Appeals Court Upholds Retail Sales by QF

A New York appeals court has upheld a 1994 decision by the New York Public Service Commission (PSC) authorizing a qualifying cogeneration facility (QF) to make retail sales to certain industrial customers in the service territory of a retail electric utility. The PSC had authorized Sithe/ Independence Power Partners L.P. (em developers of a 1040-megawatt natural gas fired QF (em to sell electricity to steam host customers Alcan Rolled Products Co. and Liberty Paperboard L.P. See, Re Sithe/Independence Power Partners L.P., 155 PUR4th 149 (N.Y.P.S.C. 1994). Alcan was a customer of Niagara Mohawk Power Co., a franchised retail electric utility. Liberty, with a substantial equity infusion from Sithe/ Independent's parent, Sithe Energies, Inc., planned to locate a new paperboard recycling facilities on the QF property. The certificate for the sale was conditioned on Sithe's paying an "equalization fee" to reimburse Niagara Mohawk for lost contributions for fixed costs associated with the loss of Alcan as a retail customer. (In an earlier order, the PSC found that the retail sales were subject to state regulation despite Sithe's status as a QF under the Public Utility Regulatory Policies Act of 1978 (PURPA). See, Re Niagara Mohawk Power Corp., 150 PUR4th 149 (N.Y.P.S.C. 1994)).