Opinion for the Court filed by Circuit Judge GINSBURG.
Connecticut Valley Electric Company, a local distribution company serving some 10,000 customers in New Hampshire and Vermont, petitions for review of two orders of the Federal Energy Regulatory Commission denying Connecticut Valley any relief against a power producing facility that violated § 3(17)(C)(ii) of the Federal Power Act (FPA). Connecticut Valley claims the Commission’s orders violate § 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA), and that the Commission is required by § 3(17)(C)(ii) of the FPA to revoke the facility’s status as a “Qualifying Facility” (QF), or alternatively that the Commission’s refusal to revoke the facility’s QF status or to provide any other relief is an abuse of the agency’s remedial discretion.
We hold that we are without jurisdiction to address Connecticut Valley’s claim arising under § 210 of the PURPA. We reject Connecticut Valley’s claim that § 3(17)(C)(ii) of the FPA requires the Commission to revoke the facility’s QF status, and we conclude that the Commission’s decision to deny any relief was a valid exercise of its remedial discretion. We therefore deny the petition for review.
I. Background
The Congress enacted Title II of the PURPA, Pub.L. No. 96-617, 92 Stat. 3117, 3134 (1978), in an effort to encourage the development of cogeneration and small power production facilities. A “cogeneration facility” produces both electric energy and steam or some other form of usable energy, 16 U.S.C. § 796(18)(A); a “small power production facility” produces less than 80 megawatts of electricity using biomass, waste, renewable resources, or geothermal resources as the primary energy source,
id.
§ 796(17)(A). The Supreme Court described § 210 of the PURPA in
FERC v. Mississippi,
... [Congress] felt that two problems impeded the development of nontraditional generating facilities: (1) traditional electricity utilities were reluctant to purchase power from, and to sell power to, the nontraditional facilities, and (2) the regulation of these alternative energy sources by state and federal utility authorities imposed financial burdens upon the nontraditional facilities and thus discouraged their development.
In order to overcome the first of these perceived problems, § 210(a) directs FERC ... to promulgate ... rules requiring utilities to offer to sell electricity to, and purchase electricity from, qualifying cogeneration and small power production facilities....
To solve the second problem perceived by Congress, § 210(e), 16 U.S.C. § 824a-3(e), directs FERC to prescribe rules exempting the favored cogeneration and small power facilities from certain state and federal laws governing electricity utilities.
In order to secure these benefits to qualifying cogeneration and small power production facilities — so-called Qualifying Facilities, or QFs — the Commission has promulgated the following regulations, respectively: 18 C.F.R. §§ 292.303-305, which require an electric utility to sell to a QF electricity for use in its operations at regulated tariff rates and to buy the QF’s output at the utility’s “avoided cost”; * and 18 C.F.R. §§ 292.601-602, which exempt a QF from the Public Utility Holding Company Act of 1935, 15 U.S.C. § 79 et seq., most state regulation as a public utility, and much of the FPA. A small power producer (SPP) is a QF only if it (1) meets various Commission requirements respecting fuel use, fuel efficiency, and reliability, 16 U.S.C. § 796(17)(C)(i) and (2) “is ... not primarily engaged in the generation or sale of electric power (other than electric power solely from cogeneration facilities or small power production facilities),” id. § 796(17)(C)(ii).
A. Regulatory Background: Gross Versus Net Output
There are two ways of measuring the power production capacity of a QF: one looks to gross output, which is all electricity produced by the facility, the other to net output, which is gross output less the electricity used in the QF’s own operations. The distinction is important because many QFs purchase their internal operating needs at tariffed rates from the electric utility to which they sell their output, which the utility is required to buy at the utility’s full avoided cost. If the QF were allowed to sell its gross output to the electric utility at full avoided cost, then it would in effect be selling back at a significant markup the quantum of electricity it purchased from the utility for its internal operating needs.
In 1991, the Commission for the first time addressed whether a facility that sold its gross output would lose its status as a QF because it would no longer be, as required by § 3(17)(C)(ii),
*
“not primarily
In light of this ambiguity and the broad discretion the Congress granted the Commission in § 3 of the FPA to determine the requirements for QF certification, the Commission concluded that it could lawfully interpret the statute either to allow or to preclude a QF’s sale of its gross output. See id. at 62,669. In the end, however, the Commission decided that the policies of the PURPA are served better if the statute is read to say that a facility that sells its gross output is not a QF. See id. at 62,671.
