Qualifying facilities are a distinct class of energy producer which consists of 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 saleable 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.

Qualifying facilities were first classified in 1978 with the establishment of the Public Utility Regulatory Policies Act, a piece of legislation which was intended to encourage more efficient and environmentally friendly energy production in the United States.

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