PURPA Put Contract

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By Michael J. Gergen and Tyler Brown

On September 8, 2014, the United States Court of Appeals for the Fifth Circuit (“Fifth Circuit”), in a 2-1 decision, reversed an opinion by the United States District Court for the Western District of Texas (“District Court”) and held that the Public Utility Commission of Texas (“PUCT”) acted within its discretion and properly implemented a federal regulation under the Public Utilities Regulatory Policies Act of 1978 (“PURPA”) in a manner that limits the ability of Qualifying Facilities (“QFs”) to enter into a long-term, fixed-price power purchase agreements, known as “PURPA Put Contracts,” with electric utility buyers to QFs that generate “firm power” as defined by the PUCT.  This decision calls into question the ability of intermittent generation resources, such as many wind generation resources, in Texas (and potentially in Louisiana and Mississippi, the two other states in the Fifth Circuit) to sell power under PURPA Put Contracts.   

By David E. Pettit

Since its decision in American Ref-Fuel Company in 2003, the Federal Energy Regulatory Commission (“FERC”) has taken the view that avoided cost power purchase agreements between a qualifying facility (“QF”) and a utility buyer under the Public Utility Regulatory Policies Act of 1978 (“PURPA”), often referred to as a “PURPA Put Contract,” do not also convey renewable energy certificates (“RECs”) to the utility buyer unless the contract expressly states otherwise.  RECs are state-created and state-issued instruments…