DC Circuit Court of Appeals Holds District Court Has Initial Jurisdiction Over PURPA Dispute

5/23/2005
Client Alert

On May 17, 2005, the Court of Appeals for the District of Columbia Circuit denied a petition for review of Federal Energy Regulatory Commission (FERC) orders stating that renewable energy credits, or RECs, are not inherently conveyed to utilities purchasing power from qualifying facilities under the Public Utility Regulatory Policies Act (PURPA).  The Court held it had no jurisdiction over the dispute over entitlement to RECs under contracts entered into pursuant to PURPA, and that it must first be brought as an enforcement action in Federal District Court.

PURPA requires FERC to promulgate rules requiring electric utilities to purchase power from certain alternative energy generators, known as "qualifying facilities," or QFs, at the utility’s "avoided cost," i.e., the cost the utility would incur to obtain that power from other sources.  State public utility commissions (PUCs) are responsible for implementing FERC’s rules.  Under the enforcement mechanism provided by PURPA, a QF or utility may petition FERC to bring an enforcement action against a PUC in Federal District Court to enforce FERC’s rules.  If FERC fails to act, the QF or utility may bring its own enforcement action in District Court.

Recently, a number of PUCs instituted programs requiring electricity retailers to generate or purchase renewable energy, or to purchase tradeable certificates representing renewable energy credits (RECs).  In 2003, several QFs petitioned the FERC seeking an order that absent express contractual provisions to the contrary, avoided cost contracts entered into pursuant to PURPA did not convey RECs to the purchasing utility.  FERC granted the petition, and Ecel Energy Services, Inc. filed a petition for review of the FERC order in the DC Circuit.  Ecel Energy contended that the Court of Appeal had jurisdiction over the dispute pursuant to the review provision of the Federal Power Act, asserting that FERC’s order concerning RECs was "inextricably linked" to the definition of a "small power production facility" under the FPA.

The DC Circuit rejected that contention, holding that it lacked jurisdiction under the FPA to review the challenged FERC order.  The sole avenue, according to the DC Circuit, to challenge FERC’s position was through an action brought in Federal District Court pursuant to PURPA’s enforcement mechanism.

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