or type of facility. The following fuel utilization effectiveness (FUE) values—based on the lower heating value (LHV) of the fuel—are required from QFs. For a new topping-cycle facility:
• No less than 5% of the total annual energy output of the facility must be useful thermal energy.
• For any new topping-cycle facility that uses any natural gas or oil:
— All the useful electric power and half the useful thermal energy must equal at least 42.5% of the total annual natural gas and oil energy input; and
— If the useful thermal output of a facility is less than 15% of the total energy output of the facility, the useful power output plus one-half the useful thermal energy output must be no less than 45% of the total energy input of natural gas and oil for the calendar.
For a new bottoming-cycle facility:
• If supplementary firing (heating of water or steam before entering the electricity generation cycle from the thermal energy cycle) is done with oil or gas, the useful power output of the bottoming cycle must, during any calendar year, be no less than 45% of the energy input of natural gas and oil for supplementary firing.
Small Power Production Facilities To qualify as a small power production facility under PURPA, the facility must have production capacity of under 80 MW and must get more than 50% of its total energy input from biomass, waste, or renewable resources. Also, use of oil, coal, or natural gas by the facility may not exceed 25% of total annual energy input to the facility.
Ownership Rules Applying to Cogeneration and Small Power Producers A qualifying facility may not have more than 50% of the equal interest in the facility held by an electric utility.
7.4.3 PURPA 210
Section 210 of PURPA directs the Federal Energy Regulatory Commission (FERC) to establish the rules
and regulations requiring electric utilities to purchase electric power from and sell electric power to qualifying cogeneration and small power production facilities and provide for the exemption to qualifying facilities QF) from certain federal and state regulations. Thus, FERC issued in 1980 a series of rules to relax obstacles to cogeneration. Such rules implement sections of the 1978 PURPA and include detailed instructions to state utility commissions that all utilities must purchase electricity from cogenerators and small power producers at the utilities’ “avoided” cost. In a nutshell, this means that rates paid by utilities for such electricity must reflect the cost savings they realize by being able to avoid capacity additions and fuel usage of their own. Tuttle (1980) states that prior to PURPA 210, cogeneration facilities wishing to sell their power were faced with three major obstacles:
• Utilities had no obligation to purchase power, and contended that cogeneration facilities were too small and unreliable. As a result, even those cogenerators able to sell power had difficulty getting an equitable price.
• Utility rates for backup power were high and often discriminatory
• Cogenerators often were subject to the same strict state and federal regulations as the utility.
PURPA was designed to remove these obstacles, by requiring utilities to develop an equitable program of integrating cogenerated power into their loads.
Avoided Costs
The costs avoided by a utility when a cogeneration plant displaces generation capacity and/or fuel usage are the basis to set the rates paid by utilities for cogenerated power sold back to the utility grid. In some circumstances, the actual rates may be higher or lower than the avoided costs, depending on the need of the utility for additional power and on the outcomes of the negotiations between the parties involved in the cogeneration development process. All utilities are now required by PURPA to provide data regarding present and future electricity costs on a cent-per-kWh basis during daily, seasonal, peak and offpeak periods for the next five years. This information must also include estimates on planned utility capacity additions and retirements, and cost of new capacity and energy costs.