Net Zero: Distributed Generation and FERC s MidAmerican Decision

Net Zero: Distributed Generation and FERC s MidAmerican Decision Steven Ferrey is Professor of Law at Suffolk University Law School in Boston, and was Visiting Professor of Law in 2003 at Harvard Law School. Professor Ferrey, who earned his J.D. from Boalt Hall School of Law at the University of California at Berkeley, serves as an expert consultant and legal counsel for various companies and stakeholders active in electric power matters in the U.S. and abroad. He advises the World Bank and the United Nations on privatization and energy development in Asia and Africa. He is the author of The Law of Independent Power, a threevolume treatise now in its 21st edition (2004) that tracks all U.S. electric power development, regulation, and issues. His sixth book, due at the end of 2004, documents how to successfully combat global warming with renewable energy for electrification in developing countries. The author thanks Lorraine Hanafin for her assistance with preparation of the article. The agency stretched precedent beyond its obvious application in an effort to support a new policy departure. It has fundamentally redefined what constitutes a sale of electricity. Ultimately, the method by which FERC did this can lead to more confusion among those affected, less precision, and a risk to the continuity of FERC policy. Steven Ferrey I. Overview With state government at the barricades, a distributed generation revolution has been launched. Three-quarters of the states recently mounted the statutory and regulatory charge to net metering, a regulatory innovation to implement decentralized renewable power alternatives. Net metering provides the most significant boost of any policy tool at any level of government both qualitatively and quantitatively to decentralize American power sources. W hile only 13 states have elected statutory initiatives to implement renewable energy system benefit charges, and 15 have elected to implement renewable portfolio standards, 1 36 states to date are implementing net metering. Net metering legally, if not always physically, runs the retail utility meter backwards when a decentralized or renewable energy generator puts power back to the grid. Net metering can pay the eligible renewable energy source approximately four times more for this power than paid to any October 2004 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 33

other independent generators, and much more than the timedependent value of this power to the purchasing utility. A 400 percent price advantage over the competition provides a nationwide platform in 36 states to launch a revolution in decentralized energy production. B y turning the meter backwards, net metering effectively compensates the generator at the full retail rate for transferring just the wholesale energy commodity. While most states compensate the generator for excess generation at the avoided cost or market-determined wholesale rate, as Table 1 shows, some states compensate the wholesale energy seller for the excess at the fully loaded, and much higher, retail rate. This sets up legal challenge. With demand for electricity increasing in both developed and developing nations, whether new power supply is developed in a centralized or decentralized mode has profound implications. How states encourage or discourage the creation of decentralized dispersed energy sources through various regulatory, subsidy, and metering initiatives will sculpt the electric energy future. W hile Minnesota was the first state to enact net metering, between 1980 and 2000, 29 other states adopted some form of net metering. Since the 2001 FERC decision in MidAmerican sanctioning net metering, six additional states have implemented net metering, as Table 1 shows. 2 Table 1 State Eligible Technology Eligible Customer Limits Size Limits Price NEG * carried forward; granted to utility at year-end Monthly NEG granted to utilities Arizona Renewables and Cogeneration All customer classes 100 kw (10 kw for AZ Public Service customers) All customer classes 25 kw residential 100 kw commercial All customer classes 1,000 kw Annual NEG granted to utilities Arkansas Most renewables, fuel cell s and microturbines California PV, landfill gas, anaerobic digestion, solar, and wind Colorado Small hydro, wind, and PV Varies by utility Varies Xcel: 10 kw NEG carried forward month-to-month Residential customers 50 kw fossil tech NEG purchased at spot market price 100 kw renewables Connecticut Renewables, cogeneration, MSW, Delaware Solar, wind, and other renewables Residential and commercial 25 kw Not Specified Solar, PV, wind, biomass, fuel cells, All customer classes 100 kw Not Specified and microturbines District of Columbia Florida PV All customer classes Not Specified Customers receive full retail credit Monthly NEG carried forward; granted to utility at year end Georgia PV, wind, fuel cells Residential and commercial 10 kw residential 100 kw commercial Hawaii PV, wind, biomass, and hydro Residential and small comercial <10 kw Monthly NEG granted to utilities Idaho Renewables All customer classes Varies by utility Monthly NEG purchased at retail rate 40 kw NEG purchased at avoided cost monthly plus annual payment to bring payment to retail rate Illinois PV, biomass, and wind Retail customer classes; Commonwealth Edison only 34 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 The Electricity Journal

