation, in the NOPR, the 
Commission found it was appropriate to establish certain minimum 
criteria governing the process by which competitive solicitations are 
to be conducted in order for a competitive solicitation to be used to 
set QF rates. In that regard, the Commission noted that it has 
addressed competitive solicitations in prior orders in a number of 
contexts that provide potential guidance to states and others. For 
example, the Commission's policy for the establishment of negotiated 
rates for merchant transmission projects,\346\ the Bidding NOPR, and 
the Hydrodynamics case \347\ all suggest factors that could be 
considered in establishing an appropriate competitive solicitation that 
is conducted in a transparent and non-discriminatory manner.\348\
---------------------------------------------------------------------------

    \346\ Id. P 87 (citing Allocation of Capacity on New Merchant 
Transmission Projects and New Cost-Based, Participant-Funded 
Transmission Projects, 142 FERC ] 61,038 (2013)).
    \347\ Id. (citing Hydrodynamics, 146 FERC ] 61,193 at P 32 n.70 
(citing Bidding NOPR, FERC Stats. & Regs. ] 32,455 at 32,030-42)). 
The Commission noted that, while QFs not awarded a contract pursuant 
to an competitive solicitation would retain their existing PURPA 
right to sell energy as available to the electric utility, if the 
state has concluded that such QF capacity puts tendered after an 
competitive solicitation was held are ``not needed,'' the capacity 
rate may be zero because an electric utility is not required to pay 
a capacity rate for such puts if they are not needed. Id. P 87 n.135 
(citing Hydrodynamics, 146 FERC ] 61,193 at P 35 (referencing City 
of Ketchikan, 94 FERC at 62,061 (``[A]voided cost rates need not 
include the cost for capacity in the event that the utility's demand 
(or need) for capacity is zero. That is, when the demand for 
capacity is zero, the cost for capacity may also be zero.''))).
    \348\ Id.
---------------------------------------------------------------------------

    186. As proposed in the NOPR, these factors included, among others: 
(a) An open and transparent process; (b) solicitations should be open 
to all sources to satisfy the purchasing electric utility's capacity 
needs, taking into account the required operating characteristics of 
the needed capacity; \349\ (c) solicitations conducted at regular 
intervals; (d) oversight by an independent administrator; and (e) 
certification as fulfilling the above criteria by the state regulatory 
authority or nonregulated electric utility. The Commission proposed 
that a state may use a competitive solicitation to set avoided cost 
energy and capacity rates, provided that such competitive solicitation 
process is conducted pursuant to procedures ensuring the solicitation 
is transparent and non-discriminatory. The Commission proposed that 
such a competitive solicitation must be conducted in a process that 
includes, but is not limited to, the factors identified above which 
would be set forth in proposed subsection (b)(8).\350\
---------------------------------------------------------------------------

    \349\ Id. (citing 18 CFR 292.304(e); Windham Solar, 157 FERC ] 
61,134 at PP 5-6).
    \350\ Id.
---------------------------------------------------------------------------

    187. In addition, the Commission sought comment on whether it 
should provide further guidance on whether, and under what 
circumstances, a competitive solicitation can be used as a utility's 
exclusive vehicle for acquiring QF capacity.\351\
---------------------------------------------------------------------------

    \351\ Id. P 88. The Commission proposed that, even if a 
competitive solicitation were used as an exclusive vehicle for an 
electric utility to obtain QF capacity, QFs that do not receive an 
award in the competitive solicitation would be entitled to sell 
energy to the electric utility at an as-available avoided cost 
energy rate. Id. P 88 n.137.
---------------------------------------------------------------------------

    188. In the final rule, the Commission adopted the NOPR proposal to 
revise the PURPA Regulations to explicitly permit a state the 
flexibility to set avoided energy and/or capacity rates using 
competitive solicitations (i.e., RFPs) conducted pursuant to 
appropriate procedures in a transparent and non-discriminatory manner. 
The Commission stated that the primary

[[Page 86684]]

feature of a transparent and non-discriminatory competitive 
solicitation is that a utility's capacity needs are open for bidding to 
all capacity providers, including QF and non-QF resources, on a level 
playing field. The Commission found that this level playing field 
ensures that any QF's capacity rates that result from the competitive 
solicitation are just and reasonable and non-discriminatory avoided 
cost rates.\352\
---------------------------------------------------------------------------

    \352\ Order No. 872, 172 FERC ] 61,041 at P 411.
---------------------------------------------------------------------------

    189. Consistent with its general approach of giving states 
flexibility in the manner in which they determine avoided costs, the 
Commission did not prescribe detailed criteria governing the use of 
competitive solicitations as tools to determine rates to be paid to QFs 
and to determine other contract terms. The Commission found that states 
are in arguably the best position to consider their particular local 
circumstances, including questions of need, resulting economic impacts, 
amounts to be purchased through auctions, and related issues.\353\
---------------------------------------------------------------------------

    \353\ Id. P 412.
---------------------------------------------------------------------------

    190. However, as in the NOPR, the Commission in the final rule 
found it appropriate to establish certain minimum criteria governing 
the process by which competitive solicitations are to be conducted in 
order for a competitive solicitation to be used to set QF rates. The 
Commission found that, in order to use the results of a competitive 
solicitation to set avoided cost rates, the competitive solicitation 
must be conducted in a transparent and non-discriminatory manner. Such 
a competitive solicitation must be conducted in a process that 
includes, but is not limited to, the following factors: (i) The 
solicitation process is an open and transparent process that includes, 
but is not limited to, providing equally to all potential bidders 
substantial and meaningful information regarding transmission 
constraints, levels of congestion, and interconnections, subject to 
appropriate confidentiality safeguards; (ii) solicitations must be open 
to all sources, to satisfy that purchasing electric utility's capacity 
needs, taking into account the required operating characteristics of 
the needed capacity; (iii) solicitations are conducted at regular 
intervals; (iv) solicitations are subject to oversight by an 
independent administrator; and (v) solicitations are certified as 
fulfilling the above criteria by the relevant state regulatory 
authority or nonregulated electric utility through a post-solicitation 
report.\354\
---------------------------------------------------------------------------

    \354\ Id. P 427.
---------------------------------------------------------------------------

    191. The Commission affirmed that such competitive solicitations 
must be conducted in a process that includes, but is not limited to, 
the factors identified above that will be set forth in 18 CFR 
292.304(b)(8). The Commission explained that the final rule does not 
undo any competitive solicitations conducted prior to the effective 
date of the final rule that may not have met these criteria. The 
Commission described the final rule as applying only to competitive 
solicitations conducted after the effective date of the final 
rule.\355\ The Commission also stated that it will presume that any 
future competitive solicitation that does not comply with the factors 
adopted in the final rule does not comply with the Commission's 
regulations implementing PURPA.\356\
---------------------------------------------------------------------------

    \355\ Id. P 414.
    \356\ Id. P 428.
---------------------------------------------------------------------------

    192. The Commission explained that, more generally, it supports the 
use of competitive solicitations as a means to foster competition in 
the procurement of generation and to encourage the development of QFs 
in a way that most accurately reflects a purchasing utility's avoided 
costs. The Commission further explained that allowing QFs to compete to 
provide capacity and energy needs, through a properly administered 
competitive solicitation, may help ensure an accurate determination of 
the purchasing electric utility's avoided cost and therefore result in 
prices meeting the PURPA's statutory requirements. The Commission found 
that it is reasonable for states to choose to require QFs to be 
responsive to price signals as to where and when capacity is needed. 
The Commission expressed its belief that a properly administered 
competitive solicitation can help provide such price signals.\357\
---------------------------------------------------------------------------

    \357\ Id. P 416.
---------------------------------------------------------------------------

    193. The Commission also clarified that, if a utility acquires all 
of its capacity through properly conducted competitive solicitations 
(using the factors described above) and does not add capacity through 
self-building and purchasing power from other sources outside of such 
solicitations, the competitive solicitations could be the exclusive 
vehicle for the purchasing electric utility to pay avoided capacity 
costs from a QF. In this situation, using properly conducted 
competitive solicitations as the exclusive vehicle to determine the 
purchasing electric utility's avoided cost capacity rates would allow 
QFs a chance to compete to provide the utility's capacity needs on a 
level playing field with the utility. The Commission clarified that it 
is up to the states to determine whether to require that a utility's 
total planned self-build and power purchase options must compete in the 
competitive solicitations and declined to direct such a 
requirement.\358\
---------------------------------------------------------------------------

    \358\ Id. P 421.
---------------------------------------------------------------------------

    194. The Commission determined that, if a state decides to require 
utility self-build and power purchase options to participate in 
competitive solicitations, then a QF that does not obtain an award in a 
competitive solicitation would have no right to an avoided cost 
capacity rate more than zero because the utility's full capacity needs 
would have been met by the competitive solicitation.\359\ However, the 
Commission determined that QFs would continue to have the right to put 
energy to the utility at the as-available avoided cost energy rate 
because the purchasing utility will still be able to avoid incurring 
the cost of generating energy even when it does not need new 
capacity.\360\
---------------------------------------------------------------------------

    \359\ The Commission stated that this would be consistent with 
City of Ketchikan, 94 FERC at 62,061 (``[A]voided cost rates need 
not include the cost for capacity in the event that the utility's 
demand (or need) for capacity is zero. That is, when the demand for 
capacity is zero, the cost for capacity may also be zero.'').
    \360\ Order No. 872, 172 FERC ] 61,041 at P 422.
---------------------------------------------------------------------------

    195. The Commission also determined that, if the state does not 
require utility self-build and purchase options to participate in 
competitive solicitations, then QFs that lose in a competitive 
solicitation still may have the right to avoided cost capacity rates 
more than zero if the state determines that the utility still has 
capacity needs after the competitive solicitation that otherwise could 
be met through the utility's self-build or purchase options.\361\
---------------------------------------------------------------------------

    \361\ Id. P 423.
---------------------------------------------------------------------------

    196. The Commission affirmed that, when capacity is not needed, the 
avoided capacity cost rate can be zero.\362\ The Commission described 
how competitive solicitations conducted pursuant to the rules adopted 
in the final rule that are held whenever capacity is needed provide QFs 
a level playing field on which to compete to sell capacity. The 
Commission explained that this approach further shields purchasing 
electric utilities from situations like those explained by Xcel, where 
QFs could simply sit out the competitive solicitation process (or 
participate but not have their bids accepted), but then seek to sell 
capacity

[[Page 86685]]

to the purchasing electric utility and to receive a separate higher 
administratively-determined avoided cost rate including an avoided cost 
capacity rate, and even potentially displace non-QF competitive 
solicitation winners.\363\ The Commission found that this approach 
benefits ratepayers because allowing QFs to compete in properly 
conducted, competitive solicitations that are held whenever capacity is 
needed allows the purchasing utility to obtain needed capacity 
efficiently. The Commission clarified, however, that the competitive 
solicitation is not to be a means to determine a QF's right to put as-
available energy to the utility. Rather, the competitive solicitation 
can be the means to determine what, if any, rate the QF will be paid 
for capacity.\364\
---------------------------------------------------------------------------

    \362\ City of Ketchikan, 94 FERC at 62,061 (``[A]voided cost 
rates need not include the cost for capacity in the event that the 
utility's demand (or need) for capacity is zero. That is, when the 
demand for capacity is zero, the cost for capacity may also be 
zero.'').
    \363\ See Xcel Comments, Docket No. RM19-15-000, at 2-3, 9-10 
(Dec. 3, 2019).
    \364\ Order No. 872, 172 FERC ] 61,041 at P 424.
---------------------------------------------------------------------------

    197. The Commission clarified that competitive solicitations must 
also be conducted in accordance with the Allegheny principles under 
which the Commission evaluates a competitive solicitation: (1) 
Transparency, a requirement that the solicitation process be open and 
fair; (2) definition, a requirement that the product, or products, 
sought through the competitive solicitation be precisely defined; (3) 
evaluation, a requirement that the evaluation criteria be standardized 
and applied equally to all bids and bidders; and (4) oversight, a 
requirement that an independent third party design the solicitation, 
administer bidding, and evaluate bids prior to selection.\365\
---------------------------------------------------------------------------

    \365\ Allegheny Energy, 108 FERC ] 61,082 at P 18.
---------------------------------------------------------------------------

    198. The Commission also revised the proposed language in 18 CFR 
292.304(d)(8)(i) to clarify that participants must be provided with 
substantial and meaningful information regarding transmission 
constraints, levels of congestion, and interconnections, subject to 
appropriate confidentiality safeguards. The Commission found that it is 
important that all participants in the competitive solicitation have 
access to these data as a necessary predicate for a nondiscriminatory 
competitive solicitation process and that requiring that this 
information be provided will help ensure that a competitive 
solicitation is open and transparent.\366\
---------------------------------------------------------------------------

    \366\ Order No. 872, 172 FERC ] 61,041 at P 431.
---------------------------------------------------------------------------

    199. The Commission also clarified that the requirement that the 
competitive solicitation process be open and transparent includes that 
the electric utility provide the state commission, and make available 
for public inspection, a post-solicitation report that: (1) Identifies 
the winning bidders; (2) includes a copy of any reports issued by the 
independent evaluator; and (3) demonstrates that the solicitation 
program was implemented without undue preference for the interests of 
the purchasing utility or its affiliates. The Commission found this 
post-solicitation report requirement to be consistent with the 
requirement that competitive solicitations be open and transparent, not 
only to ensure that utilities are not discriminating against QFs, but 
also to help all stakeholders and the public at large better understand 
the utility's competitive solicitation processes and thus to be 
confident in the fairness of the process and of the results.\367\
---------------------------------------------------------------------------

    \367\ Id. P 432.
---------------------------------------------------------------------------

    200. The Commission declined to be overly prescriptive as to what 
constitutes an ``independent administrator,'' responsible for 
administering the competitive solicitation. The Commission clarified 
that the independent administrator must be an entity independent from 
the purchasing electric utility in order to help ensure fairness. 
Whether called an independent administrator or a third-party 
consultant, the Commission stated that the substantive requirement is 
that the competitive solicitation not be administered by the purchasing 
electric utility itself or its affiliates, but by a separate, unbiased, 
and unaffiliated entity not subject to being influenced by the 
purchasing utility.\368\
---------------------------------------------------------------------------

    \368\ Id. P 435.
---------------------------------------------------------------------------

    201. The Commission declined to add any additional requirements for 
competitive solicitations, given that states may be in the best 
position to consider their particular local circumstances. The 
Commission found that the guidelines adopted in the final rule, in 
conjunction with the Allegheny principles and other clarifications, 
provide an adequate framework for competitive solicitations to be 
conducted efficiently, transparently and in a nondiscriminatory 
manner.\369\
---------------------------------------------------------------------------

    \369\ Id. P 437.
---------------------------------------------------------------------------

    202. Regarding facilities not designed primarily to sell 
electricity to the purchasing electric utility, such as waste-to-power 
small power production facilities and cogeneration facilities, the 
Commission found that an exemption from competitive solicitation 
processes is unnecessary. The Commission did not exempt small power 
production facilities from the competitive solicitation process and was 
not persuaded that such an exemption is appropriate given that 
exempting large classes of small power producers could frustrate the 
price discovery function of the competitive solicitation. The 
Commission clarified, however, that QFs with capacity of 100 kW or less 
already are entitled to standard rates regardless of whether they 
compete in a competitive solicitation, and the final rule did not 
change that regulation.\370\
---------------------------------------------------------------------------

    \370\ See 18 CFR 292.304(c).
---------------------------------------------------------------------------

i. Requests for Rehearing
    203. Northwest Coalition argues that allowing states to use 
competitive solicitations to be the exclusive means of securing a long-
term PPA to sell energy and/or capacity is arbitrary, capricious, and 
not in accordance with law.\371\
---------------------------------------------------------------------------

    \371\ Northwest Coalition Request for Rehearing at 39.
---------------------------------------------------------------------------

    204. Northwest Coalition notes that PURPA section 210(a) requires 
that the Commission's rules must ``encourage'' QFs and must ``require 
electric utilities to offer to . . . purchase electric energy from such 
facilities.'' \372\ Northwest Coalition argues that, while the term 
``electric energy'' is not defined in the statute, the phrase's context 
within the statutory scheme unambiguously confirms that electric energy 
includes both energy and capacity, meaning that the Commission's rules 
must require utilities to purchase energy and capacity made available 
by QFs.\373\ Northwest Coalition asserts that, following the enactment 
of PURPA, the Commission interpreted this language in Order No. 69 to 
mean that the statutory phrase ``electric energy'' must include both 
energy and capacity.\374\ Northwest Coalition contends that the final 
rule does not provide any basis to change the Commission's longstanding 
interpretation of PURPA section 210(a) that requires electric utilities 
to purchase all energy and capacity made available by QFs.\375\
---------------------------------------------------------------------------

    \372\ Id. at 40 (citing 16 U.S.C. 824a-3(a)(2)).
    \373\ Id.
    \374\ Id. at 40-41.
    \375\ Id. at 41.
---------------------------------------------------------------------------

    205. Northwest Coalition relies on the U.S. Court of Appeals for 
the Ninth Circuit's invalidation of the California Commission's Re-Mat 
competitive solicitation program, which found that under the Re-Mat 
program, ``a utility could purchase less energy than a QF makes 
available, an outcome forbidden by PURPA.'' \376\ Northwest Coalition 
argues that, because the same problem exists with the final rule's 
exclusive use of competitive solicitations to offer to buy capacity 
from QFs, allowing states

[[Page 86686]]

to refuse to require electric utilities to offer to purchase capacity 
from QFs violates the statutory requirement that utilities offer to 
purchase all capacity made available from QFs.\377\
---------------------------------------------------------------------------

    \376\ Id. at 41-42 (citing Winding Creek Solar LLC v. Peterman, 
932 F.3d at 865).
    \377\ Id. at 42.
---------------------------------------------------------------------------

    206. Northwest Coalition asserts that PURPA section 210(a) requires 
that the Commission design its rules implementing the statutory must-
purchase obligation in such a manner that those rules will encourage 
the development of QFs, adding that allowing utilities to evade the 
mandatory purchase obligation through the exclusive use of competitive 
solicitations that utility-owned resources commonly win is inconsistent 
with statutory requirements.\378\
---------------------------------------------------------------------------

    \378\ Id.
---------------------------------------------------------------------------

    207. Northwest Coalition contends that the final rule arbitrarily 
fails to acknowledge the Commission's own precedent and therefore does 
not constitute reasoned decision making.\379\ Northwest Coalition 
points to Hydrodynamics, in which the Commission rejected the ``Montana 
Rule,'' which imposed a ``competitive solicitation process as the only 
means by which a QF greater than 10 MW can obtain long-term avoided 
cost rates.'' \380\ Northwest Coalition also points to Windham Solar 
LLC, in which the Commission confirmed that it has held ``a state 
regulation to be inconsistent with PURPA and the PURPA regulations `to 
the extent that it offers the competitive solicitation process as the 
only means by which a QF . . . can obtain long term avoided cost 
rates.' '' \381\ Northwest Coalition argues that, under Commission 
precedent, ``regardless of whether a QF has participated in a request 
for proposal, that QF has the right to obtain a legally enforceable 
obligation.'' \382\ Northwest Coalition claims that the final rule's 
reasoning for allowing states to use competitive solicitations as a 
substitute for long-term PURPA contracts does not acknowledge these 
precedents or explain how the use of competitive solicitations could 
still comply with the statute.\383\ Northwest Coalition argues that, 
aside from generally averring it expects competitive solicitations will 
be fair with the newly adopted criteria, the final rule does not cite 
evidence suggesting that competitive solicitations will provide an 
adequate mechanism for QFs to sell energy and capacity or any other 
basis to overrule Commission precedent and therefore is arbitrary and 
capricious.\384\
---------------------------------------------------------------------------

    \379\ Id.
    \380\ Id. at 43 (citing Hydrodynamics, 146 FERC ] 61,193 at P 
33).
    \381\ Id. (citing Windham Solar, 156 FERC ] 61,042, at P 5 
(2016) (Windham Solar)).
    \382\ Id. (citing Windham Solar, 156 FERC ] 61,042 at P 5).
    \383\ Id. at 43-44.
    \384\ Id. at 44.
---------------------------------------------------------------------------

    208. Northwest Coalition asserts that the final rule relies on 
insufficient evidence to conclude that exclusive use of competitive 
solicitations will encourage QFs.\385\ First, Northwest Coalition 
contends that the Commission's decision fails to address multiple 
commenters' concerns with inherent bias in utility-run competitive 
solicitations and the difficulty and complexity of designing 
competitive solicitations that are fair to independent bidders, 
especially in regions with vertically integrated utility structures 
like the Pacific Northwest.\386\ Northwest Coalition argues that, given 
the evidence submitted concerning competitive solicitations in the 
Northwest, the Commission is required to conduct a more meaningful 
investigation and inquiry into the subject before it could rationally 
conclude that it has now developed bidding criteria that would suffice 
to justify denial of an LEO to any QF.\387\
---------------------------------------------------------------------------

    \385\ Id.
    \386\ Id. (citing NIPPC, CREA, REC, and OSEIA Comments, Docket 
No. RM19-15-000, at 13-25, 66-67 (Dec. 3, 2019)).
    \387\ Id. at 44-45.
---------------------------------------------------------------------------

    209. Northwest Coalition claims that the Commission fails to 
explain why it rejected more restrictive criteria proposed by parties 
but not included in the final rule. As an example, Northwest Coalition 
points to the Commission's failure to discuss in the final rule its 
additional proposed criteria for any RFP process to overcome inherent 
utility-ownership bias: (1) Require that the RFP include no utility-
ownership options; or (2) if utility-owned generation may result, the 
RFP must be (i) administered and scored (not just overseen by an 
independent evaluator) by a qualified independent party, not the 
utility, (ii) any utility or affiliate ownership bid must be capped at 
its bid price and not allowed traditional cost plus ratemaking 
treatment, and (iii) the product sought, minimum bidding criteria, and 
detailed scoring criteria must be made known to all parties at the same 
time, i.e., the utility or affiliate may not have an informational 
advantage in the RFP. Northwest Coalition asserts that, while the final 
rule adopted a requirement for independent third-party design and 
administration of the RFP, it rejected the rest of its proposals 
without discussion.\388\
---------------------------------------------------------------------------

    \388\ Id. at 45.
---------------------------------------------------------------------------

    210. Northwest Coalition contends that the final rule also ignores 
the lack of reasonable enforcement for the proposed exclusive use of 
competitive solicitations.\389\ Northwest Coalition argues that the 
final rule established a process that only allows QF advocates to 
challenge competitive solicitations after the fact, when it is too late 
to correct the harm caused by the utility's reliance on the competitive 
solicitation process as a basis to refuse to contract with QFs in the 
interim.\390\
---------------------------------------------------------------------------

    \389\ Id. at 46.
    \390\ Id.
---------------------------------------------------------------------------

    211. Northwest Coalition asserts that the final rule relies on 
insufficient evidence that small QFs and those primarily engaged in a 
business other than power production (e.g., irrigation districts and 
waste-to-power facilities) can succeed in the type of all-source 
competitive solicitation identified in the final rule.\391\ Northwest 
Coalition contends that the final rule summarily declines to adopt any 
exceptions other than a statement that 100 kW and smaller QFs can still 
obtain standard rates \392\ without a meaningful explanation, which 
fails to encourage such QFs, in contravention of PURPA.\393\
---------------------------------------------------------------------------

    \391\ Id.
    \392\ Id. (citing Order No. 872, 172 FERC ] 61,041 at P 440).
    \393\ Id. at 46-47.
---------------------------------------------------------------------------

    212. Mr. Mattson asserts that a QF should not have to compete in a 
competitive solicitation with coal and natural gas generators where the 
utility is selling their excess energy.\394\ Mr. Mattson alleges that 
requiring a QF to accept the competitive solicitation process to sell 
its capacity is a violation of the ``constitutional law right to 
contract.'' \395\ Mr. Mattson argues that QFs should have the right to 
a capacity payment if a capacity reduction will occur and the right to 
sell their capacity in the market.\396\
---------------------------------------------------------------------------

    \394\ Mr. Mattson Motion for Time, Reconsideration, and Request 
Answers at 1.
    \395\ Id. at 1.
    \396\ Id. at 1.
---------------------------------------------------------------------------

    213. Public Interest Organizations contend that the competitive 
solicitation provisions are arbitrary and capricious, unless the 
Commission clarifies that the solicitation only sets the full avoided 
energy costs for QFs when the utility procures all energy through 
solicitation.\397\ Public Interest Organizations claim that the final 
rule does not require a state or non-regulated utility which uses a 
competitive solicitation process to determine the price for QF energy 
and/or capacity rates to also determine that the price

[[Page 86687]]

reflects the utility's avoided cost.\398\ Public Interest Organizations 
assert that 18 CFR 292.304(b)(8) not only requires that a utility 
procure all capacity through competitive solicitations to satisfy its 
capacity requirement but also assumes that such competitive 
solicitation results reflect the full avoided energy cost without 
similarly requiring the purchasing electric utility to acquire all 
energy requirements through competitive solicitation.\399\ Public 
Interest Organizations allege that QFs are discriminated against in 
circumstances in which the competitive solicitation price is lower than 
the cost of energy produced or acquired by the utility outside the 
solicitation process.\400\ Public Interest Organizations argue that, 
while the final rule appears to agree that out-of-market acquisitions 
preclude competitive solicitation from setting the avoided cost price, 
the regulation only imposes limitations on the use of competitive 
solicitations in the capacity context.\401\
---------------------------------------------------------------------------

    \397\ Public Interest Organizations Rehearing Request at 10.
    \398\ Id. at 100.
    \399\ Id.
    \400\ Id.
    \401\ Id. at 101.
---------------------------------------------------------------------------

ii. Commission Determination
    214. We find no merit in the competitive solicitation arguments on 
rehearing. As an initial matter, we emphasize that the competitive 
solicitation framework adopted in the final rule: (1) Harmonizes the 
Commission's precedent on competitive solicitations; (2) establishes 
transparent and non-discriminatory procedural protections for and 
encourages the development of QFs; and (3) provides price discovery 
that may better determine a purchasing utility's avoided cost rates.
    215. We disagree with Northwest Coalition's arguments that the 
final rule goes against Commission precedent in Hydrodynamics and 
Windham Solar and essentially eliminates the mandatory purchase 
obligation for QF capacity. In those cases, the Commission found the 
states' decisions inconsistent with PURPA because the competitive 
solicitations were not regularly held.\402\ In contrast, the Commission 
in the final rule found that a properly run solicitation must be held 
at regular intervals, in which a utility's capacity needs are open for 
bidding to all capacity providers, including QF and non-QF resources, 
which is a level playing field for QFs to provide capacity.
---------------------------------------------------------------------------

    \402\ In Hydrodynamics, which the Commission quoted in Windham 
Solar, the Commission found relevant the fact that the Montana 
Commission's competitive solicitation were not held at regular 
intervals. See Hydrodynamics, 146 FERC ] 61,193 at P 32 (emphasis 
added) (``[W]e find that requiring a QF to win a competitive 
solicitation as a condition to obtaining a long-term contract 
imposes an unreasonable obstacle to obtaining a legally enforceable 
obligation particularly where, as here, such competitive 
solicitations are not regularly held.''); id. P 33 (emphasis added) 
(``The Montana Rule creates, as well, a practical disincentive to 
amicable contract formation because a utility may refuse to 
negotiate with a QF at all, and yet the Montana Rule precludes any 
eventual contract formation where no competitive solicitation is 
held.''); Windham Solar, 156 FERC ] 61,042 at P 5 (citing 
Hydrodynamics, 146 FERC ] 61,193 at PP 32-33).
---------------------------------------------------------------------------

    216. If a state does not require utility self-build and purchase 
options to participate in competitive solicitations, then QFs that lose 
still may have the right to avoided cost capacity rates more than zero 
if the state determines that the utility still has capacity needs.\403\ 
The Commission has already determined, and affirmed in the final rule, 
that capacity rates can be zero.\404\ The possibility of a zero 
capacity rate does not mean that the Commission has determined that 
utilities have no obligation to purchase capacity from QFs. It just 
means that, under our precedent, if a purchasing utility avoids no 
capacity costs due to the QF purchase, then the avoided cost for 
capacity will be zero. As we mentioned above, Northwest Coalition has 
conflated avoided energy costs with long-term power purchase 
agreements. Long-term avoided costs necessarily represent a utility's 
avoided capacity costs, and the Commission described how competitive 
solicitations could be ``exclusive'' means for obtaining a capacity 
rate, not an energy rate.
---------------------------------------------------------------------------

    \403\ See Order No. 872, 172 FERC ] 61,041 at PP 421-23.
    \404\ See City of Ketchikan, 94 FERC at 62,061.
---------------------------------------------------------------------------

    217. Under the final rule, even if a QF loses a competitive 
solicitation where the state requires utility self-build and purchase 
options to participate, it is still entitled to an energy rate outside 
of the competitive solicitation and would receive a capacity rate of 
zero, which is already permitted under Commission precedent where the 
purchasing utility's avoided cost capacity value is zero.\405\ The 
final rule, which largely adopted the NOPR, also provides procedural 
protections that the Commission has already indicated are prerequisites 
to competitive solicitations while allowing for a competitive 
solicitation, under certain conditions, to be a state's exclusive 
vehicle for setting QF capacity rates.\406\ The final rule therefore 
merely harmonizes, rather than overrules, that prior precedent.
---------------------------------------------------------------------------

    \405\ See supra PP 194-196; see also Order No. 872, 172 FERC ] 
61,041 at P 421 (``The Commission clarifies that, if a utility 
acquires all of its capacity through properly conducted competitive 
solicitations (using the factors described above), and does not add 
capacity through self-building and purchasing power from other 
sources outside of such solicitations, the competitive solicitations 
could be the exclusive vehicle for the purchasing electric utility 
to pay avoided capacity costs from a QF. In this situation, using 
properly conducted competitive solicitations as the exclusive 
vehicle to determine the purchasing electric utility's avoided cost 
capacity rates would allow QFs a chance to compete to provide the 
utility's capacity needs on a level playing field with the 
utility.'').
    \406\ See Order No. 872, 172 FERC ] 61,041 at P 363 (describing 
NOPR as citing Hydrodynamics, 146 FERC ] 61,193 at PP 31-35).
---------------------------------------------------------------------------

    218. We also disagree with Northwest Coalition's argument that the 
final rule does not encourage QFs. Using competitive solicitations 
encourages the development of QFs by providing them a price both 
consistent with a competitive market and more accurately reflecting a 
purchasing utility's avoided costs of capacity. The procedural 
protections the Commission has adopted for conducting competitive 
solicitations protect QFs from auctions that only benefit the utility's 
self-build because the QF is still entitled to a capacity rate that may 
exceed zero if the utility's self-build is not included in the 
competitive solicitation. Furthermore, the competitive solicitation 
regulation helps ensure that states can set QF rates no higher than 
avoided costs while guaranteeing QFs' rights to sell capacity and 
energy.\407\ In addition, while a competitive solicitation may be the 
exclusive forum for establishing avoided cost capacity rates, once a 
state has determined that the competitive solicitation set avoided 
capacity costs (even if they equal zero), there is no infringement on 
QFs' rights, and the rule does not allow a utility to evade its 
purchase obligation.
---------------------------------------------------------------------------

    \407\ See id. P 416.
---------------------------------------------------------------------------

    219. We also disagree with Northwest Coalition's argument that the 
Commission fails to address multiple commenters' concerns about 
inherent bias in utility-run competitive solicitations, especially in 
regions with vertically integrated utility structures like the Pacific 
Northwest. The final rule described practices that cannot be used and 
incorporated into the Commission's regulations a requirement for 
independent administration and review to prevent the exercise of any 
utility bias. The Commission will not assume that failure to hold an 
acceptable competitive solicitation in the past will prevent the 
establishment of an acceptable solicitation in the future given the 
guard rails for independent administration and review the Commission 
has now required through the final rule. Indeed, the new rules are 
designed to ensure that future

[[Page 86688]]

competitive solicitations are not biased in favor of the purchasing 
utility. Northwest Coalition's concerns that this new competitive 
solicitation framework will leave QFs without a contract while they 
challenge the process or results of a competitive solicitation is 
misplaced. This framework is not meaningfully different from 
administrative determinations of avoided costs, wherein a QF might not 
receive a contract until it has exhausted administrative or judicial 
processes.
    220. Northwest Coalition argues that the Commission failed to 
explain why it rejected more restrictive criteria proposed by parties, 
including some of Northwest Coalition's own suggestions. The Commission 
weighed and considered all proposed criteria in determining which 
criteria to adopt. We explain below why the Commission did not adopt 
Northwest Coalition's proposed criteria.
    221. First, Northwest Coalition proposed that the Commission 
require that the competitive solicitation include no utility-ownership 
options. The Commission did not adopt this criterion because precluding 
utility ownership from competitive solicitations or limiting how a 
utility could bid does not provide the price discovery benefit of 
competitive solicitations.
    222. Second, Northwest Coalition proposed that, if utility-owned 
generation may result from the competitive solicitation, the 
competitive solicitation must be (1) administered and scored (not just 
overseen by an independent evaluator) by a qualified independent party, 
not the utility, (2) any utility or affiliate ownership bid must be 
capped at its bid price and not allowed traditional cost plus 
ratemaking treatment, and (3) the product sought, minimum bidding 
criteria, and detailed scoring criteria must be made known to all 
parties at the same time (i.e., the utility or affiliate may not have 
an informational advantage in the RFP).\408\
---------------------------------------------------------------------------

    \408\ Northwest Coalition Request for Rehearing at 45 (citing 
NIPPC, CREA, REC, OSEIA Comments, Docket No. RM19-15-000 at 67 (Dec. 
3, 2019)).
---------------------------------------------------------------------------

    223. With regard to Northwest Coalition's proposed criterion for an 
independent administrator, as noted above, the Commission ``decline[d] 
to be overly prescriptive as to what constitutes an `independent 
administrator.' '' \409\ Although this finding in the final rule had to 
do with whether the Commission required an ``independent 
administrator'' or a ``third party consultant,'' the Commission stated 
that the ``substantive requirement of this factor is that the 
competitive solicitation not be administered by the purchasing electric 
utility itself or its affiliates, but rather by a separate, unbiased, 
and unaffiliated entity not subject to being influenced by the 
purchasing utility.'' \410\ We continue to believe that we should not 
be overly prescriptive, but expect states to design competitive 
solicitations that meet these criteria in a transparent and non-
discriminatory manner. To that end, we grant Northwest Coalition's 
request that a competitive solicitation should be administered and 
scored by an independent entity. We conclude that this requirement is 
consistent with our efforts to ensure a fair competitive solicitation 
and the criteria we established in the final rule pursuant to the 
Allegheny factors.\411\
---------------------------------------------------------------------------

    \409\ Order No. 872, 172 FERC ] 61,041 at P 435.
    \410\ Id.
    \411\ See Allegheny Energy, 108 FERC ] 61,082 at P 22 (``[A]n 
independent third party should design the solicitation, administer 
bidding, and evaluate bids prior to the company's selection.'').
---------------------------------------------------------------------------

    224. Regarding Northwest Coalition's proposal that any utility or 
affiliate ownership bid must be capped at its bid price and not allowed 
traditional cost-plus ratemaking treatment, we decline to adopt this 
criterion on rehearing. The Commission does not have any jurisdiction 
to dictate how electric utility retail rates should be set. Instead, it 
is the responsibility of retail regulators to establish the retail 
rates associated with an award to a utility resulting from a 
competitive solicitation. And to the extent that Northwest Coalition is 
arguing that QFs are entitled to cost plus ratemaking, Congress has 
already determined that QFs are not entitled to the same rate recovery 
as purchasing utilities. With regard to Northwest Coalition's proposal 
that the product sought, minimum bidding criteria, and detailed scoring 
criteria must be made known to all parties at the same time, we find 
that these requests should already be addressed in the factors adopted 
by the Commission here, including the first factor, that the process be 
open and transparent, and the fifth factor, which includes the 
requirement of a post-solicitation report.\412\ We note that our 
inclusion of the Allegheny principles also addresses the concerns 
underlying this proposal.
---------------------------------------------------------------------------

    \412\ See Order No. 872, 172 FERC ] 61,041 at P 432 (stating 
that a report must ``(1) [identify] the winning bidders; (2) 
[include] a copy of any reports issued by the independent evaluator; 
and (3) [demonstrate] that the solicitation program was implemented 
without undue preference for the interests of the purchasing utility 
or its affiliates'').
---------------------------------------------------------------------------

    225. We disagree with Northwest Coalition's argument that the final 
rule ignores the lack of reasonable enforcement. If a QF believes that 
it was improperly excluded from a competitive solicitation or lost a 
competitive solicitation that did not meet the criteria in the final 
rule, the QF may bring an enforcement action to the Commission or other 
appropriate fora. Further, the final rule more clearly establishes how 
states must run their auctions, and we do not presume at this juncture 
that states will fail to follow these new rules. If the Commission or a 
court finds that a competitive solicitation violates these criteria, 
then a remedy may be warranted, for example a court may decide to 
require a state to provide a specific rate to a QF or re-run the 
competitive solicitation pursuant to those criteria.
    226. We also disagree with Northwest Coalition's argument that the 
final rule relies on insufficient evidence that small QFs and those 
primarily engaged in a business other than power production (e.g., 
irrigation districts and waste-to-power facilities) can succeed in the 
type of all-source competitive solicitation identified in the rule. We 
find that it may be difficult to define which entities could qualify 
for this exemption and that this exemption may defeat the price 
discovery benefits of including these entities in competitive 
solicitations. We believe that a fairly administered competitive 
solicitation is a more accurate reflection of a purchasing electric 
utility's avoided energy and capacity costs. Moreover, in addition to 
the requirement to provide standard rates for QFs 100 kW and below, 
states already have discretion to set that standard rate threshold 
above 100 kW. Removing their discretion to determine which entities 
must participate in competitive solicitations may undermine the price 
discovery benefit of competitive solicitations.
    227. We disagree with Public Interest Organizations' claim that the 
final rule does not address its argument that Nevada's competitive 
solicitation process is unfair because it limits to QFs to meet a 
small, segregated portion of the utility's energy and unmet capacity 
requirements. The final rule does not apply to competitive 
solicitations, like the one in Nevada, that occurred prior to the 
effective date of the final rule. For that reason, the Commission did 
not address Public Interest Organizations' concerns with the Nevada 
process in the final rule, nor will we do so here.\413\

[[Page 86689]]

Any future competitive solicitation must meet the criteria outlined in 
the final rule, including the Allegheny principles.\414\ We clarify 
that, if a competitive solicitation is not conducted in accordance with 
the requirements of the final rule guidelines, then an aggrieved entity 
may challenge the competitive solicitation before the Commission or in 
the appropriate fora.
---------------------------------------------------------------------------

    \413\ See id. P 428 (``Without judging the competitive 
solicitations conducted to date, we find that henceforth any 
competitive solicitation that does not comply with these factors 
will be viewed as not transparent and discriminatory, and not a 
basis for either setting the avoided cost capacity rate that a QF 
may charge the purchasing electric utility or limiting which 
generators can receive a capacity rate. Phrased differently, we will 
presume that any future competitive solicitation that does not 
comply with the factors adopted in this final rule does not comply 
with the Commission's regulations implementing PURPA.'').
    \414\ See id. P 430.
---------------------------------------------------------------------------

    228. A state must still ensure that QFs are entitled to an as-
available energy avoided cost rate regardless of whether they win a 
competitive solicitation for capacity.\415\ Such as-available avoided 
cost energy rates could be determined as a result of the competitive 
solicitation, a competitive market price, or the avoided cost 
regulations in 18 CFR 292.304(e) that pre-date the final rule.
---------------------------------------------------------------------------

    \415\ See id. P 422.
---------------------------------------------------------------------------

    229. We reject Mr. Mattson's argument that the competitive 
solicitation framework infringes on a ``constitutional law right to 
contract.'' \416\ Regardless of the outcome of a competitive 
solicitation, the PURPA Regulations continue to permit QFs to negotiate 
agreements with electric utilities that differ from those required by 
PURPA.\417\ Similarly, the Commission's requirement in the final rule 
that a QF may receive a capacity rate of zero if the QF loses a 
competitive solicitation following the framework adopted in the final 
rule and in which a utility's self-build participated is consistent 
with the Commission's precedent.\418\ The final rule only governs the 
maximum rate for a sale made pursuant to the mandatory purchase 
obligation imposed on purchasing utilities by PURPA, but continues to 
permit a QF to contract voluntarily at a different rate with a 
purchasing utility.
---------------------------------------------------------------------------

    \416\ Mr. Mattson Motion for Time, Reconsideration, and Request 
Answers at 1.
    \417\ See 18 CFR 292.301(b)(1).
    \418\ See City of Ketchikan, 94 FERC at 62,061 (``[A]voided cost 
rates need not include the cost for capacity in the event that the 
utility's demand (or need) for capacity is zero. That is, when the 
demand for capacity is zero, the cost for capacity may also be 
zero.'')).
---------------------------------------------------------------------------

    230. We disagree with Public Interest Organizations' assertion that 
the competitive solicitation framework fails to ensure that a 
competitive solicitation pays QFs the full avoided energy costs because 
it does not require a utility to obtain all its energy needs through a 
competitive solicitation.\419\ The primary purpose of a competitive 
solicitation is to determine a utility's capacity needs, not its energy 
needs, which can be purchased separately from capacity. The final rule 
provides that QFs can continue to sell energy to utilities at the 
purchasing utility's avoided energy costs outside of the context of a 
competitive solicitation, even if such solicitations are the exclusive 
vehicle for acquisition of capacity. The new regulatory text in 18 CFR 
292.304(c)(8)(ii) provides that:
---------------------------------------------------------------------------

    \419\ Public Interest Organizations Comments at 99-101.

    To the extent that the electric utility procures all of its 
capacity, including capacity resources constructed or otherwise 
acquired by the electric utility, through a competitive solicitation 
process conducted pursuant to Paragraph (b)(8)(i) of this section, 
the electric utility shall be presumed to have no avoided capacity 
costs unless and until it determines to acquire capacity outside of 
such competitive solicitation process. However, the electric utility 
shall nevertheless be required to purchase energy from qualifying 
small power producers and qualifying cogeneration facilities.\420\
---------------------------------------------------------------------------

    \420\ See new 18 CFR 292.304(c)(8)(iii) (emphasis added); see 
also Order No. 872, 172 FERC ] 61,041 at P 422 (``QFs would continue 
to have the right to put energy to the utility at the as-available 
avoided cost energy rate because the purchasing utility will still 
be able to avoid incurring the cost of generating energy even when 
it does not need new capacity.'').