B. Procedural Background: Petition to Revoke Claremont’s QF Status
Wheelabrator Claremont Company (hereinafter Claremont) operates an SPP facility in Claremont, NH. In 1983 the New Hampshire Public Utilities Commission approved a settlement agreement among Connecticut Valley, Claremont (through its predecessor in interest), and the NHPUC’s own staff. See In re New Hampshire/Vermont Solid Waste Project, DR 82-343, Order No. 16,232, 68 NHPUC 96. The settlement, as embodied in a contract executed between Connecticut Valley and Claremont and approved by the NHPUC in 1984, provided that Connecticut Valley would purchase the “entire electrical output” of Claremont’s proposed SPP facility for 20 years at Connecticut Valley’s full avoided cost (of nine cents per kWh, adjusted for inflation) while simultaneously providing Claremont with its needs for electricity in its operations, at Connecticut Valley’s consolidated tariff rate, which has proven to be less than the adjusted contract rate. Claremont applied to the Commission for QF certification, representing that its output would be 4.5 MW but it did not specify whether that was its gross or net output. The Commission certified the Claremont facility as a QF in 1986, and in 1987 Claremont began selling to Connecticut Valley its gross electrical output of 4.5 MW.
In 1993 Claremont, in response to an inquiry from the NHPUC, reported that its gross output was 4.5 and its net output 3.9 MW. Connecticut Valley then asked the NHPUC to investigate whether Clare-mont qualified as a QF in view of its having sold its gross output. Instead, the NHPUC, noting that the FERC has exclusive jurisdiction over the decertification of a QF, ordered Connecticut Valley to petition the Commission for revocation of Claremont’s QF status. See In re Connecticut Valley, DR 93-196, Order No. 21,000 (NHPUC Oct. 18,1993).
Connecticut Valley duly filed a complaint with the Commission seeking revocation of Claremont’s QF status based upon Claremont’s sales of gross output and its alleged misrepresentations to the Commission in applying for QF status. Connecticut Valley further requested that, once Claremont’s QF status was revoked, the Commission take jurisdiction over Connecticut Valley’s contract with Clare-mont pursuant to §§ 205-206 of the FPA and either rescind the contract and retroactively determine just and reasonable rates for past sales, or at least prospective
Although the Commission agreed with Connecticut Valley that Claremont could not be a QF because its gross sales took it outside the rule of § 3(17)(C)(ii), the Commission denied Connecticut Valley any relief.
See Connecticut Valley Elec. Co. v. Wheelabrator Claremont Co.,
Connecticut Valley petitioned for rehearing, arguing that § 3(17)(C)(ii) is not ambiguous and therefore the Commission should have decertified Claremont or provided Connecticut Valley some alternative relief for Claremont’s acknowledged violation of the statute. The Commission denied rehearing,
II. Analysis
Connecticut Valley and the Commission agree that under § 3(17)(C)(ii) of the FPA an SPP that sells more than its net output, as Claremont does, cannot be a QF. The Commission maintains that it may nonetheless refuse to revoke Claremont’s QF status and may deny Connecticut Valley any alternative relief. Connecticut Valley claims that the Commission’s refusal to revoke Claremont’s QF status or to provide some alternative relief violates § 210 of the PURPA and § 3(17)(C)(ii) of the FPA, and is an abuse of the Commission’s remedial discretion.
A. Section 210 of the PURPA
Connecticut Valley claims that under the challenged orders it is required to pay Claremont more for electricity than the lawful maximum established by § 210 of the PURPA, that is, its full avoided cost. The matter is less than straightforward because § 210 actually caps the total amount (not just the per unit rate) a utility is required to pay a QF for electricity: the utility can be required to pay no more than “the cost to the electric utility of the electric energy which, but for the purchase from such cogenerator or small power producer, such utility would generate or purchase from another source.” 16 U.S.C. § 824a-3(d). Connecticut Valley claims its contract with Claremont requires it to purchase Claremont’s gross output, whereas but for the purchase from Claremont, Connecticut Valley would need to generate or purchase electricity equal only to Clare-mont’s net output. Thus the Commission’s refusal to revoke Claremont’s QF status and reform the contract requires Connecticut Valley to pay more than its full avoided cost.