October 2004 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 35 Indiana Renewables and cogeneration All customer classes 1,000 kwh/month Monthly NEG granted to utilities Iowa Renewables and MSW All customer classes No limit per system Monthly NEG purchased at avoided cost Kentucky PV, hydro, and wind All customer classes 10 kw NED carried to next month Louisiana Renewables, fuel cells, and All customer classess Residential 25 kw; Not specified microturbines Commercial & Agriculture 100 Maine MSW, cogeneration, renewables, All customer classes 100 kw NEG carried forward; annual NEG granted to utilities Maryland Solar and PV Residential and schools only 80 kw TBD by PSC Massachusetts MSW, renewables, cogeneration, All customer classes 60 kw Monthly NEG purchased at avoided cost Minnesota Renewables, NSW, and cogeneration All customer classes 40 kw NEG purchased at utility average retail energy rate Montana Fuel cells, geothermal, solar, wind and hydro All customer classes 50 kw Carried forward to next month; annual NEG granted to utility Nevada Wind, hydro, biomass, solar, and wind All customer classes 30 kw Granted to utility New Hampshire PV, wind and hydro All customer classes 25 kw NEG credited to next month New Jersey PV and wind Residential and small commercial 100 kw Carried forward to next month; annualized NEG purchased at avoided cost New Mexico Renewables, microturbines and cogeneration All customer classes 10 kw NEG credited to next month, or monthly NEG purchased at avoided cost (utility choise) New York PV only (biogas for farms) Residential and agriculture only 10 kw (PV); 400 kw (biogas) NEG credited to next month; Annualized NEG purchased at avoided cost North Dakota Renewables, MSW and All customer classes 100 kw Monthly NEG purchased at avoided cost cogeneration Ohio Renewables, microturbines All customer classes No size limit (100 kw for NEG purchased at unbundled generation rate microturbines) Oklahoma Renewables, MSW and cogeneration All customer classes 100 kw and Monthly NEG granted to utility 25,000 kwh/year Oregon Solar thermal, wind, fuel cells and hydro All customer classes 25 kw Annual NEG granted to low-income programs, credited to customer or other use determined by Commission Rhode Island MSW, cogeneration, renewables All customer classes 25 kw Carried forward month-to-month; annual NEG granted to utilities

Table 1 (Continued) State Eligible Technology Eligible Customer Limits Size Limits Price Texas Renewables only All customer classes 50 kw Monthly NEG purchased at avoided cost All customer classes 25 kw NEG credited to next month; any unused credit granted to utility at end of calendar year NEG credited to the following month; annual NEG granted to utilities NEG carried forward indefinitely 15 kw; farm giogas 150 kw Residential, commercial and agricultural Utah Solar, thermal, PV, wind, hydro Vermont PV, wind, fuel cells using renewable fuels and anaerobic digesters Virginia Solar thermal, wind, PV and hydro Residential and commercial 10 kw residential 25 kw non-residential Washington Solar, wind, fuel cells and hydro All customer classes 25 kw NEG carried forward monthly; annual NEG granted to utility Wisconsin Renewables, MSW and cogeneration All customer classes 20 kw Monthly NEG purchased at retail rate for renewables, avoided cost for non-renewables Wyoming PV, wind, biomass and hydro All customer classes 25 kw NEG carried forward monthly; Annual NEG purchased at avoided cost Puerto Rico Renewables Residential 50 kw NEG carried over month-to-month; unused credits at end of year purchased at avoided cost Net excess generation. * II. Changing [Mid]American Values: A Tale of Two Forums A. The Iowa Proceeding Finds Against Iowa After the Iowa Utility Board (IUB) originally approved net metering, the utility, MidAmerican, sought the Federal Energy Regulatory Commission s intervention in a federal forum to block the Iowa action. 3 Almost immediately, on Dec. 30, 1998, FERC declined to entertain the enforcement action requested by MidAmerican. 4 Left without federal venue, MidAmerican then filed a petition for judicial review of the IUB s order permitting net metering at rates exceeding avoided cost in Iowa district court. Little did MidAmerican appreciate that what seemed then like a forum disadvantage was in fact a fortuity. O n Aug. 24, 1999, the Polk County district court of Iowa issued a decision, which eventually would evolve to impact energy policy throughout the United States. 5 The district court ruled that federal law preempts Iowa s regulatory authority used to compel a utility to permit small generating facilities, such as on-site dispersed wind and solar facilities, to interconnect with the power grid under net billing or metering arrangements. The Polk County district court ruled that small electric generation facilities are Qualified Facilities (QFs) governed by the Public Utility Regulatory Policies Act of 36 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 The Electricity Journal