    231. This regulation provides that the utility presumptively has no 
avoided capacity costs if all the utility's capacity needs are 
satisfied through the competitive solicitation. If the utility's 
avoided energy costs change after a competitive solicitation is 
conducted, the as-available avoided energy rate for a QF selling 
outside such a competitive solicitation would necessarily be different 
than the avoided energy rate determined in the competitive solicitation 
itself. States must continue to use either competitive market prices or 
the traditional factors in 18 CFR 292.304(e) to calculate avoided 
energy costs at the time of delivery for QFs. Under the final rule, 
where the purchasing electric utility procures all of its capacity, 
including capacity resources constructed or otherwise acquired by the 
electric utility, through a competitive solicitation process, the 
electric utility is presumed to have no avoided capacity costs unless 
and until it determines to acquire capacity outside of such competitive 
solicitation process. However, under the final rule, QFs continue to 
have the opportunity, outside of a regularly held competitive 
solicitation, to sell energy at a purchasing utility's avoided cost 
rate.

C. Rebuttable Presumption of Separate Sites

    232. In the final rule, the Commission determined that, if a small 
power production facility seeking QF status is located one mile or less 
from any affiliated small power production QFs that use the same energy 
resource, it will be irrebuttably presumed to be at the same site as 
those affiliated small power production QFs. If a small power 
production facility seeking QF status is located 10 miles or more from 
any affiliated small power production QFs that use the same energy 
resource, it will be irrebuttably presumed to be at a separate site 
from those affiliated small power production QFs. If a small power 
production facility seeking QF status is located more than one mile but 
less than 10 miles from any affiliated small power production QFs that 
use the same energy resource, it will be rebuttably presumed to be at a 
separate site from those affiliated small power production QFs.\421\
---------------------------------------------------------------------------

    \421\ Order No. 872, 172 FERC ] 61,041 at P 466.
---------------------------------------------------------------------------

    233. The Commission adopted the NOPR proposal to allow a small 
power production facility seeking QF status to provide further 
information in its certification (both self-certification and 
application for Commission certification) or recertification (both 
self-certification and application for Commission recertification) to 
preemptively defend against anticipated challenges by identifying 
factors that affirmatively show that its facility is indeed at a 
separate site from affiliated small power production QFs that use the 
same energy resource and that are more than one but less than 10 miles 
from its facility. The Commission stated that it would allow any 
interested person or entity to challenge a QF certification (both self-
certification and application for Commission certification) or 
recertification (both self-recertification and application for 
Commission recertification) that makes substantive changes to the 
existing certification.\422\
---------------------------------------------------------------------------

    \422\ Id. P 467.
---------------------------------------------------------------------------

    234. The Commission also adopted the NOPR's proposed factors, with 
certain additions.\423\
---------------------------------------------------------------------------

    \423\ Id. P 468.
---------------------------------------------------------------------------

1. Need for Reform
    235. In the final rule, the Commission found that, since the 
establishment of the one-mile rule in the PURPA Regulations in 1980, 
the development of large numbers of affiliated renewable resource 
facilities requires a revision of the one-mile rule. The Commission 
found that the final rule will reduce the

[[Page 86690]]

opportunity for developers of small power production facilities to 
circumvent the current one-mile rule by strategically siting small 
power production facilities that use the same energy resource slightly 
more than one mile apart.\424\
---------------------------------------------------------------------------

    \424\ Id. P 472.
---------------------------------------------------------------------------

a. Requests for Rehearing
    236. Public Interest Organizations reiterate that there is little 
or no evidence of circumvention in the record.\425\ Public Interest 
Organizations argue that a theoretical threat that has failed to 
materialize in any significant way during 40 years of small power-
production facility development sufficiently for the Commission to 
consider it more than a possibility does not justify the burden imposed 
by the final rule.\426\ Similarly, Solar Energy Industries assert that 
changing one-mile rule precedent to prevent gaming without any evidence 
of gaming in the record is arbitrary and capricious and will discourage 
QF development.\427\ Solar Energy Industries contend that the 
Commission is seeking to reduce the number of QFs that can be 
constructed in any one territory.\428\
---------------------------------------------------------------------------

    \425\ Public Interest Organizations Request for Rehearing at 128 
(citing Order No. 872, 172 FERC ] 61,041 at P 471).
    \426\ Id. at 128.
    \427\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 5, 26.
    \428\ Id. at 26.
---------------------------------------------------------------------------

    237. Public Interest Organizations argue that, assuming that it is 
true that some QF developers are indeed making siting decisions based 
on the one-mile boundary, it will be just as likely that they will make 
siting decisions based on the ten-mile boundary; therefore, expanding 
the radius from one mile to 10 miles does nothing to address the 
purported problem of gaming boundaries.\429\ Public Interest 
Organizations contend that developers will take the boundary into 
account when making siting decisions, which is not to game the system 
but rather to play by the rules.\430\ Solar Energy Industries agree 
that facilities that are sited more than one mile apart have not 
``gamed'' the one-mile rule; rather, those facilities have complied 
with the one-mile rule.\431\
---------------------------------------------------------------------------

    \429\ Public Interest Organizations Request for Rehearing at 
121.
    \430\ Id. at 122.
    \431\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 26.
---------------------------------------------------------------------------

b. Commission Determination
    238. As the Commission explained in the final rule, the record 
shows that some large facilities were disaggregating into smaller 
facilities and strategically spacing themselves slightly more than one 
mile apart in order to be able to qualify as separate small power 
production facilities.\432\ Because PURPA provides advantages for small 
power production facilities, i.e., no larger than 80 MW, not large 
facilities that exceed that cap and have disaggregated into smaller 
facilities under that cap, and based on evidence and examples of QFs 
separating into several smaller QFs just over one mile apart (in 
efforts to be considered separate QFs for purposes of the one-mile 
rule), the Commission determined that reform of the one-mile rule was 
necessary.
---------------------------------------------------------------------------

    \432\ Order No. 872, 172 FERC ] 61,041 at P 470 (citing APPA 
Comments, Docket No. RM19-15-000, at 21 (Dec. 3, 2019); Center for 
Growth and Opportunity Comments, Docket No. RM19-15-000, at 5-6 
(Dec. 3, 2019); Consumers Energy Comments, Docket No. RM19-15-000, 
at 4 (Dec. 3, 2019); East River Comments, Docket No. RM19-15-000, at 
1-2; EEI Comments, Docket No. RM19-15-000, at 43 (Dec. 3, 2019); 
ELCON Comments, Docket No. RM19-15-000, at 35 (Dec. 3, 2019); 
Governor Brad Little, Idaho Comments, Docket No. RM19-15-000, at 1 
(Dec. 3, 2019); Idaho Commission Comments, Docket No. RM19-15-000, 
at 5-7 (Dec. 3, 2019); Idaho Power Comments, Docket No. RM19-15-000, 
at 13 (Dec. 3, 2019); Missouri River Energy Comments, Docket No. 
RM19-15-000, at 5 (Dec. 3, 2019); Stephen Moore Comments, Docket No. 
RM19-15-000, at 2 (Dec. 3, 2019); Northern Laramie Range Alliance 
Comments, Docket No. RM19-15-000, at 2 (Dec. 3, 2019); NorthWestern 
Comments, Docket No. RM19-15-000, at 9 (Dec. 3, 2019); NRECA 
Comments, Docket No. RM19-15-000, at 14-15 (Dec. 3, 2019); Portland 
General Comments, Docket No. RM19-15-000, at 14 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    239. The following specific examples demonstrate the need for the 
Commission to revise the one-mile rule. The Idaho Commission gave the 
example of a group of five projects that had originally been proposed 
as a single project greater than 80 MW and not eligible for PURPA. This 
project was disaggregated into five smaller projects, each separated by 
one mile, which were then eligible for Idaho's standard published rate 
contracts at that time. The estimated cost impact of these five 
projects disaggregating in order to qualify for more favorable standard 
rate contracts was $10 million per year over the term of the 
contract.\433\ The Idaho Commission also provided a chart showing the 
wind projects brought before the Idaho Commission in 2009 and 2010, 
explaining that the circumstances of these projects suggest that they 
were disaggregated to qualify for the more favorable standard rate or 
to take advantage of PURPA's must-purchase obligation.\434\
---------------------------------------------------------------------------

    \433\ Idaho Commission Comments, Docket No. AD16-16-000, at 8-9 
(Nov. 7, 2016); see also Technical Conference Tr. at 34-35 
(Commissioner Paul Kjellander, Idaho Commission).
    \434\ Idaho Commission Comments, Docket No. AD16-16-000, at 9-11 
(Nov. 7, 2016).
---------------------------------------------------------------------------

    240. Commissioner Paul Kjellander of the Idaho Commission also 
stated that, within Idaho Power's territory, there were 183 MW of power 
from four developers that were broken up into 16 projects. He stated 
that the Oregon Commission approved six PURPA projects that require 
Idaho Power to take 60 MW of power from six solar projects, adding that 
the similarities among these six projects include the same operation 
dates, project size, terms and payment conditions, developer, and solar 
panel manufacturers. He concluded that this looked like a disaggregated 
project that stretched the spirit and intent of PURPA.\435\
---------------------------------------------------------------------------

    \435\ Technical Conference Tr. at 35-36 (Commissioner Paul 
Kjellander, Idaho Commission).
---------------------------------------------------------------------------

    241. EEI and Xcel argued that the one-mile requirement can be 
evaded as resources with common ownership, financing, and even 
operation are located just slightly over one mile from each other to 
qualify for the 80 MW threshold in the statute. EEI and Xcel provided 
the example of Northern Laramie Range Alliance, in which the applicant 
filed for QF self-certification of two 48.6 MW projects that were part 
of a single wind farm with one site permit and that shared a point of 
interconnection. Because the projects were located more than one mile 
apart, each project was certified as an individual QF.\436\
---------------------------------------------------------------------------

    \436\ EEI Comments, Docket No. RM19-15-000, at 43 (Dec. 3, 2019) 
(citing N. Laramie Range All., 138 FERC ] 61,171 (2012)); Xcel 
Comments, Docket No. AD16-16-000, at 11 (Nov. 7, 2016); see also EEI 
Comments, Docket No. RM19-15-000, at 43 (Dec. 3, 2019) (citing 
Beaver Creek II, 160 FERC ] 61,052 (2017)); Xcel Comments, Docket 
No. AD16-16-000, at 11 (Nov. 7, 2016) (citing DeWind Novus, LLC, 139 
FERC ] 61,201 (2012)).
---------------------------------------------------------------------------

    242. Furthermore, large power stations based on modular generation 
technologies like solar photovoltaic (PV) panels and wind turbines can 
relatively easily be presented as subsets of the component generation 
modules in order to appear as multiple smaller generation stations, 
even if they act and operate as one large (i.e., over 80 MW) power 
station in reality.
    243. Based on these concerns and evidence of large facilities 
disaggregating into small facilities in order to circumvent the one-
mile rule and receive QF status, the Commission determined that it 
would be best to address the circumvention of the one-mile rule by 
reforming the one-mile rule, not simply addressing this concern on a 
case-by-case basis.
    244. We agree that QF developers may make siting decisions based on 
the 10-mile boundary just as they may have in the past based on the 
one-mile

[[Page 86691]]

boundary. However, in the final rule, the Commission found that, at 10 
miles or more apart, it can be assumed that affiliated small power 
production facilities are sufficiently far apart that it is reasonable 
to treat them as irrebuttably at separate sites.\437\ In contrast, the 
Commission found that, for affiliated small power production facilities 
using the same resource that are more than one mile but less than 10 
miles apart, the distinction between same site or separate site was not 
as clear and thus provided for a rebuttable presumption of separate 
sites.\438\ In adopting these boundaries and accompanying presumptions, 
the Commission recognized that 10 miles is a more reasonable place to 
draw the line of irrebuttably separate sites than the previous one-mile 
boundary, and provided for the ability to rebut the presumption for 
affiliated small power production facilities in the less clear, grey 
zone where affiliated facilities are more than one mile apart but less 
than 10 miles apart.\439\
---------------------------------------------------------------------------

    \437\ Order No. 872, 172 FERC ] 61,041 at P 491.
    \438\ Id.
    \439\ See id. P 466, 491.
---------------------------------------------------------------------------

    245. We disagree with Public Interest Organizations and Solar 
Energy Industries' contentions that taking the boundary into account 
when making siting decisions is not gaming the system but playing by 
the rules and that the Commission seeks to reduce the number of QFs 
that can be constructed in any one territory. We find that 
disaggregation practices--whereby a facility exceeding the 80 MW cap 
and therefore unable to take advantage of the benefits of PURPA (such 
as mandating that the utility buy its output) disaggregates into 
several smaller facilities for the purpose of fitting within the 
statutory mandate and receiving the benefits of PURPA--contradict the 
spirit and purpose of PURPA. PURPA section 210(a) directs the 
Commission to encourage cogeneration and small power production.\440\ 
PURPA defines a small power production facility as an eligible 
facility, which, together with other facilities located at the same 
site (as determined by the Commission), has a power production capacity 
no greater than 80 MW.\441\ The statute bestows certain advantages on 
small power production, not on large power production facilities that 
masquerade as small power production. Disaggregation practices aim to 
advantage large power production facilities with benefits that they are 
not eligible to receive. The intention of the new same site 
determination framework is not to reduce the number of QFs that can be 
constructed in an area, but to encourage small power production 
facilities as Congress intended under PURPA.
---------------------------------------------------------------------------

    \440\ 16 U.S.C. 824a-3(a).
    \441\ 16 U.S.C. 796(17)(A).
---------------------------------------------------------------------------

2. Distance Between Facilities
    246. In the final rule, the Commission adopted the NOPR proposal 
that an entity can seek to rebut the presumption of separate sites only 
for a small power production facility seeking QF status that have an 
affiliated small power production QF or QFs that are located more than 
one and less than 10 miles from it.\442\ The Commission recognized that 
it is debatable where to set these thresholds. The Commission stated 
that PURPA requires that no small power production facility, together 
with other facilities located ``at the same site,'' exceed 80 MW and 
Congress has tasked the Commission with defining what constitutes 
facilities being at the same site for purposes of PURPA. The Commission 
found that providing set geographic distances will limit unnecessary 
disputes over whether facilities are at the same site; therefore, the 
Commission must choose reasonable distances at which small power 
production facilities will be considered irrebuttably at the same site 
or irrebuttably at separate sites.\443\
---------------------------------------------------------------------------

    \442\ Order No. 872, 172 FERC ] 61,041 at P 490.
    \443\ Id. P 491.
---------------------------------------------------------------------------

    247. The Commission found that there are some affiliated small 
power production facilities using the same energy resource that are so 
close together that it is reasonable to treat them as irrebuttably at 
the same site and that one mile or less is a reasonable distance to 
treat such facilities as irrebuttably at the same site. The Commission 
found that there are some small power production facilities that are 
affiliated and may use the same energy resource but that are 
sufficiently far apart that it is reasonable to treat them as 
irrebuttably at separate sites and found that 10 miles or more is a 
reasonable distance to treat such facilities as irrebuttably at 
separate sites. For affiliated small power production facilities using 
the same resource that are more than one mile but less than 10 miles 
apart, the Commission found that the distinction between the same site 
or separate site is not as clear; therefore, it is reasonable to treat 
them as rebuttably at separate sites but to allow interested parties to 
provide evidence to attempt to rebut that presumption. The Commission 
found that establishing these reasonable distances, and particularly 
establishing the ability to rebut the presumption of separate sites for 
affiliated small power production facilities more than one mile but 
less than 10 miles apart, better allows the Commission to address the 
evolving shape and configuration of resources that are being developed 
as QFs, such as modular solar or wind power plants, and provides for 
improved administration of PURPA. The Commission therefore determined 
that the one-mile and 10-mile limits are reasonable inflection points 
for differentiating between the same site and separate sites.\444\
---------------------------------------------------------------------------

    \444\ Id.
---------------------------------------------------------------------------

    248. In the final rule, the Commission explained that, with respect 
to hydroelectric generating facilities, the regulations currently 
provide that the same energy resources essentially means ``the same 
impoundment for power generation,'' finding that it is unlikely that 
hydroelectric generating facilities located more than one mile apart 
would rely on the same impoundment.\445\ The Commission explained that, 
if that circumstance arises, the applicant could seek waiver, and argue 
that its facilities should not be considered at the same site.\446\
---------------------------------------------------------------------------

    \445\ Id. P 492 n.769 (quoting 18 CFR 292.204(a)(2)(i)).
    \446\ Id. (citing 18 CFR 292.204(a)(3)).
---------------------------------------------------------------------------

    249. The Commission also noted that it was retaining the waiver 
provision in 18 CFR 292.204(a)(3), allowing the Commission to waive the 
method of calculation of the size of the facility for good cause.\447\
---------------------------------------------------------------------------

    \447\ Id. P 492 (citing 18 CFR 292.204(a)(3)).
---------------------------------------------------------------------------

a. Requests for Rehearing
    250. Public Interest Organizations argue that the Commission does 
not connect the one-mile and 10-mile rule to the statutory phrase 
``located at the same site,'' instead relying on policy arguments that 
exceed the statutory text and FERC's authority.\448\ Public Interest 
Organizations assert that the Commission ignored relevant data 
presented by commenters and failed to articulate a satisfactory 
explanation connecting facts to its ``ten-mile rule'' 
determination.\449\ Public Interest Organizations contend that the 
decision was arbitrary and capricious because the Commission ignored 
relevant data and

[[Page 86692]]

failed to articulate a satisfactory explanation connecting the facts 
presented to its determination.\450\ Public Interest Organizations 
further argue that there is nothing in the record to show that 10 miles 
is a rational or appropriate threshold for determining whether QFs are 
at the same site, adding that the record indicates that the new 
approach will cause regulatory uncertainty and substantial burden on an 
industry it is supposed to be encouraging.\451\ Similarly, Solar Energy 
Industries argue that the Commission has not offered any justification 
for the change.\452\
---------------------------------------------------------------------------

    \448\ Public Interest Organizations Request for Rehearing at 
106.
    \449\ Id. at 124 (citing Solar Energy Industries Comments, 
Docket No. RM19-15-000, at 62 (Dec. 3, 2019); North Carolina DOJ 
Comments, Docket No. RM19-15-000, at 3-4 (Dec. 3, 2019); SC Solar 
Alliance Comments, Docket No. RM19-15-000, at 17 (Dec. 3, 2019); 
North Carolina Commission Staff Comments, Docket No. RM19-15-000, at 
6 (Dec. 3, 2019); Borrego Solar Comments, Docket No. RM19-15-000, at 
3-5 (Dec. 3, 2019)).
    \450\ Id. (citing Motor Vehicles Mfrs. Ass'n v. State Farm Mut. 
Auto. Inst. Col, 463 U.S. at 43).
    \451\ Id. at 125.
    \452\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 29.
---------------------------------------------------------------------------

    251. Public Interest Organizations contend that the Commission does 
not explain why there should be any geographic distance at which two 
facilities are irrebuttably considered to be located at the same 
site.\453\
---------------------------------------------------------------------------

    \453\ Public Interest Organizations Request for Rehearing at 
120.
---------------------------------------------------------------------------

    252. Public Interest Organizations question whether the same 
opportunities for waiver provided under the previous bright-line test, 
which the Commission maintained in the final rule, will apply for 
facilities within one mile of each other.\454\ Public Interest 
Organizations argue that, if a facility received a waiver in the past, 
there is no guarantee that they would receive one again under the final 
rule.\455\ Public Interest Organizations assert that the inability for 
an applicant to show that a small power production facility should not 
be treated as located at the same site as other affiliated facilities 
using the same resource within one mile discourages QF 
development.\456\
---------------------------------------------------------------------------

    \454\ Id. at 106-07.
    \455\ Id. at 132.
    \456\ Id. at 107.
---------------------------------------------------------------------------

    253. Public Interest Organizations raise concerns about how the 
final rule will apply to hydroelectric facilities, asserting that the 
previous one-mile rule did not penalize hydroelectric facilities that 
were located in close proximity but should not be deemed to be at the 
same site.\457\ Public Interest Organizations state that, under the 
previous one-mile rule, hydroelectric facilities were considered to be 
located at the same site whenever they use water from the same 
impoundment.\458\ Public Interest Organizations further state that the 
final rule creates a new rule that a hydroelectric facility will be 
considered to be located at the same site as the one for which 
certification is sought if the facility is ``located within one mile of 
the facility for which qualification or recertification is sought and 
use[s] water from the same impoundment for power generation.'' \459\ 
Public Interest Organizations add that a footnote in the final rule 
states that ``[f]or hydroelectric generating facilities, the 
regulations currently provide that the same energy resources 
essentially means ``the same impoundment for power generation.'' \460\ 
Public Interest Organizations state that it appears that the Commission 
in practice would consider a hydroelectric facility to be located at 
the same site whenever it uses the same impoundment as the facility for 
which qualification is sought, is located within one mile, or both, 
which would conflict with the text of the final rule and limit QF 
development.\461\
---------------------------------------------------------------------------

    \457\ Id. at 107-08 & n.312.
    \458\ Id. at 108 n.312.
    \459\ Id. at 107-09 & n.312.
    \460\ Id. at 108-09 n.312 (citing Order No. 872, 172 FERC ] 
61,041 at P 492 n.769).
    \461\ Id.
---------------------------------------------------------------------------

    254. Northwest Coalition, Public Interest Organizations, and Solar 
Energy Industries reiterate NOPR comments that the new rebuttable 
presumption will increase the ``exclusion zone'' around a QF's 
electrical generating equipment from approximately three square miles 
to over 300 square miles--a 100% increase.\462\ Public Interest 
Organizations argue that a 100-fold increase in the area in which a 
party that owns a small power production facility will find it very 
difficult or impossible to develop another facility is the definition 
of discouraging small power production facilities.\463\
---------------------------------------------------------------------------

    \462\ Northwest Coalition Request for Rehearing at 54 (citing 
Order No. 872, 172 FERC ] 61,041 at P 483); Public Interest 
Organizations Request for Rehearing at 109; Solar Energy Industries 
Request for Rehearing and/or Clarification at 27, 29.
    \463\ Public Interest Organizations Request for Rehearing at 
109-10.
---------------------------------------------------------------------------

b. Commission Determination
    255. We disagree with Public Interest Organizations' arguments that 
the Commission did not provide an explanation for the ``10-mile rule'' 
beyond policy arguments and did not adequately connect the ``10-mile 
rule'' to the statutory determination of ``located at the same site.'' 
PURPA requires that no small power production facility, together with 
other facilities located ``at the same site,'' exceed 80 MW, and 
Congress has tasked the Commission with defining what constitutes 
facilities being at the same site for purposes of PURPA.\464\ The 
Commission explained that, just as there are some facilities that may 
be so close that it is reasonable to irrebuttably treat them as a 
single facility (those one mile or less apart), there are some 
facilities that are sufficiently far apart that it is reasonable to 
treat them as irrebuttably separate facilities.\465\ The Commission 
believed that the latter distance is 10 miles or more apart.\466\ The 
statute allows the Commission to determine the meaning of ``same 
site.'' \467\ Pursuant to this discretion, the Commission chose to pick 
a distance as an inflection point beyond which it is safe to 
irrebuttably presume separate sites.
---------------------------------------------------------------------------

    \464\ 16 U.S.C. 796(17)(A)(ii).
    \465\ Order No. 872, 172 FERC ] 61,041 at P 491. See also id. P 
466.
    \466\ Id. P 491. See also id. P 466.
    \467\ 16 U.S.C. 796(17)(A)(ii).
---------------------------------------------------------------------------

    256. In response to arguments that the 10-mile demarcation is 
arbitrary and that nothing in the record supports it as a rational or 
appropriate threshold,\468\ we note that PURPA requires that no small 
power production facility, together with other facilities located ``at 
the same site,'' exceed 80 MW. In the final rule, the Commission aimed 
to protect that statutory requirement by ensuring that facilities that, 
together with other affiliated facilities located ``at the same site,'' 
exceeded 80 MW did not receive the benefits that Congress intended only 
small facilities 80 MW and under to receive. The Commission therefore 
found that 10 miles is qualitatively a large enough distance to serve 
as the inflection point beyond which it is safe to irrebuttably presume 
separate sites, while allowing entities to seek to rebut such 
presumption between one mile and 10 miles.\469\ Ten miles need not be 
the only possible choice under the statute in order for it to be 
considered reasonable; what matters is that the choice made in the 
exercise of the Commission's discretion does not run afoul of the 
statue and is reasonable rather than arbitrary and capricious.\470\
---------------------------------------------------------------------------

    \468\ Public Interest Organizations state that ``[t]here is 
nothing in the record to show that [10] miles is a rational or 
appropriate threshold for determining whether QFs are at the `same 
site.' '' We correct Public Interest Organizations' statement by 
noting that affiliated small power production facilities 10 miles or 
more apart are irrebuttably presumed to be at separate sites and 
facilities between one mile and 10 miles are rebuttably presumed to 
also be separate sites. Order No. 872, 172 FERC ] 61,041 at P 466.
    \469\ Id. P 491.
    \470\ See CP Kelco Oy v. United States, 37 ITRD 1093 (Ct. Int'l 
Trade 2015) (``[T]his threshold is a line in the sand: Commerce 
might have picked a different number to effectuate the statute's 
purpose, with reasonable results . . . Yet because the agency's 
choice does not run afoul of the statute and is not arbitrary, the 
court will defer to Commerce despite the possibility of 
alternatives.''). See also U.S. Steel Grp. v. United States, 96 F.3d 
1352, 1362 (Fed. Cir. 1996) (``So long as the Commission's analysis 
does not violate any statute and is not otherwise arbitrary and 
capricious, the Commission may perform its duties in the way it 
believes most suitable.''); Mid Continent Nail Corp. v. United 
States, 34 C.I.T. 512, 520-21 (2010) (finding, in response to 
contentions that the Commission's definitions of statutory terms 
were ``seemingly random values,'' that the numbers in the 
Commission's definitions did not violate the statute and were not 
otherwise arbitrary and capricious where the they are applied 
reasonably). Cf. Int'l Soc. for Krishna Consciousness, Inc. v. 
McAvey, 450 F. Supp. 1265, 1269 (S.D.N.Y. 1978) (``choosing any 
fixed number would seem arbitrary, yet necessary in order to strike 
a balance between the competing interests.''); AFPA v. FERC, 550 
F.3d at 1183 (permitting Commission to establish rebuttable 
presumption via rulemaking rather than case-by-case adjudication in 
PURPA section 210(m) context).

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[[Page 86693]]

    257. We find no merit in Public Interest Organizations' arguments 
that the final rule does not explain why there should be any geographic 
distance at which two facilities are irrebuttably considered located at 
the same site. PURPA requires that no small power production facility, 
together with other facilities located ``at the same site,'' exceed 80 
MW. As the Commission explained in the final rule, there are some 
affiliated small power production facilities using the same energy 
resource that are so close together that it is reasonable to treat them 
as irrebuttably at the same site. Consistent with long standing 
practice, the Commission has found that one mile or less is a 
reasonable distance to treat such affiliated facilities as irrebuttably 
at the same site.\471\ Additionally, in response to Public Interest 
Organizations, we reiterate that the final rule retains the waiver 
provision in 18 CFR 292.204(a)(3), which allow the Commission to waive 
the method of calculation of the size of the facility for good 
cause.\472\
---------------------------------------------------------------------------

    \471\ Order No. 872, 172 FERC ] 61,041 at P 491.
    \472\ Id. P 492 (citing 18 CFR 292.204(a)(3)).
---------------------------------------------------------------------------

    258. In response to Public Interest Organizations' concerns that it 
is unclear what the waiver provision will mean now that the one-mile 
rule is irrebuttable, or whether those who previously obtained a waiver 
will get it again if they recertify, we note that the Commission has 
always determined whether to grant waivers on a case-by-case basis. The 
Commission will continue to apply the waiver provision consistent with 
the Commission's waiver precedent. For example, in Windfarms, Ltd., the 
Commission granted waiver of the one-mile rule, finding that three 
clusters of wind turbine generators were at three separate and distinct 
sites when they ``had sufficiently distinct and identifiable 
topographical and energy resource-related characteristics.'' \473\ In 
contrast, in Pinellas County, the Commission declined to grant waiver 
of the one-mile rule because a new generator was within 600 to 700 feet 
of the existing generator.\474\
---------------------------------------------------------------------------

    \473\ Windfarms, Ltd., 13 FERC ] 61,017 (1980).
    \474\ Pinellas County, Florida, 50 FERC ] 61,269 (1990).
---------------------------------------------------------------------------

    259. We disagree with Public Interest Organizations that the final 
rule establishes a new rule that hydroelectric facilities are at the 
same site if they are located within one mile of the facility for which 
qualification is sought and at the same impoundment. The final rule did 
not change the prior requirement that hydroelectric facilities are at 
the same site if they are located within one mile of the facility for 
which qualification is sought and at the same impoundment.\475\ The 
only change that the Commission made in the final rule was to create a 
rebuttable presumption of separate sites for affiliated small power 
production facilities located more than one mile but less than 10 miles 
apart. Footnote 769 of the final rule, noted by Public Interest 
Organizations, explains that it is unlikely that hydroelectric 
generating facilities located more than one mile apart would be located 
on the same impoundment. We clarify that, if a hydroelectric generating 
facility is more than a mile apart (but less than 10 miles apart) from 
an affiliated facility, yet on the same impoundment, the rebuttable 
presumption would be that they are at separate sites. We further 
clarify that, although the second sentence of footnote 769 suggested 
that a hydroelectric generating facility in this circumstance was free 
to seek waiver (most likely in order to eliminate any uncertainty as to 
its status), it would be unlikely that any such a facility would, in 
practice, need to request such waiver.
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    \475\ See El Dorado Cty. Water Agency, 24 FERC ] 61,280, at 
61,577 (1983) (El Dorado) (``Under the rule, hydroelectric 
facilities using the same impoundment as a water source and located 
within one mile of each other are considered part of the same 
site.''); Small Power Production and Cogeneration Facilities--
Qualifying Status, Order No. 70, 45 FR 17995 (Mar. 20, 1980), FERC 
Stats. & Regs. ] 30,134, at 30,943 (1980) (cross-referenced at 10 
FERC ] 61,230) (``Hydroelectric facilities . . . are considered to 
be located at the same site only if the facilities use water from 
the same impoundment for power generation. The Commission views this 
additional provision for hydroelectric facilities as necessary 
because use of the one-mile rule alone might discourage the 
development of facilities on separate waterways which are within one 
mile of each other.'') (cross-referenced at 10 FERC ] 61,230), 
orders on reh'g, Order No. 70-A, FERC Stats. & Regs. ] 30,159 
(cross-referenced at 11 FERC ] 61,119) and FERC Stats. & Regs. ] 
30,160 (cross-referenced at 11 FERC ] 61,166), order on reh'g, Order 
No. 70-B, FERC Stats. & Regs. ] 30,176 (cross-referenced at 12 FERC 
] 61,128), order on reh'g, FERC Stats. & Regs. ] 30,192 (1980) 
(cross-referenced at 12 FERC ] 61,306), amending regulations, Order 
No. 70-D, FERC Stats. & Regs. ] 30,234 (cross-referenced at 14 FERC 
] 61,076), amending regulations, Order No. 70-E, FERC Stats. & Regs. 
] 30,274 (1981) (cross-referenced at 15 FERC ] 61,281) (emphasis 
added).
---------------------------------------------------------------------------

    260. In the final rule, the Commission addressed Northwest 
Coalition, Public Interest Organizations, and Solar Energy Industries' 
contention that the new rule causes a 100-times increase to the 
``exclusion zone'' around a QF's electrical generating equipment and a 
100-fold increase in the area in which a party who owns a small power 
production facility will find it very difficult or impossible to 
develop another facility is almost the definition of discouraging small 
power production facilities.\476\ We reiterate that the rule providing 
for a rebuttable presumption for affiliated small power production QFs 
located more than one but less than 10 miles apart is necessary to 
address allegations of improper circumvention of the one-mile rule that 
had been presented to the Commission.\477\ Furthermore, we disagree 
with characterizing a rebuttable presumption of separate sites between 
one mile and 10 miles as an ``exclusion'' zone for development 
purposes. While QF developers understandably may prefer that any 
attempts to rebut be prohibited, our disagreement with their preference 
(and our establishment of a presumption of separate sites between one 
mile and 10 miles, albeit a rebuttable presumption) can hardly be 
equated with enacting a development exclusion zone.
---------------------------------------------------------------------------

    \476\ See Order No. 872, 172 FERC ] 61,041 at P 495.
    \477\ Id.
---------------------------------------------------------------------------

3. Factors
    261. In the final rule, the Commission adopted the physical and 
ownership factors proposed in the NOPR with a few modifications. First, 
the Commission modified the NOPR proposal by changing terminology 
relating to the determination of whether facilities are separate 
facilities to focus not on whether they are separate facilities, but 
rather to mirror the statutory language referring to ``the same site.'' 
Accordingly, the Commission adopted these factors as relevant indicia 
of whether affiliated small power production facilities are ``at the 
same site.'' Second, the Commission modified the NOPR proposal to 
identify the following additional physical factors as indicia that 
small power production facilities should be considered located at the 
same site: (1) Evidence of shared control systems; (2) common 
permitting and land leasing; and (3) shared step-up transformers.\478\
---------------------------------------------------------------------------

    \478\ Id. P 508.

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[[Page 86694]]

    262. Specifically, the Commission adopted the following factors as 
examples of the factors the Commission may consider in deciding whether 
small power production facilities that are owned by the same person(s) 
or its affiliates are located ``at the same site'': (1) Physical 
characteristics, including such common characteristics as 
infrastructure, property ownership, property leases, control 
facilities, access and easements, interconnection agreements, 
interconnection facilities up to the point of interconnection to the 
distribution or transmission system, collector systems or facilities, 
points of interconnection, motive force or fuel source, off-take 
arrangements, connections to the electrical grid, evidence of shared 
control systems, common permitting and land leasing, and shared step-up 
transformers; and (2) ownership/other characteristics, including such 
characteristics as whether the facilities in question are owned or 
controlled by the same person(s) or affiliated persons(s), operated and 
maintained by the same or affiliated entity(ies), selling to the same 
electric utility, using common debt or equity financing, constructed by 
the same entity within 12 months, managing a power sales agreement 
executed within 12 months of a similar and affiliated small power 
production qualifying facility in the same location, placed into 
service within 12 months of an affiliated small power production QF 
project's commercial operation date as specified in the power sales 
agreement, or sharing engineering or procurement contracts.\479\
---------------------------------------------------------------------------

    \479\ Id. P 509.
---------------------------------------------------------------------------

    263. The Commission adopted the NOPR proposal to allow a small 
power production facility seeking QF status to provide further 
information in its certification (both self-certification and 
application for Commission certification) or recertification (both 
self-recertification and application for Commission recertification) to 
preemptively defend against rebuttal by identifying factors that 
affirmatively show that its facility is indeed at a separate site from 
affiliated small power production QFs more than one but less than 10 
miles away from it. The Commission stated that any party challenging a 
QF certification (both self-certification and application for 
Commission certification) or recertification (both self-recertification 
and application for Commission recertification) that makes substantive 
changes to the existing certification would, in its protest, be allowed 
to correspondingly identify factors to show that the small power 
production facility seeking QF status and affiliated small power 
production QFs more than one but less than 10 miles from that facility 
are actually at the same site.\480\
---------------------------------------------------------------------------

    \480\ Id. P 510.
---------------------------------------------------------------------------

    264. The Commission emphasized that, as a general matter, no one 
factor is dispositive. The Commission stated that it will conduct a 
case-by-case analysis, weighing the evidence for and against, and the 
more compelling the showing that affiliated small power production QFs 
should be considered to be at the same site as the small power 
production facility seeking QF status in a specific case, the more 
likely the Commission will be to find that the facilities involved in 
that case are indeed located ``at the same site.'' \481\
---------------------------------------------------------------------------

    \481\ Id. P 511.
---------------------------------------------------------------------------

a. Requests for Rehearing
    265. Solar Energy Industries assert that in adopting the physical 
and ownership characteristics as proposed in the NOPR, the Commission 
stepped beyond the statutory bounds that limit the Commission to 
determining whether a facility is located ``at the same site'' as any 
other facilities,\482\ instead imposing a separate facilities analysis. 
Solar Energy Industries argue that the Commission has previously 
recognized that ``[t]he critical test under PURPA relates to whether 
the facilities are located at one site rather than whether they are 
integrated as a project.'' \483\ Solar Energy Industries contend that 
the Commission erred in concluding that ownership and other 
characteristics are germane to the ``same site'' determination.\484\ 
Solar Energy Industries claim that Congress did not authorize the 
Commission to analyze factors that have nothing to do with physical 
commonality or surrounding geographical terrain as part of the same 
site determination.\485\
---------------------------------------------------------------------------

    \482\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 30.
    \483\ Id. at 26, 31-32 (citing El Dorado, 24 FERC at 61,578).
    \484\ Id. at 31.
    \485\ Id. at 30-31.
---------------------------------------------------------------------------

    266. Similarly, Public Interest Organizations assert that the 
Commission's definition of ``at the same site'' is ``beyond the meaning 
that the statute can bear.'' \486\ Public Interest Organizations argue 
that the American Heritage Dictionary defines ``site'' as ``[t]he place 
where a structure or group of structures was, is, or is to be 
located.'' \487\ Public Interest Organizations contend that the statute 
limits multiple QF facilities to the 80 MW cap only if those facilities 
are located at the same physical place.\488\ Public Interest 
Organizations claim that whether affiliated generators using the same 
energy resource and which are located between one mile and 10 miles are 
located at separate sites depends on various non-exclusive and non-
dispositive factors, many of which have no relationship to whether the 
two facilities are located in the same physical place.\489\
---------------------------------------------------------------------------

    \486\ Public Interest Organizations Request for Rehearing at 103 
(citing MCI Telecommunications Corp. v. Am. Tel. & Tel. Co., 512 
U.S. 218, 229 (1994)).
    \487\ Id. (citing The American Heritage Dictionary of the 
English Language 55 (3d ed. 1992)).
    \488\ Id. at 103-04.
    \489\ Id. at 105.
---------------------------------------------------------------------------

    267. Public Interest Organizations argue that the reasonable 
meaning of the phrase does not permit the Commission's definition that 
introduces numerous extraneous factors, such as corporate structure, 
financing, offtake entities, number of energy sources or ``motive 
forces,'' shared use of offsite engineering services or maintenance 
contractors, or construction timelines.\490\ Solar Energy Industries 
assert that the employment of common contractors, such as grading and 
electrical contractors, has nothing to do with whether two otherwise 
distinct generation facilities are located at the ``same site,'' 
instead having more to do with the availability of experienced, 
qualified contractors in a given region.\491\ Solar Energy Industries 
contend that many QFs are developed in rural regions where there are 
often a limited number of qualified maintenance providers and a 
commonality of such engagement should not be a factor in the 
Commission's ``same site'' analysis. Solar Energy Industries add that 
the fact that two facilities are constructed by the same entity within 
a period of 12 months is also irrelevant for a ``same site'' 
determination given that there are a limited number of qualified 
construction firms within each region.\492\ Solar Energy Industries 
claim that portfolios of QFs in multiple states (and which thus are 
unquestionably at separate sites) are frequently financed (and re-
financed) as part of a common investment portfolio for passive 
investment vehicles that do not exercise day-to-day control over the 
QF; therefore, they should not determine whether two facilities with 
separate ownership structures should not be

[[Page 86695]]

consolidated for purposes of the 80 MW size limitation.\493\
---------------------------------------------------------------------------

    \490\ Id. at 104 (citing Summit Petroleum Corp. v. U.S. EPA, 690 
F.3d 733, 742 (6th Cir. 2012)).
    \491\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 31.
    \492\ Id.
    \493\ Id.
---------------------------------------------------------------------------

    268. Public Interest Organizations argue that there are significant 
problems with the factors list that render the factors unreasonable, 
arbitrary, and capricious.\494\ Public Interest Organizations assert 
that the failed to respond to the flaws raised regarding the factors 
identified by the Commission for consideration under the rebuttable 
presumption, instead summarily adopting these factors.\495\ Public 
Interest Organizations state that commenters identified the list of 
``physical characteristics,'' particularly ``control facilities,'' 
``access and easements,'' ``collector systems or facilities,'' and 
``property leases,'' as ``far too broad and unclear,'' and subject to 
varying interpretations.\496\ Public Interest Organizations contend 
that factors listed under ``ownership and other characteristics,'' such 
as control and maintenance, are even more problematic.\497\ Public 
Interest Organizations argue that, in certain geographic regions, there 
are often a limited number of solar maintenance companies, creating the 
opportunity for frivolous challenges to QF certifications and 
recertifications.\498\ Public Interest Organizations point to Southeast 
Public Interest Organizations' comments that
---------------------------------------------------------------------------

    \494\ Public Interest Organizations Request for Rehearing at 
111.
    \495\ Id. at 124-25 (citing Order No. 872, 172 FERC ] 61,041 at 
PP 501-09).
    \496\ Id. at 126 (citing Southeast Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 34 (Dec. 3, 2019); SC Solar 
Alliance Comments, Docket No. RM19-15-000, at 17 (Dec. 3, 2019)).
    \497\ Id. (citing Southeast Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 34 (Dec. 3, 2019); SC Solar 
Alliance Comments, Docket No. RM19-15-000, at 17-18 (Dec. 3, 2019)).
    \498\ Id. (citing Southeast Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 35 (Dec. 3, 2019); SC Solar 
Alliance Comments, Docket No. RM19-15-000, at 18 (Dec. 3, 2019); 
North Carolina DOJ Comments, Docket No. RM19-15-000, at 7-8 (Dec. 3, 
2019)).

``[l]ikewise, the sale of electricity to a common utility, the 
financing of a project through a mutual lender, the construction of 
a facility through a mutual contractor, the timing of contract 
execution, and the timing of facilities being placed into service 
are all factors listed in the NOPR which do not provide relevant 
evidence as to common ownership requiring facilities to be 
considered a single unit. The use of these factors will likely 
prejudice solar facilities constructed nearby each other that used 
common associates, contractors, or partnering organizations or 
entities.'' \499\
---------------------------------------------------------------------------

    \499\ Id. at 127 (citing Southeast Public Interest Organizations 
Comments, Docket No. RM19-15-000, at 35 (Dec. 3, 2019)).

