This Act may be cited as the “Updating Purchase Obligations to Deploy Affordable Resources to Energy Markets Under PURPA Act” or the “UPDATE PURPA Act”.

(a) Cogeneration and small power production rules.—Section 210 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3) is amended by striking subsection (a) and inserting the following:

“(a) Cogeneration and small power production rules.—

“(1) IN GENERAL.—Not later than 1 year after the date of enactment of this Act, the Commission shall prescribe, and from time to time thereafter revise, rules as the Commission determines necessary to encourage cogeneration and small power production, and to encourage geothermal small power production facilities of not more than 80 megawatts capacity.

“(2) REQUIREMENTS.—The rules under paragraph (1)—

“(A) shall require electric utilities to offer—

“(i) to sell electric energy to qualifying cogeneration facilities and qualifying small power production facilities; and

“(ii) to purchase electric energy from facilities described in clause (i);

“(B) shall be prescribed after consultation with representatives of Federal and State regulatory agencies having ratemaking authority for electric utilities, and after public notice and a reasonable opportunity for interested persons (including Federal and State agencies) to submit oral as well as written data, views, and arguments;

“(C) shall include provisions requiring—

“(i) minimum reliability of qualifying cogeneration facilities and qualifying small power production facilities (including reliability of those facilities during emergencies);

“(ii) qualifying facilities to be responsible for any costs needed to hold electric utility customers financially indifferent to the cost of enabling the firm delivery capability of the qualifying facility, including the cost of any facilities or network upgrades associated with the interconnection service of the qualifying facility and transmission service arrangements of the qualifying facility to deliver the power of the qualifying facility to electric utility customers;

“(iii) curtailment of qualifying facilities as the Commission determines necessary to ensure resource adequacy; and

“(iv) reliability of electric energy service to be available to facilities described in clause (i) from electric utilities during emergencies; and

“(D) may not authorize a qualifying cogeneration facility or qualifying small power production facility to make any sale for purposes other than resale.”.

(b) Rates for purchases by electric utilities.—Section 210(b) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3(b)) is amended—

(1) in paragraph (1), by striking “, and” and inserting “; and”;

(2) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and indenting the subparagraphs appropriately;

(3) in the matter preceding subparagraph (A) (as so redesignated), by striking “The rules prescribed under subsection (a) shall insure” and inserting the following:

“(1) IN GENERAL.—Subject to paragraph (2), the rules prescribed under subsection (a) shall ensure”; and

(4) in the undesignated matter following subparagraph (B) of paragraph (1) (as so redesignated), by striking “No such rule” and inserting the following:

“(2) LIMITATION.—No rule”.

(c) Termination of mandatory purchase requirements.—Section 210(m)(1) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3(m)(1)) is amended—

(1) in subparagraph (B)(ii), by striking “or” at the end; and

(2) by striking subparagraph (C) and inserting the following:

“(C) any independently administered, voluntary, auction-based energy market (including an energy imbalance market), regardless of whether—

“(i) an applicable electric utility participating in such a market is a member of a regional transmission organization or an independent system operator; or

“(ii) such a market has a governance structure and operation that is wholly separate and autonomous from a regional transmission organization or an independent system operator; or

“(D) wholesale markets that are of comparable competitive quality to markets described in subparagraph (A), (B), or (C).”.

(d) Nondiscriminatory access.—Section 210(m) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3(m)) is amended by adding at the end the following:

“(8) NONDISCRIMINATORY ACCESS.—

“(A) IN GENERAL.—For purposes of this subsection, a qualifying small power production facility with an installed generation capacity of 2.5 megawatts or greater is presumed to have nondiscriminatory access to the transmission and interconnection services and wholesale markets described in subparagraphs (A), (B), (C), and (D) of paragraph (1).

“(B) EXCEPTION.—Subparagraph (A) shall not apply with respect to a qualifying small power production facility that, as of the date of enactment of this paragraph—

“(i) produces both electric energy and useful thermal energy; and

“(ii) on a million-British-thermal-unit basis, uses not less than 80 percent of the total annual aggregate net output of electric energy and useful thermal energy of the qualifying small power production facility for onsite industrial, commercial, or institutional purposes, rather than for sale.”.

(e) Recognition of State or local determinations.—Section 210(m) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3(m)) (as amended by subsection (d)) is amended by adding at the end the following:

“(9) STATE OR LOCAL DETERMINATION.—Effective beginning on the date of enactment of this paragraph, no electric utility shall be required to enter into a new contract or obligation to purchase electric energy under this section from a qualifying small power production facility that is not a qualifying small power production facility described in paragraph (8)(B), if the appropriate State regulatory agency or non-regulated electric utility determines that—

“(A) the electric utility has no need to purchase electric energy from the qualifying small power production facility in the quantities offered within the timeframe proposed by the qualifying small power production facility to meet any obligation to serve a customer, consistent with the needs for electric energy and the timeframe for those needs, as specified in the integrated resource plan of, or other applicable demonstration of need by, the electric utility; or

“(B) the electric utility employs integrated resource planning or another applicable demonstration of need and conducts a competitive resource procurement process for long-term energy resources that provides an opportunity for qualifying small power production facilities to supply electric energy to the electric utility in accordance with the integrated resource plan of, or other applicable demonstration of need by, the electric utility.”.

