Cogeneration User's Right

D.C. Circuit Upholds Cogeneration User's Right to Back-up Power

The U.S. Court of Appeals for the D.C. Circuit on June 3 unanimously affirmed orders by the Federal Energy Regulatory Commission in Puerto Rico Electric Power Authority v. FERC (the ALCON case). The FERC orders require a utility to provide back-up power to a host user of electricity from a cogeneration facility that the utility does not own or operate. The decision will remove a cloud a third-party development of industrial cogeneration.

Chadbourne represented the American Paper Institute, which intervened on the side of FERC. Chadbourne drafted a brief on behalf of itself and all of the other intervenors in the case.

The court essentially adopted FERC Commissioner Trabandt’s "close nexus" rationale in his concurrence to the Commission’s orders. IT found that the host user and the "cogneration equipment would be so closely related that they would together make up a single qualifying cogeneration facility entitled to back-up power under Section 210(a) of PURPA."

Back-up power is needed when the cogeneration facility suffers an outage. The host user of electricity from the facility needs the back-up power from the utility to run its industrial operations until the cogeneration facility can be put back in service.

It should be noted that back-up power is not needed in a so-called "simultaneous purchase and sale" arrangement, in which the facility sells all of its electricity to the local utility and the industrial host remains a full requirements electrical customer of the utility (i.e., the host takes steam but no electricity from the facility).

Robert F. Shapiro
June 7, 1988