    269. Public Interest Organizations assert that, rather than 
grappling with the data and information presented by commenters on 
these factors, the final rule simply summarizes the critiques and then 
summarily concludes that these factors shall be adopted in the final 
rule.\500\ Public Interest Organizations argue that the lack of 
response to these criticisms and failure to articulate a rationale for 
why the factors are appropriate for making a same site determination 
render the Commission's determination arbitrary and capricious.\501\
---------------------------------------------------------------------------

    \500\ Id.
    \501\ Id.
---------------------------------------------------------------------------

    270. Solar Energy Industries contend that, by going beyond the same 
site limitation, the Commission is discouraging the development of 
these resources.\502\ Solar Energy Industries assert that the 
Commission's failure to provide support for the expansion of its 
authority beyond that granted by Congress is arbitrary, capricious, and 
not consistent with reasoned decision-making.\503\
---------------------------------------------------------------------------

    \502\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 26.
    \503\ Id. at 27, 30 (citing Windfarms, Ltd., 13 FERC at 61,032).
---------------------------------------------------------------------------

    271. Solar Energy Industries seek rehearing of the Commission's 
determination in Paragraph 508 and ask the Commission to rescind dicta 
and associated regulations allowing for review, evaluation, or 
consideration of physical and operational characteristics that are not 
germane to whether a facility, ``together with any other facilities 
located at the same site,'' has a power production capacity greater 
than 80 MW.\504\ Solar Energy Industries argue that, if the Commission 
does not grant reconsideration, a QF could be subject to challenge 
throughout the facility's entire useful life based on overly broad 
factors that are not related to preventing a QF from ``gaming'' the 
same-site determination and development of other QFs long after a QF 
starts operation.\505\
---------------------------------------------------------------------------

    \504\ Id. at 27.
    \505\ Id. at 34.
---------------------------------------------------------------------------

    272. Public Interest Organizations add that, although the final 
rule allows applicants to ``preemptively defend against rebuttal by 
identifying factors that affirmatively show that its facility is indeed 
at a separate site,'' it does not provide guidance on what these 
factors are, which creates uncertainty.\506\
---------------------------------------------------------------------------

    \506\ Public Interest Organizations Request for Rehearing at 110 
(citing Order No. 872, 172 FERC ] 61,041 at PP 480, 510).
---------------------------------------------------------------------------

b. Commission Determination
    273. PURPA defines small power production facilities as those 
facilities that have ``a power production capacity which, together with 
any other facilities located at the same site (as determined by the 
Commission), is not greater than 80 megawatts.'' \507\ Congress notably 
did not specify that ``site'' may only encompass consideration of 
physical or geographic factors; in fact, Congress expressly delegated 
the determination of ``site'' to the Commission.\508\ When the 
Commission adopted the PURPA Regulations in 1980, it determined that 
the capacity of all facilities within one mile of each other and which 
use the same energy resource and are owned by the same person, be added 
together.\509\ Thus, for 40 years the PURPA Regulations implementing 
``same site'' have included examination not only of geography or 
distance, but also ownership and resource. The final rule's inclusion 
of physical and ownership factors is a continuation of the Commission's 
past practice and is not, as Solar Energy Industries contend, an 
expansion of the Commission's authority. We therefore decline to 
rescind the list of example factors, as requested by Solar Energy 
Industries.
---------------------------------------------------------------------------

    \507\ 16 U.S.C. 796(17)(A)(ii).
    \508\ Id.
    \509\ Order No. 70, FERC Stats. & Regs. ] 30,134 at 30,939; see 
also 18 CFR 292.204(a)(1).
---------------------------------------------------------------------------

    274. Solar Energy Industries' reliance on El Dorado is misplaced. 
In El Dorado, a protester argued that three hydroelectric facilities 
located more than one mile from each other should nevertheless be 
treated as a single hydroelectric project, noting that the three 
facilities were aggregated together as a single project for the 
purposes of receiving a hydroelectric license. The Commission found 
that, because the three facilities were located more than a mile from 
each other, under the then-current regulations, the facilities were 
located at three distinct sites, despite having been aggregated 
together for the purpose of receiving a hydroelectric license. The 
sentence Solar Energy Industries quotes, ``the critical test under 
PURPA relates to whether the facilities are located at one site rather 
than whether they are integrated as a project,'' explains that the 
requirements for certification as a small power production facility are 
not the same requirements to receive a hydroelectric license.\510\ The 
Commission did not address which kind of considerations may go into the 
same site determination; it merely applied the same site analysis

[[Page 86696]]

that existed at the time, distinct from other requirements.
---------------------------------------------------------------------------

    \510\ El Dorado, 24 FERC at 61,577-78.
---------------------------------------------------------------------------

    275. We disagree with Solar Energy Industries' contention that, if 
the Commission does not grant reconsideration of the list of example 
factors, a QF could be subject to challenge throughout the facility's 
entire useful life. We note that, prior to the final rule, an 
interested party could file a petition for declaratory order 
challenging the QF certification at any time and on any grounds. An 
interested party may still file a petition for declaratory order with 
the accompanying filing fee, just as they could prior to the effective 
date of the final rule. The final rule merely added what already exists 
for essentially every Commission proceeding, ``no fee'' protests, which 
will not subject a QF to challenges throughout the facility's entire 
useful life because any such protest must be filed with 30 days from 
the date of the filing of the Form No. 556 at the Commission.\511\
---------------------------------------------------------------------------

    \511\ Order No. 872, 172 FERC ] 61,041 at P 554.
---------------------------------------------------------------------------

    276. Moreover, we reiterate that the final rule provided that such 
protests (and hence, consideration of the factors) may only be filed in 
response to an initial certification or to a recertification that makes 
substantive changes to the existing certification,\512\ which limits 
the time periods during which such a protest may be filed. 
Additionally, once the Commission has affirmatively certified an 
applicant's QF status in response to a protest opposing a self-
certification or self-recertification, or in response to an application 
for Commission certification or recertification, any later protest to a 
recertification (self-recertification or application for Commission 
recertification) making substantive changes to a QF's existing 
certification must demonstrate changed circumstances from the facts 
upon which the Commission acted on the certification filing that call 
into question the continued validity of the earlier certification.\513\
---------------------------------------------------------------------------

    \512\ Id. P 550.
    \513\ Id. P 469.
---------------------------------------------------------------------------

    277. We also disagree with Public Interest Organizations' assertion 
that the Commission failed to respond to the flaws raised regarding the 
factors, including that the list of ``physical characteristics,'' 
particularly ``control facilities,'' ``access and easements,'' 
``collector systems or facilities,'' and ``property leases,'' was far 
too broad, unclear, and subject to varying interpretations.\514\ In the 
final rule, the Commission explained that these are examples of factors 
the Commission may consider on a case-by-case basis. The factors are 
not further defined because their application will depend on the 
context of the individual certification. Likewise, we disagree with 
Public Interest Organizations' contentions that ``ownership and other 
characteristics'' is a problematic factor and ``the sale of electricity 
to a common utility, the financing of a project through a mutual 
lender, the construction of a facility through a mutual contractor, the 
timing of contract execution, and the timing of facilities being placed 
into service'' do not provide relevant evidence of common ownership 
that requires facilities to be considered a single unit.\515\ We 
reiterate that no single factor is dispositive and the factors are 
included as examples of facts that the Commission may consider on a 
case-by-case basis.\516\ For example, Public Interest Organizations 
state that, in certain geographic regions, there are a limited number 
of solar maintenance companies, and Southeast Public Interest 
Organizations NOPR Comments stated that, because of the costs and 
complexity of financing the construction of QFs, developers frequently 
secure financing for a portfolio of distinct projects that may be 
hundreds of miles apart, at clearly separate facilities.\517\ A 
protester could indeed assert common maintenance or common financing as 
evidence that a facility is at the same site as another facility, but 
the Commission could choose to dismiss a protest based on those factors 
if the protestor's claims are not sufficient to warrant a ``same site'' 
finding, particularly if there are no other factors indicating that the 
facilities are at the same site.
---------------------------------------------------------------------------

    \514\ Public Interest Organizations Request for Rehearing at 126 
(citing Southeast Public Interest Organizations Comments, Docket No. 
RM19-15-000, at 34 (Dec. 3, 2019); SC Solar Alliance Comments, 
Docket No. RM19-15-000, at 17 (Dec. 3, 2019)). See also Order No. 
872, 172 FERC ] 61,041 at P 501.
    \515\ Public Interest Organizations Request for Rehearing at 127 
(citing Southeast Public Interest Organizations Comments, Docket No. 
RM19-15-000, at 35 (Dec. 3, 2019)).
    \516\ Order No. 872, 172 FERC ] 61,041 at P 511.
    \517\ Southeast Public Interest Organizations Comments, Docket 
No. RM19-15-000, at 35 (Dec. 3, 2019).
---------------------------------------------------------------------------

    278. Similarly, Public Interest Organizations argues that the 
Commission must articulate a rationale for why the factors are 
appropriate for making a same site determination. We believe that, when 
affiliated facilities are located more than one mile but less than 10 
miles from each other and demonstrate these factors, then they may 
reasonably be considered to be located at the same site. We again 
stress that, in the final rule, the Commission stated that the factors 
in the list were merely ``examples of the factors the Commission may 
consider.'' \518\ The Commission will conduct a case-by-case analysis, 
weighing the evidence for and against determining whether small power 
production facilities that are owned by the same person(s) or its 
affiliates are located ``at the same site.'' The Commission included 
the example factors in the final rule to provide a guide for the kinds 
of facts that an applicant seeking QF status or that a protester may 
assert, and that the Commission may consider in making its 
determination.
---------------------------------------------------------------------------

    \518\ Order No. 872, 172 FERC ] 61,041 at P 509.
---------------------------------------------------------------------------

    279. In response to Public Interest Organizations' concern that the 
Commission allows applicants to ``preemptively defend against rebuttal 
by identifying factors that affirmatively show that its facility is 
indeed at a separate site'' without identifying these factors, we 
clarify that the factors that may be used by an applicant to 
preemptively defend against rebuttal include the example factors 
identified in that same Paragraph 509 of the final rule which is the 
subject of the discussion above.\519\
---------------------------------------------------------------------------

    \519\ See id.
---------------------------------------------------------------------------

D. QF Certification Process

    280. In the final rule, the Commission adopted the NOPR proposal to 
revise 18 CFR 292.207(a) to allow an interested person or entity to 
seek to intervene and to file a protest of a self-certification or 
self-recertification of a QF and not have to file a petition for 
declaratory order and pay the filing fee for petitions. The Commission 
found that any increased administrative burden or litigation risk 
imposed by the new rule is justified by the need to ensure that QFs 
meet the statutory criteria for QF status.\520\ The Commission stated 
that the ability to intervene and to file a protest of a self-
certification or self-recertification of a QF without having to file a 
petition for declaratory order and pay the filing fee for petitions is 
effective as of the effective date of the final rule.\521\
---------------------------------------------------------------------------

    \520\ Id. P 547.
    \521\ Id. P 548.
---------------------------------------------------------------------------

    281. The Commission agreed with commenters that QF recertifications 
to implement or address non-substantive changes should not be subject 
to the new protest rule in order to respect QFs' settled expectations. 
The Commission therefore found that protests may be filed to an initial 
certification (both self-certification and application for Commission 
certification) filed on or after the effective date of the final rule,

[[Page 86697]]

but only to a recertification (both self-recertification and 
application for Commission recertification) that makes substantive 
changes to the existing certification and that are filed on or after 
the effective date of the final rule. The Commission explained that 
substantive changes that may be subject to a protest may include, for 
example, a change in electrical generating equipment that increases 
power production capacity by the greater of 1 MW or five percent of the 
previously certified capacity of the QF or a change in ownership in 
which an owner increases its equity interest by at least 10% from the 
equity interest previously reported. The Commission found that 
recertifications (both self-recertifications and applications for 
Commission recertifications) making ``administrative only'' changes 
should not be subject to a protest pursuant to the final rule.\522\
---------------------------------------------------------------------------

    \522\ Id. P 550.
---------------------------------------------------------------------------

    282. The Commission disagreed with Solar Energy Industries' 
estimates that compliance with these new requirements would require an 
additional approximately 90 to 120 hours per year. The Commission noted 
that 18 CFR 292.207(d) already stated that, if a QF fails to conform 
with any material facts or representations presented in the 
certification, the QF status of the facility may no longer be relied 
upon; hence, it is long-standing practice that a QF must recertify when 
material facts or representations in the Form No. 556 change.\523\
---------------------------------------------------------------------------

    \523\ Id. P 552.
---------------------------------------------------------------------------

    283. The Commission explained that certifications and 
recertifications are already subject to protests, albeit in the form of 
petitions for declaratory order; therefore, dealing with objections to 
a certification or recertification is not new. The Commission stated 
that, although the new procedures may result in more protests being 
filed than the number of petitions that had been filed, the Commission 
believed that the conditions imposed in the final rule will limit the 
number of protests filed. The Commission anticipated that most, though 
not all, of the protests filed pursuant to the new 18 CFR 292.207(a) 
will relate to the new more-than-one-but-less-than-10-miles rebuttable 
presumption. The Commission reasoned that such protests will 
necessarily be limited because not all certifications and 
recertifications will be subject to the new more-than-one-but-less-
than-10-miles rebuttable presumption. The Commission stated that only a 
small power production facility seeking QF status that has an 
affiliated small power production QF more than one but less than 10 
miles away and that uses the same energy resource would be subject to 
the rebuttable presumption. The Commission stated that small power 
production facilities that do not have affiliated small power 
production facilities will not be affected by the new rebuttable 
presumption, nor will cogeneration QFs be affected by the new 
rebuttable presumption. The Commission reiterated that protests may 
only be made to an initial certification (both self-certification and 
application for Commission certification) filed on or after the 
effective date of the final rule, and only to a recertification (self-
recertification or application for Commission recertification) that 
makes substantive changes to the existing certification that is filed 
on or after the effective date of the final rule.\524\
---------------------------------------------------------------------------

    \524\ Id. P 553.
---------------------------------------------------------------------------

    284. The Commission instituted time limits on protests that may be 
filed under the final rule. The Commission adopted the NOPR proposal 
that interested parties will have 30 days from the date of the filing 
of the Form No. 556 (both initial self-certification and self-
recertification) at the Commission to file a protest (without paying a 
fee).\525\
---------------------------------------------------------------------------

    \525\ Id. P 554.
---------------------------------------------------------------------------

    285. The Commission also stated that, even if it indeed takes some 
small power production facilities an additional 90 to 120 hours to 
comply with the new requirements (which the Commission thought was 
unlikely), that was not an unreasonable burden to impose to ensure that 
a generating facility that seeks to be a QF is, in fact, entitled to QF 
status and is complying with PURPA.\526\
---------------------------------------------------------------------------

    \526\ Id. P 556.
---------------------------------------------------------------------------

    286. The Commission found that, due to the unique nature of rooftop 
solar PV developers, the recertification requirement for PV developers 
could be unduly burdensome. Therefore, to lessen the burden on such 
developers when recertifying, the Commission permitted rooftop solar PV 
developers an alternative option to file their recertification 
applications. Rather than require the developer to file for 
recertification each time the developer adds or removes a rooftop 
facility, the Commission allowed a rooftop solar PV developer to 
recertify on a quarterly basis. The Commission stated that the 
recertification filing would be due within 45 days after the end of the 
calendar quarter. However, if in any quarter a rooftop solar PV 
developer either has no changes or only has changes of power production 
capacity of 1 MW or less, the Commission stated that the rooftop solar 
PV developer would not be required to recertify until it has 
accumulated changes greater than 1 MW total over the quarters since its 
last filing. Additionally, the Commission stated that rooftop solar PV 
developers, like all small power production facilities, will not be 
subject to protests when they file recertifications that are 
``administrative only'' in nature but would be subject to such protests 
when they make substantive changes to the existing certification, as 
detailed above.\527\
---------------------------------------------------------------------------

    \527\ Id. P 560.
---------------------------------------------------------------------------

    287. The Commission limited the ability to file a protest (rather 
than a petition for declaratory order, with the accompanying filing 
fee) to within 30 days of the date of the filing of the self-
certification or self-recertification. The Commission stated that, if 
an interested party would like to contest a self-certification or self-
recertification later than 30 days after the date of its filing, then 
the interested party may file a petition for declaratory order with the 
accompanying filing fee, just as they could prior to the effective date 
of the final rule.\528\
---------------------------------------------------------------------------

    \528\ Id. P 563.
---------------------------------------------------------------------------

    288. The Commission declined to impose a 60-day deadline after 
which a failure of the Commission to rule on the protest would result 
in the protest being denied by operation of law. The Commission stated 
that self-certification will be effective upon filing and will remain 
effective after a protest has been filed, until such time as the 
Commission issues an order revoking certification. The Commission 
clarified that self-recertifications will likewise remain effective 
after a protest has been filed, until such time as the Commission 
issues an order revoking recertification.\529\
---------------------------------------------------------------------------

    \529\ Id. P 565.
---------------------------------------------------------------------------

    289. The Commission noted that the presumption continues to be that 
a small power production facility seeking QF status that is located 
more than one but less than 10 miles from any affiliated small power 
production QFs is at a separate site from those affiliated small power 
production QFs, explaining that the Commission was simply making this 
presumption rebuttable.\530\
---------------------------------------------------------------------------

    \530\ Id. P 567.
---------------------------------------------------------------------------

1. Requests for Rehearing
    290. Solar Energy Industries state that the self-certification 
process was intended to be ``quick and not unduly burdensome'' \531\ to 
avoid the

[[Page 86698]]

``complexity, delays, and uncertainties created by a case-by-case 
qualification procedure'' that ``would act as an economic disincentive 
to owners of smaller facilities.'' \532\ Solar Energy Industries argue 
that the new ``[10]-mile rule'' adds unnecessary regulatory burdens on 
QFs which will have a chilling effect on the development of QFs that is 
directly counter to PURPA's mandate to encourage QF development. Solar 
Energy Industries assert that, if the Commission does not reconsider 
the rebuttable presumption framework, the self-certification process 
will no longer be quick and will become unduly burdensome for all 
parties, including the Commission and its staff.\533\
---------------------------------------------------------------------------

    \531\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 33 (citing Revisions to Form, Procedures, and 
Criteria for Certification of Qualifying Facility Status for a Small 
Power Production or Cogeneration Facility, Order No. 732, 130 FERC ] 
61,214, at P 8 (2010)).
    \532\ Id. at 28 (citing Revised Regulations Governing Small 
Power Production and Cogeneration Facilities, Order No. 671, 114 
FERC ] 61,102, at P 83, order on reh'g, Order No. 671-A, 115 FERC ] 
61,225 (2006)).
    \533\ Id. at 34.
---------------------------------------------------------------------------

    291. Public Interest Organizations state that one of the ways that 
PURPA directs the Commission to encourage development of small power 
production facilities is to prescribe rules exempting them from the 
FPA, PUHCA, and state laws and regulations, as necessary to encourage 
development.\534\ Public Interest Organizations argue that the final 
rule does the opposite by requiring applicants to list in Form No. 556 
all ``affiliated small power production QFs using the same energy 
resource within one mile,'' as well as ``all affiliated small power 
production QFs using the same energy resource whose nearest electrical 
generating equipment is less than 10 miles from the electrical 
generating equipment of the entity seeking small power production QF 
status.\535\ Public Interest Organizations note that multiple 
commenters argued that this proposal would impose a significant 
burden,\536\ and that the burden is substantial.\537\ Public Interest 
Organizations contend that the basis for the Commission's estimate that 
the final rule would impose 62 hours of administrative work on every 
small power production facility over 1 MW with affiliated facilities 
between one and 10 miles away is not clear.\538\ Public Interest 
Organizations note that Solar Energy Industries extensively raised and 
documented the expected regulatory burden of the new rule, and refer to 
Solar Energy Industries' estimate that the new rule would require an 
additional 90 to 120 hours per year to comply.\539\
---------------------------------------------------------------------------

    \534\ Public Interest Organizations Request for Rehearing at 
116.
    \535\ Id.
    \536\ Id. (citing Order No. 872, 172 FERC ] 61,041 at PP 485, 
539-42, 577-83).
    \537\ Id. at 127-29.
    \538\ Id. at 117 (citing Order No. 872, 172 FERC ] 61,041 at P 
587).
    \539\ Id. at 129 (citing Solar Energy Industries Comments, 
Docket No. RM19-15-000, at 52 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    292. Public Interest Organizations assert that the Commission's 
explanation for establishing its new protest procedure is unreasonable 
and unsupported by the record.\540\ Public Interest Organizations note 
that the new procedures make it far easier and more likely that an 
interested party will challenge certification. Both Public Interest 
Organizations and Solar Energy Industries contend that there is no need 
for this new procedure because any interested person could file a 
petition for declaratory order challenging certification.\541\ Public 
Interest Organizations and Solar Energy Industries claim that, if 
petitions for declaratory orders have been standing in for protests 
until now, they should be able to continue to do so without increasing 
the regulatory burden on small power production facilities by adding a 
protest option.\542\ Solar Energy Industries add that, while the 
current $30,000 \543\ filing fee for petitions for declaratory order is 
substantial, it is not nearly as substantial as the increased legal 
fees that QFs will now have to bear to seek and defend 
certification.\544\
---------------------------------------------------------------------------

    \540\ Id. at 122.
    \541\ Id. at 122-23; Solar Energy Industries Request for 
Rehearing and/or Clarification at 28.
    \542\ Public Interest Organizations Request for Rehearing at 
123.
    \543\ We note that the current filing fee for a petition for 
declaratory order is $30,060.
    \544\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 28.
---------------------------------------------------------------------------

    293. Public Interest Organizations assert that the Commission's new 
same site determination is contrary to the congressional intent of 
PURPA because it will discourage small power production 
facilities.\545\ Public Interest Organizations argue that the 
litigation risk created by the possibility that various interested 
parties will protest the facility owners' certifications throughout the 
life of the project any time there is a change in circumstance will 
effectively establish a 10-mile exclusion zone for a developer around 
each small power production facility.\546\
---------------------------------------------------------------------------

    \545\ Public Interest Organizations Request for Rehearing at 
106.
    \546\ Id. at 107, 112.
---------------------------------------------------------------------------

    294. Solar Energy Industries claim that the rebuttable presumption 
process and procedure will discourage investment in QFs because it 
brings a substantially increased litigation risk in each certification 
and recertification.\547\ Solar Energy Industries argue that Congress 
did not give the Commission authority to undertake a detailed case-
specific review to determine if the facility meets the maximum size 
requirements set forth in the statute.\548\ Solar Energy Industries 
assert that, by authorizing the Commission to determine whether 
facilities are considered to be located at ``the same site,'' Congress 
did not intend for the Commission to promulgate regulations that would 
stymie the development of QFs by discouraging potential financiers, 
investors, and owners from backing such resources.\549\
---------------------------------------------------------------------------

    \547\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 33.
    \548\ Id.
    \549\ Id. at 26.
---------------------------------------------------------------------------

    295. Northwest Coalition asserts that the application of the final 
rule's same site determination to existing facilities is arbitrary, 
capricious, and not in accordance with law.\550\ Northwest Coalition 
argues that the Commission erred by failing to exempt existing 
facilities from applicability of the new same site determination for 
determining eligibility as a small power production facility.\551\ 
Northwest Coalition contends that the Commission arbitrarily applied 
the new rule to any existing facility that makes any substantive change 
to its certification documents with the Commission, causing owners of 
facilities financed and constructed in reliance on the former one-mile 
rule now to face the risk of decertification almost any time a non-
ministerial change is made, including sale of a relatively minor stake 
in ownership of the facility.\552\
---------------------------------------------------------------------------

    \550\ Northwest Coalition Request for Rehearing at 6.
    \551\ Id. at 53.
    \552\ Id. at 53-55; see also Public Interest Organizations 
Request for Rehearing at 132.
---------------------------------------------------------------------------

    296. Northwest Coalition argues that the new rule decreases the 
marketability of such facilities and upsets investment-backed 
expectations of their owners, who often invest in a portfolio of 
resources with the expectation that it can eventually be sold to 
another owner.\553\ Northwest Coalition argues that the new rule will 
effectively bar the transfer or sale of existing assets that were 
lawfully qualified under the one-mile rule but cannot qualify under the 
new same site determination because they consist of more than 80 MW of 
aggregate capacity within 10 miles.\554\ It asserts that this new 
precedent of the Commission upsetting settled

[[Page 86699]]

expectations undermines the predictability needed for long-term 
investments in generation assets.\555\
---------------------------------------------------------------------------

    \553\ Northwest Coalition Request for Rehearing at 55.
    \554\ Id. at 55.
    \555\ Id. at 55.
---------------------------------------------------------------------------

    297. Public Interest Organizations argue that the final rule could 
lock in old technology because owners of existing facilities will have 
an enormous incentive to avoid making changes to their facility to 
avoid needing to recertify.\556\ Public Interest Organizations add that 
the final rule discourages development of new small power production 
facilities within 10 miles of existing facilities because the new 
facilities could potentially trigger revocation of certification for 
one or more existing facilities.\557\
---------------------------------------------------------------------------

    \556\ Public Interest Organizations Request for Rehearing at 
115.
    \557\ Id.
---------------------------------------------------------------------------

    298. Northwest Coalition and Public Interest Organizations note 
that, since 1980, facilities located more than one mile apart enjoyed 
certainty that the rules would not result in them being located at the 
same site.\558\ Public Interest Organizations argue that the Commission 
arbitrarily and unlawfully ignored serious reliance interests because 
the Commission did not fully consider it or failed to provide a ``more 
detailed justification'' for its decision to not respect acknowledged, 
settled expectations in all cases, despite commenters' lengthy 
discussion of reliance interest.\559\
---------------------------------------------------------------------------

    \558\ Northwest Coalition Request for Rehearing at 53; Public 
Interest Organizations Request for Rehearing at 132.
    \559\ Public Interest Organizations Request for Rehearing at 133 
(citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009)).
---------------------------------------------------------------------------

    299. Public Interest Organizations assert that the Commission's 
decision not to grant more extensive legacy treatment for existing 
facilities whose owners have reasonably relied on the longstanding one-
mile rule sets a precedent of dramatic regulatory uncertainty that will 
have a chilling effect on the market.\560\ Public Interest 
Organizations contend that, going forward, entrepreneurs will question 
whether the Commission will further change the regulatory structure, 
despite longstanding precedent and reliance interests.\561\
---------------------------------------------------------------------------

    \560\ Id. at 115.
    \561\ Id.
---------------------------------------------------------------------------

    300. Northwest Coalition claims that, the Administrative Procedures 
Act (APA), pursuant to which the Commission acted, does not authorize 
retroactive rules; however, the new rebuttable presumption will have 
the retroactive effect of applying to existing facilities seeking 
recertification.\562\ Northwest Coalition asserts that the failure to 
exempt existing facilities is a significant change from the 
Commission's past practice of applying new certification criteria only 
to new facilities, not existing facilities seeking 
recertification.\563\ Northwest Coalition notes that, when the 
Commission revised section 292.205(d) of its regulations regarding the 
new operation and efficiency certification criteria required by the 
Energy Policy Act of 2005 (EPAct 2005) for cogeneration facilities, 
those new criteria applied only to ``any cogeneration facility that was 
either not a qualifying cogeneration facility on or before August 8, 
2005, or that had not filed a notice of self-certification or an 
application for Commission certification as a qualifying cogeneration 
facility under [18 CFR] 292.207 of this chapter prior to February 2, 
2006. . . .'' \564\ Northwest Coalition further notes that the 
Commission clarified ``that there is a rebuttable presumption that an 
existing QF does not become a `new cogeneration facility' for purposes 
of the requirements of newly added section 210(n) of PURPA merely 
because it files for recertification.'' \565\ Northwest Coalition also 
points out that, in Order No. 671, the Commission found that only 
changes to the facility that lead it to be a whole new facility, ``such 
as an increase in capacity from 50 MW to 350 MW,'' could trigger the 
applicability of the new qualification criteria.\566\
---------------------------------------------------------------------------

    \562\ Northwest Coalition Request for Rehearing at 55 (citing 
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208-09 (1988)).
    \563\ Id.
    \564\ Id. at 55-56 (citing 18 CFR 292.205(d)).
    \565\ Id. at 56 (citing Order No. 671, 114 FERC ] 61,102 at P 
115).
    \566\ Id. (citing Order No. 671, 114 FERC ] 61,102 at P 115).
---------------------------------------------------------------------------

    301. Northwest Coalition argues that the Commission did not respond 
to the precedent on this issue that NIPPC, CREA, REC, and Solar Energy 
Industries provided in their NOPR comments.\567\ Northwest Coalition 
asserts that the Commission's failure to respond to legitimate 
objections renders its decision arbitrary and capricious.\568\
---------------------------------------------------------------------------

    \567\ Id. (citing NIPPC, CREA, REC, and OSEIA Comments, Docket 
No. RM19-15-000, at 76 (Dec. 3, 2019)).
    \568\ Id. (citing PPL Wallingford, 419 F.3d at 1198).
---------------------------------------------------------------------------

    302. Public Interest Organizations state that several commenters 
provided data, maps, and information to show that the application of 
the new ``[10]-mile rule'' to existing projects has potentially 
widespread implications for states with significant QF 
development.\569\ For example, Public Interest Organizations point out 
Southeast Public Interest Organizations' comment that the change to the 
one-mile rule would have implications for nearly every existing QF in 
North Carolina and map that shows that facilities in compliance with 
the original one-mile rule are within 10 miles from other QFs and could 
trigger the new rule on recertification.\570\
---------------------------------------------------------------------------

    \569\ Public Interest Organizations Request for Rehearing at 130 
(citing Southeast Public Interest Organizations Comments, Docket No. 
RM19-15-000, at 29-33 (Dec. 3, 2019); SC Solar Alliance Comments, 
Docket No. RM19-15-000, at 18 (Dec. 3, 2019); North Carolina DOJ 
Comments, Docket No. RM19-15-000, at 8 (Dec. 3, 2019)).
    \570\ Id. at 130-31 (citing Southeast Public Interest 
Organizations Comments, Docket No. RM19-15-000, at 31 (Dec. 3, 
2019)).
---------------------------------------------------------------------------

    303. Public Interest Organizations complain that, although the 
Commission responded to these concerns by limiting protests to 
recertifications to instances in which a substantive change is made to 
an existing certification, it provided no further explanation or 
rationale as to how the ``substantive change'' limitation would 
specifically address the concerns raised.\571\ Public Interest 
Organizations add that the Commission failed to consider the valid 
concerns because the term ``substantive changes'' is vague and 
undefined and is unlikely to meaningfully limit protests.\572\
---------------------------------------------------------------------------

    \571\ Id. at 131.
    \572\ Id. at 131-32.
---------------------------------------------------------------------------

    304. Solar Energy Industries argue that, if the Commission does not 
grant rehearing of the ``10-mile rule,'' then the Commission must 
establish a grandfathering provision for facilities that are already 
installed.\573\ Solar Energy Industries ask the Commission to clarify 
that all existing facilities will retain their QF status unless a 
recertification filing is made that changes the maximum net output or 
qualifying technologies of the QF.\574\ Solar Energy Industries assert 
that, unless there is a change in the output of the facilities or 
another change in circumstance that has economic consequences to the 
utility-purchaser, then the facility's status should be beyond 
challenge.\575\ Solar Energy Industries contend that failing to offer 
grandfathering to existing facilities is arbitrary, capricious, 
inconsistent with Commission precedent that preserves contractual 
expectations between parties in the event of regulatory

[[Page 86700]]

change, and does not encourage QFs as the statute requires.\576\
---------------------------------------------------------------------------

    \573\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 34.
    \574\ Id. at 35.
    \575\ Id.
    \576\ Id.
---------------------------------------------------------------------------

    305. Solar Energy Industries state that, if the Commission does not 
grant rehearing and grandfather existing facilities, then they seek 
clarification that challenges to recertification filings can only be 
brought ``in circumstance that has economic consequences to the 
utility-purchaser and its ratepayers.'' \577\ Solar Energy Industries 
argue that, by limiting challenges to existing facilities to situations 
where there is a change in output of the facilities or other change in 
circumstances that has economic consequences to the utility-purchaser 
and its ratepayers, the final rule will more closely align with the 
direction of the statute.\578\
---------------------------------------------------------------------------

    \577\ Id. (citing Zond-PanAero Windsystem Partners I, 76 FERC ] 
61,137 (1996)).
    \578\ Id. at 36.
---------------------------------------------------------------------------

2. Commission Determination
    306. As explained in the final rule (and also above), the record 
shows that large facilities were disaggregating into smaller facilities 
and spacing themselves at a distance sufficient to be able to qualify 
as QFs. PURPA provides advantages for small power production 
facilities, and the final rule, consistent with the statute, limits 
those advantages to small power production facilities. To that end, the 
purpose of the new rules regarding the same site determination is to 
ensure compliance with PURPA.
    307. We disagree with Solar Energy Industries' arguments that the 
``[10]-mile rule'' adds unnecessary regulatory burdens, making the 
self-certification process no longer ``quick and not unduly 
burdensome.'' The changes to the one-mile rule and the corresponding 
changes to the Form No. 556 are necessary to provide the Commission the 
information it needs to determine whether a facility qualifies to be a 
QF, consistent with the standards laid out in the statute. In 
particular, the new requirement to list affiliated small power 
production QFs using the same energy resource whose nearest electrical 
generating equipment is less than 10 miles from the electrical 
generating equipment of the entity seeking small power production QF 
status, both on initial certification and recertification, is needed to 
assess whether the applicant facility and other affiliated facilities 
using the same energy resource are located at the same site and 
ultimately whether they meet the statutory 80 MW limit. Moreover, the 
requirement is to list affiliated small power production QFs; thus, 
only facilities with affiliates will be affected by this information 
requirement--single, unaffiliated QFs will face no additional burden. 
Similarly, for QF applicants with few affiliated facilities less than 
10 miles from the applicant facility, this listing requirement should 
be only minimally burdensome. The requirement to list affiliates less 
than 10 miles from the applicant facility would likely require more 
time when a project owner owns many QFs less than 10 miles from the 
applicant facility, which will likely be a larger, more sophisticated 
QF developer that has resources to prepare the form. Even then, it is a 
necessary burden in order to ensure compliance with PURPA.
    308. Additionally, in response to Solar Energy Industries' argument 
that the final rule adds unnecessary regulatory burden ``on QFs,'' 
\579\ the final rule was responsive to comments on the burden of the 
proposed rule and, as an example of the Commission taking care to 
ascertain that the rules are not unduly burdensome, specifically 
lessened the burden on rooftop solar PV developers.\580\
---------------------------------------------------------------------------

    \579\ Solar Energy Industries Comments, Docket No. RM19-15-000, 
at 51 (Dec. 3, 2019).
    \580\ See Order No. 872, 172 FERC ] 61,041 at P 560.
---------------------------------------------------------------------------

    309. However, in light of Public Interest Organizations' and Solar 
Energy Industries' renewed assertion that the regulatory burden on QFs 
is substantial,\581\ we modify and clarify our requirements regarding 
the identification of affiliated small power production QFs, in order 
to further ensure that the regulatory burden on small power production 
facilities is within reasonable limits. The new Form No. 556, as 
revised by the final rule, requires that a facility filing a 
certification or recertification after the effective date of the final 
rule identify, in item 8a of the Form No. 556, any affiliated small 
power production QFs that use the same energy resource and are located 
less than 10 miles from the electrical generating equipment of the 
applicant facility, by including in the Form No. 556 each affiliated 
facility's: (1) Location, including geographic coordinates; (2) root 
docket number, if any; (3) maximum net power production capacity; and 
(4) common owners. Section 292.207(d) of the Commission's regulations, 
which the final rule renumbered to 18 CFR 292.207(f), states that if a 
QF fails to conform with any material facts or representations 
presented in the certification the QF status of the facility may no 
longer be relied upon.\582\
---------------------------------------------------------------------------

    \581\ Public Interest Organizations Request for Rehearing at 
127-29; see Solar Energy Industries Request for Rehearing and/or 
Clarification at 34.
    \582\ 18 CFR 292.207(d), which the final rule renumbered to 18 
CFR 292.207(f).
---------------------------------------------------------------------------

    310. As a result, when any of a small power production QF's 
affiliated facilities less than 10 miles away changes any of the items 
listed above, the final rule would require a small power production QF 
to recertify its own Form No. 556 to reflect its affiliated facility's 
updated information. This represents an expansion from the requirement 
prior to the final rule that a small power production QF reflect the 
updated information of its affiliated small power production facilities 
one mile or less away.\583\ Moreover, in order to maintain an up-to-
date Form No. 556 and recertify with the correct affiliated facility 
information, under the final rule a small power production QF would 
need to monitor continually all of its affiliated small power 
production QFs that are less than 10 miles away for changes. This also 
is an expansion from the requirement, prior to the final rule, that a 
small power production QF monitor its affiliated small power production 
QFs one mile or less away for changes.\584\ We conclude that it may be 
overly burdensome that a small power production QF monitor continually 
all of its affiliated facilities less than 10 miles away for changes, 
and that the small power production QF recertify its own facility 
whenever an affiliated small power production QF less than 10 miles 
away changes.
---------------------------------------------------------------------------

    \583\ Item 8a of the Form No. 556 effective prior to the final 
rule required an applicant to ``[i]dentify any facilities with 
electrical generating equipment located within 1 mile of the 
electrical generating equipment of the instant facility . . .'' 
Section 292.207(d) of the Commission's regulations, which the final 
rule renumbered to 18 CFR 292.207(f), states that if a QF fails to 
conform with any material facts or representations presented in the 
certification the QF status of the facility may no longer be relied 
upon. While the requirement, prior to the final rule, that a small 
power production QF update its Form No. 556 with the updated 
information of its affiliated small power production facilities one 
mile or less away, is not explicit, we believe that this requirement 
is the logical result of the intersection of the above.
    \584\ See supra note 583.
---------------------------------------------------------------------------

    311. We therefore modify the final rule to state that a small power 
production QF evaluating whether it needs to recertify does not need to 
recertify due to a change in the information it has previously reported 
regarding its affiliated small power production QFs that are more than 
one mile but less than 10 miles from its electrical generating 
equipment, including adding or removing an affiliated small power 
production QF more than one mile but less than 10 miles away, or if an 
affiliated small

[[Page 86701]]

power production QF more than one mile but less than 10 miles away and 
previously reported in item 8a makes a modification, unless that change 
also impacts any other entries on the evaluating small power production 
QF's Form No. 556.
    312. We will continue to require that a small power production QF, 
as it was prior to the final rule, recertify its Form No. 556 to update 
item 8a due to a change at any of its affiliated small power production 
facilities that use the same energy resource and are located one mile 
or less from its electrical generating equipment.\585\ We will also 
still require that a small power production QF recertify due to a 
change in material fact or representation to its own facility.
---------------------------------------------------------------------------

    \585\ See supra note 583.
---------------------------------------------------------------------------

    313. At such time as the small power production QF makes a 
recertification due to a change in material fact or representation to 
its own facility or at any of its affiliated small power production 
facilities that use the same energy resource and are located one mile 
or less from its electrical generating equipment, we will require that 
the small power production QF update item 8a for all of its affiliated 
small power production QFs within 10 miles, including adding or 
deleting affiliated small power production QFs, and recording changes 
to previously listed small power production QFs, so that the 
information in its Form No. 556 is complete, accurate, and up-to-
date.\586\
---------------------------------------------------------------------------

    \586\ If a small power production QF that was certified prior to 
the effective date of this final rule is required to recertify due 
to a material change to its own facility, then at that time it will 
be required to identify affiliates less than 10 miles from the 
applicant facility.
---------------------------------------------------------------------------

    314. We believe that this modification reduces the burden on small 
power production QFs because they will not be required to continually 
monitor their affiliated small power production QFs more than one mile 
but less than 10 miles away for changes, nor will we require a small 
power production QF that is evaluating whether it must recertify its 
facility to recertify to update item 8a due to a change at its 
affiliated small power production facilities more than one mile but 
less than 10 miles from the evaluating facility's electrical generating 
equipment.\587\ However, the affiliated QF of that evaluating small 
power production QF will need to recertify if the affiliated QF makes a 
material change to its information in its Form No. 556. In providing 
this modification, we reiterate that the rule providing for a 
rebuttable presumption for affiliated small power production QFs 
located more than one but less than 10 miles apart is necessary to 
address allegations of improper circumvention of the one-mile rule that 
had been presented to the Commission.\588\ We emphasize that 
identifying affiliated facilities, and updating affiliated facility 
information, are necessary for the Commission to assess whether small 
power production facilities located more than one but less than 10 
miles apart should be considered to be at the same site. However, we 
note that for affiliated small powder production QFs more than one mile 
but less than 10 miles apart, the presumption is that they are at 
separate sites. Therefore, we modify the recertification requirement as 
to a small power production QF's affiliated small power production QFs 
more than one mile but less than 10 miles away, because we believe this 
modification strikes an appropriate balance between the need to address 
improper circumvention and the need to avoid unduly burdening small 
power production QFs consistent with the presumption that QFs more than 
one mile but less than 10 miles apart are located at separate sites.
---------------------------------------------------------------------------

    \587\ We note that we are maintaining the final rule's 
alternative option for rooftop solar PV developers to file their 
recertification applications. See Order No. 872, 172 FERC ] 61,041 
at P 560.
    \588\ Id. P 495.
---------------------------------------------------------------------------

    315. We note that, when a small power production QF makes a 
material change to its own facility, or when any of its affiliated 
small power production facilities that use the same energy resource and 
are one mile or less from of its electrical generating equipment makes 
a material change, it needs to recertify, at which point it would also 
be required to update item 8a for all of its affiliated small power 
production QFs within 10 miles. If any of the changes made are 
substantive, including substantive changes at any of its affiliates 
less than 10 miles away, the recertification will be subject to 
protests.\589\
---------------------------------------------------------------------------

    \589\ Id. P 550.
---------------------------------------------------------------------------