1978 (PURPA), which precludes sales of excess power generated by QFs at rates in excess of the purchasing utility s avoided cost. FERC defines avoided costs as the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the QF or QFs, such utility would generate itself or purchase from another source. 6 The court also ruled that, if these small generating facilities are not QFs under PURPA, then they are public utilities engaged in the wholesale sale of power in interstate commerce and are, therefore, governed by the Federal Power Act and regulated by the Federal Energy Regulatory Commission. 7 In either event, federal law governed all activities. The court found that federal preemption under PURPA is broad enough to encompass control of state regulations affecting the avoided cost rate imposed on utilities purchasing QF excess energy. 8 Central to the court s conclusion is a determination of what the transaction involves at its core: a finding that net billing involves a sale of electricity. It followed from this finding that irrespective of the volume of power involved, the transactions are considered wholesale sales; as soon as the energy flowing to the utility is commingled with other energy in the power grid, it is sold in interstate commerce. T he district court rejected the IUB s use of different terms to avoid the discrete purchase and sale transaction. It characterized the IUB s euphemistic verb artistry with verbs such as receive, draw, supply, and transmit, as linguistic distinctions which do not mask the true nature of a purchase and sale each instant that energy is exchanged. 9 FERC has exclusive jurisdiction to set rates governing wholesale sale of electricity in interstate commerce. Accordingly FERC s exclusive rate-setting authority over interstate commerce under the Federal Power Act preempts the IUB s ruling. B. The FERC decision abandons federal authority When the Iowa Utility Board sought appeal of the district court opinion to the state Supreme Court, the utility moved laterally and took its grievance back to FERC, which on this second approach changed its mind and accepted jurisdiction. 10 This turned out to be much less fortuitous than it appeared for MidAmerican. I n its decision on the merits, FERC held that the IUB decisions were not preempted by federal law. FERC reformulated the issue in this case as how to measure the transaction between MidAmerican and those entities that installed distributed generation on their premises. FERC held inapposite MidAmerican s argument that every flow of power constitutes a sale, and that every flow of power from a QF or a non-qf to MidAmerican must be priced consistently with the requirements of either PURPA or the Federal Power Act. This decision appeared to contradict multiple FERC precedent. When it upheld the state s jurisdiction over these types of net metering transactions, it removed FERC jurisdiction, and deemed a change of title to power not to constitute a sale. FERC held that no sale occurs when an individual installs generation and accounts for its dealings with the utility through the practice of netting. 11 FERC ignored the physical reality of the transfer of the electrons, and reached an accounting decision to support a policy conclusion. FERC leaves regulation of the netting aspect of the transaction to the states. FERC arrives at the position that distributed generators (DGs) are retail consumers and thus their sales must be retail in nature, with all retail sales jurisdictionally governed by state regulation. While the first half of the statement is true, the second half is not true: A trans- October 2004 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 37

