## Facts

- California enacted Assembly Bill 1613 (AB 1613), directing the California Public Utilities Commission (CPUC) to implement a standardized 10-year feed-in tariff program for certain high-efficiency combined heat and power (CHP) generators.
- CPUC adopted a program requiring California investor-owned utilities to offer standardized contracts to buy electricity from eligible CHP facilities at CPUC-established prices tied to time of delivery, natural gas costs, and ratepayer “indifference.”
- CPUC petitioned FERC for a declaratory order that its AB 1613 tariff pricing was lawful and not preempted by the Federal Power Act (FPA) or the Public Utility Regulatory Policies Act of 1978 (PURPA).
- Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company (Joint Utilities) counter-petitioned, asserting the program unlawfully set wholesale rates reserved to FERC under the FPA.
- FERC consolidated the petitions and resolved them by declaratory order.

## Issues

1. Whether CPUC’s AB 1613 feed-in tariff pricing sets rates for wholesale sales of electricity in interstate commerce within FERC’s exclusive jurisdiction under FPA §§ 205–206.
2. Whether, and to what extent, a state commission may mandate feed-in tariff prices for wholesale purchases when the seller is (a) a publicly owned/publicly financed entity exempt under FPA § 201(f), (b) a PURPA “qualifying facility” (QF), or (c) neither.
3. Whether PURPA permits state-set feed-in tariff rates above the purchasing utility’s avoided cost, or instead caps QF purchase rates at avoided cost.

## Decision

- FERC held that AB 1613 feed-in tariff prices, as applied to sales from CHP generators to investor-owned utilities, are wholesale rates and therefore fall within FERC’s exclusive ratemaking jurisdiction under the FPA.
- FERC rejected CPUC’s request for a categorical declaration of no preemption and granted only a limited declaration recognizing two circumstances where the program could operate without FPA preemption:
  - where the CHP seller is publicly owned or publicly financed and thus exempt from FERC rate jurisdiction under FPA § 201(f); and
  - where the CHP seller is a PURPA QF and the state-required price does not exceed the purchasing utility’s avoided cost.
- FERC concluded that state-mandated feed-in tariff prices are preempted for non-exempt, non-QF sellers, and for QF sales to the extent the state-required rate exceeds avoided cost.

## Legal Principles

- Under the FPA, FERC has exclusive jurisdiction over rates and charges for wholesale sales of electric energy in interstate commerce; states may not set binding wholesale rates unless a federal exemption or authorization applies.
- FPA § 201(f) removes certain publicly owned or publicly financed entities from FERC’s wholesale rate jurisdiction, leaving room for state-directed pricing for those entities.
- PURPA § 210 authorizes states to implement QF purchase obligations, but the rate paid for QF energy may not exceed the purchasing utility’s avoided cost.
- A state may set QF rates up to avoided cost using methodologies consistent with FERC regulations, but cannot compel above-avoided-cost payments through a feed-in tariff.

## Conclusion

FERC treated CPUC’s AB 1613 feed-in tariff pricing as wholesale ratemaking subject to federal control and held the program lawful only within limited federal boundaries: pricing for § 201(f) exempt public entities, and pricing for PURPA QFs capped at the purchasing utility’s avoided cost; beyond those bounds, the state-set rates were preempted.


Cal. Pub. Utils. Comm’n, 132 FERC ¶ 61,047 (2010)