    316. In response to Public Interest Organizations' concerns that 
existing facilities will lose their certification any time they make a 
change requiring a recertification, we note that protests may only be 
made to recertification making substantive changes, and if a 
substantive change is made, both the entity filing the QF certification 
and any protesters will be allowed to present evidence supporting their 
respective positions. The Commission will examine any such evidence 
presented on a case-by-case basis to determine whether the facility in 
question does not actually meet the qualifications for QF status under 
PURPA. For a same site determination, the Commission will examine the 
relevant factors as discussed above. The Commission will decertify only 
if, after a review of the evidence, the Commission determines that the 
facility in question should be considered at the same site with 
affiliated facilities and their combined power production capacity 
exceeds 80 MW. The Commission's decision will be based on the evidence 
of whether the entity continues to comply with PURPA.
    317. In response to Public Interest Organizations' assertion that 
several commenters provided data, maps, and information showing that 
the application of the new ``[10]-mile rule'' to existing projects has 
potentially widespread implications for states with significant QF 
development \590\ and argument that litigation risk will effectively 
establish a 10-mile exclusion zone for a developer around each small 
power production facility,\591\ we note that the Commission anticipated 
that most protests filed pursuant to the new 18 CFR 292.207(a) will 
relate to the new more-than-one-but-less-than-10-miles rebuttable 
presumption.\592\ If two facilities are not owned by the same person(s) 
or its affiliates, then the facilities are definitionally not located 
at the same site.\593\ Thus, protests cannot assert that two facilities 
are at the same site, unless those facilities are affiliates using the 
same energy resource (and more than one mile but less than 10 miles 
apart). Conversely only entities that have affiliates will be subject 
to protests regarding the same site determination. Single, unaffiliated 
facilities will not be subject to protests on the new same site 
determination.\594\ Furthermore, facilities with nearby affiliates 
whose combined capacity does not exceed 80 MW also will not be 
decertified because of the new same site determination. The only 
facilities that will have concerns under the new same site 
determination are those that are affiliated with other facilities using 
the same energy resource, are relatively near each other, have a total 
combined capacity with such affiliated facilities exceeding 80 MW, and 
are considered at

[[Page 86702]]

the same site by the Commission after a consideration of the evidence.
---------------------------------------------------------------------------

    \590\ Public Interest Organizations Request for Rehearing at 130 
(citing Southeast Public Interest Organizations Comments, Docket No. 
RM19-15-000, at 29-33 (Dec. 3, 2019); SC Solar Alliance Comments, 
Docket No. RM19-15-000, at 18 (Dec. 3, 2019); North Carolina DOJ 
Comments, Docket No. RM19-15-000, at 8 (Dec. 3, 2019)).
    \591\ Id. at 107, 112.
    \592\ Order No. 872, 172 FERC ] 61,041 at P 533 & n.877.
    \593\ Id. P 286 n.797.
    \594\ See id. P 553.
---------------------------------------------------------------------------

    318. Therefore, assertions that existing QFs risk decertification 
almost any time they recertify and that the new rule decreases 
marketability or discourages QF development are overstated. To the 
extent that the new same site determination decertifies particular QFs, 
decreases their marketability, or discourages their development, it 
only does so because such entities do not comply with PURPA. To the 
extent that large facilities disaggregated in order to qualify as small 
power production facilities, or strategically built facilities just 
over one mile apart, in reliance on the old one-mile rule, we note that 
rules can and do change. In fact, Congress specifically directed the 
Commission to revise its PURPA rules from time to time.\595\ Moreover, 
we note that the new regulations do not apply to an existing facility 
unless and until it makes substantive changes. When the existing QF 
makes a substantive change, it is no longer the same facility it was 
before, and it is only then that the new regulations should apply. 
Additionally, we note that the facilities more than one but less than 
10 miles from affiliated facilities continue to enjoy the presumption 
that they are at separate sites; only now the presumption is 
rebuttable.
---------------------------------------------------------------------------

    \595\ See 16 U.S.C. 824a-3(a).
---------------------------------------------------------------------------

    319. The Commission provided examples of factors it may consider 
when determining whether affiliated facilities using the same resource 
and more than one mile but less than 10 miles apart should be 
considered to be at the same site, and stated that it will make a case-
by-case determination on whether such facilities are indeed at the same 
site.\596\ In response to Solar Energy Industries' argument that 
Congress did not give the Commission authority to undertake a detailed 
case-specific review, we find that Congress delegated to the Commission 
the authority to determine the ``same site'' and did not limit the way 
in which the Commission can do so, nor did Congress specify that the 
Commission cannot conduct a case-by-case analysis.\597\
---------------------------------------------------------------------------

    \596\ Order No. 872, 172 FERC ] 61,041 at P 511.
    \597\ 16 U.S.C. 796(17)(A).
---------------------------------------------------------------------------

    320. Regarding Public Interest Organizations and Solar Energy 
Industries' arguments that there is no need for the new protest 
procedure because any interested person could file a petition for 
declaratory order to challenge a certification, we further explain the 
rationale for implementing the new protest structure. First, allowing 
protests will bring the certification process more in line with other 
Commission procedures, where protests to filings do not require a 
petition for a declaratory order and associated filing fee. Second, 
while self-certifications themselves are free, prior to the final rule, 
the only way to protest a self-certification was via paying the fee for 
a declaratory order, which today is $30,060. Consequently, it was 
possible for a facility owner to file multiple certifications with 
minor changes effectively shutting out a protester who could not afford 
to repeatedly pay the declaratory order fee for every QF submission. 
Allowing protests equalizes the opportunity for both facility owners 
and opponents to weigh in on the certification of a facility as a 
QF.\598\
---------------------------------------------------------------------------

    \598\ The Commission notes that if the Commission issues an 
order in response to a self-certification that is protested, or in 
response to an application for Commission certification, the order 
issued by the Commission will continue to be a declaratory order 
which determines whether or not a project, as described by the 
applicant and protester, meets the technical and ownership standards 
for QFs, and serves only to establish eligibility for benefits of 
PURPA.
---------------------------------------------------------------------------

    321. While petitioners are correct that purchasing electric 
utilities, competitors, and local project opponents now may file 
protests, we believe that a more robust protest system encourages 
transparency and allows for better oversight by the Commission, as well 
as by states and other stakeholders. To the extent that petitioners 
imply that such entities may file frivolous protests for the purposes 
of delaying or otherwise hindering QF development or certification, the 
Commission has limited protests to within 30 days of the date of the 
filing of an initial certification or of a recertification making a 
substantive change.\599\ For a facility that meets the standards to 
qualify as a QF, the only effect is the potential for an exchange of 
filings immediately after the certification is filed and some limited 
uncertainty while awaiting the Commission's decision. Additionally, we 
note that quite often QF developers file for certification even before 
construction of the facility has commenced; in such a case, the 
potential for some limited uncertainty during the exchange of filings 
will have minimal impact. The Commission also has determined that self-
certifications will be effective upon filing and will remain effective 
after a protest has been filed, until such time as the Commission 
issues an order revoking the certification.\600\
---------------------------------------------------------------------------

    \599\ Order No. 872, 172 FERC ] 61,041 at P 554.
    \600\ Id. P 527.
---------------------------------------------------------------------------

    322. In response to Public Interest Organizations' argument that 
the final rule does the opposite of exempting QFs from the FPA, PUHCA, 
and state laws and regulations, the Commission is not removing or 
amending the exemptions provided by the regulations implementing PURPA 
section 210(e).\601\
---------------------------------------------------------------------------

    \601\ Id. P 514.
---------------------------------------------------------------------------

    323. We also disagree with Public Interest Organizations' arguments 
that ``substantive change'' is vague and does not limit challenges. In 
the final rule, the Commission explained that ``substantive changes 
that may be subject to a protest may include, for example, a change in 
electrical generating equipment that increases power production 
capacity by the greater of 1 MW or 5 percent of the previously 
certified capacity of the QF, or a change in ownership in which an 
owner increases its equity interest by at least 10% from the equity 
interest previously reported.'' \602\ The Commission provided examples 
of what it may consider to be a substantive change because it intends 
to make a case-by-case determination. The Commission will be able to 
reject a protest to a recertification that the Commission does not 
believe rises to the level of a substantive change.
---------------------------------------------------------------------------

    \602\ Id. P 550.
---------------------------------------------------------------------------

    324. Regarding Northwest Coalition's argument that the APA does not 
authorize retroactive rules, we disagree with Northwest Coalition's 
premise that the new rebuttable presumption for affiliated facilities 
more than one mile but less than 10 miles apart will have retroactive 
effect when applied to existing facilities seeking recertification. The 
new regulations do not apply to an existing facility unless and until 
it must recertify because of changes to the material facts and 
representations at its facility or that of an affiliated facility one 
mile or less away. When the existing QF makes a change to the material 
facts and circumstances of its certification, it very well may no 
longer be the same facility it was when originally certified. Due to 
the change in material facts, the new regulations should apply. Thus, 
the rule is prospective, and applied only if and when new facts have 
prompted a recertification.\603\
---------------------------------------------------------------------------

    \603\ Furthermore, no commenter has explained how and why 
applying the new rules to new recertifications make them retroactive 
rules.
---------------------------------------------------------------------------

    325. Northwest Coalition argues that the Commission's past practice 
in developing new certification criteria is to apply the new criteria 
only to new facilities, not existing facilities seeking

[[Page 86703]]

recertification.\604\ We disagree. Northwest Coalition relies on 
Commission Order No. 671, which implemented section 210(n) following 
EPAct 2005. However, Northwest Coalition overlooks that section 210(n) 
of PURPA required the Commission to issue a rule revising the criteria 
for new cogeneration facilities, and therefore the Commission in Order 
No. 671 focused on defining what is a new facility.\605\ In contrast, 
here the Commission was not implementing 210(n) and therefore was not 
revising the criteria solely for new facilities.
---------------------------------------------------------------------------

    \604\ Northwest Coalition Request for Rehearing at 55.
    \605\ 16 U.S.C. 824a-3(n).
---------------------------------------------------------------------------

    326. For the foregoing reasons, we decline to establish further 
legacy treatment for existing facilities, as requested. Existing QFs 
that seek to recertify due to substantive changes will be subject to 
protests. The Commission can determine, on a case-by-case basis, 
whether the evidence presented represents a substantive change or 
whether the change is non-substantive and thus not subject to protests, 
in which case the Commission will dismiss any protests submitted. We 
decline to specify, as Solar Energy Industries request, that only 
changes to the maximum net output or the qualifying technology, or in 
circumstances that have economic consequences to the utility-purchaser 
and its ratepayers, will make an existing QF's recertification subject 
to challenge. We likewise disagree with Solar Energy Industries' 
contention that failing to offer grandfathering to existing facilities 
is arbitrary, capricious, and inconsistent with Commission precedent. 
We continue to believe that conducting a case-by-case analysis is the 
best way to determine whether the change that prompted recertification 
is substantive, will avoid arbitrary outcomes, and is necessary to 
comply with the intent of PURPA to provide advantages only to small 
power production facilities.

E. Corresponding Changes to the FERC Form No. 556

    327. In the final rule, the Commission adopted the NOPR proposals 
regarding changes to the Form No. 556, with some further clarifications 
and additions. The Commission found that the added information 
collected through these changes was necessary to implement the changes 
made to the regulations in the final rule and thus justified the 
increase in reporting burden.\606\
---------------------------------------------------------------------------

    \606\ See Order No. 872, 172 FERC ] 61,041 at P 584.
---------------------------------------------------------------------------

    328. The final rule revised the ``Who Must File'' section to 
include a ``Recertification'' section which provides the text of 
revised 18 CFR 292.207(f) (previously 18 CFR 292.207(d)), which states 
that a QF must file for recertification whenever the QF ``fails to 
conform with any material facts or representations presented . . . in 
its submittals to the Commission.'' \607\ The Commission stated that 
this addition does not alter our recertification requirements, and the 
Commission included it on the Form No. 556 simply to make the Form No. 
556 clearer in its application.\608\
---------------------------------------------------------------------------

    \607\ 18 CFR 292.207(d), which the final rule renumbered to 
292.207(f).
    \608\ Order No. 872, 172 FERC ] 61,041 at P 586.
---------------------------------------------------------------------------

    329. The Commission stated that the total burden estimates in the 
``Paperwork Reduction Act Notice'' section of Form No. 556 would be 
updated based on the changes in the final rule, to provide the 
following estimates: 1.5 hours for self-certifications of facilities of 
1 MW or less; 1.5 hours for self-certifications of a cogeneration 
facility over 1 MW; 50 hours for applications for Commission 
certification of a cogeneration facility; 3.5 hours for self-
certifications of small power producers over 1 MW and less than a mile 
or more than 10 miles from affiliated small power production QFs that 
use the same energy resource; 56 hours for an application for 
Commission certification of a small power production facility over 1 MW 
and less than a mile or more than 10 miles from affiliated small power 
production QFs that use the same energy resource; 9.5 hours for self-
certifications of small power producers over 1 MW with affiliated small 
power production QFs more than one but less than 10 miles that use the 
same energy resource; 62 hours for an application for Commission 
certification of a small power production facility over 1 MW with 
affiliated small power production QFs more than one but less than 10 
miles that use the same energy resource.\609\
---------------------------------------------------------------------------

    \609\ See Order No. 872, 172 FERC ] 61,041 at P 587.
---------------------------------------------------------------------------

1. Requests for Rehearing
    330. Public Interest Organizations state that the final rule would 
impose 62 hours of administrative work on every small power production 
facility over 1 MW with affiliated facilities between one and 10 miles 
away and the basis for this calculation is not clear.\610\
---------------------------------------------------------------------------

    \610\ Public Interest Organizations Request for Rehearing at 117 
(citing Order No. 872, 172 FERC ] 61,041 at P 587).
---------------------------------------------------------------------------

2. Commission Determination
    331. Public Interest Organizations misread the final rule on this 
point. The final rule provided a total burden estimate of 9.5 hours for 
self-certifications of small power producers over 1 MW with affiliated 
small power production QFs more than one but less than 10 miles apart 
that use the same energy resource, but 62 hours for an application for 
Commission certification of a small power production facility over 1 MW 
with affiliated small power production QFs more than one but less than 
10 miles that use the same energy resource.\611\ The estimate is not 
that every small power production facility over 1 MW with affiliated 
facilities between one and 10 miles away will have a total burden of 62 
hours, but only those who chose to apply for Commission certification 
(as opposed to use the self-certification process). For those who self-
certify, the burden estimate is 9.5 hours.
---------------------------------------------------------------------------

    \611\ See Order No. 872, 172 FERC ] 61,041 at P 587. The 
majority of QFs choose the less burdensome option to self-certify 
pursuant to 18 CFR 292.207(a), by filing a Form No. 556. An 
application for Commission certification pursuant to 18 CFR 
292.207(b) also requires filing the Form No. 556, but applicants for 
Commission certification typically additionally prepare a written 
petition arguing why the Commission should grant QF status.
---------------------------------------------------------------------------

    332. In response to Public Interest Organizations' assertion that 
the basis for the calculation is not clear, below we explain the 
calculation. Prior to the final rule, ``[t]he estimated burden for 
completing the Form No. 556, including gathering and reporting 
information, [was] as follows: 1.5 hours for self-certification of a 
small power production facility . . . 50 hours for an application for 
Commission certification of a small power production facility. . . .'' 
\612\ The Information Collection Section of the final rule showed 
changes due to the final rule and estimated an additional 8 hours for 
the category ``self-certifications'' and 12 hours for the category 
``applications for Commission certification'' of small power production 
facilities greater than 1 MW that are more than one but less than 10 
miles from affiliated small power production QFs. Therefore, the total 
burden estimate as provided in the final rule is as follows: 1.5 hours 
plus 8 hours for a total of 9.5 hours for self-certifications and 50 
hours plus 12 hours for a total of 62 hours for applications for 
Commission certification.
---------------------------------------------------------------------------

    \612\ Commission Information Collection Activities (FERC-556); 
Comment Request; Extension, Docket No. IC19-16-000, at 5 (issued May 
15, 2019).
---------------------------------------------------------------------------

    333. In light of the modification to the final rule described in 
section III.D, we

[[Page 86704]]

further modify the ``Recertification'' section in page one of the 
instructions of the Form No. 556, which was added by the final rule. 
The ``Recertification'' section currently reads ``A QF must file a 
recertification whenever the qualifying facility `fails to conform with 
any material facts or representations presented . . . in its submittals 
to the Commission.' 18 CFR 292.207(f).'' To this, we will add ``Among 
other possible changes in material facts that would necessitate 
recertification, a small power production QF is required to recertify 
to update item 8a due to a change at an affiliated facility(ies) one 
mile or less from its electrical generating equipment. A small power 
production QF is not required to recertify due to a change at an 
affiliated facility(ies) listed in item 8a that is more than one mile 
but less than 10 miles away from its electrical generating equipment, 
unless that change also impacts any other entries on the Form 556.''

F. PURPA Section 210(m) Rebuttable Presumption of Nondiscriminatory 
Access to Markets

    334. In the final rule, the Commission acknowledged that, when 
Order Nos. 688 and 688-A were issued, the Commission decided that small 
QFs may not have nondiscriminatory access to markets.\613\ In Order 
Nos. 688 and 688-A, based on factors present at that time, the 
Commission decided to draw the line for small entities at 20 MW.\614\ 
However, as stated in the final rule, energy markets have matured and 
market participants have gained a better understanding of the mechanics 
of such markets.\615\ In the final rule, the Commission stated that, 
since Order Nos. 688 and 688-A, the Commission recognized multiple 
examples of small power production facilities under 20 MW participating 
in RTO/ISO energy markets.\616\ The Commission stated that it had found 
that the electric utilities in those proceedings rebutted the 
presumption of no market access and therefore terminated the mandatory 
purchase obligation.\617\
---------------------------------------------------------------------------

    \613\ Order No. 688, 117 FERC ] 61,078 at P 72; Order No. 688-A, 
119 FERC ] 61,305 at PP 94-96; N. States Power Co., 151 FERC ] 
61,110, at PP 31-36 (2015); PPL Elec. Utilities Corp., 145 FERC ] 
61,053, at PP 21-24 (2013).
    \614\ Order No. 688, 117 FERC ] 61,078 at PP 74, 76; Order No. 
688-A, 119 FERC ] 61,305 at P 103.
    \615\ Order No. 872, 172 FERC ] 61,041 at P 629.
    \616\ Id. P 624.
    \617\ Id. (citing Fitchburg Gas and Elec. Light Co., 146 FERC ] 
61,186, at P 33 (2014); City of Burlington, Vt., 145 FERC ] 61,121, 
at P 33 (2013)).
---------------------------------------------------------------------------

    335. The Commission adopted the proposal to revise 18 CFR 
292.309(d) to update the net power production capacity level at which 
the presumption of nondiscriminatory access to a market attaches for 
small power production facilities, but not for cogeneration facilities. 
After reviewing commenters' concerns, the Commission updated the 
rebuttable presumption from 20 MW to 5 MW, rather than from 20 MW to 1 
MW as originally proposed in the NOPR. The Commission explained that 
small power production facilities with a net power production capacity 
at or below 5 MW will be presumed not to have nondiscriminatory access 
to markets and, conversely, small power production facilities with a 
net power production capacity over 5 MW will be presumed to have 
nondiscriminatory access to markets.
    336. The Commission disagreed with commenters who argued that a 
lack of record evidence existed to support the proposed reduction below 
20 MW. The Commission explained that, in Order Nos. 688 and 688-A, the 
Commission had determined that small QFs may not have nondiscriminatory 
access to wholesale markets and, therefore, it was reasonable to 
establish a presumption for small QFs. The Commission explained that, 
at that time, the Commission had found that it was ``reasonable and 
administratively workable'' to define ``small'' for purposes of this 
regulation to be QFs below 20 MW.\618\ The Commission noted that a 
number of commenters, including state entities which are charged with 
applying PURPA in their jurisdictions, supported revising the 
definition of small QFs eligible for the presumption in reducing the 20 
MW threshold.
---------------------------------------------------------------------------

    \618\ Id. PP 626-29 (citing Order No. 688, 117 FERC ] 61,078 at 
PP 74-78 (establishing rebuttable presumption); Order No. 688-A, 119 
FERC ] 61,305 at P 95 (``There is no perfect bright line that can be 
drawn and we have reasonably exercised our discretion in adopting a 
20 MW or below demarcation for purposes of determining which QFs are 
unlikely to have nondiscriminatory access to markets.'')).
---------------------------------------------------------------------------

    337. The Commission again acknowledged that there is no unique 
number to draw a line for determining what is a small entity.\619\ The 
Commission explained that, in establishing the 20 MW presumption as the 
line between large and small QFs for purposes of section 210(m), the 
Commission had looked at other non-QF rulemaking orders in which it had 
considered what constituted a small entity and those orders showed 20 
MW was a reasonable number at which to draw the line.\620\ The 
Commission explained that it had since determined, based on changed 
circumstances since the issuance of Order Nos. 688 and 688-A, that 
entities with capacity lower than 20 MW have nondiscriminatory access 
to the markets and, therefore, a capacity level of 20 MW may no longer 
be a reasonable place to establish the presumption on what constitutes 
a smaller entity under our regulations.
---------------------------------------------------------------------------

    \619\ Order No. 872, 172 FERC ] 61,041 at P 627 (citing Order 
No. 688-A, 119 FERC ] 61,305 at P 97 (``Although there is no unique 
and distinct megawatt size that uniquely determines if a generator 
is small, in other contexts the Commission has used 20 MW, based on 
similar considerations to those presented here, to determine the 
applicability of its rules and policies.'')).
    \620\ Id. PP 628-29 (citing Order No. 688, 117 FERC ] 61,078 at 
P 76; Order No. 688-A, 119 FERC ] 61,305 at PP 96-97).
---------------------------------------------------------------------------

    338. The Commission explained that it was updating the rebuttable 
presumption based on industry changes since Order No. 688. The 
Commission stated that it was reasonable to update the rebuttable 
presumption as the markets defined in PURPA section 210(m)(1)(A), (B), 
and (C) evolve because the statute itself does not establish a 
presumption and the statue requires the Commission to update the rules 
from time to time to ensure it complies with PURPA.
    339. The Commission explained that, over the last 15 years, the 
RTO/ISO markets have matured and market participants have gained a 
better understanding of the mechanics of such markets. As a result, the 
Commission found that it is reasonable to presume that access to the 
RTO/ISO markets has improved and that it is appropriate to update the 
presumption for smaller production facilities. The Commission further 
explained that, as in Order No. 688, it looked to indicia in other 
orders to determine where the presumption should be set.\621\
---------------------------------------------------------------------------

    \621\ Id. P 629.
---------------------------------------------------------------------------

    340. The Commission found that market rules are inclusive of power 
producers below 20 MW participating in markets. The Commission 
explained that, for example, since the issuance of Order No. 688, the 
Commission has required public utilities to increase the availability 
of a Fast-Track interconnection process for projects up to 5 MW.\622\
---------------------------------------------------------------------------

    \622\ Id. P 630 (citing Small Generator Interconnection 
Agreements and Procedures, Order No. 792, 78 FR 73240 (Dec. 5, 
2013), 145 FERC ] 61,159, at P 103 (2013), clarifying, Order No. 
792-A, 146 FERC ] 61,214 (2014)).
---------------------------------------------------------------------------

    341. The Commission found that, while the existence of Fast-Track 
interconnection processes does not on its own demonstrate 
nondiscriminatory access for resources under 20 MW, it does indicate 
that entities smaller than 20 MW have access to the market. The 
Commission found that presuming that QFs above 5 MW have such access is

[[Page 86705]]

therefore a reasonable approach to identifying a capacity level at 
which to update the rebuttable presumption of nondiscriminatory market 
access.\623\
---------------------------------------------------------------------------

    \623\ Id. P 631.
---------------------------------------------------------------------------

    342. The Commission explained that, since the issuance of Order No. 
688 the Commission has required each RTO/ISO to update its tariff to 
include a participation model for electric storage resources that 
established a minimum size requirement for participation in the RTO/ISO 
markets that does not exceed 100 kW.\624\ The Commission explained that 
these proposals require RTO/ISOs to revise their tariffs to provide 
easier access for smaller resources. The Commission determined that 
requiring markets to accommodate storage resources as low as 100 kW 
also supports this finding that resources smaller than 20 MW have 
nondiscriminatory access to those RTO/ISO markets. The Commission 
stated that it believed that these developments support updating the 20 
MW presumption to a lower number.
---------------------------------------------------------------------------

    \624\ Id. P 632 (citing Elec. Storage Participation in Mkts. 
Operated by Reg'l Transmission Orgs. and Indep. Sys. Operators, 83 
FR 9580 (Mar. 6, 2018), Order No. 841, 162 FERC ] 61,127, at P 265 
(2018)).
---------------------------------------------------------------------------

    343. The Commission found that, when these changes are viewed 
together, their cumulative effect demonstrates that it is reasonable 
for the Commission to maintain a small entity presumption but update 
its determination of what is a small entity under this presumption 
under the PURPA Regulations. The Commission found that the prospect of 
increased participation of distributed energy resources in energy 
markets further supports the proposition that wholesale markets are 
accommodating resources with smaller capacities.\625\
---------------------------------------------------------------------------

    \625\ Id. P 633 (citing Elec. Participation in Mkts Operated by 
Reg'l Transmission Orgs and Indep. Sys. Operators, 157 FERC ] 
61,121, at P 129 (2016) (footnote omitted) (``The costs of 
distributed energy resources have decreased significantly, which 
when paired with alternative revenue streams and innovative 
financing solutions, is increasing these resources' potential to 
compete in and deliver value to the organized wholesale electric 
markets.'')).
---------------------------------------------------------------------------

    344. The Commission recognized that certain of these precedents 
would support reducing the presumption below 5 MW and perhaps even 
lower than 1 MW. The Commission explained that it carefully considered 
the comments detailing the problems that QFs have had in participating 
in RTO/ISO markets, problems that necessarily are more acute for 
smaller QFs at or near the 1 MW threshold proposed in the NOPR.\626\ 
The Commission therefore determined that 5 MW is a more reasonable 
threshold of non-discriminatory access to RTO/ISO markets.
---------------------------------------------------------------------------

    \626\ Id. P 634 (referencing Allco Comments, Docket No. RM19-15-
000, at 17-19 (Dec. 3, 2019); Advanced Energy Economy Comments, 
Docket No. RM19-15-000, at 10-11 (Dec. 3, 2019); DC Commission 
Comments, Docket No. RM19-15-000, at 5 (Dec. 3, 2019); Public 
Interest Organizations Comments, Docket No. RM19-15-000, at 89-90 
(Dec. 3, 2019); Solar Energy Industries Comments, Docket No. RM19-
15-000, at 45-49 (Dec. 3, 2019)).
---------------------------------------------------------------------------

    345. The Commission therefore found it reasonable to update the 
presumption under these regulations as to what constitutes a small 
entity that is presumed to have non-discriminatory access to RTO/ISO 
markets and markets of comparable competitive quality below 20 MW, and 
that 5 MW represents a reasonable new threshold that accounts for the 
change of circumstances indicating that 20 MW no longer is appropriate 
but also accommodates commenters' concerns that a 1 MW threshold would 
be too low. The Commission acknowledged that ``there is no unique and 
distinct megawatt size that uniquely determines if a generator is 
small.'' \627\ The Commission found that a 5 MW threshold accords with 
PURPA's mandate to encourage small power production facilities, 
recognizes the progress made in wholesale markets as discussed above, 
and balances the competing claims of those seeking a lower threshold 
and those seeking a higher threshold.\628\
---------------------------------------------------------------------------

    \627\ Order No. 688-A, 119 FERC ] 61,305 at P 97.
    \628\ Order No. 872, 172 FERC ] 61,041 at P 635.
---------------------------------------------------------------------------

    346. The Commission explained that individual small power 
production QFs that are over 5 MW and less than 20 MW can seek to make 
the case; however, they do not truly have nondiscriminatory access to a 
market and should still be entitled to a mandatory purchase 
obligation.\629\
---------------------------------------------------------------------------

    \629\ Id. P 636.
---------------------------------------------------------------------------

    347. The Commission disagreed with Advanced Energy Economy's 
argument that the Commission failed to sufficiently justify its change 
in policy.\630\ The Commission noted that, in FCC v. Fox Television, 
the court stated that, when an agency makes a change in policy, the 
agency must show that there are good reasons for the change, ``[b]ut it 
need not demonstrate to a court's satisfaction that the reasons for the 
new policy are better than the reasons for the old one; it suffices 
that the new policy is permissible under the statute, that there are 
good reasons for it, and that the agency believes it to be better, 
which the conscious change of course adequately indicates.'' \631\
---------------------------------------------------------------------------

    \630\ Id. P 639 (referencing Advanced Energy Economy Comments, 
Docket No. RM19-15-000, at 6 (Dec. 3, 2019) (citing FCC v. Fox 
Television, 556 U.S. at 515)).
    \631\ FCC v. Fox Television, 556 U.S. at 515.
---------------------------------------------------------------------------

    348. The Commission clarified that it was maintaining its 
determination from Order No. 688 that small entities potentially may 
not have non-discriminatory access for purposes of PURPA section 
210(m). The Commission explained that it had determined that using 20 
MW as an indicator of what constitutes a small entity is no longer 
valid. The Commission found that entities below 20 MW increasingly have 
access to the markets and become familiar with practices and procedures 
and that markets have since implemented changes to provide easier 
access to smaller facilities, including small power production QFs, 
storage facilities, and distributed energy resources. The Commission 
found that these changes demonstrate a change in facts since the time 
it issued Order No. 688, which supports updating what constitutes a 
small entity for purposes of PURPA section 210(m).\632\
---------------------------------------------------------------------------

    \632\ Order No. 872, 172 FERC ] 61,041 at P 638.
---------------------------------------------------------------------------

    349. The Commission explained that, while it found that it is 
reasonable to update the rebuttable presumption from 20 MW to 5 MW, it 
recognized commenters' concerns regarding specific barriers to 
participation in RTO markets that may affect the nondiscriminatory 
access to those markets of some individual small power production 
facilities between 5 MW and 20 MW. The Commission explained that, to 
address these concerns, it was revising 18 CFR 292.309(c)(2)(i)-(vi) to 
include factors that small power production facilities between 5 MW and 
20 MW can point to in seeking to rebut the presumption that they have 
nondiscriminatory access. The Commission clarified that these factors 
are in addition to the existing ability, pursuant to 18 CFR 292.309(c), 
to rebut the presumption of access to the market by demonstrating, 
inter alia, operational characteristics or transmission 
constraints.\633\
---------------------------------------------------------------------------

    \633\ Id. P 640.
---------------------------------------------------------------------------

    350. The Commission added to 18 CFR 292.309(c) the following 
factors: (1) Specific barriers to connecting to the interstate 
transmission grid, such as excessively high costs and pancaked delivery 
rates; (2) the unique circumstances impacting the time/length of 
interconnection studies/queue to process small power QF interconnection 
requests; (3) a lack of affiliation with entities that participate in 
RTO/ISO markets; (4) a predominant purpose other than selling 
electricity which would warrant the small power QF being treated 
similarly to cogenerators (e.g., municipal solid waste

[[Page 86706]]

facilities, biogas facilities, run-of-river hydro facilities, and non-
powered dams); (5) the QF has certain operational characteristics that 
effectively prevent the QF's participation in a market; and (6) the QF 
lacks access to markets due to transmission constraints, including that 
it is located in an area where persistent transmission constraints in 
effect cause the QF not to have access to markets outside a 
persistently congested area to sell the QF output or capacity. The 
Commission explained that this list was not intended to be an 
exhaustive list of the factors that a QF could rely upon in seeking to 
rebut the presumption. The Commission further explained that these 
factors, among other indicia of lack of nondiscriminatory access, would 
be assessed by the Commission on a case-by-case basis when considering 
a claim that the presumption of nondiscriminatory access to the defined 
markets should be considered rebutted for a specific QF.\634\
---------------------------------------------------------------------------

    \634\ Id. P 641.
---------------------------------------------------------------------------

    351. The Commission found that the addition of these factors 
addressed commenters' concern that not all small power production 
facilities between 5 and 20 MW may have nondiscriminatory access to 
competitive markets and facilitates the ability of small power 
production facilities facing barriers to participation in RTO markets 
to demonstrate their lack of access.\635\ The Commission explained, for 
example, that, while a small power production facility between 5 MW and 
20 MW does not need to be physically interconnected to transmission 
facilities to be considered as having access to the statutorily-defined 
wholesale electricity markets, there are some small power production 
facilities between 5 MW and 20 MW that may face additional barriers, 
such as excessively high costs and pancaked delivery rates, to access 
wholesale markets.\636\
---------------------------------------------------------------------------

    \635\ Id. P 642.
    \636\ Id.
---------------------------------------------------------------------------

    352. The Commission further explained that, for example, several 
commenters expressed concern over the resources or administrative 
burden for some small power QFs that lack the necessary experience or 
expertise to participate in energy markets. Recognizing these concerns, 
the Commission added consideration of both the fact that some small 
power production facilities will face additional difficulties due to 
costs, administrative burdens, length of the interconnection study 
process and the size of the queues and the fact that some small power 
production QFs do not have access to the expertise of affiliated 
entities.\637\
---------------------------------------------------------------------------

    \637\ Id. P 643.
---------------------------------------------------------------------------

    353. The Commission agreed with commenters that some small power 
production facilities are similar to cogeneration facilities because 
their predominant purpose is not power production. The Commission found 
that, like cogeneration facilities, the sale of electricity from these 
small power production facilities is a byproduct of another purpose and 
these facilities might not be as familiar with energy markets and the 
technical requirements for such sales. The Commission therefore allowed 
the small subset of small power production facilities that are between 
20 MW and 5 MW to rebut the presumption of access to markets when the 
predominant purpose of the facility is other than selling electricity, 
and the sale of electricity is simply a byproduct of that purpose. The 
Commission recognized that, like all QFs over 20 MW, there may be 
particular small power production facilities with certain operational 
characteristics or that are located in an area where persistent 
transmission constraints in effect cause the QF not to have access to 
markets outside a persistently congested area to sell the QF output or 
capacity.\638\
---------------------------------------------------------------------------

    \638\ Id. P 644.
---------------------------------------------------------------------------

1. Requests for Rehearing and Clarification
    354. Northwest Coalition, Public Interest Organizations, and Solar 
Energy Industries contend that the Commission erred in revising the 
rebuttable presumption for QFs between 5 MW and 20 MW, arguing that the 
Commission failed to demonstrate that QFs between 5 MW and 20 MW have 
nondiscriminatory access to markets prior to shifting the burden from 
requiring utilities to demonstrate QFs 20 MW and under have non-
discriminatory access to markets to requiring QFs between 5 MW and 20 
MW to prove that they do not have access.\639\ Public Interest 
Organizations, Northwest Coalition and Solar Energy Industries argue 
that, under the terms of section 210(m), a utility must ``set forth the 
factual basis'' showing that QFs have non-discriminatory access to the 
market, and the Commission is statutorily required to determine if the 
record sufficiently demonstrates that QFs have non-discriminatory 
access to the market before terminating the mandatory purchase 
obligation.\640\ Public Interest Organizations argue that general 
presumptions that conditions are improving for small QFs to access 
competitive markets is insufficient justification.\641\
---------------------------------------------------------------------------

    \639\ Public Interest Organizations Request for Rehearing and 
Clarification at 136-37 (citing 5 U.S.C. 556(d); Nat'l Min. Ass'n v. 
Babbitt, 172 F.3d 906, 910 (D.C. Cir. 1999); United Scenic Artists 
v. NLRB, 762 F.2d 1027, 1034 (D.C. Cir. 1985)); Northwest Coalition 
Request for Rehearing at 47-48; Solar Energy Industries Request for 
Rehearing and/or Clarification at 38-41.
    \640\ Public Interest Organizations Request for Rehearing at 136 
(citing 16 U.S.C. 824a-3(m)(3)).
    \641\ Solar Energy Industries Request for Rehearing and/or 
Clarification at 38-39; Public Interest Organizations Request for 
Rehearing and Clarification at 40.
---------------------------------------------------------------------------

    355. Northwest Coalition and Public Interest Organizations assert 
that there is no evidence that circumstances have changed since Order 
No. 688, arguing that most QFs 20 MW and under (1) are still connected 
to lower-voltage distribution facilities that are subject to state 
regulations instead of Commission-regulated interconnection procedures; 
and (2) require technical enhancements, face pancaked rates, and 
additional administrative burdens.\642\ Public Interest Organizations 
contend that the Commission has repeatedly concluded that QFs below 20 
MW face obstacles to transmission access in RTO/ISO regions that 
prevent them from participating in competitive markets.\643\ Northwest 
Coalition and Public Interest Organizations claim that the only two 
examples of small QFs selling into wholesale markets that the 
Commission included in the final rule did so with a larger, more 
experienced company acting on their behalf.\644\ Public Interest 
Organizations and Northwest Coalition contend that there is no evidence 
that small QFs are actually participating in regional markets, 
therefore, it is impossible to conclude that small QFs do so 
regularly.\645\
---------------------------------------------------------------------------

    \642\ Public Interest Organizations Request for Rehearing at 
138-140.
    \643\ Id. at 138-39.
    \644\ Id. at 140.
    \645\ Id. at 139; Northwest Coalition Request for Rehearing at 
49-50.
---------------------------------------------------------------------------

    356. Northwestern Coalition and Public Interest Organizations 
dispute the Commission's claims that (1) small QFs have gained a better 
understanding of the markets; (2) changes to interconnection rules 
indirectly support small QFs' access to markets; and (3) changes in 
RTO/ISO market rules to accommodate energy storage resources support 
the Commission's finding that QFs between 5 and 20 MW have non-
discriminatory access to markets.\646\ Northwestern Coalition and 
Public Interest Organizations argue that the Commission provided no 
evidence that

[[Page 86707]]

small QFs have gained a better understanding or how that understanding 
helped them overcome the obstacles small QFs face in accessing 
markets.\647\ Northwestern Coalition and Public Interest Organizations 
assert that the adoption of fast-track procedures for facilities under 
5 MW or accommodations for energy storage resources do nothing to 
support access by QFs between 5 and 20 MW to markets.\648\ Northwest 
Coalition contends that the Commission also ignored evidence that 
smaller resources face unique barriers to accessing competitive 
markets, such as that the standard trading block in wholesale markets 
is 25 MW, or that requiring transmission be scheduled in 1 MW blocks 
place a disproportionate burden on small generators.\649\
---------------------------------------------------------------------------

    \646\ Northwest Coalition Request for Rehearing at 50; Public 
Interest Organizations Request for Rehearing at 137-140.
    \647\ Northwest Coalition Request for Rehearing at 49; Public 
Interest Organizations Request for Rehearing at 139.
    \648\ Northwest Coalition Request for Rehearing at 51-52; Public 
Interest Organizations Request for Rehearing at 140.
    \649\ Northwest Coalition Request for Rehearing at 52-53.
---------------------------------------------------------------------------

    357. One Energy claims that behind-the-meter distributed energy 
resources (DERs) are more like cogeneration than small power production 
because their primary purpose is to directly power homes and business 
and not to sell energy at wholesale.\650\ Therefore, One Energy argues 
that the final rule was ``unduly discriminatory'' in finding that 
behind-the-meter DERs between 5 and 20 MW have non-discriminatory 
access to markets. One Energy asserts that behind-the-meter resources 
should be exempted from the reduction like cogeneration facilities. 
Further, One Energy contends that the Commission cited QFs that are 
similar to cogeneration facilities, such as solid waste facilities and 
biogas facilities, but did not specifically include behind-the-meter 
DERs. One Energy argues that at a minimum the Commission should list 
behind-the-meter DERs like other categories of small power production 
facilities that are entitled to rebut the presumption of 
nondiscriminatory market access.\651\
---------------------------------------------------------------------------

    \650\ One Energy Request for Rehearing and Clarification at 5-7.
    \651\ Id. at 7.
---------------------------------------------------------------------------

    358. One Energy also seeks clarification as to how the new same 
site determination rules will affect the PURPA section 210(m) 
presumption that small power production facilities with a net power 
production capacity at or below 5 MW do not have nondiscriminatory 
access to markets. One Energy states that it has three behind-the-meter 
wind projects with three separate off-takers, within one mile of each 
other. One Energy is concerned that, if one of the off-takers no longer 
takes service, the Commission would aggregate the formerly behind-the-
meter facility with the other facilities within one mile, find that the 
three together are 15 MW and consequently find that the formerly 
behind-the-meter facility is not eligible for the below 5 MW 
presumption.\652\
---------------------------------------------------------------------------

    \652\ Id. at 8-9.
---------------------------------------------------------------------------

    359. Public Interest Organizations assert that the rebuttable list 
of factors is only included in 18 CFR 292.309(c) and was not added to 
18 CFR 292.309(e) that applies to QFs in ISO-NE, MISO, NYISO and PJM 
nor in 18 CFR 292.309(f) that applies to QFs in ERCOT. Public Interest 
Organizations request that, to prevent unnecessary confusion, the 
Commission incorporate the factors listed in 18 CFR 292.309(c) into 
both (e) and (f).\653\
---------------------------------------------------------------------------

    \653\ Public Interest Organizations Request for Rehearing at 
143-44.
---------------------------------------------------------------------------

2. Commission Determination
    360. We disagree with parties' arguments and reaffirm the finding 
that market conditions have changed since the issuance of Order No. 
688. In establishing the original rebuttable presumption of 20 MW in 
Order No. 688, the Commission relied on the market conditions at that 
time. As the Commission stated, markets have matured and the markets 
have provided, and continue to provide, increased access to smaller 
resources demonstrating the need for the Commission to reconsider its 
definition of small power production QFs. In the final rule, the 
Commission updated the relevant definition of a small power production 
facility for purposes of 292.309 to be 5 MW and, despite the arguments 
on rehearing, we affirm that finding here.\654\
---------------------------------------------------------------------------

    \654\ Order No. 872, 172 FERC ] 61,041 at PP 629-633.
---------------------------------------------------------------------------

    361. We disagree with arguments that the Commission did not provide 
sufficient support for its finding that QFs between 5 and 20 MW can be 
presumed to have non-discriminatory access competitive markets. 
Specifically, the Commission explained that, since the issuance of 
Order No. 688, the Commission has required each RTO/ISO to update its 
tariff to include a participation model for electric storage resources 
that established a minimum size requirement for participation in the 
RTO/ISO markets that does not exceed 100 kW.\655\ The Commission 
explained that these proposals require RTO/ISOs to revise their tariffs 
to provide easier access for smaller resources. The Commission 
determined that requiring markets to accommodate storage resources as 
low as 100 kW also supports this finding that resources smaller than 20 
MW have nondiscriminatory access to those RTO/ISO markets. Further, 
that the Commission chose a 5 MW cut-off for eligibility for the fast-
track procedures represents an implicit judgment by the Commission that 
facilities larger than 5 MW do not need such procedures to be able to 
interconnect to the grid.\656\ The Commission stated that it believed 
that these developments support updating the 20 MW presumption to a 
lower number.\657\
---------------------------------------------------------------------------

    \655\ Id. P 632 (citing Order No. 841, 162 FERC ] 61,127 at P 
265).
    \656\ Id. PP 630-31.
    \657\ Id. P 632.
---------------------------------------------------------------------------