action to a utility cannot be retail, even if the seller of power also is, at times, a retail consumer. At first blush, this FERC holding appears contrary to a string of prior FERC decisions. N otwithstanding this, FERC cites various cases to support each aspect of its decision. Do these precedents, in fact, ground the decision? There is much less there than meets FERC s eye. III. The Vanishing Precedent FERC states in MidAmerican that there is no sale (for end use or otherwise) between two different parties when one party is using its own generating resources for the purpose of self-supply of station power, and accounting for such usage through the practice of netting. 12 In FERC s decision, it cites no less than eight previous decisions to support its conclusion. However, with the exception of one, PJM Interconnection, 13 none of the remaining seven cases cited even concerns the issues raised in the MidAmerican matter. They simply are not on point. PJM Interconnection, alone among the citations, is relevant. So what legal foundations does PJM provide? A careful examination of PJM reveals that it simply does not support this broader proposition for which FERC relies on it in MidAmerican. InPJM, FERC held that a generator s selfsupply of station power does not involve a sale. However, the third-party provision of station power generally involves a sale for end use that is not subject to our jurisdiction. The only point this decision reaches is the part of the netting transaction that is not in controversy with DGs: No one disputes that the retail sale of power from the utility to the consumer is not subject to federal jurisdiction. However, PJM does not address the transfer of power back into the utility s lines. The controversial issue in netting is the transfer back of excess self-supply to the utility, regardless of whether or not some other power is later resold to the consumer/generator. In PJM, FERC reviews the Federal Power Act definition of sale of electricity at wholesale as sale of electric energy to any person for resale. 14 FERC has jurisdiction over the transmission of power in interstate commerce and the sale of electricity at wholesale in interstate commerce. 15 The transactions over which FERC has jurisdiction are very much like the transfer of electrons from the generator to the utility at issue with net metering. However, for FERC to decide it had no jurisdiction, it had to find the factual non-occurrence of a sale. So when is provision of power from a generator to an unwilling utility a sale? InPJM, FERC first looks at under what circumstances generator power is used, how it is provided, and what facilities are involved in its provision. FERC identifies three separate sets of circumstances: o The small generator is on-line and producing enough energy to meet its needs (self-supply). o The small facility uses an offsite source of power owned by the same company (remote self-supply). o The small facility uses an off-site source of power owned by third party (third-party supply). In PJM, FERC holds that a generator s self-supply of power does not involve a sale. 16 This is not controversial: Logically speaking, it does not constitute a sale because there is only one party, and one cannot sell to itself. Whether the source of supply is on-site or off-site, the generator is using its own power resources, so facilities typically self-supply net power requirements against gross output. 17 The first two bulleted situations above clearly are not sales. However, PJM does not address the third bulleted situation, which is key. But even if it did, the third 38 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 The Electricity Journal

situation is not the issue of net metering and billing. Note that none of these three situations addresses the key controversial issue of net metering: The transaction transferring to the utility excess power. PJM does not speak at all to the type of transaction involved in net metering. PJM thus simply does not offer the support for which FERC s MidAmerican decision relies on it. FERC in PJM cites three prior FERC cases in support of its analysis. 18 None of the three precedents behind the PJM precedent addresses the factual or legal situation of net metering and billing. They appear, rather, to support the opposite conclusion than what FERC reaches. FERC uses PJM as the precedential springboard, yet the opinion in PJM Interconnection never confronts the net metering sale or exchange back to the utility, instead focusing on the converse issue of an unidirectional transfer of power to the QF when needed. Thus, PJM is a negative declaration but does not reach the issue: It does not define what is a sale or deal with net metering. As one tracks back through the FERC precedent, and peels away the layers of the FERC MidAmerican opinion, none of these cases or precedent directly addresses the key issue in net metering or provides any support. P rior to MidAmerican, ina string of four cases, FERC established that QF power sellers may not receive more than avoided cost for power transmitted and sold to the utility. 19 Under 210(b) of PURPA, FERC also made clear that the states cannot impose rates exceeding the utility s avoided cost. 20 In fact, two decades of FERC and federal court precedent prior to MidAmerican seems to prescribe, to the contrary, that states cannot cause a utility to take power effectively at its retail rate, several times more than the applicable wholesale rate for purchase of power. Moreover, these precedents suggest a sale occurs in the power exchange to the utility. IV. What Constitutes a Sale? A. Exchanges According to FERC, the energy flowing from a generator to a utility under net metering is an exchange or offset rather than a sale. Is this correct legally? Exchange is defined in Black s Law Dictionary as [t]o barter; to swap. To part with, give or transfer for an equivalent. 