The Federal Energy Regulatory Commission ruled that the Iowa Utilities Board's decision to implement an Iowa statute, which obligates electric utilities to purchase power from qualified facilities at rates in excess of the purchasing utilities' avoided costs, is preempted by the Public Utility Regulatory Policies Act (Docket No. EL95-51-000).
The Iowa statute (Iowa Code §476.41-45) defined a category of electric generators called "alternative energy production facilities." The statute allows the utility board to order electric utilities to enter into long-term purchase contracts or wheel electricity from these alternative facilities, and set the rates. Alternative facilities may or may not be a QF under PURPA.
The board had required Midwest Power Systems Inc. to purchase power from alternative facilities at 6 cents per kilowatt-hour. Midwest asked the Federal Energy Regulatory Commission to overturn the board's order to purchase wind-generated power. Midwest claimed it did not need the power, which cost in excess of its 1.5-cent-per-kWh avoided cost for QF purchases.