    362. While these factors were a sufficient basis to support the 
Commission's action, they were by no means an exhaustive recitation of 
relevant developments in competitive markets since Order Nos. 688. For 
example, as the Commission noted in another recent rulemaking, all of 
the RTOs/ISOs have at least one participation model that allows 
resources as small as 100 kW to participate in their markets.\658\ 
Indeed, even since the final rule, the Commission has continued to 
provide greater opportunities for small power production facilities to 
participate in wholesale organized markets.\659\
---------------------------------------------------------------------------

    \658\ Order No. 841, 162 FERC ] 61,127 at P 272.
    \659\ See Participation of Distributed Energy Resource 
Aggregations in Markets Operated by Regional Transmission 
Organizations and Independent System Operators, Order No. 2222, 172 
FERC ] 61,247 (2020). While Order No. 2222 will not become effective 
until after the effective date of the rulemaking in the instant 
proceeding and applies only to Commission-jurisdictional RTOs/ISOs, 
we find it appropriate to mention it here to provide another example 
of the greater opportunities for small power producer participation 
in organized electric markets.
---------------------------------------------------------------------------

    363. Regarding arguments from Public Interest Organizations and 
Northwest Coalition that the final rule failed to consider that smaller 
resources face unique barriers to accessing competitive markets, we 
disagree. In the final rule, the Commission carefully considered such 
concerns and amended 18 CFR 292.309(c) to include factors that small 
power production QFs between 5 and 20 MW can use to rebut the 
presumption of non-discriminatory access to markets.\660\ These factors 
include (1) specific barriers to connecting to the interstate 
transmission grid, such as excessively high costs and pancaked delivery 
rates; (2) unique circumstances impacting the time/

[[Page 86708]]

length of interconnection studies/queue to process small power QF 
interconnection requests; (3) lack of affiliation with entities that 
participate in RTO/ISO markets; (4) predominant purpose other than 
selling electricity which would warrant the small power QF being 
treated similarly to cogenerators (e.g., municipal solid waste 
facilities, biogas facilities, run-of-river hydro facilities, and non-
powered dams); (5) having certain operational characteristics that 
effectively prevent the qualifying facility's participation in a 
market; and (6) lack of access to markets due to transmission 
constraints, including that it is located in an area where persistent 
transmission constraints in effect cause the QF not to have access to 
markets outside a persistently congested area to sell the QF output or 
capacity.\661\ The Commission adopted the first four of these factors 
recognizing that some small power production facilities between 5 and 
20 MW may lack nondiscriminatory access to markets.\662\ The first four 
factors address concerns that a small power production QF may lack 
expertise, either directly or within its corporate family, to access 
markets defined in PURPA section 210(m)(1) or has operational 
characteristics or is remotely located such that it faces additional 
transmission obstacles to reach such markets. Additionally, the 
Commission applied the last two factors on the list, i.e., 
``operational characteristics'' and ``transmission constraints,'' which 
were originally adopted in Order No. 688 for QFs between 20 and 80 MW, 
to permit QFs between 5 and 20 MW to rebut the presumption that they 
have non-discriminatory access to markets. This list of factors, we 
stress, is not exclusive but was adopted in the final rule to address 
the specific concerns commenters raised in responding to the NOPR.
---------------------------------------------------------------------------

    \660\ Order No. 872, 172 FERC ] 61,041 at P 640.
    \661\ Id. P 641.
    \662\ Id. PP 640, 642.
---------------------------------------------------------------------------

    364. Like the initial regulations implementing PURPA section 
210(m), the final rule's revision to the rebuttable presumption merely 
provides a framework for evaluating whether individual small power 
production facilities have nondiscriminatory access to the markets 
defined in PURPA section 210(m); it does not decide that every small 
power producer QF between 5 MW and 20 MW in fact has nondiscriminatory 
access. The D.C. Circuit has held that ``[t]he fact that FERC chose to 
adopt certain rebuttable presumptions via rulemaking, rather than by 
case-by-case adjudication, does not violate any of the statute's 
requirements.'' \663\ Contrary to Public Interest Organizations' 
argument,\664\ the rebuttable presumption, if applicable, provides the 
requisite ``factual basis'' for a utility to invoke. Conversely, the 
corresponding factors for rebutting this presumption, if applicable, 
provide a ``factual basis'' that a QF may invoke to rebut that 
presumption.
---------------------------------------------------------------------------

    \663\ AFPA v. FERC, 550 F.3d at 1183.
    \664\ Public Interest Organizations Request for Rehearing at 136 
(citing 16 U.S.C. 824a-3(m)(3)).
---------------------------------------------------------------------------

    365. In undertaking this rulemaking, the Commission stated its 
intent to modify PURPA in light of changed circumstances since it first 
implemented PURPA section 210(m).\665\ During the rulemaking process, 
the Commission appropriately reviewed the MW level at which to set a 
presumption of nondiscriminatory market access for small power 
production qualifying facilities. As discussed above, a variety of 
factors have led to the increased ability to access wholesale markets 
by small power production qualifying facilities, and in supporting this 
trend of an increased ability to access the energy market, the 
Commission has established policies and procedures such as the fast-
track interconnection process, among others, to accommodate and 
encourage smaller energy resources' participation in organized 
electricity markets.\666\ Thus, as the Commission stated in the final 
rule, 20 MW is no longer the appropriate threshold to presume 
nondiscriminatory access to markets for small power production QFs 
under PURPA section 210(m).\667\
---------------------------------------------------------------------------

    \665\ See NOPR, 168 FERC ] 61,184 at P 127.
    \666\ See Order No. 872, 172 FERC ] 61,041 at PP 628-33.
    \667\ See id. P 627.
---------------------------------------------------------------------------

    366. In the final rule, as noted above, the Commission addressed 
commenters' concerns by establishing a list of established specific 
factors that QFs between 5 and 20 MW can utilize, among others, to 
rebut nondiscriminatory access.\668\ Commenters stated that small power 
production QFs 20 MW and less are often located on local distribution 
systems and have additional hurdles to gain transmission access to 
energy markets. To address this concern, the Commission established the 
first factor: Specific barriers to connecting to the interstate 
transmission grid, such as excessively high costs and pancaked delivery 
rates.\669\
---------------------------------------------------------------------------

    \668\ Id. PP 641-42.
    \669\ Id.
---------------------------------------------------------------------------

    367. In response to commenters' concerns over the potential 
disproportionate high costs and delays a small power production QF 
between 5 and 20 MW could face, the Commission added the second factor: 
The unique circumstances impacting the time or length of 
interconnection studies or queue to process small power producer QF 
interconnection requests.\670\
---------------------------------------------------------------------------

    \670\ Id. PP 641, 643.
---------------------------------------------------------------------------

    368. Commenters asserted that those QFs between 5 and 20 MW that 
have larger energy affiliates could access the knowledge and expertise 
needed to participate in such markets, whereas other QFs could not, 
which led the Commission to adopt the third factor: A lack of 
affiliation with entities that participate in RTO/ISO markets.\671\
---------------------------------------------------------------------------

    \671\ Id.
---------------------------------------------------------------------------

    369. Commenters representing solid waste, biogas, and hydro 
facilities claimed that some small power production QFs between 5 and 
20 MW were more similar to cogeneration QFs than small power production 
QFs in that their primary purpose was not the sale of electricity. In 
response, the Commission included the fourth factor: A predominant 
purpose other than selling electricity, which would warrant the small 
power QF being treated similarly to cogenerators (e.g., municipal solid 
waste facilities, biogas facilities, run-of-river hydro facilities, and 
non-powered dams).\672\
---------------------------------------------------------------------------

    \672\ Id. PP 641, 644.
---------------------------------------------------------------------------

    370. As the Commission explained in the final rule (and reiterated 
above), this is not intended to be an exhaustive list but is intended 
to provide a framework for the Commission to evaluate small power 
producer QFs between 5 and 20 MW who wish to rebut the presumption of 
nondiscriminatory access.\673\ Any small power producer QF may use 
these factors (or other evidence) to rebut the presumption that a 
specific QF between 5 MW and 20 MW has non-discriminatory access to 
markets, and the Commission will review each request on a case-by-case 
basis.
---------------------------------------------------------------------------

    \673\ Id. P 641.
---------------------------------------------------------------------------

    371. One Energy argues that a behind-the-meter DER's primary 
purpose is to generate electricity for its host and any potential sale 
is secondary like cogeneration facilities. While not ruling on the 
validity of this argument with respect to any behind-the-meter DER, we 
clarify that small power production QFs that are behind-the-meter DERs 
are permitted to argue that the fourth factor which states ``a 
predominant purpose other than selling electricity which would warrant 
the small power QF being treated similarly to cogenerators (e.g., 
municipal solid waste facilities, biogas facilities, run-of-river hydro 
facilities, and non-power dams)'' supports their argument that they 
lack

[[Page 86709]]

nondiscriminatory access to markets.\674\ We will rule on any such 
arguments on a case-by-case basis taking into account the specific 
facts of the DER making the argument.
---------------------------------------------------------------------------

    \674\ Id.
---------------------------------------------------------------------------

    372. We grant Public Interest Organizations request for 
clarification that the list of factors in section 18 CFR 292.309(c) 
that small power production facilities between 5 MW and 20 MW can point 
to in seeking to rebut the presumption that they have nondiscriminatory 
access was not--but should be--added to 18 CFR 292.309(e) that applies 
to QFs in ISO-NE, MISO, NYISO, and PJM, and also to 18 CFR 292.309(f) 
that applies to QFs in ERCOT. In order to avoid confusion, we hereby 
incorporate the factors listed in 18 CFR 292.309(c) into both (e) and 
(f).
    373. In response to One Energy's request for clarification as to 
how the new same site determination rules will affect the PURPA section 
210(m) presumption, in determining whether a QF is eligible for the 
rebuttable presumption that a qualifying small power production 
facility with a capacity at or below 5 MW does not have 
nondiscriminatory access to the market, the Commission will look 
primarily at the net certified capacity of each QF. We note that the 
regulations state that, for the purposes of implementing the rebuttable 
presumption of nondiscriminatory access, the Commission will not be 
bound by the standards (i.e., the new ten-mile rule) of section 
292.204(a)(2). The Commission will review, on a case-by-case basis, any 
question that involves applying both 18 CFR 292.309 and 292.204 to the 
same entity. We further note that, while we will look primarily at the 
net certified capacity of each QF, we may consider, inter alia, the new 
``ten-mile rule.''

G. Legally Enforceable Obligation

    374. In the final rule, the Commission adopted the NOPR proposal to 
require QFs to demonstrate that a proposed project is commercially 
viable and that the QF has a financial commitment to construct the 
proposed project, pursuant to objective, reasonable, state-determined 
criteria in order to be eligible for a LEO.\675\ The Commission 
affirmed that the states have flexibility in determining what 
constitutes an acceptable showing of commercial viability and financial 
commitment, albeit subject to the criteria being objective and 
reasonable. The Commission found that requiring a showing of commercial 
viability and financial commitment, based on objective and reasonable 
criteria, would ensure that no electric utility obligation is triggered 
for those QF projects that are not sufficiently advanced in their 
development and, therefore, for which it would be unreasonable for a 
utility to include in its resource planning. At the same time, the 
Commission found, the criteria also ensure that the purchasing utility 
does not unilaterally and unreasonably decide when its obligation 
arises. The Commission believed that this struck the right balance for 
QF developers and purchasing utilities and should encourage development 
of QFs.\676\
---------------------------------------------------------------------------

    \675\ Id. P 684.
    \676\ Id.
---------------------------------------------------------------------------

    375. The Commission explained that examples of factors a state 
could reasonably require are that a QF demonstrate that it is in the 
process of at least some of the following prerequisites: (1) Taking 
meaningful steps to obtain site control adequate to commence 
construction of the project at the proposed location and (2) filing an 
interconnection application with the appropriate entity. The Commission 
found that the state could also require that the QF show that it has 
submitted all applications, including filing fees, to obtain all 
necessary local permitting and zoning approvals. The Commission also 
clarified that it is appropriate for states to require a QF to 
demonstrate that it is in the process of obtaining site control or has 
applied for all local permitting and zoning approvals, rather than 
requiring a QF to show that it has obtained site control or secured 
local permitting and zoning. Moreover, the Commission noted that the 
factors that the state requires must be factors that are within the 
control of the QF.\677\
---------------------------------------------------------------------------

    \677\ Id. P 685.
---------------------------------------------------------------------------

    376. The Commission clarified that demonstrating the required 
financial commitment does not require a demonstration of having 
obtained financing. The Commission explained that requiring QFs to, for 
example, apply for all relevant permits, take meaningful steps to seek 
site control, or meet other objective and reasonable milestones in the 
QF's development can sufficiently demonstrate QF developers' financial 
commitment to the QFs' development and allows utilities to reasonably 
rely on the LEO in planning for system resource adequacy.\678\
---------------------------------------------------------------------------

    \678\ Id. P 687.
---------------------------------------------------------------------------

    377. The Commission explained that the intent of these factors is 
to provide a reasonable balance between providing QFs with objective 
and transparent milestones up front that are needed to obtain a LEO, 
allowing states the flexibility to establish factors that address the 
individual circumstances of each state, and increasing utilities' 
ability to accurately plan their systems.\679\ The Commission further 
explained that establishing objective and reasonable factors is 
intended to limit the number of unviable QFs obtaining LEOs and 
unnecessarily burdening utilities that currently have to plan for QFs 
that obtain a LEO very early in the process but ultimately are never 
developed.\680\ The Commission explained that, in adopting this 
provision, the Commission was raising the bar to prevent speculative 
QFs from obtaining LEOs, with an associated burden on purchasing 
utilities, but was not establishing a barrier for financially committed 
developers seeking to develop commercially viable QFs.
---------------------------------------------------------------------------

    \679\ Id. P 688.
    \680\ Id.
---------------------------------------------------------------------------

    378. The Commission disagreed that establishing reasonable, 
transparent factors is an onerous barrier or will cause a substantial 
reduction in QFs. The Commission found that the objective and 
reasonable criteria it had established would protect QFs against 
onerous requirements for LEOs that hinder financing, such as a 
requirement for a utility's execution of an interconnection agreement 
\681\ or power purchase agreement,\682\ requiring that QFs file a 
formal complaint with the state commission,\683\ limiting LEOs to only 
those QFs capable of supplying firm power,\684\ or requiring the QF to 
be able to deliver power in 90 days.\685\ The Commission found that, by 
making clear that such conditions are not permitted, and by instead 
providing objective criteria to clarify when a LEO commences, the LEO 
provisions it adopted would encourage the development of QFs.
---------------------------------------------------------------------------

    \681\ Id. P 689 (citing FLS, 157 FERC ] 61,211 at P 26 (stating 
that requiring signed interconnection agreement as prerequisite to 
LEO is inconsistent with PURPA Regulations)).
    \682\ Id. (citing Murphy Flat Power, LLC, 141 FERC ] 61,145, at 
P 24 (2012) (finding that requiring a signed and executed contract 
with an electric utility as a prerequisite to a LEO is inconsistent 
with PURPA Regulations)).
    \683\ Id. (citing Grouse Creek Wind Park, LLC, 142 FERC ] 
61,187, at P 40 (2013)).
    \684\ Id. (citing Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d at 
400).
    \685\ Id. (citing Power Resource Group, Inc. v. Public Utility 
Comm'n of Texas, 422 F.3d 231 (5th Cir. 2005)).
---------------------------------------------------------------------------

    379. The Commission, however, declined to establish specific 
factors for the states to adopt, to establish a baseline for eligible 
factors, or to otherwise limit states' flexibility. The Commission 
found that states are in the best position to determine, in the first 
instance, what specific factors would

[[Page 86710]]

best suit the specific circumstances of each state so long as they are 
objective and reasonable and provided the suggested prerequisites above 
as examples of objective and reasonable factors.\686\
---------------------------------------------------------------------------

    \686\ Id. P 690.
---------------------------------------------------------------------------

    380. The Commission explained that the concept of a LEO was 
specifically adopted to prevent utilities from circumventing the 
mandatory purchase requirement under PURPA by refusing to enter into 
contracts.\687\ The Commission stated that it had found that requiring 
a QF to have a utility-executed contract or interconnection agreement 
or requiring the completion of a utility-controlled study places too 
much control over the LEO in the hands of the utility and defeats the 
purpose of a LEO and is inconsistent with PURPA.\688\ The Commission 
stated that, when reviewing factors to demonstrate commercial viability 
and financial commitment, states thus should place emphasis on those 
factors that show that the QF has taken meaningful steps to develop the 
QF that are within the QF's control to complete, and not on those 
factors that a utility controls. The Commission explained, for example, 
that requiring a QF to make a deposit or whether the QF has applied for 
system impact, interconnection or other needed studies are the types of 
factors that may show that the QF has taken meaningful steps to develop 
the QF that are within the QF's control and the type of objective and 
reasonable standards that states can consider in their 
implementation.\689\
---------------------------------------------------------------------------

    \687\ Id. P 695 (citing JD Wind 1, LLC, 129 FERC ] 61,148 at P 
25, reh'g denied, 130 FERC ] 61,127 (citing Order No. 69, FERC 
Stats. & Regs. ] 30,128 at 30,880); see also Midwest Renewable 
Energy Projects, LLC, 116 FERC ] 61,017 (2006)).
    \688\ Id. (citing FLS, 157 FERC ] 61,211 at P 23 (finding such 
requirements ``allows a utility to control whether and when a 
legally enforceable obligation exists--e.g., by delaying the 
facilities study'')).
    \689\ Id.
---------------------------------------------------------------------------

1. Requests for Rehearing
    381. Public Interest Organizations argue that the final rule's 
provision allowing states to require a showing of commercial viability 
and financially commitment results in additional barriers to QFs 
without sufficient safeguards to protect QFs from states' abuses. 
Public Interest Organizations contend that the Commission erred in 
failing to justify how these factors are consistent with PURPA's 
purpose of encouraging QFs. Public Interest Organizations assert that 
the Commission ignored the evidence that utilities adopt requirements 
to avoid their mandatory purchase obligation and states often 
acquiesce. Public Interest Organizations contend that the requirement 
that the factors be reasonable and objective are insufficient to 
protect QFs in seeking to establish a LEO and reiterate their request 
that the Commission establish specific limits on the kind of showing 
that is required before a LEO is established.\690\
---------------------------------------------------------------------------

    \690\ Public Interest Organizations Request for Rehearing at 
145.
---------------------------------------------------------------------------

    382. Public Interest Organizations argue that the Commission has 
repeatedly issued declaratory orders showing the unlawfulness of 
several LEO restrictions adopted by states but has repeatedly declined 
to initiate enforcement actions. They add that state regulators and 
courts have dismissed the Commission's declaratory orders as advisory 
and states have supported utilities' efforts to restrict LEOs. Public 
Interest Organizations assert that the Commission erred in considering 
the potential benefits to the utility's planning process of imposing 
new burdens on QFs. Instead, they contend that Congress directed the 
Commission to develop rules that would encourage QFs, not impose new 
burdens on QFs to benefit a utility's planning process.\691\
---------------------------------------------------------------------------

    \691\ Id. at 147-49.
---------------------------------------------------------------------------

    383. Mr. Mattson argues that requiring financing as a factor to 
obtain a LEO is problematic because a LEO is needed to obtain 
financing.\692\
---------------------------------------------------------------------------

    \692\ Mr. Mattson Motion for Time, Reconsideration, and Request 
Answers at 2.
---------------------------------------------------------------------------

2. Commission Determination
    384. We disagree with the arguments raised on rehearing. The 
Commission created the LEO concept in Order No. 69 and has the 
authority to refine its contours in a way that continues to encourage 
QF development. The final rule achieves that result. Therefore, we 
reaffirm the Commission's finding in the final rule that requiring a 
showing of commercial viability and financial commitment based on 
objective and reasonable criteria encourages the development of 
QFs.\693\ It also strikes an appropriate balance between the needs of 
the QFs and the needs of the purchasing utilities.
---------------------------------------------------------------------------

    \693\ Order No. 872, 172 FERC ] 61,041 at P 684.
---------------------------------------------------------------------------

    385. That the revisions to the LEO eligibility requirements 
encourage the development of QFs is clear. In the past, purchasing 
utilities impeded the development of QFs by unilaterally erecting 
barriers to QFs establishing an obligation, such as by requiring a QF 
to have entered into an interconnection agreement or a power purchase 
agreement with the purchasing utility. It would then be up to the 
purchasing utility to decide whether and when to enter into such an 
agreement. The Commission changed that dynamic in the final rule by 
adopting regulations formalizing Commission precedent that takes away 
from the purchasing utility the unilateral ability to determine when 
the purchasing utility's obligation arises. Under the final rule, 
state-established objective and reasonable criteria would clarify when 
an obligation arises, rather than leave it to the purchasing 
utility.\694\ What is more, the criteria should be such that the 
ability to meet the criteria is in the hands of the QF and not in the 
hands of the purchasing utility. For example, it is the QF, and not the 
purchasing utility, that decides when it will apply for necessary 
permits or when it will apply for an interconnection agreement.\695\ 
Therefore, providing guidelines for establishing reasonable and 
objective criteria will prevent purchasing utilities from unilaterally 
and unreasonably deciding when its obligation to purchase arises and 
provides guidance to QFs seeking to establish a LEO. Moreover, to meet 
the needs of the purchasing utility, requiring a showing of commercial 
viability and financial commitment will ensure that no electric utility 
obligation is triggered for those QF projects that are not sufficiently 
advanced in their development and, therefore, for which it would be 
unreasonable for a utility to include in its resource planning.
---------------------------------------------------------------------------

    \694\ Id. P 690.
    \695\ Id. P 694.

---------------------------------------------------------------------------

[[Page 86711]]

    386. The criteria the Commission provided under the final rule are 
different from the prerequisites that the Commission in the past has 
found inconsistent with PURPA or that courts have permitted despite 
such Commission precedent.\696\ Objective and reasonable criteria for 
demonstrating commercial viability and financial commitment to proceed 
give a better sense to a state and a purchasing utility that a QF is 
more likely to be built. In comparison, requiring that a utility 
execute an interconnection agreement \697\ or power purchase 
agreement,\698\ a QF file a formal complaint with the state 
commission,\699\ a QF be capable of supplying firm power,\700\ or a QF 
be able to deliver power in 90 days \701\ are likely beyond the control 
of a QF or procedural requirements that do not reveal the likelihood 
that a QF will be developed and are therefore inappropriate obstacles 
to QF development.
---------------------------------------------------------------------------

    \696\ See id. P 34 (citing examples of state-established 
prerequisites to obtaining LEOs that are inconsistent with PURPA 
Regulations because they hinder QF financing).
    \697\ Id. P 689 (citing FLS, 157 FERC ] 61,211 at P 26 (stating 
that requiring signed interconnection agreement as prerequisite to 
LEO is inconsistent with PURPA Regulations)).
    \698\ Id. (citing Murphy Flat Power, LLC, 141 FERC ] 61,145 at P 
24 (finding that requiring a signed and executed contract with an 
electric utility as a prerequisite to a LEO is inconsistent with 
PURPA Regulations)).
    \699\ Id. (citing Grouse Creek Wind Park, LLC, 142 FERC ] 61,187 
at P 40).
    \700\ Id. (citing Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d at 
400 (requiring that only QFs capable of providing firm power are 
entitled to an LEO)).
    \701\ Id. (citing Power Resource Group, Inc. v. Pub. Util. 
Comm'n of Texas, 422 F.3d 231, 237-39 (5th Cir. 2005) (requiring 
that only QFs capable of delivering power within 90 days are 
entitled to an LEO)).
---------------------------------------------------------------------------

    387. Allowing states to require a showing of commercial viability 
and financial commitment from QFs will enable utilities and states to 
know which QFs are more likely to be built, thus enabling them to 
better plan their systems and accommodate all sources of QF power, and 
are just and reasonable to the consumers of the electric utility. 
States are not required to adopt specific criteria, but, as with other 
PURPA Regulations, the Commission has established the boundaries within 
which each state can adopt appropriate criteria that address each 
states' unique characteristics. As explained in the final rule, 
providing guidance as to how QFs can establish commercial viability and 
a financial commitment will provide certainty that QF developers can 
rely upon, thereby encouraging QF development.\702\ We believe that 
providing clear, objective, and reasonable guidelines for establishing 
a LEO will also reduce disputes between state commissions, utilities, 
and QF developers.
---------------------------------------------------------------------------

    \702\ Id. P 684.
---------------------------------------------------------------------------

    388. Finally, the final rule explicitly provided that ``obtaining a 
PPA or financing cannot be required to show proof of financial 
commitment.'' \703\
---------------------------------------------------------------------------

    \703\ Id. P 687 (emphasis added).
---------------------------------------------------------------------------

III. Information Collection Statement

    389. The Paperwork Reduction Act \704\ requires each federal agency 
to seek and obtain the Office of Management and Budget's (OMB) approval 
before undertaking a collection of information (including reporting, 
record keeping, and public disclosure requirements) directed to 10 or 
more persons or contained in a rule of general applicability. OMB 
regulations require approval of certain information collection 
requirements contained in rulemakings (including deletion, revision, or 
implementation of new requirements).\705\ Upon approval of a collection 
of information, OMB will assign an OMB control number and an expiration 
date. Respondents subject to the information collection of a rule will 
not be penalized for failing to respond to the collection of 
information unless the collection of information displays a valid OMB 
control number.
---------------------------------------------------------------------------

    \704\ 44 U.S.C. 3501-21.
    \705\ See 5 CFR 1320.11.
---------------------------------------------------------------------------

    390. With respect to the Form No. 556 information collection 
(Certification of Qualifying Facility (QF) Status for a Small Power 
Production or Cogeneration Facility, OMB Control No. 1902-0075), in the 
final rule, the Commission affirmed that the relevant burdens derive 
from the change from the Commission's current ``one-mile rule'' for 
determining whether generation facilities should be considered to be at 
the same site for purposes of determining qualification as a qualifying 
small power production facility, to allowing an interested person or 
other entity challenging a QF certification the opportunity to file a 
protest, without a fee, to rebut the presumption that affiliated small 
power production QFs using the same energy resource and located more 
than one mile and less than 10 miles from the applicant facility are 
considered to be at separate sites. The Commission stated that it was 
making the following changes to the Form No. 556 which affect the 
burden of the information collection:
     Allow an interested person or other entity challenging a 
QF certification the opportunity to file a protest, without a fee, to 
an initial certification (both self-certification and application for 
Commission certification) filed on or after the effective date of the 
final rule, or to a recertification (self-recertification or 
application for Commission recertification) that makes substantive 
changes to the existing certification that is filed on or after the 
effective date of the final rule.
     Require all applicants to report the applicant facility's 
geographic coordinates, rather than only for applications where there 
is no street address.
     Change the current requirement to identify any affiliated 
facilities with electrical generating equipment within one mile of the 
applicant facility's electrical generating equipment to instead require 
applicants to list only affiliated small power production QFs using the 
same energy resource one mile or less from the applicant facility.
     Additionally require applicants to list affiliated small 
power production QFs using the same energy resource whose nearest 
electrical generating equipment is greater than one mile and less than 
10 miles from the electrical generating equipment of the applicant 
facility.
     Require the applicant to list the geographic coordinates 
of the nearest ``electrical generating equipment'' of both its own 
facility and the affiliated small power production QF in question based 
on the definitions adopted in the final rule.
     Provide space for the applicant to explain, if it chooses 
to do so, why the affiliated small power production QFs using the same 
energy resource, that are more than one mile and less than 10 miles 
from the electrical generating equipment of the applicant facility, 
should be considered to be at separate sites from the applicant's 
facility, considering the relevant physical and ownership factors 
identified in the final rule.
    The Commission stated that these changes in burden are appropriate 
because they are necessary to meet the statutory requirements contained 
in PURPA.

[[Page 86712]]

    391. The Commission included the following table (shown below) 
which provided estimated changes to the burden and cost of the Form No. 
556 due to the final rule.\706\ (The estimates have not changed from 
the final rule.)
---------------------------------------------------------------------------

    \706\ There were no rehearing requests related to the estimated 
burden changes for the FERC-912 (PURPA Section 210(m) Notification 
Requirements Applicable to Cogeneration and Small Power Production 
Facilities; OMB Control No. 1902-0237), so it is not addressed 
further.

                                   FERC-556, Changes Due to Final Rule in Docket Nos. RM19-15-000 and AD16-16-000 \707\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Increased total
                                                                    Annual  number                         Increased      annual burden      Increased
        Facility type             Filing type        Number of       of  responses    Total number of   average  burden   hours & total    annual  cost
                                                    respondents     per  respondent      responses     hours & cost per    annual cost          per
                                                                                                         response  ($)         ($)        respondent ($)
                                                 (1).............  (2).............  (1) * (2) = (3).  (4).............  (3) * (4) = (5)     (5) / (1) =
                                                                                                                                                     (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cogeneration and Small Power   Self-             no change (692).  no change (1.25)  no change (865).  no change (1.5    no change                    $0
 Production Facility <=1 MW     certification.                                                          hrs.); $0.        (1,297.5
 \708\.                                                                                                                   hrs.); $0.
Cogeneration Facility >1 MW..  Self-             no change (63)..  no change (1.25)  no change         no change (1.5    no change                     0
                                certification.                                        (78.75).          hrs.); $0.        (118.125
                                                                                                                          hrs.); $0.
Cogeneration Facility >1 MW..  Application for   no change (1)...  no change (1.25)  no change (1.25)  no change (50     no change (62.5               0
                                FERC                                                                    hrs.); $0.        hrs.); $0.
                                certification.
Small Power Production         Self-             no change (899)   no change (1.25)  no change         2 hrs.; $166....  2,247.5 hrs.;             207.5
 Facility >1 MW, <=1 Mile       certification.    \709\.                              (1,123.75).                         $186,542.5.
 from Affiliated Small Power
 Production QF.
Small Power Production         Application for   no change (0)...  no change (1.25)  no change (0)...  6 hrs.; $498....  no change (0                  0
 Facility >1 MW, <=1 Mile       FERC                                                                                      hrs.); $0.
 from Affiliated Small Power    certification.
 Production QF.
Small Power Production         Self-             no change (900).  no change (1.25)  no change         8 hrs.; $664....  9,000 hrs.;                 830
 Facility >1 MW, >1 Mile, <10   certification.                                        (1,125).                            $747,000.
 Miles from Affiliated Small
 Power Production QF.
Small Power Production         Application for   no change (0)...  no change (1.25)  no change (0)...  12 hrs.; $996...  no change (0                  0
 Facility >1 MW, >1 Mile, <10   FERC                                                                                      hrs.); $0.
 Miles from Affiliated Small    certification.
 Power Production QF.
Small Power Production         Self-             no change (899).  no change (1.25)  no change         2 hrs.; $166....  2,247.5 hrs.;             207.5
 Facility >1 MW, >=10 Miles     certification.                                        (1,123.75).                         $186,542.5.
 from Affiliated Small Power
 Production QF.
Small Power Production         Application for   no change (0)...  no change (1.25)  no change (0)...  6 hrs.; $498....  no change (0                  0
 Facility >1 MW, >=10 Miles     FERC                                                                                      hrs.); $0.
 from Affiliated Small Power    certification.
 Production QF.
                                                --------------------------------------------------------------------------------------------------------
    FERC-556, Total            ................  no change         ................  no change         ................  13,495 hrs.;     ..............
     Additional Burden and                        (3,454).                            (4,317.5).                          $1,120,085.
     Cost Due to Final Rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------

A. Request for Rehearing
---------------------------------------------------------------------------

    \707\ The figures in this table reflect estimated changes to the 
current OMB-approved inventory for the Form No. 556 (approved by the 
Office of Management and Budget (OMB) on November 18, 2019). As of 
October 21, 2020, the Paperwork Reduction Act (PRA) packages for the 
reporting requirements in the final rule in Docket Nos. RM19-15 and 
AD16-16 are still pending review at OMB.
    Where ``no change'' is indicated, the current figure is included 
parenthetically for information only. Those parenthetical figures 
are not included in the final total for column 5.
    Commission staff believes that the industry is similarly 
situated in terms of wages and benefits. Therefore, cost estimates 
are based on FERC's 2020 average hourly wage (and benefits) of 
$83.00/hour. (The submittal to and approval of OMB in 2019 for Form 
No. 556 was based on FERC's 2018 average annual wage hourly rate of 
$79.00/hour. Because the change from the $79.00 hourly rate to the 
current $83.00 hourly rate was not due to the final rule, this chart 
does not depict this increase.)
    \708\ Not required to file.
    \709\ In the Form No. 556 approved by OMB in 2019, for the 
category ``Small Power Production Facility > 1 MW, Self-
certification,'' we estimated the number of respondents at 2,698. We 
have now divided that category into three categories: ``Small Power 
Production Facility >1 MW, <=1 Mile from Affiliated Small Power 
Production QF,'' ``Small Power Production Facility >1 MW, >1 Mile, 
<10 Miles from Affiliated Small Power Production QF,'' ``Small Power 
Production Facility >1 MW, >=10 Miles from Affiliated Small Power 
Production QF.'' In this column, the numbers 899, 900, and 899 are a 
distribution of those same estimated 2,698 respondents across the 
three categories.
---------------------------------------------------------------------------

    392. Public Interest Organizations state that Solar Energy 
Industries questioned the Commission's burden estimate in the NOPR, 
anticipating that the actual burden will be far higher.\710\ Public 
Interest Organizations assert that the Commission dismissed Solar 
Energy Industries' estimates that the new rule would require an 
additional 90 to 120 hours per year to comply \711\ without providing 
additional justification or explanation for the Commission's time and 
expense estimates, which is arbitrary and capricious.\712\
---------------------------------------------------------------------------

    \710\ Public Interest Organizations Request for Rehearing at 
129.
    \711\ Id. (citing Solar Energy Industries Comments, Docket No. 
RM19-15-000, at 52 (Dec. 3, 2019)).
    \712\ Id. at 129-30.
---------------------------------------------------------------------------

B. Commission Determination

    393. The Commission in the final rule directly addressed Solar 
Energy Industries comments and explained why it did not agree with 
Solar Energy Industries' estimates.\713\ Additionally, we note that 
while other commenters agreed that the NOPR's proposals would result in 
increased administrative

[[Page 86713]]

burden and expense,\714\ Solar Energy Industries was the only commenter 
to provide a numerical estimate to challenge the Commission's proposed 
estimates. The Commission nevertheless increased its burden estimates 
in the final rule in response to the comments received.\715\ We also 
note that Solar Energy Industries did not independently support its 
estimate of increased burden of 90 to 120 hours. Rather, Solar Energy 
Industries relied on a separate rulemaking proceeding for a different 
regulatory program administered by the Commission,\716\ and stated, 
without justification, that it believed the estimates for an ultimately 
withdrawn portion of that rulemaking (the proposed Connected Entity 
Information requirement) are a reasonable approximation of the burden 
that QFs would face in complying with the new requirements in the final 
rule.\717\ While both rulemakings require the disclosure of affiliate 
information, the withdrawn Connected Entity Information proposal would 
have also required reporting of certain employee information.\718\ 
Furthermore, the final rule limits the information geographically to 
require the listing of only those affiliated entities that are less 
than 10 miles away, whereas the withdrawn Connected Entity Information 
requirement from the other proceeding would not have limited its 
information collection geographically.
---------------------------------------------------------------------------

    \713\ Order No. 872, 172 FERC ] 61,041 at PP 552-56.
    \714\ Ares EIF Management, LLC Comments, Docket No. RM19-15-000, 
at 6 (Dec. 2, 2019); Borrego Solar Systems, Inc. Comments, Docket 
No. RM19-15-000, at 4 (Dec. 3, 2019); Consolidated Edison 
Development, Inc. Comments, Docket No. RM19-15-000, at 5 (Nov. 15, 
2019); Public Interest Organizations Comments, Docket No. RM19-15-
000, at 97-98 (Dec. 3, 2019); Solar Energy Industries Comments, 
Docket No. RM19-15-000, at 51-52, 54, 57-58 (Dec. 3, 2019); South 
Carolina Solar Business Alliance Comments, Docket No. RM19-15-000, 
at 15-18 (Dec. 3, 2019); Southern Environmental Law Center, et al. 
Comments, Docket No. RM19-15-000, at 29, 35 (Dec. 3, 2019); sPower 
Development Company, LLC Comments, Docket No. RM19-15-000, at 14 
(Dec. 3, 2019).
    \715\ For example, in the NOPR, the Commission estimated that a 
small power production facility greater than 1 MW, but less than one 
mile from an affiliated facility, that submits a self-certification 
would not change the annual burden or cost. However, the Commission 
in the final rule estimated that such a small power production 
facility would need two additional hours to complete the Form No. 
556; thus, the total annual burden hours and cost per response for 
this category would increase by two hours and by $166. Moreover, in 
the NOPR, the Commission estimated that a small power production 
facility greater than 1 MW, and greater than 10 miles from an 
affiliated facility, that submits an application for Commission 
certification would not change the annual burden or cost. However, 
Commission in the final rule estimated that such a small power 
production facility would need six additional hours to complete the 
Form No. 556; thus, the total annual burden hours and cost per 
response for this category would increase by six hours and by $498.
    \716\ See Data Collection for Analytics and Surveillance and 
Market-Based Rate Purposes, Order No. 860, 168 FERC ] 61,039 (2019) 
(adopting rules concerning data collection for public utilities with 
market-based rates).
    \717\ Solar Energy Industries Comments, Docket No. RM19-15-000, 
at 57-58 (Dec. 3, 2019).
    \718\ See Data Collection for Analytics and Surveillance and 
Market-Based Rate Purposes, Notice of Proposed Rulemaking, 156 FERC 
] 61,045, at P 52 (2016).
---------------------------------------------------------------------------

    394. Moreover, we believe that Solar Energy Industries' estimate 
vastly overstates the regulatory burden. First, the Commission 
explained in the final rule that 18 CFR 292.207(d) (which the 
Commission did not alter in the final rule except to renumber as 18 CFR 
292.207(f)) already states that if a QF fails to conform with any 
material facts or representations presented in the certification, the 
QF status of the facility may no longer be relied upon,\719\ and hence 
it is long-standing practice that a QF must recertify when material 
facts or representations in the Form No. 556 change.
---------------------------------------------------------------------------

    \719\ 18 CFR 292.207(d), which the final rule renumbered to 18 
CFR 292.207(f).
---------------------------------------------------------------------------

    395. Second, with regard to the new Form No. 556 requirement to 
identify all affiliated small power production QFs using the same 
energy resource that are less than 10 miles from the electrical 
generating equipment of the certifying facility, we note that the final 
rule expanded the requirement to identify such facilities to less than 
10 miles away, but the requirement to identify such facilities less 
than one mile already existed.
    396. Third, we note that not all QFs will be affected by this 
expanded requirement. Only small power production QFs that have an 
affiliated small power production QF more than one but less than 10 
miles away that uses the same energy resource will be subject to the 
new requirement to list the affiliated small power production QF. QFs 
that have no affiliated small power production QFs will not be 
affected, nor will those whose only affiliates are more than 10 miles 
away. Moreover, those QFs that have only a few affiliated small power 
production QFs more than one but less than 10 miles away will only 
suffer a small increase in burden to list these affiliated facilities. 
The only facilities that may suffer a more significant burden--from the 
new requirement to identify affiliated facilities that use the same 
energy resource more than one and less than 10 miles away--are 
facilities with multiple facilities close together, and it is precisely 
this group of facilities from whom the Commission needs this 
information, in order to determine whether those facilities should be 
considered to be at the same site.
    397. However, in light of Public Interest Organizations' and Solar 
Energy Industries' renewed assertion that the regulatory burden on QFs 
is substantial,\720\ we modify and clarify our requirements regarding 
the identification of affiliated small power production QFs, in order 
to further ensure that the regulatory burden on small power production 
facilities is within reasonable limits as described in section III.D. 
Specifically, as explained more fully in section III.D above, we modify 
the final rule to state that a small power production QF evaluating 
whether it needs to recertify does not need to recertify due to a 
change in the information it has previously reported regarding its 
affiliated small power production QFs that are more than one mile but 
less than 10 miles from its electrical generating equipment, including 
adding or removing an affiliated small power production QF more than 
one mile but less than 10 miles away, or if an affiliated small power 
production QF more than one mile but less than 10 miles away and 
previously reported in item 8a makes a modification, unless that change 
also impacts any other entries on the evaluating small power production 
QF's Form No. 556.
---------------------------------------------------------------------------

    \720\ Public Interest Organizations Request for Rehearing at 
127-29; see Solar Energy Industries Request for Rehearing and/or 
Clarification at 34.
---------------------------------------------------------------------------

    398. We will continue to require that a small power production QF, 
as it was prior to the final rule, recertify its Form No. 556 to update 
item 8a due to a change at any of its affiliated small power production 
facilities located one mile or less from of its electrical generating 
equipment.\721\ We will also still require that a small power 
production QF recertify due to a change in material fact or 
representation to its own facility.
---------------------------------------------------------------------------

    \721\ See supra note 583.
---------------------------------------------------------------------------

    399. At such time as the small power production QF makes a 
recertification due to a change in material fact or representation to 
its own facility or at any of its affiliated small power production 
facilities that use the same energy resource and are located one mile 
or less from its electrical generating equipment, we will require that 
the small power production QF update item 8a for all of its affiliated 
small power production QFs within 10 miles, including adding or 
deleting affiliated small power production QFs, and recording changes 
to previously listed small power production QFs, so that the

[[Page 86714]]

information in its Form No. 556 is complete, accurate, and up-to-
date.\722\
---------------------------------------------------------------------------

    \722\ If a small power production QF that was certified prior to 
the effective date of this final rule is required to recertify due 
to a material change to its own facility, then at that time it will 
be required to identify affiliates less than 10 miles from the 
applicant facility.
---------------------------------------------------------------------------

    400. We believe that this modification reduces the burden on small 
power production QFs because we will not require them to monitor 
continually their affiliated small power production QFs more than one 
mile but less than 10 miles away for changes nor will we require a 
small power production QF that is evaluating whether it must recertify 
its facility to recertify to update item 8a due to a change at its 
affiliated small power production facilities more than one mile but 
less than 10 miles from the evaluating facility's electrical generating 
equipment.\723\ However, the affiliated QF of that evaluating small 
power production QF will need to recertify if the affiliated QF makes a 
material change to its information in its Form No. 556. After reviewing 
the rehearing requests, and implementing the modification described 
above, we conclude that this requirement strikes an appropriate balance 
between the need to address improper circumvention and the need to 
avoid unduly burdening small power production QFs. With the 
modification described above, we find that our burden estimates, as 
reported in the final rule, continue to be reasonable, especially now 
that we have lessened the burden as compared to the final rule by 
making this change on rehearing. We do not believe that the change we 
have made today to the Form No. 556 to implement the above modification 
adds any additional burden to the information collection. We also note 
that, in retaining the pre-final rule requirement that a small power 
production recertify information on affiliate small power production 
facilities one mile or less away,\724\ we are not adding any additional 
burden.
---------------------------------------------------------------------------