21 Interestingly, also found under the definition for exchange is language setting forth a criterion distinguishing an exchange from a sale : The criterion in determining whether a transaction is a sale or an exchange is whether there is a determination of value of things exchanged, and if no price is set for either property it is an exchange. 22 This language may be central to understanding the arguments of both the proponents and opponents of net billing. P roponents of the FERC exchange view argue that there has been no value assigned to the energy transmitted because the single meter is read only at the end of the billing period. Because an assignment of value cannot take place prior to the meter being read, the criterion establishing a sale will not be met. Therefore, only an exchange has taken place, rather than a sale, yielding no Federal PURPA requirements. Proponents of the contrary view note that even if no payment is yet due, as the electrons pass through the meter their legal title and ownerships passes, and a monetary obligation occurs, due in the future under either a power purchase agreement or the utility tariff. B. Sales The common law legal definition of sale found in Black s Law Dictionary is a [t]ransfer of property or providing of services for consideration. 23 Sale is also defined as [a] transfer of property for a fixed price in money or its equivalent. 24 October 2004 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 39

Article 2 of the Uniform Commercial Code defines sale in 2-106(1) as [p]assing of title from seller to buyer for a price. 25 The U.C.C. further defines sale as [a] contract whereby property is transferred from one person to another for a consideration of value, implying the passing of the general and absolute title, as distinguished from a special interest falling short of complete ownership. 26 V. Sale or Exchange? The substantive issue presented is whether or not the net metering transaction at issue is a sale. In addition to the substantive issue, there is a critical procedural issue of whether the transaction is subject to federal or state jurisdiction. If the sale transaction is wholesale or in interstate commerce, it is subject to federal jurisdiction and the states have no control. If the transaction is retail or solely intrastate in nature, it is within state jurisdiction. While the determination of whether or not a sale occurs is critical for future on-site distributed generation energy policy, the decision as to whether federal or state regulation governs has profound implications for who will sculpt future energy policy. There is no doubt with net metering that power physically is transferred to the local utility, often at times when it does not wish to take that power, cannot sell that power to consumers, and/or must ground or dispose of such power. An actual physical transfer or exchange of generated electrons and electric current to the utility occurs at the discretion of the generator. The utility takes title, pays for these electrons (or nets them against others sold in the opposite direction to the generator), co-mingles these electrons in its system, and resells them to other third parties or disposes of them as it can. W hether one deems electricity to be matter or energy, both a physical and legal transfer have occurred having all the attributes of a legal transfer in fee simple. Given that a contract or tariff amount is required to be paid, netted or bartered eventually by the utility for such power, this would seem to resemble a sale of either goods or services (depending upon which a particular state deems electricity to be). 27 When physical, legal, and financial transfer occurs, this would appear to be a sale under analogous legal precedent and definitions of either the U.C.C., the general common law applied to services, or the Federal Power Act. There also is no doubt that the transaction in dispute occurs at the wholesale level, although it is netted against a retail sale. Electricity is a unique energy form: It cannot be stored or conserved well with efficiency. Therefore, electricity has substantially different value at different hours of the day, different seasons of the year, and at different places in the utility system. Contrary to this physical reality, net metering and billing treats all power at all hours as being tangibly storable or bankable and having equal value, when in fact it does not. By ignoring interim actual physical transfers of power occurring at all the minutes and hours of the month, and recognizing only the net