Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO: KRS Chapter 278,
18 C.F.R.
292.203,
292.204,
292.205,
292.206
NECESSITY, FUNCTION, AND CONFORMITY: Under Title II of the
Public Utility Regulatory Policies Act of 1978, the Federal Energy Regulatory
Commission (FERC) was required to adopt rules to encourage cogeneration and
small power production by requiring electric utilities to sell electricity to
qualifying cogeneration and small power production facilities and purchase
electricity from such facilities. Section 210(f) of this Act requires the state
regulatory authority with jurisdiction over electric utilities to implement the
FERC rules. As the state regulatory authority for Kentucky, the Public Service
Commission proposes to implement those rules.
Section 1. Definitions.
(1) "Avoided costs" means incremental costs
to an electric utility of electric energy or capacity or both which, if not for
the purchase from the qualifying facility, the utility would generate itself or
purchase from another source.
(2)
"Back-up power" means electric energy or capacity supplied by an electric
utility to replace energy ordinarily generated by a facility's own generation
equipment during an unscheduled outage of the facility.
(3) "Cogeneration facility" means equipment
used to produce electricity and another form of useful energy which is used for
industrial purposes or commercial heating or cooling purposes through
sequential use of input energy and which facility meets criteria at 18 C.F.R.
Part 292.203(b) and 292.205 , as published in the Federal Register on March 20,
1980 (45 F.R. 17959).
(4)
"Interconnection costs" means the reasonable costs of connection, switching,
metering, transmission, distribution, safety provisions and administrative
costs incurred by the electric utility directly related to installation and
maintenance of physical facilities necessary to permit interconnected
operations with a qualifying facility, to the extent those costs are in excess
of corresponding costs which the utility would have incurred if it had not
engaged in interconnected operations but instead had generated an equivalent
amount of electric energy itself or purchased an equivalent amount of electric
energy or capacity or both from other sources. Interconnection costs do not
include any costs included in calculation of avoided costs.
(5) "Interruptible power" means electric
energy or capacity supplied by an electric utility subject to interruption by
the electric utility under specified conditions.
(6) "Maintenance power" means electric energy
or capacity supplied by an electric utility during scheduled outages of the
qualifying facility.
(7) "Purchase"
means purchase of electric energy or capacity or both from a qualifying
facility by an electric utility.
(8) "Qualifying facility" means a
cogeneration facility as defined in this administrative regulation,
construction of which was commenced on or after November 9, 1978, or a small
power production facility as defined in this administrative regulation,
construction or substantial renovation of which was begun on or after November
9, 1978, neither of which is owned in equity interest greater than fifty (50)
percent by a person primarily engaged in generation of electric power other
than as described in these rules.
(9) "Sale" means sale of electric energy or
capacity or both by an electric utility to a qualifying facility.
(10) "Small power production facility" means
an arrangement of equipment for the production of electricity with capacity no
greater than eighty (80) megawatts, which equipment is located within a one (1)
mile radius or, if hydroelectric facilities, on the same impoundment of water,
and which equipment is powered at least seventy-five (75) percent by biomass,
waste, renewable resources, or any combination thereof and not more than
twenty-five (25) percent by coal or oil or natural gas or any combination
thereof and which meets criteria at 18 C.F.R. Part 292.204 as published in the
Federal Register on March 20, 1980 (45 F.R. 17959).
(11) "Supplementary power" means electric
energy or capacity supplied by an electric utility, regularly used by a
qualifying facility in addition to that which the facility generates
itself.
(12) "System emergency"
means a condition on a utility's system which may result in imminent
significant disruption of service to customers or may imminently endanger life
or property.
Section 2.
General. This administrative regulation sets forth the manner in which the
Public Service Commission will discharge duties conferred upon it by Title II
of the Public Utility Regulatory Policies Act of 1978.
Section 3. Applicability. This administrative
regulation shall apply to any electric utility, subject to the jurisdiction of
the commission, which purchases from or sells to any qualifying
facility.
Section 4. Criteria for
Qualifying Facility.
(1) Criteria for
qualification of small power production facilities and cogeneration facilities
constructed on or after November 9, 1978, are the same as those adopted by the
Federal Energy Regulatory Commission including
18 C.F.R. Parts
292.203,
292.204,
292.205,
and 292.206 as published in the Federal Register March 20, 1980 (45 F.R.
17959).
(2) The qualifying status
of small power production facilities and cogeneration facilities, the
construction of which was commenced prior to November 9, 1978, but which were
not selling power to the interconnected utility under an existing contract as
of November 9, 1978, will be determined under this administrative regulation on
a case-by-case basis.