    \723\ We note that we are maintaining the final rule's 
alternative option for rooftop solar PV developers to file their 
recertification applications. See Order No. 872, 172 FERC ] 61,041 
at P 560.
    \724\ See supra note 583.
---------------------------------------------------------------------------

    401. Though Public Interest Organizations and Solar Energy 
Industries questioned the Commission's estimates, the Commission 
provided ample justification for why the burden and cost estimates 
would increase as a result of the final rule. In the final rule, the 
Commission estimated that the annual burden hours and costs for the 
information collection for the Form No. 556 would increase as a result 
of the changes to the ``one-mile rule'' in the final rule.\725\ The 
Commission explained that it was implementing new requirements for 
applicants to report the QF's geographic coordinates, list affiliated 
small power production QFs using the same energy resource one mile or 
less from the applicant facility, list affiliated small power 
production QFs using the same energy resource whose nearest electrical 
generating equipment is greater than one mile and less than 10 miles 
from the electrical generating equipment of the applicant facility, and 
list the geographic coordinates of the nearest ``electrical generating 
equipment'' of both its own facility and the affiliated small power 
production QF in question.\726\ The Commission also suggested that if 
applicants anticipate a protest to their certifications, they could 
provide explanations as to why the affiliated small power production 
QFs using the same energy resource that are more than one mile and less 
than 10 miles from the electrical generating equipment of the applicant 
facility should be considered at separate sites from the applicant's 
facility.\727\
---------------------------------------------------------------------------

    \725\ Order No. 872, 172 FERC ] 61,041 at P 699.
    \726\ Id. P 698.
    \727\ Id.
---------------------------------------------------------------------------

    402. Additionally, the Commission noted that, as a result of the 
changes to the PURPA Regulations made in the final rule, small power 
production QFs will have to spend more time identifying any affiliated 
small power production QFs that are less than one mile, between one and 
10 miles, and more than 10 miles, apart. The Commission further 
expected that there will be an increase in the burden hours and cost 
due to the new ability of entities to protest without a fee, which will 
affect initial self-certifications, applications for Commission 
certification, or recertifications that make substantive changes to an 
existing certification after the effective date of the final rule.\728\
---------------------------------------------------------------------------

    \728\ Id. P 699.
---------------------------------------------------------------------------

1. QFs Submitting Self-Certifications
    403. Prior to the final rule, the estimated burden for a small 
power production facility greater than 1 MW filing a self-certification 
was 1.5 hours.\729\
---------------------------------------------------------------------------

    \729\ Commission Information Collection Activities (FERC-556); 
Comment Request; Extension, Docket No. IC19-16-000 (issued May 15, 
2019).
---------------------------------------------------------------------------

a. Small Power Production Facility Greater Than 1 MW, and Less Than One 
Mile From an Affiliated Small Power Production QF
    404. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW, and less than one mile from an 
affiliated facility, two hours in addition to the prior estimated 1.5 
hours to fill out the new version of the Form No. 556 for a self-
certification.\730\ In making this estimate of two additional hours, 
the Commission took into consideration that the applicant would now be 
required to additionally provide its geographic coordinates.\731\ While 
it would also be required to identify and provide the geographic 
coordinates for any small power production QFs located less than 10 
miles from the applicant facility, the current Form No. 556 already 
required identifying any facilities located within one mile of the 
applicant facility. The Commission reasoned that the applicant may need 
to take some additional time to ascertain that there were no additional 
facilities located more than one mile from the applicant facility. The 
Commission therefore reasoned that, for this category, it may take an 
applicant facility an additional two hours to complete the Form No. 
556.\732\
---------------------------------------------------------------------------

    \730\ Order No. 872, 172 FERC ] 61,041 at P 699.
    \731\ Id. P 698.
    \732\ Id. P 699.
---------------------------------------------------------------------------

b. Small Power Production Facility Greater Than 1 MW, and More Than One 
Mile but Less Than 10 Miles From an Affiliated Small Power Production 
QF
    405. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW, and more than one mile but less 
than 10 miles from an affiliated facility, eight hours in addition to 
the prior estimated 1.5 hours to fill out the new version of the Form 
No. 556 for a self-certification.\733\ In making this estimate of eight 
additional hours, the Commission took into consideration that the 
applicant would now be required to additionally provide its geographic 
coordinates and to identify and provide the geographic coordinates for 
any small power production QFs located less than 10 miles from the 
applicant facility. If the applicant chose, it could provide 
explanations as to why the affiliated small power production QFs using 
the same energy resource that are more than one mile and less than 10 
miles from the electrical generating equipment of the applicant 
facility should be considered to be at separate sites from the 
applicant's facility.\734\ The Commission

[[Page 86715]]

therefore reasoned that, for this category, it may take an applicant 
facility an additional eight hours to complete the Form No. 556.\735\
---------------------------------------------------------------------------

    \733\ Id.
    \734\ Id. P 698.
    \735\ Id. P 699.
---------------------------------------------------------------------------

c. Small Power Production Facility Greater Than 1 MW and 10 Miles or 
More From an Affiliated Small Power Production QF
    406. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW and 10 miles or more from an 
affiliated facility two hours in addition to the prior estimated 1.5 
hours to fill out the new version of the Form No. 556 for a self-
certification.\736\ In making this estimate of two additional hours, 
the Commission took into consideration that the applicant would now be 
required to additionally provide its geographic coordinates but would 
not be required to identify and provide the geographic coordinates for 
any small power production QFs located more than 10 miles from the 
applicant facility. The Commission reasoned that the applicant may need 
to take some additional time to ascertain that there were no additional 
facilities located less than 10 miles from the applicant facility. The 
Commission therefore reasoned that, for this category, it may take an 
applicant facility an additional two hours to complete the Form No. 
556.\737\
---------------------------------------------------------------------------

    \736\ Id.
    \737\ Id.
---------------------------------------------------------------------------

2. QFs Submitting Applications for Commission Certification
    407. Prior to the final rule, the estimated burden for a small 
power production facility greater than 1 MW filing an application for 
Commission certification was 50 hours.\738\
---------------------------------------------------------------------------

    \738\ Commission Information Collection Activities (FERC-556); 
Comment Request; Extension, Docket No. IC19-16-000 (issued May 15, 
2019).
---------------------------------------------------------------------------

a. Small Power Production Facility Greater Than 1 MW, and Less Than One 
Mile From an Affiliated Small Power Production QF
    408. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW, and less than one mile from an 
affiliated facility, six hours in addition to the prior estimated 50 
hours to fill out the new version of the Form No. 556 as part of an 
application for Commission certification.\739\ In making this estimate 
of six additional hours, the Commission took into consideration that 
the applicant would now be required to additionally provide its 
geographic coordinates. Also, while the applicant would also be 
required to identify and provide the geographic coordinates for any 
small power production QFs located less than 10 miles from the 
applicant facility, the current Form No. 556 already required 
identifying any facilities located within one mile of the applicant 
facility. The Commission reasoned that the applicant may need to take 
some additional time to ascertain that there were no additional 
facilities located more than one mile from the applicant facility. 
Unlike a self-certification, the application for Commission 
certification also requires the applicant to pay a filing fee, and 
applicants for a Commission certification generally provide more 
explanation and a narrative filing. The Commission therefore reasoned 
that, for this category, it may take an applicant facility an 
additional six hours to complete the Form No. 556.\740\
---------------------------------------------------------------------------

    \739\ Order No. 872, 172 FERC ] 61,041 at P 699.
    \740\ Id.
---------------------------------------------------------------------------

b. Small Power Production Facility Greater Than 1 MW, and More Than One 
Mile but Less Than 10 Miles From an Affiliated Small Power Production 
QF
    409. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW, and more than one mile but less 
than 10 miles from an affiliated facility, 12 hours in addition to the 
prior estimated 50 hours to fill out the new version of the Form No. 
556 for an application for Commission certification.\741\ In making 
this estimate of 12 additional hours, the Commission took into 
consideration that the applicant would now be required to additionally 
provide its geographic coordinates and to identify and provide the 
geographic coordinates for any small power production QFs located less 
than 10 miles from the applicant facility. If the applicant chose, it 
could also provide explanations as to why the affiliated small power 
production QFs using the same energy resource, that are more than one 
mile and less than 10 miles from the electrical generating equipment of 
the applicant facility, should be considered to be at separate sites 
from the applicant's facility.\742\ Unlike a self-certification, the 
application for Commission certification also requires the applicant to 
pay a filing fee, and applicants for a Commission certification 
generally provide more explanation and a narrative filing. Therefore, 
the Commission reasoned that, for this category, it may take an 
applicant facility an additional 12 hours to complete the Form No. 
556.\743\
---------------------------------------------------------------------------

    \741\ Id.
    \742\ Id. P 698.
    \743\ Id. P 699.
---------------------------------------------------------------------------

c. Small Power Production Facility Greater Than 1 MW and 10 Miles or 
More From an Affiliated Small Power Production QF
    410. In the final rule, given the implementation of the new 10-mile 
rule, the Commission estimated that it would take a small power 
production facility greater than 1 MW and 10 miles or more from an 
affiliated facility six hours in addition to the prior estimated 50 
hours to fill out the new version of the Form No. 556 for an 
application for Commission certification.\744\ In making this estimate 
of six additional hours, the Commission took into consideration that 
the applicant would now be required to additionally provide its 
geographic coordinates, but the applicant would not be required to 
identify and provide the geographic coordinates for any small power 
production QFs located more than 10 miles from the applicant facility. 
The Commission reasoned that the applicant may need to take some 
additional time to ascertain that there were no additional facilities 
located less than 10 miles from the applicant facility. Unlike a self-
certification, the application for Commission certification also 
requires the applicant to pay a filing fee, and applicants for a 
Commission certification generally provide more explanation and a 
narrative filing. The Commission reasoned that, for this category, it 
may take an applicant facility an additional six hours to complete the 
Form No. 556.\745\
---------------------------------------------------------------------------

    \744\ Id.
    \745\ Id.
---------------------------------------------------------------------------

3. Calculations for Additional Burden and Cost
    411. Lastly, the Commission explained that it believed that the 
industry is similarly situated in terms of wages and benefits. 
Therefore, estimates for the annual cost of additional burden are based 
on FERC's 2020 average hourly wage (and benefits) of $83.00 per 
hour.\746\ In order to determine the cost per response in the column 
titled ``Increased Average Burden Hours & Cost Per Response ($) (4),'' 
the Commission multiplied the number of additional burden hours by the 
average hourly wage of $83.00 per hour. For

[[Page 86716]]

example, for small power production facilities greater than 1 MW 
located less than one mile from affiliated small power production QFs, 
the Commission determined that the increased average burden hours as a 
result of the final rule was two hours. The two-hour increase in the 
average burden hours, multiplied by an average hourly wage of $83.00 
per hour, equals $166 cost per response.\747\ In order to determine the 
increased total annual burden hours and total annual cost in the column 
titled ``Increased Total Annual Burden Hours & Total Annual Cost ($) 
(3) * (4) = (5),'' the Commission multiplied the numbers in the column 
titled ``Total Number of Responses (1) * (2) = (3)'' by the numbers in 
the column titled ``Increased Average Burden Hours & Cost Per Response 
($) (4).'' For example, for small power production facilities greater 
than 1 MW located less than one mile from affiliated small power 
production QFs, the Commission multiplied the increased average burden 
hours of two hours by the total number of responses of 1,123.75 for 
increased total annual burden hours of 2,247.5 hours. The Commission 
then multiplied the increased cost per response of $166 by the total 
number of responses of 1,123.75 for an increased total annual cost of 
$186,542.50.\748\
---------------------------------------------------------------------------

    \746\ Id. P 699 n.1050.
    \747\ Id. P 699.
    \748\ Id.
---------------------------------------------------------------------------

IV. Environmental Analysis

A. No EIS or EA Is Required

    412. In the final rule, the Commission noted that NEPA requires 
federal agencies to prepare a detailed statement on the environmental 
impact for ``major Federal actions significantly affecting the quality 
of the human environment.'' \749\ The Council on Environmental 
Quality's (CEQ) regulations implementing NEPA provide that federal 
agencies can comply with NEPA by preparing: (a) An Environmental Impact 
Statement (EIS) for a proposed action significantly affecting the 
quality of the human environment; \750\ or (b) an Environmental 
Assessment (EA) to determine whether an EIS is required.\751\ The CEQ 
regulations also provide that agencies are not obligated to prepare 
either an EIS or an EA if they find that a categorical exclusion 
applies.\752\
---------------------------------------------------------------------------

    \749\ Id. P 710 (citing 42 U.S.C. 4332(C)); see also Regulations 
Implementing the National Environmental Policy Act, Order No. 486, 
FERC Stats. & Regs. ] 30,783 (1987) (cross-referenced at 41 FERC ] 
61,284)).
    \750\ 40 CFR 1502.4 (2019).
    \751\ 40 CFR 1508.9.
    \752\ 40 CFR 1508.4.
---------------------------------------------------------------------------

    413. The Commission found that no EA or EIS was required for the 
final rule because the rule does not involve a particular project that 
``define[s] fairly precisely the scope and limits of the proposed 
development'' and any potential environmental impacts from the final 
rule are not reasonably foreseeable.\753\ In response to comments on 
the NOPR that although an EA and later an EIS was prepared for the 1980 
initial rules implementing PURPA (Order No. 70), the Commission 
explained, based on a number of factual differences between the initial 
rules and the final rule, that a meaningful NEPA analysis could not be 
prepared for the final rule.\754\ The Commission also found that, as a 
separate and independent alternative ground, that a categorical 
exclusion applied to the final rule so that an EA or EIS need not be 
prepared.\755\
---------------------------------------------------------------------------

    \753\ Order No. 872, 172 FERC ] 61,041 at PP 710, 715.
    \754\ Id. PP 728-36.
    \755\ Id. P 720.
---------------------------------------------------------------------------

1. NEPA Analysis Is Not Required Where Environmental Impacts Are Not 
Reasonably Foreseeable
    414. The Commission explained that the final rule does not propose 
or authorize, much less define, the scope and limits of any potential 
energy infrastructure and, as a result, there is no way to determine 
whether issuance of the rule will significantly affect the quality of 
the human environment.\756\ The Commission also explained that, while 
courts have held that NEPA requires ``reasonable forecasting,'' ``NEPA 
does not require a `crystal ball' inquiry.'' \757\ The Commission added 
that an agency ``is not required to engage in speculative analysis'' or 
``to do the impractical, if not enough information is available to 
permit meaningful consideration'' \758\ or to ``foresee the 
unforeseeable.'' \759\ and ``[i]n determining what effects are 
`reasonably foreseeable,' an agency must engage in `reasonable 
forecasting and speculation,' . . . with reasonable being the operative 
word.'' \760\ The Commission explained that environmental impacts are 
not reasonably foreseeable if the impacts would result only through a 
lengthy causal chain of highly uncertain or unknowable events.\761\
---------------------------------------------------------------------------

    \756\ Id. P 711.
    \757\ Id. P 716 (citing Vt. Yankee Nuclear Power Corp. v. Nat. 
Res. Def. Council, Inc., 435 U.S. 519, 534 (1978)).
    \758\ Id. (citing N. Plains Res. Council v. Surface Transp. 
Board, 668 F.3d 1067, 1078-79 (9th Cir. 2011) (citation omitted)).
    \759\ Id. (citing Concerned About Trident v. Rumsfeld, 555 F.2d 
817, 830 (D.C. Cir. 1976) (citation omitted)).
    \760\ Id. (citing Sierra Club v. U.S. Dep't of Energy, 867 F.3d 
189, 198 (D.C. Cir. 2017) (emphasis in original) (citation 
omitted)).
    \761\ Id. (citing Dep't of Transp. v. Pub. Citizen, 541 U.S. 
752, 767 (2004) (``NEPA requires a `reasonably close causal 
relationship' between the environmental effect and the alleged 
cause.''); Metro. Edison Co. v. People Against Nuclear Energy, 460 
U.S. 766, 774 (1983) (noting effects may not fall within section 102 
of NEPA because ``the causal chain is too attenuated'')).
---------------------------------------------------------------------------

    415. The Commission found that any consideration of whether the 
revised rules could potentially result in significant new environmental 
impacts due to less QF development and increased development of coal, 
nuclear, and combined cycle natural gas plants, would be unduly 
speculative, based on the difficulty in determining which, if any, of 
the additional flexibilities the final rule provides to the states will 
be adopted by each state, how state rules would impact QF development 
going forward and whether any reduction in QF renewables would be 
replaced by an increased amount of non-QF renewable resources with 
similar environmental characteristics.\762\
---------------------------------------------------------------------------

    \762\ Id. P 717.
---------------------------------------------------------------------------

    416. The Commission pointed to Center for Biological Diversity v. 
Ilano,\763\ in which the court held that no NEPA review was required 
for United States Forest Service designations, pursuant to the Healthy 
Forests Restoration Act (HFRA), of certain forests as ``landscape-scale 
areas.'' The Commission explained that the court held that no NEPA 
review was required for the designations, noting that no specific 
projects were proposed for any of the landscape-scale areas and that 
``[i]n such circumstances, `any attempt to produce an [EIS] would be 
little more than a study . . . containing estimates of potential 
development and attendant environmental consequences.' '' \764\ The 
Commission further explained that the court concluded that ``unless 
there is a particular project that `define[s] fairly precisely the 
scope and limits of the proposed development of the region,' there can 
be `no factual predicate for the production of an [EIS] of the type 
envisioned by NEPA.' '' \765\
---------------------------------------------------------------------------

    \763\ Id. P 712 (citing Ctr. for Biological Diversity v. Ilano, 
928 F.3d 774 at 780) (9th Cir. 2019).
    \764\ Id.
    \765\ Id. See also Northcoast Ent. Ctr. v. Glickman, 136 F.3d 
660, 668 (9th Cir. 1998) (citing Kleppe v. Sierra Club, 427 U.S. 390 
(1976) (explaining that NEPA does not require agency to complete 
environmental analysis where environmental effects are speculative 
or hypothetical)).

---------------------------------------------------------------------------

[[Page 86717]]

    417. The Commission found that the final rule does not fund any 
particular QFs or issue permits for their construction or operation 
(neither of which the Commission has jurisdiction to do) and neither 
the Commission's regulation nor the final rule authorize or prohibit 
the use of any particular technology or fuel, or mandate or prohibit 
where QFs should be or are built.\766\
---------------------------------------------------------------------------

    \766\ Id. P 713.
---------------------------------------------------------------------------

    418. The Commission found that the final rule continues to give 
states wide discretion and that it is impossible to know what the 
states may choose to do in response to the final rule, whether they 
will make changes in their current practices or not, and how those 
state choices would impact QF development and the environment in any 
particular state, let in any particular locale.\767\
---------------------------------------------------------------------------

    \767\ Id. P 714.
---------------------------------------------------------------------------

    419. The Commission found that the scope of the final rule is even 
less defined than the landscape-scale area designations at issue in 
Center for Biological Diversity v. Ilano, explaining that PURPA applies 
throughout the entire United States and the revisions implemented by 
the final rule theoretically could affect future QF development 
anywhere in the country.\768\ The Commission reasoned that, as was the 
case in Center for Biological Diversity v. Ilano, any attempt to 
evaluate the environmental effects of the final rule by necessity would 
involve hypothesizing the potential development of QFs and the 
resultant environmental consequences.\769\ The Commission found that 
any attempt by the Commission to estimate the potential environmental 
effects of the final rule would be considerably more speculative than 
the estimates of potential development and attendant environmental 
consequences that the court in Center for Biological Diversity held are 
not required under NEPA. The Commission found that it was not possible 
to provide any reasonable forecast of the effects of the final rule on 
future QF development, whether any affected potential QF would be a 
renewable resource (such as solar or wind) or employ carbon-emitting 
technology (such as a fossil-fuel-burning cogenerator or a waste-coal-
burning small power production facility). The Commission further found 
that environmental effects on land use, vegetation, water quality, etc. 
are all dependent on location, which is unknown and could be anywhere 
in the United States.\770\ The Commission therefore concluded that any 
the potential effects of the final rule on future QF development are so 
speculative as to render meaningless any environmental analysis of 
these impacts.\771\
---------------------------------------------------------------------------

    \768\ Id. P 715.
    \769\ Id. P 718.
    \770\ Id.
    \771\ Id. P 719.
---------------------------------------------------------------------------

a. Requests for Rehearing
    420. Northwest Coalition and Public Interest Organizations allege 
that the Commission erred in determining that there is no need to 
prepare an EA or EIS.\772\ With respect to the discussion in the final 
rule of why potential environmental impacts are too speculative, 
Northwest Coalition asserts, with no explanation, that the Commission 
provided ``out-of-context quotations from a number of cases.'' \773\ 
Northwest Coalition and Public Interest Organizations argue that the 
impacts are not too speculative or uncertain for a NEPA analysis 
because the Commission used the wrong standard to determine impact, 
asserting that the ``question is whether the proposed rules may have a 
significant impact on the human environment,'' not whether it will have 
an impact.\774\ They claim that, because states were prohibited from 
lawfully denying fixed-price contracts to QFs under previous rules, the 
Commission must assume that under the new rules the states will 
eliminate the right to fixed-price contracts and that the development 
of new QFs will halt, which is the type of analysis that must be done 
in a NEPA document.\775\ Northwest Coalition claims that the final rule 
does not appear to seriously dispute that the new rules may have a 
significant effect; instead, it appears to merely conclude the precise 
impact would be too difficult to pinpoint.
---------------------------------------------------------------------------

    \772\ Northwest Coalition Request for Rehearing at 56-57; Public 
Interest Organizations Request for Rehearing at 15-16.
    \773\ Northwest Coalition Request for Rehearing at 61 n.222.
    \774\ Id. at 58.
    \775\ Id. at 58-59.
---------------------------------------------------------------------------

    421. Public Interest Organizations similarly argue that the 
Commission cannot avoid NEPA review by making unsupported claims that 
environmental impacts are unforeseeable, prior to any NEPA analysis, as 
the role of NEPA itself is to ``indicate the extent to which 
environmental effects are uncertain or unknown.'' \776\ Public Interest 
Organizations assert that the Commission mistakenly found that any 
environmental analysis of the final rule would be speculative and would 
not meaningfully inform the Commission or the public.\777\ Public 
Interest Organizations add that NEPA requires agencies to examine all 
foreseeable impacts, including cumulative and indirect impacts, when 
undertaking rule changes that grant states new regulatory authority, 
which ``plainly includes changes to allow new ways and options for 
states when exercising their authority.'' \778\ Public Interest 
Organizations contend that NEPA may apply when the agency makes a 
decision that permits actions by other parties that will have an impact 
on the environment.\779\ Northwest Coalition adds that courts have 
required a NEPA analysis in cases where the agency proposes rules that 
will have an impact on future development, even for widespread 
regulatory changes that do not themselves authorize any discrete 
project.\780\
---------------------------------------------------------------------------

    \776\ Public Interest Organizations Request for Rehearing at 20, 
26 (emphasis added) (citing Sierra Club v. Froehlke, 534 F.2d 1289, 
1296 (8th Cir. 1976); Scientists' Institute for Public Information, 
Inc. v. AEC, 481 F.2d 1079, 1092, 1098 (D.C. Cir. 1973); Jicarilla 
Apache Tribe of Indians v. Morton, 471 F.2d 1275, 1280 n.11 (9th 
Cir. 1973); Citizens Against Toxic Sprays, Inc. v. Bergland, 428 F. 
Supp. 908, 922 (D. Or. 1977)).
    \777\ Id. at 21 (citing NOPR, 168 FERC ] 61,184 at P 155).
    \778\ Id.
    \779\ Id. at 22 (citing Mid States Coal. for Progress v. Surface 
Transp. Bd., 345 F.3d 520, 549-50 (8th Cir. 2003); Scientists' Inst. 
For Public Info., Inc. v. AEC, 481 F.2d at 1088-89).
    \780\ Northwest Coalition Request for Rehearing at 60-61 (citing 
American Bird Conservancy, Inc. v. FCC, 516 F.3d 1027, 1033-34 (D.C. 
Cir. 2008)).
---------------------------------------------------------------------------

    422. Public Interest Organizations assert that a NEPA analysis is 
required when uncertainty may be resolved by collecting further data or 
the collection of such data may prevent speculation on potential 
environmental effects.\781\ Public Interest Organizations add that the 
Commission's position that collecting data and analyzing it would be 
too difficult is an impermissible basis for foregoing an EA or 
EIS.\782\ Public Interest Organizations contend that, when an agency is 
faced with incomplete or unavailable information, the CEQ regulations 
require an EIS to include a summary of existing credible scientific 
evidence that is relevant to evaluating the reasonably foreseeable 
impacts of a proposed action.\783\
---------------------------------------------------------------------------

    \781\ Public Interest Organizations Request for Rehearing at 24 
(citing National Parks & Conservation Ass'n v. Babbitt, 241 F.3d 
722, 732 (9th Cir. 2001)).
    \782\ Id. (citing Seattle Audubon Soc'y v. Mosley, 798 F. Supp. 
1494, 1497 (W.D. Wash. 1992)).
    \783\ Id. at 24-25 (citing 40 CFR 1502.22(b)(3)-(b)(4)).
---------------------------------------------------------------------------

    423. Northwest Coalition and Public Interest Organizations argue 
the Commission is required to prepare an EIS because courts have found 
an EIS is required where ``substantial questions''

[[Page 86718]]

have been raised as to whether an agency action ``may cause significant 
degradation of some human environmental factor,'' adding that parties 
are not required to show that significant effects will occur, but only 
raise substantial questions that they may occur.\784\
---------------------------------------------------------------------------

    \784\ Northwest Coalition Request for Rehearing at 57 (citing 
LaFlamme v. FERC, 852 F.2d 389, 397 (9th Cir. 1988)); Public 
Interest Organizations Request for Rehearing at 17 (citing 
Greenpeace Action v. Franklin, 14 F.3d 1324, 1332 (9th Cir. 1992)).
---------------------------------------------------------------------------

    424. Northwest Coalition and Public Interest Organizations allege 
that the Commission improperly relied on Center for Biological 
Diversity v. Ilano to determine that the rulemaking's impacts were too 
speculative for NEPA analysis.\785\ Public Interest Organizations 
assert that the court found that the action would not change the 
``status quo,'' in contrast to here, where they claim the final rule 
legally alters the status quo.\786\ Public Interest Organizations claim 
that ``significantly'' reduced QF development is foreseeable based on 
experience in states that have undermined the prior rules, regardless 
of the fact that the proposed changes do not mandate or prohibit the 
construction of any specific QF's, and the environmental impacts of 
removing major incentives for emissions-free renewable resources will 
be significant and far-reaching.\787\ Northwest Coalition asserts that 
the Center for Biological Diversity v. Ilano court ``relied on its 
finding that the designation did not authorize any discrete projects 
and would only potentially lead to such projects, making the exercise 
of an EIS too speculative.'' \788\ Northwest Coalition claims that this 
reasoning does not apply to the final rule because the Commission has 
demonstrated it has the capability to conduct detailed market analysis 
on the impact of its proposed rules and their likely environmental 
impacts.\789\
---------------------------------------------------------------------------

    \785\ Northwest Coalition Request for Rehearing at 59-60; Public 
Interest Organizations Request for Rehearing at 30.
    \786\ Public Interest Organizations Request for Rehearing at 31 
(citing Ctr. for Biological Diversity v. Ilano, 928 F.3d at 781).
    \787\ Id. at 34.
    \788\ Northwest Coalition Request for Rehearing at 60.
    \789\ Id.
---------------------------------------------------------------------------

b. Commission Determination
    425. As an initial matter, Northwest Coalition errs in suggesting 
that the Commission does not dispute that the final rule may have 
significant impacts on the environment and that the precise impact 
would be too difficult to pinpoint. Rather, the Commission found that 
any consideration of whether the final rule could potentially have 
significant environmental impacts would be so speculative as to render 
meaningless any environmental analysis of these hypothetical 
impacts.\790\
---------------------------------------------------------------------------

    \790\ Order No. 872, 172 FERC ] 61,041 at PP 717-719. We note 
that CEQ issued a final rule, Update to the Regulations Implementing 
the Procedural Provisions of the National Environmental Policy Act, 
85 FR 43,304 (July 16, 2020) (to be codified at 40 CFR pts. 1500-08, 
1515-18), which became effective as of September 14, 2020. The final 
rule replaces the requirement for agency consideration of ``direct, 
indirect, and cumulative effects'' of a proposed action, with agency 
consideration of environmental effects ``that are reasonably 
foreseeable and have a reasonably close causal relationship.'' 40 
CFR 1508.1(g). CEQ explains that agencies should not consider 
effects that are ``remote in time, geographically remote, or the 
result of a lengthy causal chain.'' Under this standard, the mere 
fact that an effect might not occur ``but for'' the project is not 
sufficient to trigger a NEPA analysis; rather, there must be a 
``reasonably close causal relationship'' between the proposed action 
and the effect, ``analogous to proximate cause in tort law.'' Update 
to the Regulations Implementing the Procedural Provisions of the 
National Environmental Policy Act, 85 FR at 43,343.
---------------------------------------------------------------------------

    426. Moreover, the Commission did not reach this conclusion based 
on an inability to ``pinpoint'' precise impacts. Rather the Commission 
made this determination based on, among other things, the inability to 
provide any reasonable forecast of the effects of the final rule on the 
environment. This is the case not only because it is not possible to 
predict how the states will exercise the increased flexibilities 
provided by the final rule and whether the effects, if any, of such 
state actions will encourage or discourage renewable resources as 
opposed to fossil-fueled resources, but also because any environmental 
effects on resources such as land use, vegetation, and water quality 
are all dependent on location, which is unknown at this time and could 
be anywhere in the United States.\791\
---------------------------------------------------------------------------

    \791\ Id.
---------------------------------------------------------------------------

    427. We also reject Northwest Coalition's argument that in making 
an impact determination, the Commission erroneously considered whether 
the final rule ``will,'' rather than ``may,'' have a significant impact 
on the environment. In explaining why no EA or EIS was required, the 
Commission stated that any consideration of whether the final rule 
could potentially result in significant new environmental impacts due 
to less QF development and increased development of coal, nuclear, and 
combined cycle natural gas plants, would be highly speculative, based 
on the difficulty in determining which additional flexibilities the 
final rule provides to the states that each state will adopt, if any; 
how such state rules would impact QF development going forward; and 
whether any reduction in QF renewables would be replaced by the much 
greater amount of non-QF renewable resources with similar environmental 
characteristics.\792\
---------------------------------------------------------------------------

    \792\ Id. P 717. (emphasis added).
---------------------------------------------------------------------------

    428. Public Interest Organizations' reliance on Mid States Coal. 
for Progress v. Surface Transp. Bd \793\ to support its claim that NEPA 
applies when an agency makes decisions which permit actions by other 
parties that will impact the environment is misplaced. In that case, 
parties challenged the permitting of a railroad extension that would 
transport coal to the Midwest, resulting in an increased availability 
of coal at reduced rates. The court found that the EIS prepared for the 
railroad extension had failed to address the indirect impacts of air 
emissions resulting from the consumption of this coal when it was used 
to generate electricity, even though the railroad had not yet signed 
any contracts to haul this coal. The court noted that ``if the nature 
of the effect is reasonably foreseeable but its extent is not . . . the 
agency may not simply ignore the effects.'' \794\ In contrast to this 
proceeding, in Mid States Coal. for Progress v. Surface Transp. Bd, it 
was undisputed that the proposed rail line would increase the use of 
coal for power generation; the Surface Transportation Board itself had 
concluded that its action would lead to increased mining and air 
emissions but then failed to address those impacts in the EIS. Here, 
the Commission did not conclude that the final rule would have 
identifiable environmental impacts; on the contrary, it explained in 
detail why any potential impacts from the final rule are not reasonably 
foreseeable.
---------------------------------------------------------------------------

    \793\ Mid States Coal. for Progress v. Surface Transp. Bd., 345 
F.3d 520.
    \794\ Id. (emphasis in original).
---------------------------------------------------------------------------

    429. Public Interest Organizations' reliance on Scientists' 
Institute for Public Information, Inc., v. AEC \795\ is equally 
misplaced. There, the D.C. Circuit faulted the Atomic Energy Commission 
(AEC) for failing to prepare a NEPA analysis for its proposed liquid 
metal fast breeder reactor program. The D.C. Circuit noted that AEC had 
prepared a complex cost/benefit analysis in attempting to justify the 
proposed program but failed to include a consideration of the 
environmental costs and benefits associated with the proposed program. 
The court was persuaded that a NEPA analysis should have been prepared 
because AEC had existing detailed estimates on the

[[Page 86719]]

amount of waste and the amount of land area necessary for storage of 
the waste, as well as ``much information on alternatives to the program 
and their environmental effects.'' \796\ In contrast here, for the 
reasons discussed in the final rule and herein, the Commission has no 
existing detailed or quantifiable information, nor is such information 
attainable, with respect to future actions that might or might not 
occur as a result of the final rule that would assist us in a 
meaningful analysis.\797\
---------------------------------------------------------------------------

    \795\ Scientists' Institute for Public Information, Inc. v. AEC, 
481 F.2d 1079.
    \796\ Id.
    \797\ Order No. 872, 172 FERC ] 61,041 at PP 718-19.
---------------------------------------------------------------------------

    430. We also disagree with Public Interest Organizations' arguments 
that ``substantial questions'' have been raised with respect to 
potential significant environmental impacts such that the Commission 
must prepare an EA or EIS for the final rule.\798\ Courts have found 
that the applicable standard for determining whether substantial 
questions have been raised is whether the ``alleged facts if true, show 
that the proposed project may significantly degrade some human 
environmental factor.'' \799\ Public Interest Organizations' arguments 
are based not on alleged facts, but on speculative assumptions which 
the Commission considered and addressed in the final rule.\800\ Public 
Interest Organizations' reliance on LaFlamme v. FERC \801\ is without 
merit. There, the Commission approved the construction of a new 
hydroelectric project without benefit of an EA or an EIS. The court 
found that substantial questions had been raised regarding identifiable 
potential impacts from site specific activities.\802\ In contrast, the 
final rule does not authorize any site-specific activities for which 
there are identifiable potential impacts; as discussed above, the final 
rule does not authorize any specific projects.
---------------------------------------------------------------------------

    \798\ Northwest Coalition Request for Rehearing at 57 (citing 
LaFlamme v. FERC, 852 F.2d at 397); Public Interest Organizations 
Request for Rehearing at 17 (citing Greenpeace Action v. Franklin, 
14 F.3d at 1332).
    \799\ Foundation for N. Am. Wild Sheep v. USDA, 681 F.2d 1172, 
1177-78 (9th Cir. 1982).
    \800\ Order No. 872, 172 FERC ] 61,041 at PP 717-19, 731-36.
    \801\ LaFlamme v. FERC, 852 F.2d at 389.
    \802\ Id. at 397 (finding that substantial questions were raised 
about potential ``significant environmental degradation [of a 
hydropower project] due to both its site-specific impact on 
recreational use and visual quality and its cumulative impact[s]'').
---------------------------------------------------------------------------

    431. Greenpeace Action v. Franklin \803\ is similarly inapposite. 
There, the National Marine Fisheries Service prepared an EA for 
proposed fishery harvest specifications for pollock that concluded in a 
finding of no significant impacts on the Stellar sea lion, whose diet 
included a significant amount of pollock.\804\ The National Marine 
Fisheries Service determined that, while it was uncertain there would 
be adverse impacts on the Stellar sea lion, it would take precautions 
and impose management measures to provide an adequate buffer against 
any adverse impacts. The court rejected plaintiff's claim that the 
National Marine Fisheries Service should have prepared an EIS based on 
plaintiff's competing affidavits with respect to National Marine 
Fisheries Service's findings. While the court cited the general 
principle that an agency must prepare an EIS if substantial questions 
are raised as to environmental impacts, the court found that 
petitioner's affidavits did not set forth facts demonstrating there 
would be significant impacts on the Stellar sea lion; rather they only 
demonstrated ``uncertainty as to how pollock fishing affects the sea 
lion, which is undisputed.'' \805\ The court declined to set aside the 
National Marine Fisheries Service's findings because there was no 
disagreement over whether the proposed action impact may have a 
significant impact on the environment but rather ``represent[ed] a 
difference of scientific opinion'' over the extent of potential 
impacts.\806\
---------------------------------------------------------------------------

    \803\ Greenpeace Action v. Franklin, 14 F.3d 1324.
    \804\ Id. at 1327.
    \805\ Id. at 1333.
    \806\ Id. (emphasis added). Plaintiffs in this case also cited 
several cases to support its claim that the very existence of 
uncertainty mandates the preparation of an EIS. However, the court 
noted that because the cases cited ``deal not with whether an impact 
statement should be prepared, but with what information should be 
included in an impact statement after it has been judged necessary, 
they do not stand for the proposition that the existence of 
uncertainty mandates the preparation of an impact statement.'' Id. 
at 1334 n.11.
---------------------------------------------------------------------------

    432. We also reject Northwest Coalition's claim that the Commission 
must consider the impacts of reasonably foreseeable future actions even 
if there is no specific proposal, asserting there are previous 
experiences on how states have allegedly reacted to prior PURPA 
Regulations. Specifically, Northwest Coalition argues the Commission 
must assume that under the new rules the states will eliminate the 
right to fixed-price contracts and, therefore, the development of new 
QFs will halt.\807\ Public Interest Organizations allege that the 
environmental impacts of removing major incentives for emissions-free 
renewable resources will be significant and far-reaching \808\ 
Northwest Coalition's and Public Interest Organizations' arguments 
would require the Commission first to make highly speculative and 
hypothetical assumptions about future state action on QFs and that all 
QFs are renewables, as well as unrealistic and unsupported assumptions 
as to whether such actions would impact renewable QFs more than 
emitting QFs.
---------------------------------------------------------------------------

    \807\ Northwest Coalition Request for Rehearing at 59.
    \808\ Public Interest Organizations Request for Rehearing at 34.
---------------------------------------------------------------------------

    433. As discussed in the final rule, an agency ``is not required to 
engage in speculative analysis'' or ``to do the impractical, if not 
enough information is available to permit meaningful consideration'' or 
to ``foresee the unforeseeable.'' \809\ Further, the Commission 
explained that the final rule ``continues to give states wide 
discretion and it is impossible to know what the states may choose to 
do in response to [the final rule], whether they will make changes in 
their current practices or not, and how those state choices would 
impact QF development and the environment in any particular state, let 
alone any particular locale.'' \810\
---------------------------------------------------------------------------

    \809\ See Order No. 872, 172 FERC ] 61,041 at P 716 (citing N. 
Plains Res. Council v. Surface Transp. Board, 668 F.3d at 1078-79; 
Concerned About Trident v. Rumsfeld, 555 F.2d at 830).
    \810\ Id. P 714.
---------------------------------------------------------------------------

    434. Public Interest Organizations cite National Parks & 
Conservation Ass'n v. Babbitt for the proposition that an EA or EIS is 
required ``where uncertainty may be resolved by further collection of 
data.\811\ Here, attempting to collect further data or information 
would not resolve uncertainty; the Commission has explained that it is 
not possible to collect detailed or quantifiable information regarding 
future QF development.\812\ This contrasts with National Parks & 
Conservation Ass'n v. Babbitt, where the National Park Service issued 
an EA finding that a substantial increase in cruise ship traffic 
entering Glacier Bay National Park and Preserve would have no 
significant impact on the environment. In requiring the National

[[Page 86720]]

Park Service to prepare an EIS, the court explained that scientific 
evidence provided by the National Park Service's own studies ``revealed 
very definite environmental effects,'' and the National Park Service's 
EA established that information was ``obtainable and that it would be 
of substantial assistance'' in considering the environmental impacts of 
the increased cruise ship traffic.\813\
---------------------------------------------------------------------------

    \811\ National Parks & Conservation Ass'n v. Babbitt, 241 F.3d 
722, 732 (9th Cir. 2001) (emphasis added).
    \812\ We also disagree with Public Interest Organizations' 
assertion that because the Commission is faced with incomplete or 
unavailable information, the CEQ regulations state the Commission 
must include in an EIS a summary of existing credible scientific 
evidence that is relevant to evaluating the reasonably foreseeable 
impacts of a proposed action. Public Interest Organizations Request 
for Rehearing at 23-24 (citing 40 CFR 1502.22(b)(3)-(b)(4)). This 
regulation is inapplicable to the final rule, as it contemplates 
that an EIS has been prepared, and that there are reasonably 
foreseeable impacts for which existing credible scientific evidence 
may be relevant (emphasis added). The Commission did not prepare an 
EIS because there are no reasonably foreseeable impacts for the 
reasons discussed in the final rule and herein.
    \813\ National Parks & Conservation Ass'n v. Babbitt, 241 F.3d 
732.
---------------------------------------------------------------------------

    435. We also reject Northwest Coalition's and Public Interest 
Organizations' claims that the Commission improperly relied on Center 
for Biological Diversity v. Ilano, because, they assert, the final rule 
legally alters the ``status quo.'' The court in Center for Biological 
Diversity held that an EIS is not required where a proposed action does 
not change the status quo, and defined changes in the status quo as 
those ``alter[ing] future land use or otherwise foreseeably impact[ing] 
the environment.'' \814\ The court further explained that `` `[l]ong-
range aims are quite different from concrete plans,' and `NEPA does not 
require an agency to consider the environmental effects that 
speculative or hypothetical projects might have . . . .' '' \815\ While 
the final rule results in changes to the implementation of the original 
PURPA Regulations, the final rule does not change the status quo as 
contemplated by NEPA. It does not direct or preclude the development of 
any project or otherwise require entities to take actions that 
foreseeably alter future land use or otherwise result in foreseeable 
environmental impacts. As discussed in the final rule, it is not 
possible to make simplifying assumptions that the mere implementation 
of the revised regulations necessarily would result in specific changes 
in the development of particular generation technologies compared to 
the status quo.\816\ The final rule is premised on a finding that, even 
after the revisions, the PURPA Regulations will continue to encourage 
QF development while addressing concerns about how PURPA works in 
today's electric markets; therefore, there it cannot be presumed that 
the rule will result in a reduction in QF development or a change in 
the type of QFs that are built. The impact, if any, of the final rule 
on QF development is both uncertain or unknowable.\817\ As the court 
found in Center for Biological Diversity, such speculative 
environmental consequences are not required to be analyzed under 
NEPA.\818\ Thus, the Commission cannot analyze environmental impacts in 
this case, when such an analysis could only be done if multiple, 
unlikely, and unreasonable assumptions are made as to the variables 
above.\819\
---------------------------------------------------------------------------

