Feed in tariffs – lack of premium price and mandatory FERC compliance kills solvency

(David Yaffe, adjunct professor of energy law at The George Washington University Law School, litigator in front of the FERC. “Are State Renewable Feed-In-Tariff Initiatives Truly Throttled by Federal Statutes After the FERC California Decision?” The Electricity Journal, Vol. 3 Issue 8 pp.9-16 October 2010)

There appear to be two aspects of the current federal regulatory structure that interfere with complete state formulation and implementation of FITs. The first is rate regulation under either FPA Sections 205 and 206 or PURPA 210. This is the framework confirmed by the FERC’s FIT Order. The second is that since generators qualifying for FIT treatment are public utilities under the FPA, they must file their rates, terms and conditions of service with the FERC under FPA Part II unless they fit within the QF exemptions under PURPA 210 and the FERC’s implementing regulations. This is not an issue for FIT QFs with a net power production capability of 1 MW or less. Those FIT generators that qualify as QFs under PURPA 210 with a net power production capability exceeding 1 MW must make a filing with FERC to confirm that they meet the QF standards in the FERC’s regulations[14] and either self certify or file an application with the FERC to confirm such status.[15] QFs using renewable sources with a net power production capacity of less than 20 MW (or higher in the case of geothermal sources) are exempt from various provisions of the FPA[16] and the Public Utility Holding Company Act of 2005.[17] These requirements were not addressed by the FERC’s FIT decision, however, if the FERC actively enforces them, they may present potentially larger obstacles to FIT implementation than the rate issues because the home and small business owners that are expected to deploy FIT generators are not likely to be in a position to understand or bear the transaction costs of compliance. Another factor common to both issues is the treatment of FIT generators that do not qualify as QFs. If each state were to define eligible FIT generators in a way that would also qualify them as QFs, the scope of concerns to be worked through with respect to both rate setting and utility filing would be simplified. States might consider requesting the FERC to clarify how and whether CHPs may qualify as qualifying cogeneration facilities.