(3) Small
power production facilities and cogeneration facilities constructed prior to
November 9, 1978, but which were selling power to their interconnected utility
under an existing contract on that date will not be considered qualifying
facilities. Upon expiration of the power sales contract between a small power
production or cogeneration facility and the electric utility, the commission
will determine the qualifying status of the facility under this administrative
regulation on a case-by-case basis.
Section 5.
(1)
(a) All
electric utilities with annual retail sales greater than 500 million kilowatt
hours shall provide data to the commission from which avoided costs may be
derived not later than June 30, 1982, and not less often than every two (2)
years thereafter unless otherwise determined by the commission.
(b) In the case of a utility required to
purchase all of its electricity from a wholesale supplier by contract, the
utility shall file the contracts under which its capacity and energy are
purchased, in addition to data provided by the supplying utility required by
subsection (2) of this section.
(2) Each electric utility as described in
subsection (1) of this section shall file with the commission and shall
maintain for public inspection the following data:
(a) Estimated avoided cost on the electric
utility's system, solely with respect to the energy component, for various
levels of purchases from qualifying facilities. Such levels of purchases shall
be stated in blocks of not more than 100 megawatts for systems with peak demand
of 1,000 megawatts or more, and in blocks equivalent to not more than ten (10)
percent of system peak demands for systems with peak demand of less than 1,000
megawatts. Avoided costs shall be stated on a cents per kilowatt-hour basis
during daily, seasonal peak and off-peak periods, by year, for the current
calendar year, and each of the next five (5) years.
(b) The electric utility's plan for addition
of capacity by amount and type, for purchases of firm energy and capacity, and
for capacity retirements for each year during the succeeding ten (10)
years.
(c) Estimated capacity costs
at completion of planned capacity additions and planned capacity firm
purchases, on the basis of dollars per kilowatt, and the associated energy cost
of each unit, expressed in cents per kilowatt-hour. These costs shall be
expressed separately for each individual unit and individual planned firm
purchases.
(3)
(a) Any data submitted by an electric utility
beginning with the scheduled June 30, 1982, data shall be subject to review by
the commission.
(b) The electric
utility has the burden of proof to justify the data it supplies.
Section 6. Electric
Utility Obligations.
(1) Each electric utility
shall purchase any energy and capacity which is made available from a
qualifying facility except as provided in subsections (2) and (3) of this
section.
(2) The qualifying
facility's right to sell power to the utility shall be curtailed in periods
when purchases from qualifying facilities will result in costs greater than
those which the utility would incur if it generated an equivalent amount of
energy instead of purchasing that energy.
(3) During any system emergency, an electric
utility may discontinue:
(a) Purchases from a
qualifying facility if such purchases would contribute to such emergency;
or
(b) Sales to a qualifying
facility if discontinuance is nondiscriminatory.
(4) Any utility which invokes subsection (2)
of this section shall provide adequate notice to the qualifying facility. In
addition, the commission may require the utility to furnish documentation
within ten (10) working days after suspension occurs. If the utility fails to
provide adequate notice or incorrectly identifies such a period, it will be
required to reimburse the qualifying facility for energy or capacity or both
available for delivery on a legally enforceable basis as if that period had not
occurred.
(5) Rates for sale. An
electric utility shall sell power to a qualifying facility upon request except
as provided in subsection (3)(b) of this section. Rates for sale shall be just
and reasonable, in the public interest and nondiscriminatory. Rates for sale
which are based on accurate data and consistent system costing principles shall
not be considered to discriminate against any qualifying facility to the extent
that such rates apply to the utility's other customers with similar load or
cost-related characteristics. If a utility provides back-up or supplementary
power to a qualifying facility, then costs associated with that capacity
reservation are properly recoverable from the qualifying facility.
(6) Obligation to interconnect.
(a) An electric utility is required to make
any interconnection with a qualifying facility that is necessary for purchase
and sale. Owners of qualifying facilities shall be required to pay for any
additional interconnection costs to the extent that those costs are in excess
of costs that the electric utility would have incurred if the qualifying
facility's output had not been purchased. Payment shall be over a reasonable
period of time, and terms of payment shall be a part of the contract between
the electric utility and the qualifying facility.
(b) Each electric utility shall offer to
operate in parallel with a qualifying facility, provided that the qualifying
facility complies with applicable standards established in accordance with
Section 7(6) of this administrative regulation.
Section 7. Purchase of Output from Qualifying
Facilities.