(f) Technical corrections.—Section 210 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a–3) is amended—

(1) in subsection (h)(2)(A)(i), by striking “subsection (f) or” and inserting “subsection (f); or”; and

(2) in subsection (k), by adding a period at the end.

(a) Required amendments relating to location of small power production facilities.—

(1) IN GENERAL.—Not later than 180 days after the date of enactment of this Act, the Federal Energy Regulatory Commission (referred to in this section as the “Commission”) shall publish in the Federal Register a final rule to amend, in accordance with this section, the regulations of the Commission promulgated to carry out section 3(17)(A)(ii) of the Federal Power Act (16 U.S.C. 796(17)(A)(ii)) relating to the method used by the Commission to determine whether a facility is considered to be located at the same site as a facility for which qualification is sought for the purpose of calculating power production capacity.

(2) REBUTTABLE PRESUMPTION.—

(A) IN GENERAL.—The amendments to regulations required by paragraph (1) shall establish a rebuttable presumption that—

(i) facilities separated by a distance of 1 mile or more shall not be considered to be located at the same site; and

(ii) facilities separated by a distance of less than 1 mile shall be considered to be located at the same site.

(B) REBUTTING PRESUMPTION.—The Commission shall allow any person (as defined in section 385.102 of title 18, Code of Federal Regulations (as in effect on the date of enactment of this Act)) to rebut the presumption described in subparagraph (A).

(3) FACTORS FOR CONSIDERATION.—

(A) IN GENERAL.—The amendments to regulations required by paragraph (1) shall require that, in determining whether a facility is considered to be located at the same site as a facility for which qualification is sought, the Commission shall take into consideration, to the maximum extent practicable, the following factors:

(i) The extent to which the owners or operators of the facilities are—

(I) affiliates or associate companies (as those terms are defined in section 1262 of the Public Utility Holding Company Act of 2005 (42 U.S.C. 16451)); or

(II) under the control of the same person, subject to subparagraph (B).

(ii) The extent to which the facilities have been treated as a single project for purposes of other regulatory filings or applications.

(iii) Whether the facilities use the same energy resource.

(iv) Whether the facilities—

(I) have a common generator lead line; or

(II) connect at the same or nearby interconnection points or substations.

(v) The extent to which the owners or operators of the facilities have a common land lease or land rights with respect to land on which the facilities are located.

(vi) The extent to which there is common financing with respect to the facilities.

(vii) The extent to which the facilities are part of a common development plan or permitting effort, regardless of whether the interconnection of the facilities occurs at separate points.

(B) CONTROL.—For purposes of subparagraph (A)(i)(II), the Commission shall consider the owner or operator of a facility to be under the control of a person if—

(i) the person directly or indirectly owns, controls, or holds, with power to vote, 10 percent or more of the outstanding voting securities of the owner or operator; or

(ii) the Commission determines, after notice and opportunity for hearing, that the person exercises, directly or indirectly (alone or pursuant to an arrangement or understanding with 1 or more persons), a controlling influence over the management of the owner or operator.

(4) EXCEPTION.—Paragraphs (2) and (3) shall not apply with respect to a facility that, as of the date of enactment of this Act—

(A) produces both electric energy and useful thermal energy; and

(B) on a million-British-thermal-unit basis, uses not less than 80 percent of the total annual aggregate net output of electric energy and useful thermal energy of the facility for onsite industrial, commercial, or institutional purposes, rather than for sale.

(b) Prohibition on requiring minimum term for certain contracts.—The Commission shall not issue any regulation, guidance, or order that requires a minimum contract term for any power purchase contract between—

(1) an electric utility (as defined in section 3 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2602)); and

(2) a qualifying small power production facility (as defined in section 3 of the Federal Power Act (16 U.S.C. 796)).

(c) Required amendment relating to legally enforceable obligations.—Not later than 180 days after the date of enactment of this Act, the Commission shall publish in the Federal Register a final rule to amend the regulation contained in section 292.304(d)(2) of title 18, Code of Federal Regulations (as in effect on the date of enactment of this Act), to provide that a legally enforceable obligation for the delivery of electric energy or capacity from a qualifying small power production facility to an electric utility shall not require any electric utility to purchase electric energy or capacity from a qualifying small power production facility at a rate that exceeds the incremental cost to the electric utility of alternative electric energy or capacity, as calculated at the time of delivery of the electric energy or capacity.