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New Standard Offer Contract (SOC) for Qualifying Facilities (QF) of 20 Megawatts (MW) or Less Pursuant to Public Utility Regulatory Policies Act of 1978 (PURPA) (the “New QF SOC”)

On May 15, 2020, the California Public Utilities Commission (CPUC) issued Decision (D.) 20-05-006 (the “Decision”), which among several requirements, ordered the investor-owned utilities (IOUs) to create a new standard offer contract (SOC) for qualifying facilities (QFs) of 20 megawatts (MW) or less, with new price terms. The Commission issued the Decision pursuant to the Order Instituting Rulemaking (OIR) (R.) 18-17-017, which addresses the history of the Commission’s implementation of PURPA.

Consistent with the Federal Energy Regulatory Commission’s (FERC) PURPA regulations 18 C.F.R. § 292.304, the new qualifying facilities standard offer contract (“New QF SOC”) adopted through D.20-05-006 includes the following two pricing options for both capacity and energy. See Table 1: New QF SOC – Pricing Options below.

Table 1: New QF SOC - Pricing Options

Option New QF SOC – Pricing Option Energy Price Capacity Price
1 Seller elects pricing fixed at time of contract execution
  • 3-year average of publicly available CAISO locational marginal prices for the PNode specific to QF
  • Calculated on a monthly basis with periods based on the Commissioner's most recently approved standard time-of-use periods, and a collar based on prices at the relevant Energy Trading Hub
  • 5-year weighted average of publicly available resource adequacy prices
  • Shaped to time periods based on generation capacity allocation factors adopted by the Commission and applied to updated time-of-use periods
  • 2.5% escalation factor for each year of the contract term after the last year included in the average
  • A capacity price is based on the provision of Resource Adequacy.
2 Seller elects pricing at time of delivery
  • Locational marginal pricing from CAISO's day-ahead market for the node specific to a QF
  • Same methodology used for capacity price at time of execution (above)
  • Price recalculated annually based on changes in the cost of RA and/or capacity allocation factors, and time-of-use periods

 

If a seller elects to provide energy as it is available, pursuant to D.20-05-006, the price will be calculated using the time of delivery energy price methodology.

The maximum term for the New QF SOC is twelve years for new facilities and seven years for existing facilities, and the contract will be available until suspended by the CPUC’s Executive Director.

Parties interested in submitting an offer for a New QF SOC should first certify or recertify itself with FERC using Form 556. Once the certification docket number is available, the completed Form 556 along with a completed SCE QF SOC Intake Application must be submitted to SCE through the PowerAdvocate® website (please register if not a current site user). SCE staff will then reach out to schedule and commence the project eligibility assessment and contracting process. Links to the relevant documents are provided below.

Decision 20-05-006 kept the proceeding open for potential changes to the program. Further, the CPUC is extending the statutory deadline on its rulemaking process on the implementation of PURPA and related matters. Please refer to the CPUC website for updates on these developments.

Notice: On December 22, 2020, SCE, together with the other Investor-Owned Utilities (IOUs), sent a letter to the Executive Director of the California Public Utilities Commission (Commission) requesting suspension of the fixed energy price option of the New QF Standard Offer Contract (SOC), consistent with the Federal Energy Regulatory Commission’s Order No. 872, which became effective on January 1, 2021. If any QF files an application requesting the fixed energy price option and the Commission acts to suspend it before the New QF SOC is executed, SCE will deny the application and offer the QF the option of taking a variable energy price together with a fixed capacity price instead.

Interconnection Information

Additionally, new QF must have requested interconnection service and/or distribution service to the electric system for the proposed project. For projects in the SCE service areas, the SCE’s Grid Interconnections Department is a separate organization and can be reached to initiate the appropriate technical review and studies. Interconnection facilities and system upgrades which may be needed for project interconnect will need to be identified in this process to ensure that the proposed project commercial operation date (COD) is achievable. This study process and related construction may take substantial time to complete, depending on project size and location, among other factors. QFs are therefore encouraged to understand the impacts that interconnection and transmission may have on its project plans, schedule and contractual commitments.

Inquiries

For additional information, please submit inquiries to QF@sce.com, carbon copied Charles Diep (Charles.Diep@sce.com) and/or Denise Lee (Denise.Lee@sce.com)

To establish a record, please submit the offer (application) for a New QF SOC through the Power Advocate® website at: https://www.poweradvocate.com/appNavigator?navType=bidevent&okey=111234.

Background on the Public Utilities Regulatory Policies Act of 1978

The Public Utility Regulatory Policies Act of 1978 (PURPA) is a federal law enacted to encourage the development of Qualifying Facilities (QFs), which are either small renewable generation facilities or gas-fired cogeneration, and to reduce reliance on fossil fuels nationally. The CPUC has a long history of PURPA implementation over nearly four decades, and many of the State’s first investments in renewable and efficient natural gas generation stem from CPUC implementation of PURPA. Under PURPA, a utility will purchase energy, capacity, or both, from a QF that is no greater than a certain MW threshold. This is a "must-take" requirement for the utilities. PURPA requires that the amount that a utility pays a QF for this purchase - known as avoided cost rates - to be the incremental cost to the electric utility of alternative electric energy to ensure ratepayer indifference to whether the capacity or energy comes from the utility or a QF. QFs fall into two categories: small power production facilities whose primary energy source is renewable, biomass, waste or geothermal; and cogeneration facilities that sequentially produce electricity and another form of useful thermal energy in a way that is more efficient than the separate production of both forms of energy.

CPUC Decisions and Related Documents

Disclaimers

The PURPA QF information on this page (including any presentations prepared by SCE and any imbedded links) is provided by SCE as a convenience to the public. This information may not completely or accurately describe or link to all relevant provisions of the PURPA QF regulations, and expressly does not constitute legal advice to or for any party. A party should consult with appropriate experts on how the PURPA QF regulations can impact any specific transaction, agreement, relationship, or circumstance. The publication of the information on this page does not constitute an offer to buy or sell electricity. Every PURPA QF power purchase agreement between SCE and any party is subject to SCE management approval and the prior execution of definitive documents by both parties.