Although neither party raised this issue in their briefs, we asked the parties to address at oral argument whether we have jurisdiction to adjudicate in the first instance a dispute arising under § 210.
See New York State Electric & Gas Corp. v. FERC,
Thus, when Connecticut Valley says that § 210 “requires FERC to cap QF rates at full avoided cost,” it is correct only in the limited sense that the Commission is required to promulgate regulations to that effect. The Commission satisfied that obligation when it promulgated 18 C.F.R. § 292.304(a)(2), which limits the cost at which a utility purchases power from an SPP at an amount equal to the utility’s full avoided cost. The Commission’s only obligations under § 210 are the promulgation and periodic revision of these regulations and of the exemption regulations required by § 210(e); therefore, the Commission’s decision not to take any action in response to Claremont’s apparent violation of § 3(17)(C)(ii) cannot be a violation of § 210 by the Commission. The Commission has in effect merely “announced the position ... it would take in any future enforcement action that [Connecticut Valley] might bring,”
New York State Electric,
Connecticut Valley may have a valid claim that the NHPUC has violated § 210 by approving a contract that requires Connecticut Valley ■ to purchase gross output and therefore to pay more than the utility’s full avoided cost. As we have said before, “[t]he failure of a state commission to ensure that a rate does not exceed a utility’s avoided cost is a failure to comply with a [Commission] regulation implementing the PURPA,” which “would ordinarily be challenged through an enforcement action brought in district court under § 210(h).” Id. Based upon the Commission’s position as stated in the orders under review, that agency would presumably decline to bring an enforcement action if Connecticut Valley petitioned it to do so; and its declination would clear the way for Connecticut Valley to bring its own enforcement action in district court.
If this court, in the guise of reviewing the Commission’s present no-action position, were to address the question whether the petitioner’s contract with Claremont violates § 210, .then we would “usurp the role of the district court as the court of first instance, contrary to the enforcement scheme adopted by the Congress in § 210(h) of the PURPA.”
Industrial Cogenerators v. FERC,
B. Section 3(17)(C)(ii) of the FPA
Connecticut Valley next challenges the Commission’s decision to grandfather contracts entered into prior to its decision in
Turners Falls
and therefore not to revoke Claremont’s QF status. Connecticut Valley claims that in view of the clear congressional decision in FPA § 3(17)(C)(ii)
In order to establish that the Commission has no remedial discretion, Connecticut Valley must demonstrate not only that Claremont’s sale of gross output violates § 3(17)(C)(ii), but also that the Commission is required to apply the revocation rule of
Turners Falls
to contracts predating that decision. The first point is moot, for the Commission agrees that Claremont is in violation of the statute. The second point is the difficult one for Connecticut Valley because “the breadth of agency discretion is, if anything, at [its] zenith when the action assailed relates primarily not to the issue of ascertaining whether conduct violates the statute, or regulations, but rather to the fashioning of policies, remedies and sanctions.”
Niagara Mohawk Power Corp. v. FPC,
Section 3(17)(C)(ii) does not expressly specify a particular remedy for the violation of its terms.
Compare National Insulation Transp. Comm. v. ICC,
We reject this claim because, contrary to the petitioner’s premise, § 3(17)(C)(ii) is not unambiguous. As the Commission first recognized in
Turners Falls,
when electricity sales between a QF and a utility are analyzed from a physical perspective, § 3(17)(C)(ii) can reasonably be interpreted to- allow a QF to sell its gross output.
See Turners Falls,
C. Abuse of Remedial Discretion
Because we conclude that the Commission has discretion with respect to remedying Claremont’s violation of § 3(17)(C)(ii), Connecticut Valley is remitted to challenging the Commission’s exercise of that discretion, which we review only for abuse.
