Federal Energy Regulatory Commission, FERC, recently issued an order confirming that certain qualifying facilities (“QFs”) under the Public Utility Regulatory Policies Act of 1978 (PURPA) are exempt from section 203(a)(1) of the Federal Power Act (“FPA”) pursuant to section 292.601(c) of its regulations even if the QF has a market-based rates (“MBR”) tariff and/or generator interconnection facilities. FERC’s order was issued in response to a petition for declaratory order from Chevron U.S.A. Inc. (“Chevron”), which sought clarification on account of industry uncertainty as to whether section 203 approval is required for dispositions of QFs with MBR authority. FERC’s regulations clearly exempt small power production QFs 30 MWs or smaller and cogeneration QFs of any size from most sections of the FPA, including section 203. Nevertheless, QFs with MBR tariffs and related agreements, generator interconnection facilities, and associated books and records have filed section 203 applications out of an abundance of caution as to whether FERC jurisdiction under section 203 attached to these otherwise jurisdictional assets.

In granting Chevron’s declaratory order, FERC stated that QFs are exempt from section 203 even if the QF has MBR authority and/or owns generator interconnection facilities based on the plain language of section 292.601(c) which is “straight-forward, and on its face exempts the vast majority of QFs from FPA section 203(a)(1).” However, FERC underscored that if a public utility would otherwise be jurisdictional because of its ownership or operation of facilities other than those considered part of the QF (as defined and described in section 292.101(b)(1)), the public utility would be subject to section 203 and required to report its QF assets along with its jurisdictional facilities in its section 203 application.

FERC’s order concluded with a reminder that QFs which dispose of their MBR authorization must file a cancelation of their MBR authority following the transaction along with a notice of change in status in accordance with the regulations.