balance of the transactions at the end of the month or quarter, net metering assumes all electricity generated and transmitted to have equal average value. This is not accurate at the wholesale level, it is not the case with power trading, and it is not the case in those 18 states where retail competition has been promoted with deregulated competitive retail markets. In deregulated states, wholesale power is differentially valued and priced each hour of each day of the year. The market and regulatory reality is contrary to the key implicit premise of MidAmerican. It is possible even to game the system with net metering selling power to the utility at the netted average retail price in offpeak late evening hours when the customer/generator has no need for the power and the utility has surplus power. Other utility 40 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 The Electricity Journal

ratepayers ultimately will be left to make up the revenue deficit that occurs. I n essence, FERC held that it was within state authority only to recognize a transaction as not what occurs on an instantaneous, hourly, daily, or even weekly physical basis. Rather, it ruled that it is within state authority to recognize through a single or dual meter(s) once per billing period (typically monthly or quarterly) the net result of the transfer of power to and from a distributed generator and a local utility, as a positive or negative retail sale. In other words, it is legally permissible to take a (retail) snapshot on periodic occasion of the net transactions between these two entities, and treat these as the only point of sale? Put another proverbial way, if an electron is transferred and no one records it, has it really been transferred? The peculiar procedural element in this holding is that FERC allows states to make the netting decision, which at its core is a determination to recharacterize instantaneous (FERC jurisdictional) wholesale sales as (state jurisdictional) retail sales. VI. Policy Implications By FERC s decision, states are liberated to utilize largely invisible transactions through the rate base to subsidize projects through net metering without FERC oversight. Second, this elevates meter reading, an occasional discretionary act, to a position of more importance than the constant flow of power. If no sale of power is deemed to occur until the net meter(s) is read at the end of the billing period, could every retail consumer then refuse to pay every estimated bill not based on an actual meter reading but an estimated reading, because there could be no sale? In essence, this FERC decision elevates the form of the monthly meter reading over the substance of the actual flow of power between two entities. While it is not possible to track the flow of individual electrons, it is possible, as well as the premise of basic utility regulation, that the actual gross flow of electrons determines the utility transaction. Now, there is a divergence with net metering. That said, there are various positive and legitimate rationales to support renewable and decentralized power at the state level. FERC could have taken a more straightforward position and announced via a generic rulemaking that it was choosing to forge or clarify new metering policy. It has done this recently by rulemaking in establishing a variety of new paradigms for restructuring and deregulating the electric power industry. This would have been a more transparent and less confusing approach. I nstead, FERC stretched precedent beyond its obvious application, to attempt to support a new departure. Ultimately, this will lead to more confusion and less precision, and perhaps reversal in a case with different facts, undercutting continuity of FERC decisions in the federal courts. This is not the recommended manner to establish fundamental policy. This net metering and billing policy constitutes the most important of four policy supports for the renewable energy industry initiatives in the U.S. 28 In addition to net metering and billing, more than a dozen states among the approximately 20 states that have deregulated their electric power sectors have elected to establish renewable portfolio standards and/or system benefit charges that support renewable energy trust funds. 29 However, among these state-level renewable energy policy initiatives, net metering and billing is not only the most pervasive (adopted in 36 states) but also provides the most significant financial advantage to generators. 30 Significant renewable subsidies are an important, and many would say critical, bridge to a renewable energy future. Only with these subsidies can certain smaller-scale technologies at dis- October 2004 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 41