See Louisiana Public Serv. Comm’n v. FERC,
Connecticut Valley argues that-the Commission’s decision not to revoke Clare-mont’s QF status or to provide any alternative relief is an abuse of discretion for a number of reasons. First, Connecticut Valley claims the decision directly conflicts with all three statutory purposes expressed in § 101 of the PURPA, to wit, “conservation of energy,” “optimization of [electric utility] efficiency,” and “equitable rates to electric consumers.” 16 U.S.C. § 2611.
As the Commission properly notes, however, § 101 applies only to Title I of the PURPA, whereas QF status is a creature of Title II. And the Supreme Court has said that the core purpose of Title II is “to encourage the development of cogeneration and small power production facilities” by addressing “problems imped[ing] the development of nontraditional generating facilities.”
FERC v. Mississippi,
Nor can we accept Connecticut Valley’s second'argument, which is that the Commission’s failure even to consider harm to consumers was an abuse of discretion. According to Connecticut Valley, § 210(b) of the PURPA expressly requires the Commission to balance the interests of consumers against- those of producers, thus:
The rules prescribed under ■ subsection (a) of this section shall insure that, in requiring any electric utility to offer to purchase electric energy from any [QF], the rates for such purchase ... shall be just and reasonable to the electric consumers of the electric utility and in the public interest....
16 U.S.C. § 824a-3(b). This requirement is directed, however, at the Commission’s exercise of rulemaking authority over the rates utilities must pay QFs for power. The Supreme Court has already held that the, full avoided cost rule satisfies the requirements of § 210(b).
See American Paper Inst.,
Third, Connecticut Valley claims the Commission failed adequately to consider whether
Occidental Geothermal, Inc.,
Fourth, Connecticut Valley argues the Commission failed to consider whether Claremont intentionally or negligently misled the Commission by stating its gross rather than its net output in its application for certification. The Commission did not have to address this claim in the orders under review, however; it was rendered moot when the Commission held that it was reasonable for a facility applying for QF certification prior to the
Turners Falls
decision to have believed that the Commission’s “simultaneous buy-sell” rule allowed the QF to sell its gross output.
See
Finally, Connecticut Valley claims the Commission failed to support with substantial evidence a key factual determination, namely, that Claremont had a settled expectation it could lawfully sell its gross output when it entered into the contract. As Connecticut Valley conceives the issue, the Commission must show that, in developing and financing the SPP facility, Claremont actually relied upon being able to sell its gross output.
The Commission never made a factual finding about Claremont’s actual reliance, however. Rather, the Commission reiterated its general policy “against invalidating contracts for which a PURPAbased challenge was not timely raised— that is, before the contracts were executed,” so as not “to upset the settled expectations of parties to, and to invalidate any of their obligations and responsibilities under, such executed PURPA sales contracts.”
Id.
at 61,419-20;
see also
Because the Commission did not make a factual finding relative to settled expectations, but rather drew a reasonable inference in accord with its established policy, it need not support this aspect of its decision with substantial evidence. Nor does Connecticut Valley claim that the Commission is legally required to determine settled expectations by making a case-specific factual inquiry rather than relying upon a rule of general applicability. The only question remaining, therefore, is whether the Commission’s application of its general rule in this case was arbitrary and capricious.
See Southeastern Michigan Gas Co. v. FERC,
III. Summary and Conclusion
We are without jurisdiction to review Connecticut Valley’s claim that the orders under review violate § 210 of the PURPA. As to Connecticut Valley’s other challenges, we conclude that the Commission acted within its remedial discretion in refusing to revoke Claremont’s QF status or to provide any other relief to Connecticut Valley. Therefore, the petition for review is
Denied.
Notes
PURPA § 210(b), 16 U.S.C. § 824a-3(b), caps the total amount a utility may be required to pay for purchases from a QF at “incremental cost,” also called "full avoided cost,”
American Paper Inst., Inc. v. American Elec. Power Serv. Corp.,
Calculation of the full avoided cost rate is complicated. See 18 C.F.R. § 292.304(e). For purposes of this petition the important point is that the rate that a QF can require a utility to pay is almost always higher than the regulated tariff rate at which the QF can purchase from the utility electricity for its internal operating needs.
Turners Falls
actually addressed a cogenerator’s status as a QF pursuant to § 3(18)(B)(ii). Section 3(17)(C)(ii), which applies to SPPs, and § 3(18)(B)(ii), which applies to cogenera-