What is a QF?

A QF is a qualifying electric power production facility under PURPA. QFs can be cogeneration facilities, which sequentially produce electricity and thermal energy from a single fuel source, or small power production facilities, which use renewable energy sources such as wind, solar, biomass, hydro, geothermal, or waste. QFs must meet efficiency and size standards and cannot be more than 50 percent owned by an electric utility or a utility holding company. When they need power, electric utilities are required to purchase the output of QFs at their avoided cost. Because they do not directly serve ratebase customers, QFs are exempt from many federal and state regulatory requirements, including federal and state rate regulation and oversight by the Securities and Exchange Commission. QFs are not exempt from environmental regulations.