FERC rules on Saguaro QF

U.S. energy regulators have denied a petition by a Nevada electric utility that would have rejected a regulatory filing by a local power plant. The ruling preserves the power plant's ability to sell electricity to its host utility.

The case centers on Saguaro Power Company, owner and operator of a 105 megawatt topping-cycle cogeneration facility in Henderson, Nevada. The plant sells electricity to Nevada Power Company under a power purchase agreement. Under that PPA, the energy and capacity rates paid by Nevada Power to Saguaro would be reduced by 20 percent if Saguaro loses its status as a "qualifying facility" or QF under federal law.

Since 1978, qualifying facilities have been entitled to receive certain benefits under the federal law called PURPA, but the process and requirements for becoming a QF have changed over time. Prior to August 8, 2005, in order to be a QF, a cogeneration facility was required to “produce electric energy and forms of useful thermal output (such as heat or steam), used for industrial, commercial, heating, or cooling purposes, through the sequential use of energy” and meet the applicable operating and efficiency standards. Since then, EPAct 2005 and Order No. 671 have provided that any “new” cogeneration facilities, i.e., a cogeneration facility that was either not certified as a QF on or before August 8, 2005 or had not filed a notice of self-certification or Commission application for certification prior to February 2, 2006, must also demonstrate that the “thermal energy output... is used in a productive and beneficial manner.”

In December 2017, Saguaro filed a Form No. 556 recertifying its facility as an existing cogeneration QF. That filing identified new thermal hosts who will receive thermal energy in the form of distilled water from the facility’s low pressure steam output, replacing thermal hosts previously identified in a prior self-recertification filing.

But Nevada Power Company filed a petition for declaratory order with the Federal Energy Regulatory Commission, asserting that Saguaro's self-recertification filing was deficient. Specifically, the utility argued that Saguaro failed to demonstrate its compliance with the operating and efficiency standards -- and also that the facility should be treated as "new" and thus be subject to additional standards under the Energy Policy Act of 2005 and the Commission's Order No. 671, such as whether the facility is being used in a productive and beneficial manner.

The Commission has rejected Nevada Power's petition. In its order denying Nevada Power's petition, the Commission noted that its Order No. 671 establishes a rebuttable presumption that an existing QF does not become a "new cogeneration facility" merely because it files for recertification, and that Saguaro represented having made no changes to its facility. The Commission concluded that filing for recertification to identify new replacement thermal hosts did not make the Saguaro facility "new."