(1) Qualifying facilities shall be
permitted the option of either:
(a) Using
output of the qualifying facility to supply their power requirements and
selling their surplus; or
(b)
Simultaneously selling their entire output to the interconnecting utility while
purchasing their own requirements from that utility.
(2) Rates for purchase of output of
qualifying facility with design capacity of 100 kilowatts or less. Each
electric utility shall prepare standard rates for purchases from qualifying
facilities with a design capacity of 100 kilowatts or less. These rates shall
be just and reasonable to the electric customer of the utility, in the public
interest and nondiscriminatory. These rates shall be based on avoided costs
after consideration of the factors listed in subsection (5)(a) of this section
and shall be subdivided into an energy component and a capacity component.
(a) Rates for power offered on an "as
available" basis shall be based on the purchasing utility's avoided energy
costs estimated at time of delivery.
(b) Rates for power offered on all legally
enforceable obligations shall be based at the option of the qualifying facility
on either avoided costs at the time of delivery or avoided costs at the time
the legally enforceable obligation is incurred. The capacity component shall be
based on supply characteristics of qualifying facilities, and the aggregate
capacity value of all 100 kilowatts or less facilities which supply power on a
legally enforceable basis.
(3) Electric utilities shall design and offer
a standard contract to qualifying facilities with a design capacity of 100
kilowatts or less. This contract shall be subject to commission
approval.
(4) Rates for purchase of
output of qualifying facility with design capacity over 100 kilowatts. Each
electric utility shall provide a standard rate schedule for qualifying
facilities with design capacity over 100 kilowatts. The rate schedule shall be
based on avoided costs which shall be subdivided into an energy component and a
capacity component. These rates shall be used only as the basis for negotiating
a final purchase rate with qualifying facilities after proper consideration has
been given to factors affecting purchase rates listed in subsection (5)(a) of
this section. Negotiated rates shall be just and reasonable to the electric
customer of the utility, in the public interest and nondiscriminatory. If the
electric utility and qualifying facility cannot agree on the purchase rate,
then the commission shall determine the rate after a hearing.
(a) Rates for power offered on an "as
available" basis shall be based on the purchasing utility's avoided costs
estimated at time of delivery.
(b)
Rates for energy or capacity or both offered on a legally enforceable basis
shall be based at the option of the qualifying facility on either avoided costs
at the time of delivery or avoided costs at the time the legally enforceable
obligation is incurred.
(5) Factors affecting rates for purchase for
all qualifying facilities. In determining the final purchase rate, the
following factors shall be taken into account:
(a) Availability of capacity or energy from a
qualifying facility during the system daily and seasonal peak. The utility
should consider for each qualifying facility the ability to dispatch,
reliability, terms of contract, duration of obligation, termination
requirements, ability to coordinate scheduled outages, usefulness of energy and
capacity during system emergencies, individual and aggregate value of energy
and capacity, and shorter construction lead times associated with cogeneration
and small power production.
(b)
Ability of the electric utility to avoid costs due to deferral, cancellation,
or downsizing of capacity additions, and reduction of fossil fuel
use.
(c) Savings or costs resulting
from line losses that would not have existed in the absence of purchases from a
qualifying facility.
(6)
Utility safety and system protection requirements. The qualifying facility
shall provide adequate equipment to insure the safety and reliability of
interconnected operations. This equipment shall be designed to protect
interconnect operations between the qualifying facility and the electric
utility grid. If the electric utility and qualifying facility cannot agree,
then the qualifying facility may apply to the commission for a determination of
adequate system protection.
(7)
Additional services to be provided to qualifying facilities. Upon request by a
qualifying facility each electric utility shall provide supplementary power,
back-up power, maintenance power, and interruptible power. The commission may
waive this requirement if the electric utility demonstrates that compliance
with it would impair its ability to render adequate service to its other
customers or would be unduly burdensome.
(8) Wheeling. The electric utility may wheel
power to another utility if the qualifying facility approves. This provision
shall not eliminate the responsibility of the interconnected electric utility
to purchase power from the qualifying facility if the qualifying facility does
not approve the wheeling transaction. The electric utility which agrees to
purchase power shall pay to the qualifying facility its avoided cost connected
with the transmission of this power adjusted for line losses.
(9) This administrative regulation is not
intended to restrict voluntary agreements between qualifying facilities and
electric utilities. All contracts between qualifying facilities and electric
utilities shall be provided to the commission for its review.
(10) Disputes. The commission's inquiry and
determination shall be limited to those parts of a proposed contract which are
in dispute.
STATUTORY AUTHORITY:
KRS
278.040(3),
18 C.F.R.
292.203,
292.204,
292.205,
292.206