The Federal Energy Regulatory Commission ruled Thursday that a power project is not exempted as a "qualifying facility" (QF) from various federal rules if the ownership information—or any other material information—in the Form 556 the project owner has on file with FERC is incorrect.

The ruling applies to power projects that are certified as QFs and are more than 1 MW in size.

Project owners should check the information in such forms.

The ruling is in a case called Branch Street Solar Partners, LLC, et al., 194 FERC ¶ 61,124 (2026). It upends established precedent.

Potential Consequences

Qualifying facilities are power projects that generate two useful forms of energy from a single fuel or that that use waste or other renewable fuels and are no more than 80 MW in size and meet certain other technical and legal requirements, including filing a Form 556 (if over 1 MW).

The Public Utility Regulatory Policies Act of 1978 directed regulated utilities to buy electricity from QFs at the avoided cost the utilities would otherwise pay to generate the electricity themselves. In recent years, that has been less important as a reason for power plant owners to seek QF status for their projects than the fact that QFs are exempted from a series of rules that would otherwise apply to such projects. (For more detail about QFs and how project size is determined, see PURPA Overhauled.)   

Loss of QF status could lead to significant adverse consequences.

For example, some QFs are exempted under section 205 of the Federal Power Act from having to apply to FERC for market-based rate authority to make wholesale sales of energy in interstate commerce at negotiated rates. If unauthorized energy sales were made because QF status was lost, then part of the revenue collected from electricity purchasers must be refunded.

Many QFs and their direct and indirect upstream owners with 10% or greater interests rely on QF status for exemptions from books and record-keeping requirements under the Public Utility Holding Company Act. Loss of QF status potentially affects a multitude of investors.

Some transactions involving changes in ownership or control of QFs are exempted from the need to get prior FERC approval by making filings under section 203 of the Federal Power Act. The ownership changes may be invalid if QF filings are incorrect.

QFs that have contractual obligations in power purchase agreements or interconnection, financing or other agreements to preserve status as QFs may be in default under such contracts.

More Detail

The Branch Street Solar Partners decision arose out of a proceeding in which certain QFs voluntarily refunded revenues earned on energy sales for the period of time after they had upstream changes in ownership to the date they notified FERC of the changes by filing revised Form 556s. They said that they did not believe refunds were required because QF status remained effective irrespective of the late notice of changes in ownership. FERC disagreed.

Ownership has not been a factor in determining QF status since the Energy Policy Act of 2005. FERC nonetheless said in a 2010 order that ownership is still “material” information. That finding did not cause much industry concern because it is clear from the plain statutory language, FERC regulations and prior precedent that a QF is a QF as long as it satisfies the elements of QF status, which do not include reporting ownership updates.

The legal basis for the Branch Street Solar Partners order is highly questionable. Unless and until the order is overturned, it has significant consequences.

Based on the order, project owners should confirm all FERC Form 556s are correct and file updated Form 556s in advance of any future changes in ownership or other “material” changes.

The Form 556 requires a list of all direct owners of 10% or more of the QF (or the two largest equity owners, if none holds 10% or more equity interests in the facility). It also requires a list of all upstream owners of the facility that hold at least 10% equity interests that are electric utilities or holding companies. A holding company, in turn, generally includes any entity that owns 10% or more of the outstanding voting securities of an entity that owns facilities for the sale of energy (other than certain financial institutions). Thus, it includes nearly all upstream owners anywhere in the ownership chain with 10% or more interests.