Summary of a Recent
Judicial
Development in
Administrative Law
Renewable Fuel Facility Allowed to Sell
More Energy Than Its Net Output
Craig RaysorNational AgLaw Center Graduate Assistant
In Southern California Edison Co. v. Fed. Energy Reg. Comm., 443 F.3d. 94 (D.C. Cir. 2006), the Circuit Court held that FERC did not act arbitrarily and capriciously when it allowed a small production facility to sell, over and above its net power output, additional electricity purchased from another qualified facility’s supply of qualifying output.
Congress enacted Section 210 of the Public Utility Regulatory Policies Act of 1978 (“PURPA”) to encourage the development of cogeneration and small power production facilities, which are facilities “that produce no more than 80 megawatts of electricity using only biomass, waste, renewable resources, or geothermal resources as the primary energy source.” Southern California Edison Co., 443 F.3d. at 95. The Energy Policy Act of 2005 (“Energy Policy”) eliminated a statutory ownership limitation that was located in PURPA, which meant that a qualifying facility could now sell non-qualifying facility energy without losing its status as a qualifying facility. See Southern California Edison Co., 443 F.3d. 97. Ormesa LLC (“Ormesa”) was a small power production facility, which allowed the company to compel traditional utilities to purchase Ormesa’s net power output, while Edison was an investor-owned electric utility that was in a purchase agreement with Ormesa in compliance with the compelled purchase regulations. Id. at 94. Ormesa began to sell an additional incremental amount of electricity over its set net power output, which was purchased from another qualifying facility. See id. at 98.
The D.C. Circuit held that FERC was not arbitrary and capricious in determining that a small production facility could sell, above its net power output, additional electricity purchased from another qualified facility, since the sale would comport with the Energy Policy’s elimination of statutory ownership. See id. at 100. The Court’s interpretation was premised on the purchased output being qualifying power, meaning biomass, waste, renewable resources, or geothermal resources. Id.
The case was decided on March 24, 2006; this summary was posted Jan. 4, 2006.