tributed locations become viable and be implemented. As long as the fragile MidAmerican decision prevails against subsequent attack the net impact on society may be positive, as America transitions to renewable resources over the next generations. H owever, FERC has created a policy by a solitary case decision, relying on precedent that does not withstand scrutiny. Such an important national policy would most appropriately be fostered by a rulemaking with factual policy findings, taking notice and public comment.& Endnotes: 1. Steven Ferrey, Sustainable Energy, Environmental Policy, and States Rights: Discerning the Energy Future Through the Eye of the Dormant Commerce Clause, 12 NYU ENV T L LAW REV. 507 (2004). 2. Green Power Network, Net Metering Policies, available at http:// www.eere.energy.gov/greenpower/ netmetering/ \l state. 3. See Brief of Amici Curiae Renewable Energy Advocates, Supreme Court of Iowa Docket No. 99-1529 at 3. 4. See Federal Energy Regulatory Commission Decision Docket No. EL99-3-000 (Dec. 30, 1998). 5. Polk District Court Ruling On Petition For Judicial Review Docket Nos. AA 3173, 3195, 3196 (May 25, 1999). The district court found that the case involved potential conflicts between state and federal laws. The court further held that federal preemption under PURPA is broad enough to encompass state regulations affecting the avoided cost rate because of three FERC decisions that the district court interpreted as unequivocally stating the scope of federal preemption. 6. 18 C.F.R. 292.101(6). 7. Seth M. Colton and James W. Brehl Cogeneration: The Small Facility Perspective in Minnesota, 11WM. MITCHELL L. REV. 477, 480 (1985). 8. See Iowa District Court In and For Polk County, Ruling on Petition For Judicial Review (Sept. 27, 1999). 9. Id., at 17. 10. After the adverse district court decision, the Iowa Utilities Board took an appeal to the Iowa Supreme Court, which entertained the appeal but never rendered a decision. The FERC decision stands as the ultimate adjudication and was not appealed. 11. MidAmerican Energy Co, 85 FERC ô61,470 (2001). 12. Id., at 62,263. 13. PJM Interconnection, L.L.C., 94 FERC ô61,251 (2000). 14. Id., at 61,889. 15. Id. (citing 16 U.S.C. 824(b)(1)). 16. Id. 17. Id., at 61,891. 18. Occidental Geothermal, Inc., 17 F.E.R.C. ô61,231, 3 (1981). 19. Re: Orange & Rockland Utilities, Inc. FERC Docket No. EL87-53-000, 43 FERC (CCH) ô61,067 (Apr. 14, 1998); In Feb. 1989, the Second Circuit dismissed an appeal of the FERC decision on the grounds of ripeness pending conclusion of the FERC rulemaking in Docket RM-88-6-000, appeal dismissed sub nom. Occidental Chem. Corp. v. FERC, 869 F.2d 127 (2d Cir. 1989). In June 1988, FERC stayed the enforcement of its administrative decision pending appeal. Re: Orange & Rockland Utilities, FERC Docket No. EL-87-53-001, 43 FERC (CCH) ô61,547 (June 16, 1988). See, Connecticut Light and Power Company, FERC Docket No. EL93-55- 000 (Jan. 11, 1995; construction of this case was discussed in Section B2. See, Independent Energy Producers Assoc. v. Cal. Pub. Utilities Commission, 36 F.3d 848 (9th Cir. 1994). Southern Cal. Edison Co., 71 FERC ô61,269 (1995). 20. Section 210(b) of PURPA requires electric utilities to offer to purchase electric energy from QFs at rates that are (1) just and reasonable to the electric consumers of the electric energy and in the public interest, (2) nondiscriminatory with respect to QFs and (3) not in excess of the incremental cost to the electric utility of alternative electric energy. 16 U.S.C. 824a-3. 21. Black s Law Dictionary 562 (West) (6th ed. 1990). 22. Id.; Gruver v. Commissioner of Internal Revenue, C.C.A.D.C., 142 F.2d 363, 366 (4th Cir. 1944). 23. Black s Law Dictionary 1337 (West)(6th ed. 1990). 24. Id. 25. U.C.C. 2-106. If a good, the U.C.C. rather than common law governs. The U.C.C. s definition states that [g]oods means all things (including specially manufactured goods) which are moveable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. The definition further states that goods also includes the unborn young of animals and growing crops and other identified things as attached to realty as described in the section on goods to be severed from realty (Section 2-107). U.C.C. 2-105(1)(1994). 26. Id. 27. For a discussion of the goods versus services distinction, see, S. FERREY,THE LAW OF INDEPENDENT POWER, 21st ed. (West, 2004), at Section 10:76; S. FERREY, THE NEW RULES (Penwell, 2000), at Ch. 12; Steven Ferry, Inverting Choice of Law in the Wired Universe: Thermodynamics, Mass, and Energy, 45 WILLIAM & MARY LAW REV. 1839 (2004). 28. Mark Bollinger, et al., Clean Energy Funds: An Overview of State Support for Renewable Energy, April 2001, available at http:// eetd.lbl.gov/ea/ems/reports/ 47705.pdf. 29. See S. Ferrey, THE LAW OF INDEPENDENT POWER, supra note 28, at Ch. 10:95 and 10:96; Steven Ferrey, SUSTAINABLE ENERGY, ENVIRONMENTAL POLICY, supra note 1. 30. Bollinger, et al., supra note 29. 42 1040-6190/$ see front matter # 2004 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2004.08.002 The Electricity Journal