    \814\ Ctr. for Biological Diversity v. Ilano, 928 F.3d at 781.
    \815\ Id. at 780 (quoting Northcoast Envtl. Ctr. v. Glickman, 
136 F.3d at 668).
    \816\ Order No. 872, 172 FERC ] 61,041 at P 733.
    \817\ Id. P 716 (citing Dep't of Transp. v. Pub. Citizen, 541 
U.S. at 767; Metro. Edison Co. v. People Against Nuclear Energy, 460 
U.S. at 774).
    \818\ Ctr. for Biological Diversity, 928 F.3d at 781 (citing 
Northcoast Envtl. Ctr. v. Glickman, 136 F.3d at 668).
    \819\ See Order No. 872, 172 FERC ] 61,041 at PP 733-35.
---------------------------------------------------------------------------

2. A Categorical Exclusion Applies
    436. The Commission found as a separate and independent alternative 
basis for concluding that no environmental analysis is warranted that 
the final rule falls within the categorical exclusion for rules that, 
as relevant here: (1) Are clarifying in nature; (2) are corrective in 
nature; or (3) are procedural in nature.\820\
---------------------------------------------------------------------------

    \820\ Id. P 720 (citing 18 CFR 380.4(a)(2)(ii)). The exclusion 
applies to a fourth type of rule, the promulgation of regulations 
``that do not substantially change the effect of . . . regulations 
being amended.'' Further, although not challenged on rehearing, the 
final rule noted two revisions that are procedural in nature: The 
revision to procedures that apply to QF certification and the 
revision to the Commission's Form No. 556, used by QFs seeking 
certification. Id. P 727.
---------------------------------------------------------------------------

    437. The Commission explained that clarifying changes include those 
that clarify how market prices can be used to set as-available energy 
rates, the changes clarifying how fixed energy rates in contracts or 
LEOs may be determined, and the changes clarifying how competitive 
solicitations can be used to set avoided cost rates.\821\
---------------------------------------------------------------------------

    \821\ Id. P 721.
---------------------------------------------------------------------------

    438. The Commission stated that corrective changes include those 
needed in order to ensure that a regulation conforms to the 
requirements of the statutory provisions being implemented by the 
regulation. The Commission noted that it does not find that its 
existing PURPA Regulations were inconsistent with the statutory 
requirements of PURPA when promulgated. The Commission found instead 
that the changes adopted in the final rule are required to ensure 
continued future compliance of the PURPA Regulations with PURPA, based 
on the changed circumstances found by the Commission in the final 
rule.\822\
---------------------------------------------------------------------------

    \822\ Id. P 722.
---------------------------------------------------------------------------

    439. The Commission found that three aspects of the final rule are 
corrective in nature. The first is the change allowing states to 
require variable energy rates in QF contracts. The Commission explained 
this change is required based on the Commission's finding that, 
contrary to the Commission's expectation in 1980, there have been 
numerous instances where overestimates and underestimates of energy 
avoided costs used in fixed energy rate contracts have not balanced 
out, causing the contract rate to violate the statutory avoided cost 
rate cap. The Commission explained that giving states the ability to 
require energy rates in QF contracts to vary based on the purchasing 
utility's avoided cost of energy at the time of delivery ensures that 
QF rates do not exceed the avoided cost rate cap imposed by PURPA.\823\
---------------------------------------------------------------------------

    \823\ Id. P 723.
---------------------------------------------------------------------------

    440. The second corrective aspect is the change in the PURPA 
Regulations regarding the determination of what facilities are located 
at the same site for purposes of complying with the statutory 80 MW 
limit on small power production facilities located at the same 
site.\824\ The Commission explained that it found, based on changed 
circumstances, that the current one-mile rule is inadequate to 
determine which facilities are located at the same site. The Commission 
determined that, based on this finding, the Commission was obligated by 
PURPA to revise its definition of when facilities are located at the 
same site.\825\
---------------------------------------------------------------------------

    \824\ Id. P 724.
    \825\ Id.
---------------------------------------------------------------------------

    441. The third corrective aspect relates to the implementation of 
PURPA section 210(m). The Commission explained that this statutory 
provision allows purchasing utilities to terminate their obligation to 
purchase from QFs that have nondiscriminatory access to certain 
statutorily-defined markets, which the Commission has determined to be 
the RTO/ISO markets.\826\ The Commission explained that the final rule 
updates the presumption in the PURPA Regulations that QFs with a 
capacity of 20 MW or less do not have non-discriminatory access to such 
markets, reducing the threshold for such presumption to 5 MW.\827\
---------------------------------------------------------------------------

    \826\ Id. P 725.
    \827\ Id.
---------------------------------------------------------------------------

    442. The Commission explained that, since the 20-MW threshold was 
established in 2005, the RTO/ISO markets have matured and the industry 
has developed a better understanding of the mechanics of market 
participation.\828\ The Commission added that this determination 
rendered inaccurate the presumption currently

[[Page 86721]]

reflected in the PURPA Regulations that QFs of 20 MW and below do not 
have non-discriminatory access to the relevant markets.\829\ The 
Commission explained that, once the Commission made this determination, 
it was appropriate for the Commission to update the 20 MW threshold to 
comply with the requirements of PURPA section 210(m).\830\
---------------------------------------------------------------------------

    \828\ Id. P 726.
    \829\ Id.
    \830\ Id.
---------------------------------------------------------------------------

a. Exception to Categorical Exclusion
i. Requests for Rehearing
    443. Northwest Coalition and Public Interest Organizations assert 
that, as a threshold matter, the final rule does not qualify for a 
categorical exclusion because the Commission's regulations provide 
that, ``[w]here circumstances indicate that an action may be a major 
Federal action significantly affecting the quality of the human 
environment,'' the Commission will prepare either an EA or an EIS.\831\ 
They add that the Commission's regulations provide that an exception to 
a categorical exclusion may exist ``[w]here the environmental effects 
are uncertain.'' \832\
---------------------------------------------------------------------------

    \831\ Northwest Coalition Request for Rehearing at 62; Public 
Interest Organizations Request for Rehearing at 36 (citing 18 CFR 
380.4(b)(1)).
    \832\ Northwest Coalition Request for Rehearing at 62; Public 
Interest Organizations Request for Rehearing at 36 (citing 18 CFR 
380.4(b)(1)).
---------------------------------------------------------------------------

ii. Commission Determination
    444. We disagree that the Commission's exceptions to categorical 
exclusions preclude the application of a categorical exclusion to the 
final rule. The CEQ regulations state that a categorical exclusion 
applies to an action that does not individually or cumulatively have a 
significant effect on the environment and an agency's categorical 
exclusion procedures should provide for limitations on the use of a 
categorical exclusion where ``extraordinary circumstances'' indicate 
that a normally excluded action may have a significant environmental 
effect.\833\ The Commission's regulations provide a list of these 
extraordinary circumstances, which are effects on Indian lands; 
Wilderness areas; Wild and Scenic rivers; Wetlands; Units of the 
National Park System, National Refuges, or National Fish Hatcheries; 
Anadromous fish or endangered species; or where environmental effects 
are uncertain.\834\ None of these extraordinary circumstances are 
present here except to the extent the environmental effects are 
uncertain. The final rule explained in detail why any potential 
environmental impacts are uncertain and unknown as they are too 
speculative to provide an EA or EIS that would meaningfully inform the 
Commission.\835\ In any case, the Commission's regulations state that 
the presence of one or more of the extraordinary circumstances ``will 
not automatically require . . . the preparation of an environmental 
assessment or an environmental impact statement.'' \836\
---------------------------------------------------------------------------

    \833\ 40 CFR 1508.4.
    \834\ 18 CFR 380.4(b)(ii).
    \835\ Order No. 872, 172 FERC ] 61,041 at P 716.
    \836\ 18 CFR 380.4.
---------------------------------------------------------------------------

b. Applying a Categorical Exclusion for Clarifying and Corrective 
Actions Is Appropriate
i. Requests for Rehearing
    445. Northwest Coalition and Public Interest Organizations also 
dispute that the final rule falls under the categorical exclusion for 
actions that are clarifying or corrective in nature.\837\ Northwest 
Coalition argues that the final rule is not merely clarifying in nature 
but rather a major change in policy.\838\ Northwest Coalition 
highlights what it deems the Commission's decision to change its long-
standing precedent by allowing use of RFPs as the exclusive means for 
all QFs to obtain a long-term contract to sell energy and 
capacity.\839\ Northwest Coalition further argues that overruling 
existing precedent is not clarifying and the new policy will result in 
loss of existing QF capacity.\840\
---------------------------------------------------------------------------

    \837\ Northwest Coalition Request for Rehearing at 62-63; Public 
Interest Organizations Request for Rehearing at 35.
    \838\ Northwest Coalition Request for Rehearing at 63.
    \839\ Id. We address in section III.B.5 above Northwest 
Coalition's challenge to the competitive solicitation framework 
itself.
    \840\ Id.
---------------------------------------------------------------------------

    446. Northwest Coalition asserts that the Commission's reliance on 
the `corrective' exclusion fails because it is contrary to what 
Northwest Coalition deems the ``obvious intent'' of the categorical 
exclusion for corrective changes to regulations.'' \841\ Northwest 
Coalition opines that the categorical exclusion applies only to an 
action ``to correct an error, such as a misplaced word or mis-numbered 
section.'' \842\ Northwest Coalition also contends that the Commission 
cites no authority to find that changes that are corrective in nature 
include ``changes needed in order to ensure that a regulation conforms 
to the requirements of the statutory provisions being implemented by 
the regulation.'' \843\ Northwest Coalition asserts that, as noted in 
Commissioner Glick's dissent, this interpretation would exempt from 
NEPA analysis virtually any action the Commission takes under any of 
its enabling statutes.\844\
---------------------------------------------------------------------------

    \841\ Id. at 63-64.
    \842\ Id. at 64.
    \843\ Id. at 63 (quoting Order No. 872, 172 FERC ] 61,041 at P 
722).
    \844\ Id. at 63-64 (citing Order No. 872, 172 FERC ] 61,041, 
Glick, Comm'r, dissenting in part at P 26).
---------------------------------------------------------------------------

    447. Public Interest Organizations assert that the Commission fails 
to cite precedent for using multiple exclusionary categories for ``such 
an impactful rulemaking.'' \845\ Public Interest Organizations suggest 
that doing so is a red flag that what they deem sweeping changes in the 
final rule are not suited for a categorical exclusion.\846\
---------------------------------------------------------------------------

    \845\ Public Interest Organizations Request for Rehearing at 35-
36.
    \846\ Id. at 35.
---------------------------------------------------------------------------

    448. Finally, Public Interest Organizations argue the Commission 
failed to engage in the appropriate scoping in determining that a 
categorical exclusion was appropriate. Public Interest Organizations 
assert that CEQ regulations require a federal agency to engage in 
scoping, which is defined in relevant part: ``There shall be an early 
and open process for determining the scope of issues to be addressed 
and for identifying the significant issues related to a proposed 
action.'' \847\ Public Interest Organizations note that the CEQ 
regulations define ``NEPA process'' to mean ``all measures necessary 
for compliance with the requirements of section 2 and Title 1 of 
NEPA.'' \848\ Public Interest Organizations conclude that taken 
together, these two regulations require the application of scoping to 
the entire NEPA process, including the application of a categorical 
exclusion.\849\
---------------------------------------------------------------------------

    \847\ Id. at 41 (citing 40 CFR 1501.7).
    \848\ Id. (citing 40 CFR 1508.21).
    \849\ Id.
---------------------------------------------------------------------------

ii. Commission Determination
    449. We affirm the alternative finding that the final rule was 
properly categorically excluded because it is clarifying and corrective 
in nature. Northwest Coalition's arguments are based primarily on what 
they deem to be the appropriate interpretation of the Commission's 
categorical exclusion regulation, rather than providing supporting 
precedent.\850\
---------------------------------------------------------------------------

    \850\ Northwest Coalition Request for Rehearing at 62-64.
---------------------------------------------------------------------------

    450. Northwest Coalition specifically challenges the use of the 
clarifying categorical exclusion for the changes to the competitive 
solicitation process (allowing the use of RFPs as the means for QFs to 
obtain long-term

[[Page 86722]]

contracts).\851\ We affirm that the final rule's treatment of 
competitive solicitations is clarifying in nature because competitive 
solicitations are already often used by industry to set capacity rates 
in both PURPA and non-PURPA contexts. Additionally, by including the 
standards discussed in the Allegheny Principles and elaborating on how 
states may conduct competitive solicitations as the Commission 
explained in prior precedent,\852\ the Commission clarified, 
formalized, and consolidated existing policy.\853\ Finally, the final 
rule clarifies and follows logically from Commission precedent by 
requiring that, if a utility places its own capacity in competitive 
solicitations held at regular intervals and satisfies its capacity 
needs only through competitive solicitations following the procedural 
requirements formalized in the final rule, then that utility need not 
have an alternative avoided cost capacity rate for QFs because it no 
longer has any avoided capacity costs.
---------------------------------------------------------------------------

    \851\ Id. at 63. We address in section III.B.5 above Northwest 
Coalition's challenge to the competitive solicitation framework 
itself.
    \852\ E.g., Hydrodynamics, 146 FERC ] 61,193 at PP 31-35; City 
of Ketchikan, 94 FERC ] 61,293 at 62,061; Bidding NOPR, FERC Stats. 
& Regs. ] 32,455 at 32,030-42.
    \853\ See Order No. 872, 172 FERC ] 61,041 at P 430 (citing 
Allegheny Energy, 108 FERC ] 61,082 at P 18).
---------------------------------------------------------------------------

    451. We also affirm that the final rule was corrective in nature. 
With respect to the challenge to variable energy rates in the QF 
contracts or LEOs, the Commission found that, contrary to expectations 
in 1980, there are numerous instances where overestimates and 
underestimates of energy avoided costs used in fixed energy rates did 
not balance-out over the long term.\854\ Such an imbalance resulted in 
long-term fixed avoided cost energy rates well above the purchasing 
utility's avoided costs for energy.\855\ This result is prohibited by 
PURPA section 210(b).\856\ The Commission's actions to adjust the QF 
rate framework are necessary to harmonize the Commission's regulations 
with this underlying finding and to comply with the statutory 
provisions of PURPA section 210(b).
---------------------------------------------------------------------------

    \854\ Id. PP 283, 723.
    \855\ Id. P 283.
    \856\ Id.
---------------------------------------------------------------------------

    452. We also find that the Commission's interpretation that 
corrective actions include those that ensure that a regulation conforms 
to the requirements of the statutory provisions being implemented by 
the final rule is appropriate. We disagree that such an interpretation 
sets a precedent for evading NEPA analysis for future Commission 
actions. The Commission considers all matters before it, including 
rulemakings, on a case-by-case basis to determine whether an EIS, EA or 
a categorical exclusion is appropriate based on the facts and 
circumstances of each matter. Further, in this case the Commission is 
not relying on general statutory standards, such as the just and 
reasonable standard under the FPA, but specific statutory requirements 
that the Commission may not require above avoided cost rates, that 
small power production facilities located at a single site may not 
exceed 80 MW, and that the mandatory purchase obligation may be 
terminated with respect to QFs with nondiscriminatory access to certain 
markets.
    453. We also disagree with Public Interest Organizations' claim 
that the Commission inappropriately relied on multiple exclusionary 
categories in determining that the final rule was subject to a 
categorical exclusion. As an alternative to its explanation that the 
effect of the final rule are so speculative as to preclude the 
preparation of an environmental analysis, the Commission applied a 
single categorical exclusion that provides four possible bases for its 
application, including, as relevant here, that the rulemaking is 
clarifying, corrective, or procedural in nature. The categorical 
exclusion does not limit the Commission to invoking only one of these 
bases, nor do Public Interest Organizations elaborate on why the 
Commission is precluded from doing so.
    454. Finally, contrary to Public Interest Organizations' claim, the 
Commission was not required to initiate a scoping process for the 
application of the categorical exclusion to the final rule. Public 
Interest Organizations appear to erroneously conflate the definition of 
``scoping process'' with the definition of ``NEPA process.'' The CEQ 
regulations address requirements for scoping only when an EIS is 
prepared.\857\ Notwithstanding that there is no requirement to provide 
for scoping for a categorical exclusion, all commenters, including 
Public Interest Organizations, now have had ample opportunity to 
provide comments on the application of the categorical exclusion, which 
they have presented in their rehearing requests.
---------------------------------------------------------------------------

    \857\ 40 CFR 1501.7 (``As soon as practicable after its decision 
to prepare an environmental impact statement and before the scoping 
process the lead agency shall publish a notice of intent'' to 
prepare an EIS). Moreover, CEQ guidance addressing whether scoping 
applies to EAs, states that where an EA is being prepared, ``useful 
information might result from early participation . . . in a scoping 
process'' CEQ, Forty Most Asked Questions Concerning CEQ's National 
Environmental Policy Act Regulations, 46 FR 18,026, Q. 13 (Mar. 17, 
1981) (emphasis added).
---------------------------------------------------------------------------

3. That the Commission Prepared NEPA Analyses for the Promulgation of 
the Original PURPA Rule and Other Prior Rulemakings Does Not Mean That 
Such Analysis Was Possible or Required Here
    455. As discussed in the final rule, the Commission prepared an EA 
and EIS for its initial rules implementing PURPA in 1980.\858\ The 
Commission explained that the EA for Order No. 70 was based on a market 
penetration study and that, to carry out the market penetration study, 
the EA had to make the simplifying assumption that the mere 
implementation of PURPA would necessarily result in the development and 
operation of certain types of generation facilities that would not 
otherwise be developed.\859\ The Commission stated that, based on these 
types of facilities, the EA conducted in 1980 identified specific 
resource conflicts related to each type of facility, which were nothing 
more than a generalized listing of potential impacts.\860\
---------------------------------------------------------------------------

    \858\ Order No. 872, 172 FERC ] 61,041 at P 728.
    \859\ Id. P 729 (citing Order No. 70-E, 46 FR 33,025, 33,026 
(June 18, 1981); Small Power Production and Cogeneration 
Facilities--Environmental Findings; No Significant Impact and Notice 
of Intent To Prepare Environmental Impact Statement, 45 FR 23,661, 
23,664 (Apr. 8, 1980) (Original PURPA EA)).
    \860\ Original PURPA EA, 45 FR at 23,664.
---------------------------------------------------------------------------

    456. The Commission addressed comments on the NOPR that asserted 
that a NEPA analysis similarly should be possible for this rulemaking. 
The Commission explained that the assertions are undermined by the fact 
that circumstances have changed significantly since the promulgation of 
the original PURPA Regulations in 1980.\861\ The Commission explained 
that, prior to 1980, essentially no QF generation technologies or other 
independent generation facilities (other than those used to supply the 
loads of the owners rather than to sell at wholesale) had been 
constructed. The Commission explained that by contrast, today QF 
generation technologies and other independent generation facilities are 
common, and they are predominantly built and operated outside of PURPA.
---------------------------------------------------------------------------

    \861\ Order No. 872, 172 FERC ] 61,041 at P 731.
---------------------------------------------------------------------------

    457. The Commission further explained that, because there was 
virtually no QF or independent power development in 1980, the original 
PURPA EA could reasonably project that the incentives created by PURPA 
and the original PURPA Regulations would lead to increased development 
of

[[Page 86723]]

power generated by QF technologies.\862\ The Commission stated that its 
market penetration study was based on these projections.
---------------------------------------------------------------------------

    \862\ Id. P 732.
---------------------------------------------------------------------------

    458. The Commission noted that, by contrast, it is not possible 
here to make simplifying assumptions that the mere implementation of 
the revised regulations necessarily would result in specific changes in 
the development of particular generation technologies compared to the 
status quo.\863\ The Commission explained that the revisions to the 
PURPA Regulations are premised on a finding that, even after the 
revisions, the PURPA Regulations will continue to encourage QFs. The 
Commission found that, consequently, there is no way to estimate 
whether any reduction in QF development, as opposed to the status quo, 
will be focused on one or more of the many different types of QF 
technologies, some of which are renewable resources and some of which 
are fueled by fossil fuels \864\ and have emissions comparable to non-
QF fossil fueled generators. The Commission explained that, because the 
rule primarily increases state flexibility in setting QF rates, 
including giving states the option of not changing their current rate-
setting approaches, there is no way to develop any estimate of the 
location or size of any hypothetical reduction in QF development.
---------------------------------------------------------------------------

    \863\ Id. P 733.
    \864\ This would include both cogeneration, which typically is 
fossil fueled, and those small power production facilities that are 
fueled by waste, which would include a range of fossil fuel-based 
waste. See 18 CFR 292.202(b), 292.204(b)(1).
---------------------------------------------------------------------------

    459. The Commission stated that renewable generation technologies 
today are commonly, and even predominantly, built and operated outside 
of PURPA.\865\ The Commission explained that current projections show 
that most new generation construction will be of renewable resources 
\866\ and cost of renewables has declined so much that in some regions 
renewables are the most cost effective new generation technology 
available.\867\ The Commission found that, even if the final rule were 
to result in reduced renewable QF development, there is little 
likelihood today that hypothetical, unbuilt QFs necessarily would be 
replaced by new conventional fossil fuel generation.
---------------------------------------------------------------------------

    \865\ Order No. 872, 172 FERC ] 61,041 at P 734.
    \866\ EIA, Annual Energy Outlook 2020, at tbl. 9 (Jan. 29, 2020) 
(in table see rows labeled Cumulative Planned Additions and 
Cumulative Unplanned Additions in the reference case) (Annual Energy 
Outlook 2020), https://www.eia.gov/outlooks/aeo/.
    \867\ Order No. 872, 172 FERC ] 61,041 at P 734.
---------------------------------------------------------------------------

    460. The Commission found that, alternatively, in the absence of 
these hypothetical, unbuilt QFs, existing generation units--whose 
current emissions, if any, would already be part of the baseline for 
any environmental analysis of the impacts of the final rule--might 
continue to operate without any change in their emissions; in sum, in 
the absence of these hypothetical, unbuilt QFs, emissions would remain 
at the baseline and might not increase at all.\868\ The Commission 
explained that, in the current environment where stagnant load growth 
has prevailed in recent years, this would seem to be a more likely 
scenario than an alternative where these hypothetical, unbuilt QFs are 
replaced by brand new fossil fuel generation that would increase 
emissions over the baseline.
---------------------------------------------------------------------------

    \868\ Id. P 735.
---------------------------------------------------------------------------

    461. The Commission explained that, given these facts, it would not 
be possible to perform a market penetration study of the effects of the 
final rule that would not be wholly speculative.\869\ The Commission 
found that, without such a study, there could be no analysis defining 
the types and geographic location of facilities that could serve as the 
basis for any NEPA analysis similar to that performed in 1980.
---------------------------------------------------------------------------

    \869\ Id. P 736.
---------------------------------------------------------------------------

a. Requests for Rehearing
    462. Northwest Coalition and Public Interest Organizations assert 
that, in addition to the NEPA analysis for Order No. 70, the Commission 
has conducted a NEPA analysis for prior rulemakings, which they argue 
undermines the Commission's claim that the impacts here are too 
speculative and uncertain to prepare an EA or EIS.\870\ Specifically, 
Northwest Coalition and Public Interest Organizations point to the 
competitive bidding NOPR under section 210 of PURPA \871\ and Order No. 
888.\872\
---------------------------------------------------------------------------

    \870\ Northwest Coalition Request for Rehearing at 59; Public 
Interest Organizations Request for Rehearing at 26-30.
    \871\ Northwest Coalition Request for Rehearing at 59; Public 
Interest Organizations Request for Rehearing at 28 (citing Bidding 
NOPR, FERC Stats. & Regs. ] 32,455 at 32,047).
    \872\ Northwest Coalition Request for Rehearing at 59; Public 
Interest Organizations Request for Rehearing at 29 (citing Promoting 
Wholesale Competition Through Open Access Non-Discriminatory 
Transmission Services by Public Utilities; Recovery of Stranded 
Costs by Public Utilities and Transmitting Utilities, Order No. 888, 
FERC Stats. & Regs. ] 31,036 (1996) (cross-referenced at 75 FERC ] 
61,080 and 61 FR 21,540 (May 10, 1996)), order on reh'g, Order No. 
888-A, FERC Stats. & Regs. ] 31,048 (cross-referenced at 78 FERC ] 
61,220 and 62 FR 12,274 (Mar. 14, 1997)), order on reh'g, Order No. 
888-B, 81 FERC ] 61,248 (1997) (cross-referenced at 62 FR 64,688 
(Dec. 9, 1997), order on reh'g, Order No. 888-C, 82 FERC ] 61,046 
(1998), aff'd in relevant part sub nom. Transmission Access Pol'y 
Study Grp. v. FERC, 225 F.3d 667, aff'd sub nom. N.Y. v. FERC, 535 
U.S. 1 (2002)).
---------------------------------------------------------------------------

    463. Public Interest Organizations argue that, because an EA was 
prepared for Order No. 70, the Commission ``has experience doing the 
very thing it alleges is so impossibly burdensome.'' \873\ Public 
Interest Organizations add that, with respect to Order No. 70, the 
Commission acknowledged that its NEPA analysis contains uncertainties 
but is nevertheless required to assess the environmental effects to the 
fullest extent possible.\874\ They add that Order No. 70 states that 
the proposed rules did not authorize or fund a particular project or 
forbid or authorize the use of certain fuels, but the Commission 
nevertheless prepared a NEPA analysis.\875\ Public Interest 
Organizations also argue that, in Order No. 70, the Commission was able 
to develop a specific methodology for predicting its effects on QF 
development and should be able to do so here as well.\876\
---------------------------------------------------------------------------

    \873\ Public Interest Organizations Request for Rehearing at 26.
    \874\ Id. at 26-27 (citing Order No. 70, FERC Stats. & Regs. ] 
30,134).
    \875\ Id. at 27.
    \876\ Id.
---------------------------------------------------------------------------

    464. Northwest Coalition asserts that that the Commission's 
statement in the final rule that the NEPA analysis for Order No. 70 was 
simpler (because very few renewable cogeneration facilities were online 
prior to the rule) fails to address how the Commission was able to 
conduct NEPA analyses for later rulemakings with equal or greater 
magnitude and complexity than the current case.\877\ Similarly, Public 
Interest Organizations claim that the Commission cannot underplay its 
past modeling efforts and could use similar methodology, or 
advancements in modern modeling software that has significantly 
improved over the last 40 years, to model the final rule's potential 
impacts.\878\ As an example, Northwest Coalition and Public Interest 
Organizations point to the Commission's environmental analysis for the 
competitive bidding NOPR and Order No. 888, which they claim involved 
uncertainties and more complex market changes than the final rule.\879\ 
Related to Order No. 888 specifically, Public Interest Organizations 
argue that the

[[Page 86724]]

Commission was able to conduct complex modeling to forecast emissions 
based on simulations of power generation patterns and should be able to 
reverse the modeling here to forecast the effects of the final 
rule.\880\
---------------------------------------------------------------------------

    \877\ Northwest Coalition Request for Rehearing at 59.
    \878\ Public Interest Organizations Request for Rehearing at 29.
    \879\ Northwest Coalition Request for Rehearing at 59; Public 
Interest Organizations Request for Rehearing at 28-29.
    \880\ Public Interest Organizations Request for Rehearing at 29-
30.
---------------------------------------------------------------------------

b. Commission Determination
    465. We reiterate that the Commission considers all matters before 
it, including rulemakings, on a case-by-case basis as to whether an 
EIS, EA, or a categorical exclusion is appropriate. As the Commission 
stated in the final rule, the basis for its NEPA analysis for Order No. 
70 was the ability to conduct a market penetration study.\881\ However, 
circumstances since the promulgation of Order No. 70 have changed 
significantly, making it impossible to perform a market penetration 
study of the effects of the final rule that would not be wholly 
speculative. This is due in large part to the fact that renewable 
technologies that are commonly adopted by QFs are also commonly adopted 
by non-QF generation developers today.\882\ In contrast, in 1980, 
essentially no QF technologies, renewable or otherwise, were being 
built by non-QFs.\883\ Thus, it was possible in 1980 to assume that 
certain generation technologies would only be deployed if the PURPA 
Regulations were issued, and that assumption enabled a market 
penetration study that could underpin an analysis of the environmental 
impact of deploying those technologies.\884\ These same assumptions 
cannot be made today. Renewable technology, for example, is being 
widely deployed without PURPA support; thus, it is impossible to assume 
that any potential impact of this rule change will necessarily reduce 
the deployment of renewables because PURPA is no longer the only route, 
or even the predominant route, to such development.\885\ To the 
contrary, as much as 90 percent of all renewable capacity placed in 
service today was developed outside of PURPA.\886\
---------------------------------------------------------------------------

    \881\ Order No. 872, 172 FERC ] 61,041 at P 729.
    \882\ Id. P 731.
    \883\ Id.
    \884\ Id. PP 731-32.
    \885\ Id. PP 731-34.
    \886\ See id. P 240.
---------------------------------------------------------------------------

    466. We also disagree with Northwest Coalition's and Public 
Interest Organizations' arguments that the Commission should be able to 
prepare a NEPA analysis similar to those for the competitive bidding 
NOPR and Order No. 888, using similar methodology and advancements in 
modern modeling software. Contrary to Northwest Coalition's and Public 
Interest Organizations' assertions, the Commission's ability to prepare 
NEPA analyses in these prior rulemakings does not facilitate our 
ability to prepare an EA or EIS for this rulemaking. While we agree 
that modelling technology has advanced since the Commission conducted a 
NEPA analysis in these prior rulemakings, the Commission would be 
required to make too many unsupported assumptions to undertake an 
analysis in this case, which would result in a speculative and 
meaningless analysis.
    467. For example, the Commission would need to assume that all 
affected QFs would be renewables and all replacement utility generation 
would be conventional emitting resources, which as previously explained 
would not necessarily be true in either case.\887\ Similar to the 
original PURPA rulemaking, the technologies that could qualify for QF 
status and independent generation more broadly were not widely used 
outside of the PURPA context when studies were conducted for the 
competitive bidding NOPR, so the Commission could make basic 
assumptions about the effects the competitive bidding NOPR would have 
on QF development.\888\ The same assumptions cannot be made about the 
final rule as the technologies that renewable QFs use are now 
widespread and developed outside of PURPA, making any market 
penetration study wholly speculative.
---------------------------------------------------------------------------

    \887\ Id. P 734.
    \888\ Id. PP 731-32.
---------------------------------------------------------------------------

    468. Finally, we disagree that the Commission could reverse 
engineer the modeling used to forecast emissions based on simulations 
of power generation patterns in Order No. 888 to forecast the effects 
of the final rule in a NEPA analysis. The modeling from prior 
rulemakings is not applicable here. Order No. 888 involved the direct 
regulation of entities under the Commission's jurisdiction to impose 
open access requirements, and it was possible to estimate potential 
changes in conventional generation (gas and coal) development and 
dispatch in light of the advent of open access to the transmission 
grid.\889\ In contrast, under the final rule, and PURPA more generally, 
the Commission sets rules for states and nonregulated electric 
utilities to implement. The Commission cannot predict how the states 
will choose to implement the final rule--if at all--and what effect 
that will have on QF development, whether renewable QFs will be 
impacted more than non-renewable QFs or whether non-QFs will develop 
renewables or conventional generation.
---------------------------------------------------------------------------

    \889\ See Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,861-
96.
---------------------------------------------------------------------------

V. Regulatory Flexibility Act Certification

    469. The Regulatory Flexibility Act of 1980 (RFA) \890\ generally 
requires a description and analysis of rules that will have significant 
economic impact on a substantial number of small entities. No comments 
on the Regulatory Flexibility Act were filed on rehearing, and the 
comments on rehearing regarding burden and cost estimates are addressed 
in the Information Collection Statement section.
---------------------------------------------------------------------------

    \890\ 5 U.S.C. 601-12.
---------------------------------------------------------------------------

    470. As discussed in the final rule, we estimate that annual 
additional compliance costs on industry (detailed above) will be 
approximately $1,149,965 (or an average additional burden and cost per 
response, of 3.187 hrs. and the corresponding $264.51) to comply with 
these requirements.\891\ Therefore, pursuant to section 605(b) of the 
RFA, we still conclude that this rule will not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \891\ Order No. 872, 172 FERC ] 61,041 at P 748.
---------------------------------------------------------------------------

VI. Document Availability

    471. In addition to publishing the full text of this document in 
the Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
internet through the Commission's Home Page (http://www.ferc.gov). At 
this time, the Commission has suspended access to the Commission's 
Public Reference Room due to the President's March 13, 2020 
proclamation declaring a National Emergency concerning the Novel 
Coronavirus Disease (COVID-19).
    472. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    473. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

[[Page 86725]]

VII. Effective Dates and Congressional Notification

    474. The further revised regulation in this order is effective 
February 16, 2021. No other changes to the Commission's regulations 
have been made on rehearing to the final rule, however we modify the 
instructions to the Form No. 556. Out of an abundance of caution, this 
order addressing arguments raised on rehearing is being submitted to 
the Administrator of the Office of Information and Regulatory Affairs 
of OMB, Senate, House, and Government Accountability Office.

List of Subjects in 18 CFR Part 292

    Electric power plants; Electric utilities, Reporting and 
recordkeeping requirements.

    By the Commission. Commissioner Glick is dissenting in part with 
a separate statement attached.

    Issued: November 19, 2020.
Kimberly D. Bose,
Secretary.
    In consideration of the foregoing, the Commission amends part 292, 
chapter I, title 18, Code of Federal Regulations, as follows.

SUBCHAPTER K--REGULATIONS UNDER THE PUBLIC UTILITY REGULATORY 
POLICIES ACT OF 1978

* * * * *

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

0
1. The authority citation for part 292 continues to read as follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352.


0
2. Amend Sec.  292.309 by revising paragraphs (c), (d), (e), and (f) to 
read as follows:


Sec.  292.309  Termination of obligation to purchase from qualifying 
facilities.

* * * * *
    (c) For purposes of paragraphs (a)(1), (2) and (3) of this section, 
with the exception of paragraph (d) of this section, there is a 
rebuttable presumption that a qualifying facility has nondiscriminatory 
access to the market if it is eligible for service under a Commission-
approved open access transmission tariff or Commission-filed 
reciprocity tariff, and Commission-approved interconnection rules.
    (1) If the Commission determines that a market meets the criteria 
of paragraphs (a)(1), (2) or (3) of this section, and if a qualifying 
facility in the relevant market is eligible for service under a 
Commission-approved open access transmission tariff or Commission-filed 
reciprocity tariff, a qualifying facility may seek to rebut the 
presumption of access to the market by demonstrating, inter alia, that 
it does not have access to the market because of operational 
characteristics or transmission constraints.
    (2) For purposes of paragraphs (a)(1), (2), and (3) of this 
section, a qualifying small power production facility with a capacity 
between 5 megawatts and 20 megawatts may additionally seek to rebut the 
presumption of access to the market by demonstrating that it does not 
have access to the market in light of consideration of other factors, 
including, but not limited to:
    (i) Specific barriers to connecting to the interstate transmission 
grid, such as excessively high costs and pancaked delivery rates;
    (ii) Unique circumstances impacting the time or length of 
interconnection studies or queues to process the small power production 
facility's interconnection request;
    (iii) A lack of affiliation with entities that participate in the 
markets in paragraphs (a)(1), (2), and (3) of this section;
    (iv) The qualifying small power production facility has a 
predominant purpose other than selling electricity and should be 
treated similarly to qualifying cogeneration facilities;
    (v) The qualifying small power production facility has certain 
operational characteristics that effectively prevent the qualifying 
facility's participation in a market; or
    (vi) The qualifying small power production facility lacks access to 
markets due to transmission constraints. The qualifying small power 
production facility may show that it is located in an area where 
persistent transmission constraints in effect cause the qualifying 
facility not to have access to markets outside a persistently congested 
area to sell the qualifying facility output or capacity.
    (d)(1) For purposes of paragraphs (a)(1), (2), and (3) of this 
section, there is a rebuttable presumption that a qualifying 
cogeneration facility with a capacity at or below 20 megawatts does not 
have nondiscriminatory access to the market.
    (2) For purposes of paragraphs (a)(1), (2), and (3) of this 
section, there is a rebuttable presumption that a qualifying small 
power production facility with a capacity at or below 5 megawatts does 
not have nondiscriminatory access to the market.
    (3) Nothing in paragraphs (d)(1) through (3) affects the rights the 
rights or remedies of any party under any contract or obligation, in 
effect or pending approval before the appropriate State regulatory 
authority or non-regulated electric utility on or before February 16, 
2021, to purchase electric energy or capacity from or to sell electric 
energy or capacity to a small power production facility between 5 
megawatts and 20 megawatts under this Act (including the right to 
recover costs of purchasing electric energy or capacity).
    (4) For purposes of implementing paragraphs (d)(1) and (2) of this 
section, the Commission will not be bound by the standards set forth in 
Sec.  292.204(a)(2).
    (e) Midcontinent Independent System Operator, Inc. (MISO), PJM 
Interconnection, L.L.C. (PJM), ISO New England Inc. (ISO-NE), and New 
York Independent System Operator, Inc. (NYISO) qualify as markets 
described in paragraphs (a)(1)(i) and (ii) of this section, and there 
is a rebuttable presumption that small power production facilities with 
a capacity greater than 5 megawatts and cogeneration facilities with a 
capacity greater than 20 megawatts have nondiscriminatory access to 
those markets through Commission-approved open access transmission 
tariffs and interconnection rules, and that electric utilities that are 
members of such regional transmission organizations or independent 
system operators should be relieved of the obligation to purchase 
electric energy from the qualifying facilities.
    (1) A qualifying facility above 20 MW may seek to rebut this 
presumption by demonstrating, inter alia, that:
    (i) The qualifying facility has certain operational characteristics 
that effectively prevent the qualifying facility's participation in a 
market; or
    (ii) The qualifying facility lacks access to markets due to 
transmission constraints. The qualifying facility may show that it is 
located in an area where persistent transmission constraints in effect 
cause the qualifying facility not to have access to markets outside a 
persistently congested area to sell the qualifying facility output or 
capacity.
    (2) A small power producer qualifying facility between 5 megawatts 
and 20 megawatts may show it does not have access to the market in 
light of consideration of other factors, including, but not limited to:
    (i) Specific barriers to connecting to the interstate transmission 
grid, such as excessively high costs and pancaked delivery rates;

[[Page 86726]]

    (ii) Unique circumstances impacting the time or length of 
interconnection studies or queues to process the small power production 
facility's interconnection request;
    (iii) A lack of affiliation with entities that participate in the 
markets in section Sec.  292.309(a)(1), (2), and (3);
    (iv) The qualifying small power production facility has a 
predominant purpose other than selling electricity and should be 
treated similarly to qualifying cogeneration facilities;
    (v) The qualifying small power production facility has certain 
operational characteristics that effectively prevent the qualifying 
facility's participation in a market; or
    (vi) The qualifying small power production facility lacks access to 
markets due to transmission constraints. The qualifying small power 
production facility may show that it is located in an area where 
persistent transmission constraints in effect cause the qualifying 
facility not to have access to markets outside a persistently congested 
area to sell the qualifying facility output or capacity.
    (f) The Electric Reliability Council of Texas (ERCOT) qualifies as 
a market described in paragraph (a)(3) of this section, and there is a 
rebuttable presumption that small power production facilities with a 
capacity greater than five megawatts and cogeneration facilities with a 
capacity greater than 20 megawatts have nondiscriminatory access to 
that market through Public Utility Commission of Texas (PUCT) approved 
open access protocols, and that electric utilities that operate within 
ERCOT should be relieved of the obligation to purchase electric energy 
from the qualifying facilities.
    (1) A qualifying facility above 20 MW may seek to rebut this 
presumption by demonstrating, inter alia, that:
    (i) The qualifying facility has certain operational characteristics 
that effectively prevent the qualifying facility's participation in a 
market; or
    (ii) The qualifying facility lacks access to markets due to 
transmission constraints. The qualifying facility may show that it is 
located in an area where persistent transmission constraints in effect 
cause the qualifying facility not to have access to markets outside a 
persistently congested area to sell the qualifying facility output or 
capacity.
    (2) A small power producer qualifying facility between 5 megawatts 
and 20 megawatts may show it does not have access to the market in 
light of consideration of other factors, including, but not limited to:
    (i) Specific barriers to connecting to the interstate transmission 
grid, such as excessively high costs and pancaked delivery rates;
    (ii) Unique circumstances impacting the time or length of 
interconnection studies or queues to process the small power production 
facility's interconnection request;
    (iii) A lack of affiliation with entities that participate in the 
markets in section Sec.  292.309(a)(1), (2), and (3);
    (iv) The qualifying small power production facility has a 
predominant purpose other than selling electricity and should be 
treated similarly to qualifying cogeneration facilities;
    (v) The qualifying small power production facility has certain 
operational characteristics that effectively prevent the qualifying 
facility's participation in a market; or
    (vi) The qualifying small power production facility lacks access to 
markets due to transmission constraints. The qualifying small power 
production facility may show that it is located in an area where 
persistent transmission constraints in effect cause the qualifying 
facility not to have access to markets outside a persistently congested 
area to sell the qualifying facility output or capacity.
* * * * *

    Note:  The following appendix will not appear in the Code of 
Federal Regulations.

