FERC to States: No QF Rates Higher than Avoided Cost

The Federal Energy Regulatory Commission (FERC) has ruled that states may not set rates higher than a utility's avoided cost for power purchases from qualifying facilities (QFs) (Docket Nos. EL93-55-000 and

EL87-53-003). The new rule comes as part of a case in which Connecticut Light and Power Co. (CL&P) challenged a state law requiring it to pay the same rate to purchase electricity from a municipal waste disposal QF as it charged the municipality for power.

The FERC said it could find no legal precedent for giving states independent authority to prescribe rates for bulk-power sales by QFs that exceed the avoided-cost cap contained in the Public Utilities Regulatory Policies Act (PURPA). The FERC added that mandating rates above avoided costs for a certain class of power suppliers runs counter to current policies in Congress and at the FERC that strongly favor competition among all bulk-power suppliers.