Public Utility Regulatory Policies Act of 1978 (PURPA)

A US federal law enacted in 1978 which was intended to encourage more energy-efficient and environmentally friendly commercial energy production. PURPA defined a new class of energy producer called a qualifying facility. QFs are either small-scale producers of commercial energy who normally self-generate energy for their own needs but may have occasional or frequent surplus energy, or incidental producers who happen to generate usable electric energy as a byproduct of other activities. When a facility of this type meets the Federal Energy Regulatory Commission's requirements for ownership, size and efficiency, utility companies are obliged to purchase energy from these facilities based on a pricing structure referred to as avoided cost rates. These rates tend to be highly favorable to the producer, and are intended to encourage more production of this type of energy as a means of reducing emissions and dependence on other sources of energy.

See also:

deregulation, qualifying facility, cogeneration, Federal Energy Regulatory Commission, avoided cost