Rates for purchases. (1) Rates for purchases shall:

Be just and reasonable to the electric consumer of the electric utility and in the public interest; and

Not discriminate against qualifying cogeneration and small power production facilities.

Nothing in this subpart requires any electric utility to pay more than the avoided costs for purchases.

Relationship to avoided costs. (1) For purposes of this paragraph, “new capacity” means any purchase from capacity of a qualifying facility, construction of which was commenced on or after November 9, 1978.

Subject to paragraph (b)(3) of this section, a rate for purchases satisfies the requirements of paragraph (a) of this section if the rate equals the avoided costs determined after consideration of the factors set forth in paragraph (e) of this section

A rate for purchases (other than from new capacity) may be less than the avoided cost if the State regulatory authority (with respect to any electric utility over which it has ratemaking authority) or the nonregulated electric utility determines that a lower rate is consistent with paragraph (a) of this section, and is sufficient to encourage cogeneration and small power production.

Rates for purchases from new capacity shall be in accordance with paragraph (b)(2) of this section, regardless of whether the electric utility making such purchases is simultaneously making sales to the qualifying facility.

In the case in which the rates for purchases are based upon estimates of avoided costs over the specific term of the contract or other legally enforceable obligation, the rates for such purchases do not violate this subpart if the rates for such purchases differ from avoided costs at the time of delivery.

Standard rates for purchases. (1) There shall be put into effect (with respect to each electric utility) standard rates for purchases from qualifying facilities with a design capacity of 100 kilowatts or less.

There may be put into effect standard rates for purchases from qualifying facilities with a design capacity of more than 100 kilowatts.

The standard rates for purchases under this paragraph:

Shall be consistent with paragraphs (a) and (e) of this section; and

May differentiate among qualifying facilities using various technologies on the basis of the supply characteristics of the different technologies.

Purchases “as available” or pursuant to a legally enforceable obligation. Each qualifying facility shall have the option either:

To provide energy as the qualifying facility determines such energy to be available for such purchases, in which case the rates for such purchases shall be based on the purchasing utility's avoided costs calculated at the time of delivery; or

To provide energy or capacity pursuant to a legally enforceable obligation for the delivery of energy or capacity over a specified term, in which case the rates for such purchases shall, at the option of the qualifying facility exercised prior to the beginning of the specified term, be based on either:

The avoided costs calculated at the time of delivery; or

The avoided costs calculated at the time the obligation is incurred.

Factors affecting rates for purchases. In determining avoided costs, the following factors shall, to the extent practicable, be taken into account:

The data provided pursuant to § 292.302(b), (c), or (d), including State review of any such data;

The availability of capacity or energy from a qualifying facility during the system daily and seasonal peak periods, including:

The ability of the utility to dispatch the qualifying facility;

The expected or demonstrated reliability of the qualifying facility;

The terms of any contract or other legally enforceable obligation, including the duration of the obligation, termination notice requirement and sanctions for non-compliance;

The extent to which scheduled outages of the qualifying facility can be usefully coordinated with scheduled outages of the utility's facilities;

The usefulness of energy and capacity supplied from a qualifying facility during system emergencies, including its ability to separate its load from its generation;

The individual and aggregate value of energy and capacity from qualifying facilities on the electric utility's system; and

The smaller capacity increments and the shorter lead times available with additions of capacity from qualifying facilities; and

The relationship of the availability of energy or capacity from the qualifying facility as derived in paragraph (e)(2) of this section, to the ability of the electric utility to avoid costs, including the deferral of capacity additions and the reduction of fossil fuel use; and

The costs or savings resulting from variations in line losses from those that would have existed in the absence of purchases from a qualifying facility, if the purchasing electric utility generated an equivalent amount of energy itself or purchased an equivalent amount of electric energy or capacity.

Periods during which purchases not required. (1) Any electric utility which gives notice pursuant to paragraph (f)(2) of this section will not be required to purchase electric energy or capacity during any period during which, due to operational circumstances, purchases from qualifying facilities will result in costs greater than those which the utility would incur if it did not make such purchases, but instead generated an equivalent amount of energy itself.

Any electric utility seeking to invoke paragraph (f)(1) of this section must notify, in accordance with applicable State law or regulation, each affected qualifying facility in time for the qualifying facility to cease the delivery of energy or capacity to the electric utility.

Any electric utility which fails to comply with the provisions of paragraph (f)(2) of this section will be required to pay the same rate for such purchase of energy or capacity as would be required had the period described in paragraph (f)(1) of this section not occurred.

A claim by an electric utility that such a period has occurred or will occur is subject to such verification by its State regulatory authority as the State regulatory authority determines necessary or appropriate, either before or after the occurrence.