Power & Pipes

FERC, CFTC, and State Energy Law Developments

Electric power generation and sale customarily fall within the scope of FERC jurisdiction under the Federal Power Act, as amended, as do generator investment and ownership. Qualifying small power production facilities (Small Power QFs) of no larger than 20 MW (net AC) are usually exempt from FERC regulation of mergers, acquisitions, divestitures, power sale rates, and related regulation under the Public Utility Holding Company Act. Small Power QFs are also normally exempt from state utility commission regulation of corporate, financial, and power sales rate matters. These Small Power QF regulatory exemptions are widely viewed as helpful and appropriate by industry stakeholders ranging from generation investors to traditional franchised utilities, and residential and commercial generation users.

But the price of attaining Small Power QF status is this: A Small Power QF has to make a Form 556 Self-Certification filing with FERC if it is larger than 1 MW, taking into account all co-owned Small Power QFs within one mile. FERC’s one-mile aggregation rule requires that where a Small Power QF is larger than 1 MW, every single affiliated qualifying facility within one mile that uses the same energy source, such as PV solar power, must be listed on the Form 556.

Sunrun, Inc. is among the most recognizable distributed solar providers in the United States. In September 2018, Sunrun petitioned FERC for a declaratory order, explaining to FERC that compliance with Form 556 filing requirements would be effectively impossible. Sunrun reported that it had well over 202,000 separate solar photovoltaic systems installed, and that more than 99% of them were below 20 kW each. In a densely solar-installed locality, a single Sunrun household solar installation might be within one mile of literally hundreds of other Sunrun facilities. Cross-referencing hundreds of filings would, Sunrun argued, be impossible. Sunrun asked FERC for relief from the following:

  • The requirement that, to be eligible for the 1 MW-and-under Form 556 filing exemption, it must aggregate residential solar Small Power QFs of 20 kW and under in order to determine whether it has reached a one-mile saturation level of 1 MW.
  • The requirement that when a 1 MW level within one mile has been reached, triggering a Form 556 filing, individual Small Power QFs of no larger than 20 kW be enumerated.

FERC granted Sunrun’s petition, but the order is subject to several limitations:

  • The order on its face is only applicable to solar Small Power QFs. Sunrun did not seek, and the Commission’s order did not volunteer, similar coverage for any other energy technology.
  • The relief from filing requirements only applies to residential Small Power QF units. While FERC’s order implies that similar treatment might be available to similarly small solar “electric consumers such as retail stores, hospitals, or schools,” the Commission did not extend the order to include these.
  • If FERC imposes any other or inconsistent requirements on distributed solar Small Power QF sales into wholesale markets, then those requirements will trump the light-handed treatment that FERC has offered in the order.
  • Importantly, if even a single solar Small Power QF within a one-mile portfolio that is covered by the order is not purely residential, or is over 20 kW in size, and reaches 1 MW, then the solar portfolio owner simply must file a Form 556. Arguably, the solar portfolio owner would be permitted to exclude residential units of 20 kW and under from the Form 556 enumeration, but the paperwork involved in such a filing could still be substantial.

Overall, FERC’s order will materially reduce the paper burdens on a vast class of solar generation owners with respect to many thousands of unit installations. But the FERC order should not be over-read: It does not structurally change the substance of existing regulations, and it does not entitle a large solar portfolio owner to completely terminate the owner’s unit size and location tracking requirements.