In an order denying a request to waive filing requirements triggered by changes in ownership of qualifying facility (QF) projects, the Federal Energy Regulatory Commission reiterated the importance of ensuring QF filings, specifically Form 556, are up to date.
Background
Small power production facilities and co-generation facilities are eligible for QF status, which generally confers special rate and regulatory treatment. A generating resource may either self-certify or apply for certification with FERC. Either certification avenue requires submitting a FERC Form 556 for each QF.
FERC may waive the certification requirement for good cause upon request. Under FERC’s regulations, a QF-owning entity must recertify when a material change occurs to ensure the facility retains QF status.
A company that acquired 185 not yet operational QFs sought a waiver of the recertification requirements, arguing that although the prior owner had filed a Form 556 for each, it was unnecessarily burdensome to have to make new filings for all those projects to reflect the change in ownership. The company also noted that FERC advised that a Form 556 must be filed within 30 days of a material change, although no regulation provided a specific deadline.
FERC’s Order Denying Waiver
The Commission’s order denying the waiver request provides additional guidance for QF certification. The Commission reiterated the importance of QF certification and recertification for any material changes to the facts and representations of a certification. FERC considers a material change to be any acquisition that would make any entity have a 10% equity interest in a QF, as well as an increase in ownership by 10% or more.
The Commission explained that QF certification is not necessary “until such time as the facility begins operations and makes an otherwise [Federal Power Act]-jurisdictional sale.” Agreeing with the company, the Commission held that because none of the company’s facilities were operational, none had to be certified as QFs.
But, the company can no longer rely on the prior QF status of these facilities because the change in ownership constitutes a material change. As each QF becomes operational, and assuming it makes jurisdictional sales, the owner must file an updated Form 556 to re-obtain the facility’s QF status.
Finally, regarding the timing of filing a Form 556 to recertify as a QF after a material change, the Commission agreed that its “regulations do not explicitly state when a QF must file.” But the regulations require recertification “when the material change is made,” and the Commission will determine timeliness of the filing “on a case-by-case basis.”
The Commission also noted, in apparent reference to the 30-day filing window provided by FERC staff, that “informal staff advice . . . does not necessarily represent the official views of the Commission, and thus is not binding on the Commission.”
Key Takeaways
- QF status, while always voluntary, can create additional compliance burdens if created well in advance of the facility beginning operations, particularly where the ownership or project design changes prior to operation.
- A material change requires an updated Form 556 to retain QF status. Changes in ownership are material when an entity acquires a 10% equity interest or increases ownership by 10% or more.
- Recertifying QF status following a material change must be timely, although FERC has not clarified how long after a material change it would consider a filing to be timely and did not commit to informal staff guidance suggesting a 30-day period. It may be advantageous to prepare a Form 556 in advance of an anticipated material change to ensure it can be filed as soon as possible after the change occurs.
The Commission’s order is Irradiant Partners, LP, 178 FERC ¶ 61,215 (2022).