Appendix B

Revised Form No. 556

BILLING CODE 6717-01-P

[[Page 86727]]

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[GRAPHIC] [TIFF OMITTED] TR30DE20.023


[[Page 86750]]


BILLING CODE 6717-01-C

United States of America

Federal Energy Regulatory Commission

------------------------------------------------------------------------
                                                            Docket Nos.
------------------------------------------------------------------------
Qualifying Facility Rates and Requirements..............     RM19-15-001
Implementation Issues Under the Public Utility               AD16-16-001
 Regulatory Policies Act of 1978........................
------------------------------------------------------------------------

(Issued November 19, 2020)

    GLICK, Commissioner, dissenting in part:
    1. I dissent in part from today's order on rehearing (Rehearing 
Order \1\) because it upholds the overwhelming majority of Order No. 
872,\2\ which effectively gutted the Commission's implementation of 
the Public Utility Regulatory Policies Act (PURPA).\3\ The 
Commission's basic responsibilities under PURPA are three-fold: (1) 
To encourage the development of qualifying facilities (QFs); (2) to 
prevent discrimination against QFs by incumbent utilities; and (3) 
to ensure that the resulting rates paid by electricity customers 
remain just and reasonable, in the public interest, and do not 
exceed the incremental costs to the utility of alternative 
energy.\4\ I do not believe that Order No. 872 satisfies those 
responsibilities.
---------------------------------------------------------------------------

    \1\ Qualifying Facility Rates and Requirements Implementation 
Issues Under the Public Utility Regulatory Policies Act of 1978, 
Order No. 872-A, 173 FERC ] 61,158 (2020).
    \2\ Qualifying Facility Rates and Requirements Implementation 
Issues Under the Public Utility Regulatory Policies Act of 1978, 
Order No. 872, 172 FERC ] 61,041 (2020).
    \3\ Public Law 95-617, 92 Stat. 3117 (1978).
    \4\ See 16 U.S.C. 824a-3(a)-(b) (2018).
---------------------------------------------------------------------------

    2. Although I have concerns about many of the individual changes 
imposed by the Order No. 872,\5\ I remain, on a broader level, 
dismayed that the Commission is attempting to accomplish via 
administrative fiat what Congress has repeatedly declined to do via 
legislation. I am especially disappointed because Congress expressly 
provided the Commission with a different avenue for ``modernizing'' 
our administration of PURPA. The Energy Policy Act of 2005 gave the 
Commission the authority to excuse utilities from their obligations 
under PURPA where QFs have non-discriminatory access to competitive 
wholesale markets.\6\ Had we pursued reforms based on those 
provisions, rather than gutting our longstanding regulations, I 
believe we could have reached a durable, consensus solution that 
would ultimately have done more for all interested parties.
---------------------------------------------------------------------------

    \5\ Those concerns notwithstanding, I supported certain aspects 
of Order No. 872, including the revisions to the ``one-mile'' rule, 
requiring that QFs demonstrate commercial viability before securing 
a legally enforceable obligation, and allowing stakeholders to 
protest a QF's self-certification. See Order No. 872, 172 FERC ] 
61,041 (Glick, Comm'r, dissenting in part at n.4).
    \6\ Public Law 109-58, 1253, 119 Stat. 594 (2005).
---------------------------------------------------------------------------

 PURPA's Continuing Relevance Is an Issue for Congress To 
Decide

    3. This proceeding began with a bang. The Commission championed 
its NOPR as a ``truly significant'' action that would fundamentally 
overhaul the Commission's implementation of PURPA.\7\ And so it was. 
The NOPR suggested altering almost every significant aspect of the 
Commission's PURPA regulations, thereby transforming the foundation 
on which the Commission had carried out its statutory responsibility 
to ``encourage'' the development of QFs for over four decades. 
Although Order No. 872 walked back some of the NOPR's most extreme 
proposals, it adopted the overwhelming majority of the NOPR, 
including all of its tenets. In so doing, the Commission upended the 
regulatory regime that has formed the basis of its implementation of 
PURPA almost since the day the statute was enacted.
---------------------------------------------------------------------------

    \7\ Sept. 2019 Commission Meeting Tr. at 8.
---------------------------------------------------------------------------

    4. I partially dissented from both the NOPR and Order No. 872 in 
large part because I believe that it is not the Commission's role to 
sit in judgment of a duly enacted statute and determine whether it 
has outlived its usefulness. As I explained, ``almost from the 
moment PURPA was passed, Congress began to hear many of the 
arguments being used today to justify scaling the law back.'' \8\ 
Congress, however, has seen fit to significantly amend PURPA only 
once in its more-than-forty-year lifespan. As part of the Energy 
Policy Act of 2005, Congress amended PURPA, leaving in place the 
law's basic framework, while adding a series of provisions that 
allowed the Commission to excuse utilities from its requirements in 
regions of the country with sufficiently competitive wholesale 
energy markets.\9\ And while Congress considered numerous proposals 
to further reform the law, it never saw fit to act on them.\10\ 
Against that background, I could not support my colleagues' 
willingness to ``remove[ ] an important debate from the halls of 
Congress and isolate[ ] it within the Commission.'' \11\ Whatever 
your position on PURPA--and I recognize views vary widely--``what 
should concern all of us is that resolving these sorts of questions 
by regulatory edict rather than congressional legislation is neither 
a durable nor desirable approach for developing energy policy.'' 
\12\
---------------------------------------------------------------------------

    \8\ Qualifying Facility Rates and Requirements Implementation 
Issues Under the Public Utility Regulatory Policies Act of 1978, 
Notice of Proposed Rulemaking, 168 FERC ] 61,184 (2019) (NOPR) 
(Glick, Comm'r, dissenting in part at P 3).
    \9\ Supra note 6.
    \10\ See Solar Energy Industries Association (SEIA) Comments at 
11.
    \11\ NOPR, 168 FERC ] 61,184 (Glick, Comm'r, dissenting in part 
at P 4).
    \12\ Id.
---------------------------------------------------------------------------

    5. Order No. 872 and today's order on rehearing retreat from 
much of the original rationale used to support the NOPR, but the 
effect is the same: The Commission is administratively gutting 
PURPA. Make no mistake, although the Commission has dropped much of 
the NOPR preamble's opening screed against PURPA's continuing 
relevance, Order No. 872 is a full-throated endorsement of the 
conclusion that PURPA has outlived its usefulness. And while walking 
back the argument that PURPA is antiquated may reduce the risk that 
Order No. 872 is overturned on appeal, that does not change the fact 
that the rule usurps what should be Congress's proper role.
    6. Throughout this proceeding, the Commission has been quick to 
point to Congress's directive to from time to time amend our 
regulations implementing PURPA.\13\ Order No. 872, however, is a 
wholesale overhaul of the Commission's PURPA regulations that 
reflects a deep skepticism of the need for the law we are charged 
with implementing. I continue to doubt that is what Congress had in 
mind when it gave us responsibility for periodically updating our 
implementing regulations.
---------------------------------------------------------------------------

    \13\ Order No. 872-A, 173 FERC ] 61,158 at P 115; Order No. 872, 
172 FERC ] 61,041 at PP 24, 48, 54, 67, 296, 628; NOPR, 168 FERC ] 
61,184 at PP 4, 16, 29, 155.
---------------------------------------------------------------------------

 The Commission's Proposed Reforms Are Inconsistent With Our 
Statutory Mandate

    7. PURPA directs the Commission to adopt such regulations as are 
``necessary to encourage'' QFs,\14\ including by establishing rates 
for sales by QFs that are just and reasonable and by ensuring that 
such rates ``shall not discriminate'' against QFs.\15\ The changes 
adopted by the Commission in Order No. 872 fail to meet that 
standard. In addition, many of the reforms are unsupported--and, in 
many cases, contradicted--by the evidence in the record.\16\ 
Accordingly, I believe Order No. 872 is not just poor public policy, 
but also arbitrary and capricious agency action.
---------------------------------------------------------------------------

    \14\ A QF is a cogeneration facility or a small power production 
facility. See 18 CFR 292.101(b)(1) (2019).
    \15\ 16 U.S.C. 824a-3(a)-(b).
    \16\ Genuine Parts Co. v. EPA, 890 F.3d 304, 312 (D.C. Cir. 
2018) (``[A]n agency cannot ignore evidence that undercuts its 
judgment; and it may not minimize such evidence without adequate 
explanation.'') (citations omitted); id. (``Conclusory explanations 
for matters involving a central factual dispute where there is 
considerable evidence in conflict do not suffice to meet the 
deferential standards of our review.'' (quoting Int'l Union, United 
Mine Workers v. Mine Safety & Health Admin., 626 F.3d 84, 94 (D.C. 
Cir. 2010)).
---------------------------------------------------------------------------

A. Avoided Cost

    8. The Final Rule adopted two fundamental changes to how QF 
rates are determined. First, and most importantly, it eliminated the 
requirement that a utility must afford a QF the option to enter a 
contract at a rate for energy that is either fixed for the duration 
of the contract or determined at the outset--e.g., based on a 
forward curve reflecting estimated prices over the term of the 
contract.\17\ Second, it presumptively allows states to set the rate 
for as-available energy at the relevant locational marginal price 
(LMP).\18\ The record in this proceeding does not support either of 
those changes.
---------------------------------------------------------------------------

    \17\ Order No. 872, 172 FERC ] 61,041 at P 253.
    \18\ Id. P 151.
---------------------------------------------------------------------------

i. Elimination of Fixed Energy Rate

    9. Prior to Order No. 872, a QF generally had two options for 
selling its output to a utility. Under the first option, the QF 
could sell its energy on an as-available basis and

[[Page 86751]]

receive an avoided cost rate calculated at the time of delivery. 
This is generally known as the as-available option. Under the second 
option, a QF could enter into a fixed-duration contract at an 
avoided cost rate that was fixed either at the time the QF 
established a legally enforceable obligation (LEO) or at the time of 
delivery. This is generally known as the contract option. The 
ability to choose between the two options played an important role 
in fostering the development of a variety of QFs. For example, the 
as-available option provided a way for QFs whose principal business 
was not generating electricity, such as industrial cogeneration 
facilities, to monetize their excess electricity generation. The 
contract option, by contrast, provided QFs who were principally in 
the business of generating electricity, such as small renewable 
electricity generators, a stable option that would allow them to 
secure financing. Together, the presence of these two options 
allowed the Commission to satisfy its statutory mandate to encourage 
the development of QFs and ensured that the rates they received were 
non-discriminatory.
    10. Order No. 872 eliminated the requirement that states provide 
a contract option that includes a fixed energy rate.\19\ Prior to 
this proceeding, the Commission recognized time and again that 
fixed-price contracts play an essential role in financing QF 
facilities, making them a necessary element of any effort to 
encourage QF development, at least in certain regions of the 
country.\20\ In addition, fixed-price contracts have helped prevent 
discrimination against QFs by ensuring that they are not 
structurally disadvantaged relative to vertically integrated 
utilities that are guaranteed to recover the costs of their 
prudently incurred investments through retail rates.\21\
---------------------------------------------------------------------------

    \19\ Id. P 253.
    \20\ See, e.g., Small Power Production and Cogeneration 
Facilities; Regulations Implementing Section 210 of the Public 
Utility Regulatory Policies Act of 1978, Order No. 69, FERC Stats. & 
Regs. ] 30,128, at 30,880, order on reh'g sub nom. Order No. 69-A, 
FERC Stats. & Regs. ] 30,160 (1980), aff'd in part vacated in part, 
Am. Elec. Power Serv. Corp. v. FERC, 675 F.2d 1226 (D.C. Cir. 1982), 
rev'd in part sub nom. Am. Paper Inst. v. Am. Elec. Power Serv. 
Corp., 461 U.S. 402 (1983) (justifying the rule on the basis of 
``the need for certainty with regard to return on investment in new 
technologies''); NOPR, 168 FERC ] 61,184 at P 63 (``The Commission's 
justification for allowing QFs to fix their rate at the time of the 
LEO for the entire term of a contract was that fixing the rate 
provides certainty necessary for the QF to obtain financing.''); 
Windham Solar LLC, 157 FERC ] 61,134, at P 8 (2016).
    \21\ See, e.g., ELCON Comments at 21-22 (``More variable avoided 
cost rates will result in unintended consequences that result in 
less competitive conditions and may leave consumers worse off, as 
utility self-builds do not face the same market risk exposure. 
Pushing more market risk to QFs while utility assets remain 
insulated from markets creates an investment risk asymmetry. This 
puts QFs at a competitive disadvantage.''); South Carolina Solar 
Business Association Comments at 8 (``[A]s-available rates for QFs 
in vertically-integrated states therefore discriminate against QFs 
by requiring QFs to enter into contracts at substantially and 
unjustifiably different terms than incumbent utilities.''); Southern 
Environmental Law Center Supplement Comments, Docket No. AD16-16-
000, at 6-8 (Oct. 17, 2018) (explaining that vertically integrated 
utilities in Indiana, Alabama, Virginia and Tennessee only offer 
short-term rates to QFs); sPower Comments at 13; see also Statement 
of Travis Kavulla, Docket No. AD16-16-000, at 2 (June 29, 2016).
---------------------------------------------------------------------------

    11. The record before us confirms the continuing importance of 
the fixed-price contract option for QFs. Numerous entities with 
experience in financing and developing QFs explain that a fixed 
revenue stream of some sort is necessary to obtain the financing 
needed to develop a new QF.\22\ In both Order No. 872 and today's 
order on rehearing, the Commission responds to that evidence with a 
reference to the general track record of independent power 
producers, and renewables developers in particular, that develop new 
resources without a regulatory guarantee of a fixed revenue 
stream.\23\ But the overwhelming majority of the Commission's 
statistics reflect development in RTO/ISO markets, where developers 
generally can rely on financing arrangements, such as commodity 
hedges, to lock-in the revenue needed to secure financing.\24\
---------------------------------------------------------------------------

    \22\ See, e.g., Public Interest Organizations Rehearing Request 
at 73-76; SEIA Comments at 29; North Carolina Attorney General's 
Office Comments at 5; ConEd Development Comments at 3; South 
Carolina Solar Business Association Comments at 6; sPower Comments 
at 11; Resources for the Future Comments at 6-7; Southeast Public 
Interest Organizations Comments at 9.
    \23\ Order No. 872-A, 173 FERC ] 61,158 at PP 150-151 (citing 
Order No. 872, 172 FERC ] 61,041 at P 340).
    \24\ See, e.g., EEI Comments at 36; sPower Comments at 12; 
Public Interest Organization Comments at n. 87 (fixed price 
contracts for non-QF generation); SEIA Rehearing Request at 14-15.
---------------------------------------------------------------------------

    12. Those products are far less ubiquitous--if they are 
available at all--outside of RTO/ISO markets.\25\ Accordingly, the 
success of relatively large independent power producers in the 
organized markets does not constitute substantial evidence 
suggesting that QFs will be able to finance new development outside 
RTO/ISO markets where PURPA plays a larger role.\26\ Indeed, the 
Commission's deliberate blurring of the lines between RTO/ISO 
markets and the rest of the country is the equivalent of arguing 
that Tommie and Hank Aaron ought to both be hall-of-famers because, 
together, they hit 768 home runs, while ignoring the fact that Hank 
was responsible for 755 of the brothers' 768 home runs.\27\
---------------------------------------------------------------------------

    \25\ See, e.g., SEIA Comments at 29-30 (``As both Mr. Shem and 
Mr. McConnell explain, financial hedge products are not available 
outside of ISO/RTO markets.''); Resources for the Future Comments at 
6-7 (``[W]hile hedge products do support wind and solar project 
financing, they would not be suited for most QF projects. To hedge 
energy prices, wind projects have used three products: Bank hedges, 
synthetic power purchase agreements (synthetic PPAs), and proxy 
revenue swaps. . . . From US project data for 2017 and 2018, the 
smallest wind project securing such a hedge was 78 MW, and most 
projects were well over 100 MW. Additionally, as hedges rely on 
wholesale market access and liquid electricity trading, all of the 
projects were in ISO regions.''); SEIA Rehearing Request at 18.
    \26\ See, e.g., Public Interest Organizations Rehearing Request 
at 74-78; Northwest Coalition Rehearing Request at 28.
    \27\ Compare https://en.wikipedia.org/wiki/Hank_Aaron with 
https://en.wikipedia.org/wiki/Tommie_Aaron. The Commission also 
points to the rate structure discussed in Town of Norwood v. FERC, 
962 F.2d 20, 21, 24 (D.C. Cir. 1992), ``variable energy rate/fixed 
capacity rate construct is the standard rate structure used 
throughout the electric industry.'' Order No. 872, 172 FERC ] 61,041 
at P 38; see also Order No. 872-A, 173 FERC ] 61,158 at P 143. I do 
not believe that the discussion of a single contract in a single 
case, decided roughly thirty years ago, is substantial evidence 
regarding the typical financing and contractual requirements of a QF 
in the contemporary electricity sector.
---------------------------------------------------------------------------

    13. The Commission next responds that PURPA does not require 
that QFs be financeable.\28\ That is true in a literal sense; 
nothing in PURPA directs the Commission to ensure that at least some 
QFs be financeable. But it does require the Commission to encourage 
their development, which we have previously equated with 
financeability.\29\ If the Commission is going to abandon that 
standard, it must then explain why what is left of its regulations 
provides the requisite encouragement--an explanation that is lacking 
from this order, notwithstanding the Commission's repeated 
assertions to the contrary.\30\
---------------------------------------------------------------------------

    \28\ See, e.g., Order No. 872-A, 173 FERC ] 61,158 at PP 145-
146, 172.
    \29\ See, e.g., Order No. 69, FERC Stats. & Regs. ] 30,128 at 
30,880 (finding that ``legally enforceable obligations are intended 
to reconcile the requirement that the rates for purchases equal to 
the utilities avoided cost with the need for qualifying facilities 
to be able to enter into contractual commitments, by necessity, on 
estimates of future avoided costs'' and ``the need for certainty 
with regard to return on investment in new technologies''); NOPR, 
168 FERC ] 61,184 at P 63 (``The Commission's justification for 
allowing QFs to fix their rate at the time of the LEO for the entire 
term of a contract was that fixing the rate provides certainty 
necessary for the QF to obtain financing.''). The Commission 
responds that ``[i]t is not necessary to prove that all potential 
QFs would be able to raise useful financing.'' Order No. 872-A, 173 
FERC ] 61,158 at P 175. Talk about moving the goal posts. No one has 
argued that this is the Commission's burden. Rather, the argument is 
that the Commission's reforms may render it impossible, or nearly 
so, for QFs outside the organized markets to obtain the necessary 
financing. Order No. 872, 172 FERC ] 61,041 (Comm'r, Glick, 
dissenting in part at PP 11-12); Public Interest Organizations at 
79-84. The Commission cannot skirt that point by knocking down a 
strawman, especially given the weight it is has historically given 
to the importance of financeability for QFs.
    \30\ See, e.g., Order No. 872-A, 173 FERC ] 61,158 at P 43.
---------------------------------------------------------------------------

    14. In addition, much of the Commission's justification for 
eliminating the fixed-price contract option for energy rests on the 
availability of a fixed-price contract option for capacity.\31\ 
Commission precedent, however, permits utilities to offer a capacity 
rate of zero to QFs when the utility does not

[[Page 86752]]

need incremental capacity.\32\ That means that, after Order No. 872, 
QF developers now face the very real prospect of not receiving any 
fixed revenue stream, whether for energy or capacity, on top the 
fact at they also may not be able to secure hedging products or 
other mechanisms needed to finance a new QF.\33\ It is hard for me 
to understand how the Commission can, with a straight face, claim to 
be encouraging QF development while at the same time eliminating the 
conditions necessary to develop QFs in the regions where they are 
being built.\34\
---------------------------------------------------------------------------

    \31\ See id. P 174; Order No. 872, 172 FERC ] 61,041 at P 36 
(``This assertion that the Commission has eliminated fixed rates for 
QFs is not correct. . . . The NOPR thus made clear: under the 
proposed revisions to 292.304(d), a QF would continue to be entitled 
to a contract with avoided capacity costs calculated and fixed at 
the time the LEO is incurred.'') (internal quotation marks omitted); 
id. P 237 (``The Commission stated that these fixed capacity and 
variable energy payments have been sufficient to permit the 
financing of significant amounts of new capacity in the RTOs and 
ISOs.'').
    \32\ See, e.g., Order No. 872, 172 FERC ] 61,041 at P 422 
(citing to City of Ketchikan, Alaska, 94 FERC ] 61,293, at 62,061 
(2001)).
    \33\ See, e.g., Electric Power Supply Association (EPSA) 
Rehearing Request at 13-14; Resources for the Future Comments at 6; 
SEIA Comments at 30; Southeast Public Interest Organizations 
Comments at 12.
    \34\ See Public Interest Organizations Comments at 10-11 
(``Obviously, rules that have an effect of discouraging QFs cannot 
be `necessary to' encouraging them.''); see also Massachusetts 
Attorney General Maura Healey Comments at 6 (``This action may 
reduce investor confidence and discourage future development. That 
outcome is a negative one for the Commonwealth and its 
ratepayers.'').
---------------------------------------------------------------------------

    15. The Commission also does not sufficiently explain how 
eliminating the fixed-price contract requirement is consistent with 
PURPA's requirement that rates ``shall not discriminate against'' 
QFs.\35\ Vertically integrated utilities effectively receive 
guaranteed fixed-price contracts through their rights to recover 
prudently incurred investments.\36\ QFs' equivalent right to receive 
fixed-price contracts for energy has to date proved an integral 
element of the Commission's ability to prevent discrimination 
against QFs.\37\ Neither Order No. 872 nor today's order on 
rehearing adequately explain how eliminating the fixed-price option 
is consistent with that prohibition or, moreover, how permitting QFs 
to receive variable rates for energy while any vertically integrated 
utility to which they sell electricity receives fixed rates is 
consistent with the Commission's obligation to encourage QF 
development.\38\
---------------------------------------------------------------------------

    \35\ 16 U.S. Code 824a-3(b)(2). Unlike provisions of the Federal 
Power Act, PURPA prohibits any discrimination against QFs, not just 
undue discrimination. See Order No. 872, 172 FERC ] 61,041 at P 82; 
see also EPSA Rehearing Request at 6; ELCON Comments at 21-22; South 
Carolina Solar Business Alliance Comments at 7-8; sPower Comments at 
13.
    \36\ Order No. 872, 172 FERC ] 61,041 at P 40.
    \37\ See supra note 20; Commissioner Slaughter Comments at 4.
    \38\ EPSA Rehearing Request at 8-9; Public Interest 
Organizations Comments at 51 (``[L]imiting QFs to contracts 
providing no price certainty for energy values, while non-QF 
generation regularly obtains fixed price contracts and utility-owned 
generation receives guaranteed cost recovery from captive 
ratepayers, constitutes discrimination.'').
---------------------------------------------------------------------------

    16. On rehearing, the Commission argues that both Congress and 
the Supreme Court ``recognize that PURPA treats QFs differently from 
purchasing utilities, rendering QFs not similarly situated to non-QF 
resources.'' \39\ As an initial matter, the question of whether 
entities are similarly situated is one that is relevant to 
evaluating whether any discrimination is undue.\40\ PURPA, however, 
prohibits any discrimination against QFs, not just undue 
discrimination.\41\ In any case, the congressional language cited by 
the Commission,\42\ which the Court reiterated, stands only for the 
proposition that Congress did not intend to apply traditional 
utility ratemaking concepts, such as guaranteed cost recovery, to 
QFs. But while Congress clearly envisioned different cost-recovery 
regimes for incumbent utilities and QFs, PURPA's prohibition on 
discrimination against QFs indicates that the ratemaking regime 
applicable to QFs can be no less favorable than that applied to 
incumbent purchasing utilities. Permitting QFs to receive only 
variable-rate contracts while incumbent utilities simultaneously 
receive what are functionally decades-long fixed price contracts 
through their retail rates plainly falls short of the standard.
---------------------------------------------------------------------------

    \39\ Order No. 872-A, 173 FERC ] 61,158 at P 142.
    \40\ See Public Interest Organizations Rehearing Request at 94-
95; Northwest Coalition Rehearing Request at 11-12.
    \41\ See supra note 35.
    \42\ Order No. 872-A, 173 FERC ] 61,158 at P 142 n.275.
---------------------------------------------------------------------------

    17. Finally, the Commission fails to explain why certain 
allegations of QF rates exceeding a utility's actual avoided cost 
require us to abandon fixed-price contracts.\43\ The Commission has 
long recognized that QF rates may exceed actual avoided costs, but, 
at the same time, that avoided cost rates might also turn out to be 
lower than the electric utility's avoided costs over the course of 
the contract. The Commission has reasoned that, ``in the long run, 
`overestimations' and `underestimations' of avoided costs will 
balance out.'' \44\ Today's order on rehearing takes the position 
that variable-price contracts are necessary to ensure that QF rates 
do not exceed utility avoided costs.\45\ The Commission, however, 
both fails to adequately explain that new interpretation of PURPA 
\46\ and justify the avulsive change of course that it 
represents.\47\
---------------------------------------------------------------------------

    \43\ Id. PP 76-78.
    \44\ Order No. 69, FERC Stats. & Regs. ] 30,128 at 30,880.
    \45\ Order No. 872-A, 173 FERC ] 61,158 at PP 84, 175.
    \46\ EPSA Rehearing Request at 15-16 (citing Order No. 69, FERC 
Stats. & Regs. ] 30,128 at 30,880).
    \47\ Order No. 872 was quick to point to ``the precipitous 
decline in natural gas prices'' starting in 2008 that may have 
caused QF contracts fixed prior to that period to underestimate the 
actual cost of energy. See, e.g., Order No. 872, 172 FERC ] 61,041 
at P 287. However, PURPA has been in place for forty years, and the 
Commission does not wrestle with the magnitude of potential savings 
conveyed to consumers from the fixed-price energy contracts that 
locked-in low rates for consumers during the decades prior when 
natural gas prices were several times higher. See Energy Information 
Administration Total Energy, tbl. 9.10, https://www.eia.gov/totalenergy/data/browser/ (last viewed November 18, 2020).
---------------------------------------------------------------------------

ii. Setting Avoided Cost at LMP

    18. I also do not support the Commission's decision to treat LMP 
as a presumptively reasonable measure of a utility's as-available 
avoided cost for energy.\48\ The short-term marginal cost of 
production represented by LMP can be a useful and transparent input 
and ought to be considered in calculating an appropriate avoided-
cost for as-available energy. But considering LMP in setting avoided 
cost is not the same thing as presuming that LMP is a sufficient 
measure to establish the avoided cost rate for energy. And, as the 
Public Interest Organizations explain, the record is replete with 
evidence indicating that vertically integrated utilities' costs are 
often well above LMP.\49\ Where there is good reason to believe that 
LMP may not actually reflect the avoided cost of the purchasing 
utility, it makes no sense to put the burden on QFs to prove the 
point.
---------------------------------------------------------------------------

    \48\ Order No. 872, 172 FERC ] 61,041 at PP 151, 189, 211.
    \49\ See, e.g., Public Interest Organizations Rehearing Request 
at 69-71. These points have also been raised throughout this 
proceeding. Public Interest Organizations Comments at 47-49 
(explaining that numerous power plants incur marginal production 
costs that exceed the LMP); id at 50-51 (discussing analysis from 
Bloomberg New Energy Finance that compares marginal production costs 
with LMP and finds that many vertically integrated utilities 
regularly incur production costs that exceed LMP); id. at 51-52 
(showing that a Springfield Illinois coal-fired power plant's 
marginal dispatch costs exceeds LMP); id. at 52-53 (explaining that 
many utilities' per-net-kWh costs exceed LMP); id. at 53-54 
(contending that the cost associated with long-term fixed-price 
contracts for nuclear plants exceed LMP even net of capacity value).
---------------------------------------------------------------------------

    19. On rehearing, the Commission responds that its rebuttable 
presumption has not changed the burden of proof, only the burden of 
production.\50\ That's an argument that only a lawyer's mother could 
love. It discounts the very real concerns about whether LMP is an 
accurate reflection of a purchasing utility's avoided energy costs. 
In any case, as the precedent cited by the Commission makes clear, 
an administrative agency cannot defend an irrational presumption 
simply by labeling it a shift in the burden of production.\51\ 
Because the presumption does not makes sense in its own right, the 
Commission cannot rehabilitate that presumption by labeling it 
merely a shift in the burden of production rather than 
persuasion.\52\
---------------------------------------------------------------------------

    \50\ Order No. 872-A, 173 FERC ] 61,158 at PP 63-64 (citing 
Cablevision Sys. Corp. v. FCC, 649 F.3d 695, 716 (D.C. Cir. 2011)).
    \51\ Cablevision, 649 F.3d at 716 (```[A]n evidentiary 
presumption is only permissible if there is a sound and rational 
connection between the proved and inferred facts, and when proof of 
one fact renders the existence of another fact so probable that it 
is sensible and timesaving to assume the truth of the inferred 
fact.' '' (quoting Nat'l Mining Ass'n v. Dep't of Interior, 177 F.3d 
1, 6 (D.C. Cir. 1999))).
    \52\ It is also unclear from this record whether that 
presumption is best characterized as a shift in the burden of 
production rather than the burden of persuasion. To the extent that 
a QF or other entity must show that LMP is not an adequate measure 
of avoided cost in order to rebut the presumption, then the 
Commission has, for all intents and purposes, shifted the burden of 
persuasion to those entities no matter how the Commission describes 
its presumption.
---------------------------------------------------------------------------

    20. Finally, the presumption that LMP is an adequate measure of 
a utility's full avoided energy cost is even more problematic when 
combined with the decision to eliminate the fixed-price contract 
option. Because the Commission has removed the

[[Page 86753]]

requirement that utilities offer a fixed-price contract option for 
energy, it is entirely possible that a QF will be eligible to 
receive only LMP both on a short-term basis and a long-term basis as 
a result of the variable cost structure now permitted under the 
long-term contract.\53\ Given this reality, QFs may be reduced to 
relying solely on some highly variable measure of the spot market 
price for energy, all while the utilities whose costs the QF is 
avoiding potentially recover an effectively guaranteed rate well 
above that spot market price, particularly in RTO/ISO markets that 
remain vertically integrated.\54\ I am not persuaded that this 
approach will satisfy our obligation to encourage QFs and do so 
using rates that are non-discriminatory across all regions of the 
country.
---------------------------------------------------------------------------

    \53\ Public Interest Organizations Rehearing Request at P 61.
    \54\ EPSA Rehearing Request at 13-14; Public Interest 
Organizations Rehearing Request at 98-99.
---------------------------------------------------------------------------

B. Rebuttable Presumption 20 MW to 5 MW

    21. Following the Energy Policy Act of 2005, the Commission 
established a rebuttable presumption that QFs with a capacity 
greater than 20 MW operating in RTOs and ISOs have non-
discriminatory access to competitive markets, eliminating utilities' 
must-purchase obligation from those resources.\55\ Order No. 872 
reduced the threshold for that presumption from 20 MW to 5 MW.\56\ 
That was an improvement over the NOPR, which--without any support 
whatsoever--proposed to lower that threshold to 1 MW.\57\ But, even 
so, the reduced 5-MW threshold is unsupported by the record and 
inadequately justified on rehearing.
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    \55\ New PURPA Section 210(m) Regulations Applicable to Small 
Power Production and Cogeneration Facilities, Order No. 688, 117 
FERC ] 61,078, at P 72 (2006), order on reh'g, Order No. 688-A, 119 
FERC ] 61,305 (2007), aff'd sub nom. Am. Forest & Paper Ass'n v. 
FERC, 550 F.3d 1179 (D.C. Cir. 2008); see 16 U.S.C. 824a-3(m).
    \56\ Order No. 872, 172 FERC ] 61,041 at P 625.
    \57\ NOPR, 168 FERC ] 61,184 at P 126.
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    22. When it originally established the 20-MW threshold, the 
Commission pointed to an array of barriers that prevented resources 
below that level from having truly non-discriminatory access to RTO/
ISO markets. Those barriers included complications associated with 
accessing the transmission system through the distribution system (a 
common occurrence for such small resources), challenges with 
reaching distant off-takers, as well as ``jurisdictional 
differences, pancaked delivery rates, and additional administrative 
procedures'' that complicate those resources' ability to participate 
in those markets on a level playing field.\58\ In just the last few 
years, the Commission has recognized the persistence of those 
barriers ``that gave rise to the rebuttable presumption that smaller 
QFs lack nondiscriminatory access to markets.'' \59\
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    \58\ Order No. 688-A, 119 FERC ] 61,305 at PP 96, 103.
    \59\ E.g., N. States Power Co., 151 FERC ] 61,110, at P 34 
(2015).
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    23. Nevertheless, Order No. 872 abandoned the 20 MW threshold 
based on the conclusory assertion that ``it is reasonable to presume 
that access to RTO/ISO markets has improved,'' making it 
``appropriate to update the presumption.'' \60\ No doubt markets 
have improved. But a borderline-truism about maturing markets does 
not explain how the barriers arrayed against small resources have 
dissipated, why it is reasonable to ``presume'' that the remaining 
barriers do not still significantly inhibit non-discriminatory 
access, or why 5 MW is an appropriate new threshold for that 
presumption.\61\
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    \60\ Order No. 872, 172 FERC ] 61,041 at P 629 (``Over the last 
15 years, the RTO/ISO markets have matured, market participants have 
gained a better understanding of the mechanics of such markets and, 
as a result, we find that it is reasonable to presume that access to 
the RTO/ISO markets has improved and that it is appropriate to 
update the presumption for smaller production facilities.''); see 
Order No. 872-A, 173 FERC ] 61,158 at P 361.
    \61\ See Public Interest Organizations Rehearing Request at 135.
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    24. Instead of any such evidence, Order No. 872 noted that the 
Commission uses the 5-MW level as a demarcating line for other rules 
applying to small resources. It points in particular to the fact 
that resources below 5 MW can use a ``fast-track'' interconnection 
process, whereas larger ones must use the large generator 
interconnection procedures.\62\ But the fact that the Commission 
used 5 MW as the cut off in another context hardly shows that it is 
the right cut off to use in this context. Specifically, the 5 MW cut 
off in the Commission's interconnection rule is based on the impacts 
that projects below 5 MW are likely to have on system safety and 
reliability, not on whether they have non-discriminatory market 
access.\63\ In addition, the Commission points to the fact that 
```all of the RTOs/ISOs have at least one participation model that 
allows resources as small as 100 kW to participate in their 
markets.' '' \64\ Be that as it may, that fact that all RTOs do not 
prohibit certain small resources from accessing their markets does 
not support the proposition that QFs below 5 MW now have non-
discriminatory access to those markets.
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    \62\ Order No. 872, 172 FERC ] 61,041 at P 630; Order No. 872-A, 
173 FERC ] 61,158 at P 361.
    \63\ Order No. 792, 145 FERC ] 61,159, at P 103 (2013) (``The 
Commission finds that the modifications . . . are just and 
reasonable and strike a balance between allowing larger projects to 
use the Fast Track Process while ensuring safety and 
reliability.''); see also SEIA Rehearing Request at 39-40.
    \64\ Order No. 872-A, 173 FERC ] 61,158 at P 362 (citing 
Electric Storage Participation in Markets Operated by Regional 
Transmission Organizations and Independent System Operators, Order 
No. 841, 162 FERC ] 61,127 (2018), at P 272).
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    25. Lacking substantial evidence to support the 5 MW threshold, 
Order No. 872 made a great deal out the deferential standard of 
review applied to the Commission's rulemakings.\65\ But while 
judicial review of agency policymaking is deferential, it is not 
toothless. The cases on which the Commission relied still require 
that, when an agency's policy reversal ``rests upon factual findings 
that contradict those which underlay its prior policy,'' the agency 
must ``provide a more detailed justification than what would suffice 
for a new policy created on a blank slate.'' \66\ That is because 
reasoned decisionmaking requires that, when an agency changes 
course, it must provide ``a reasoned explanation . . . for 
disregarding facts and circumstances that underlay or were 
engendered by the prior policy.'' \67\ For the foregoing reasons, 
the Commission has failed to produce any such explanation, making 
its change of course arbitrary and capricious.
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    \65\ Order No. 872, 172 FERC ] 61,041 at P 637 (citing FCC v. 
Fox Television, 556 U.S. 502, 515 (2009), for the proposition that 
an agency ``need not demonstrate to a court's satisfaction that the 
reasons for the new policy are better than the reasons for the old 
one; it suffices that the new policy is permissible under the 
statute, that there are good reasons for it, and that the agency 
believes it to be better, which the conscious change of course 
adequately indicates.''); see Order No. 872-A, 173 FERC ] 61,158 at 
P 347.
    \66\ Fox Television, 556 U.S. at 515; Advanced Energy Economy 
Comments at 6.
    \67\ Fox Television, 556 U.S. at 516; Advanced Energy Economy 
Comments at 6-7.
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 Environmental Review Under the National Environmental Policy 
Act

    26. Today's order also doubles down on the Commission's refusal 
to conduct any environmental review whatsoever of the likely 
consequences of Order No. 872's reforms. Whatever one may think of 
the questionable merits of those reforms, no one can seriously argue 
that they are anything short of a significant and sweeping overhaul 
of the Commission's forty-year-old framework for implementing PURPA. 
And yet, at the same time that the Commission has championed the 
scope of its sweeping reforms, it simultaneously insists that no 
environmental review is necessary both because it cannot venture any 
guess as to the effects of those reforms and because they somehow 
fit into a categorical exception from NEPA review. Neither 
justification holds water.
    27. As an initial matter, the Commission's assertion that Order 
No. 872's effects are overly speculative is tough to square with the 
fact that it has not undertaken any effort whatsoever to assess 
those effects. For example, instead of performing any modeling 
exercises, as the Commission did in the environmental assessment it 
issued along with its PURPA regulations in 1980,\68\ the Commission 
peremptorily rejects the possibility that it could glean anything 
useful from such an exercise. I have a hard time believing that our 
modeling capabilities have not improved dramatically over the course 
of the last four decades or that we cannot use those capabilities to 
perform an analysis that is quite a bit more detailed and reliable 
than that which was previously good enough for the Commission. In 
any case, NEPA does not require complete certainty or exacting 
precision. Instead, it recognizes that administrative agencies will 
often have to rely `` `reasonable forecasting' '' aided by `` 
`educated assumptions.' '' \69\ Nothing in

[[Page 86754]]

Order No. 872 or today's order on rehearing adequately explains why 
those techniques could not have formed the basis for a useful 
environmental review of the likely consequences of this proceeding.
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    \68\ Small Power Production and Cogeneration Facilities--
Environmental Findings; No Significant Impact and Notice of Intent 
To Prepare Environmental Impact Statement, 45 FR 23,661 (Apr. 8, 
1980).
    \69\ Sierra Club v. FERC, 867 F.3d 1357, 1374 (D.C. Cir. 2018) 
(quoting Del. Riverkeeper Network v. FERC, 753 F.3d 1304, 1310 (D.C. 
Cir. 2014)).
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    28. In addition, in a head-spinning contrast to the Commission's 
crowing over the significance of its PURPA overhaul, the Commission 
describes the changes adopted as merely corrective and clarifying in 
nature for the purposes of avoiding its environmental review.\70\ In 
particular, the Commission contends that ``the changes adopted in 
this final rule are required to ensure continued future compliance 
of the PURPA Regulations with PURPA, based on the changed 
circumstances found by the Commission in this final rule.'' \71\ In 
other words, because the Commission believes that the changes 
adopted are necessary to conform with the statute, they are mere 
corrective changes, which, in turn, qualifies them for the 
categorical exemption from any environmental review under NEPA, or 
so the argument goes.
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    \70\ Order No. 872-A, 173 FERC ] 61,158 at P 449.
    \71\ Order No. 872, 172 FERC ] 61,041 at P 722; Order No. 872-A, 
173 FERC ] 61,158 at P 438.
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    29. But by that logic, any Commission action needed to comply 
with our various statutory mandates--whether ``just and reasonable'' 
or the ``public interest''--would be deemed corrective in nature 
and, therefore, excluded from environmental review. That would seem 
to exempt any future Commission action under PUPRA or Title II of 
the FPA from NEPA, at least absent a major congressional revision of 
those statutes. The Commission, however, fails to point to any 
evidence suggesting that is what the Council on Environmental 
Quality contemplated when it allowed for categorical exemptions. 
Accordingly, I do not believe that the Commission has demonstrated 
that the significant changes made in Order No. 872 qualify for any 
of the existing categorical exclusions, meaning that this 
significant revision of our PURPA regulations requires an 
environmental review under NEPA.

 The Way To Revise PURPA Is To Create More Competition, Not 
Less

    30. It didn't have to be this way. When Congress reformed PURPA 
in the 2005 Energy Policy Act amendments, it indicated an 
unmistakable preference for using market competition as the off-ramp 
for utilities seeking relief from their PURPA obligations.\72\ Those 
reforms directed the Commission to excuse utilities from those 
obligations where QFs had non-discriminatory access to RTO/ISO 
markets or other sufficiently competitive constructs.\73\
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    \72\ 16 U.S.C. 824a-3(m).
    \73\ See Order No. 688, 117 FERC ] 61,078 at P 8.
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    31. This record contains numerous comments explaining how the 
Commission could use those amendments as a way to ``modernize'' 
PURPA in a manner that both promotes actual competition and reflects 
Congress's unambiguous intent.\74\ For example, in a white paper 
released prior to the NOPR, the National Association of Regulatory 
Utility Commissioners (NARUC) urged the Commission to give meaning 
to the 2005 amendments by establishing criteria by which a 
vertically integrated utility outside of an RTO or ISO could apply 
to terminate the must-purchase obligation if it conducts 
sufficiently competitive solicitations for energy and capacity.\75\ 
Other groups, including representatives of QF interests, submitted 
additional comments on how an approach along those lines might 
work.\76\ Several parties commented on those proposals.\77\
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    \74\ See Advanced Energy Economy Comments at 13; Industrial 
Energy Consumers Comments at 13-14; EPSA Comments at 16.
    \75\ National Association of Regulatory Utility Commissioners 
Supplemental Comments, Docket No. AD16-16-00, Attach. A, at 8 (Oct. 
17, 2018); id. (proposing the Commission's Edgar-Allegheny criteria 
as a basis for evaluating whether a proposal was adequately 
competitive).
    \76\ See, e.g., SEIA Supplemental Comments, Docket No. AD16-16-
000 (Aug. 28, 2019).
    \77\ See, e.g., Advanced Energy Economy Comments at 12; APPA 
Comments at 29; Colorado Independent Energy Comments at 7; ELCON 
Comments at 19; Public Interest Organizations Comments at 90; SEIA 
Comments at 24; Xcel Comments at 11.
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    32. It is a shame that the Commission has elected to 
administratively gut its long-standing PURPA implementation regime, 
rather than pursuing reform rooted in PURPA section 210(m), such as 
the NARUC proposal. Although the Commission can still consider 
proposals along the lines of the NARUC approach,\78\ making that 
approach the center of our reforms could have produced a durable, 
consensus solution to the issues before us. I continue to believe 
that the way to modernize PURPA is to promote real competition, not 
to simply dismantle the provisions that the Commission has relied on 
for decades out of frustration that Congress has repeatedly failed 
to repeal the statute itself.
---------------------------------------------------------------------------

    \78\ Order No. 872, 172 FERC ] 61,041 at P 662.
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    For these reasons, I respectfully dissent in part.

Richard Glick,
Commissioner.

[FR Doc. 2020-26106 Filed 12-29-20; 8:45 am]
BILLING CODE 6717-01-P