In a recent order, the Federal Energy Regulatory Commission (FERC) confirmed its recent policy to require owners of qualifying small power production and cogeneration facilities (each, a QF) to immediately update their Form No. 556 QF self-certifications to reflect a material change, including with respect to upstream ownership. On February 19, 2026, FERC issued an Order on Rehearing and Clarification in Branch Street Solar Partners, LLC, 194 FERC ¶ 61,124 (2026) (Branch Street), denying rehearing requests from owners of seven QFs that had filed recertifications several months to over a year after undergoing changes in ownership. FERC rejected the companies’ refund reports and required the companies to pay time-value refunds calculated on total revenues collected, with interest accruing from the date of collection until the date refunds are actually made.
The case stems from the indirect acquisition of the membership interests of seven QFs between July 2019 and March 2020. The QF owners did not file updated QF self-certifications to reflect the change in ownership until several months (and in some cases, nearly a year) after the transaction. Approximately four years later, the companies paid refunds representing the difference between revenues received and the interconnecting utilities’ avoided costs of service but without adding the time-value of money (interest) – a methodology that FERC ultimately determined was inconsistent with its regulations and precedent.
In Branch Street, FERC addresses several significant issues for QF owners and developers:
- QF Status and Related Benefits Cannot Be Asserted Without an Accurate Certification on File with FERC. FERC reaffirmed its rule that having an accurate certification on file is required to establish and maintain QF status, and that under FERC’s regulations, prior certifications “may no longer be relied upon” if there is a change in the material facts represented in the facility’s certification. Therefore, when a material change occurs, such as a change of ownership, a QF owner must immediately file a notice of self-recertification or apply to FERC for recertification to maintain its QF status. This rule is consistent with FERC’s 2022 order in Irradiant Partners, LP, which stated that “[h]aving current and accurate information on file with [FERC] via an updated Form No. 556 is necessary for a facility to obtain and to continue to maintain its QF status.” 178 FERC ¶ 61,215, at P 10 (2022) (Irradiant Partners). While the regulations do not explicitly state when a QF must file for recertification to reflect a material change, FERC held that “recertification is required when the material change is made.” Id. at P 17. Accordingly, FERC’s order in Irradiant Partners established that there is no grace period to file recertifications following a material change, including changes in upstream ownership. Such changes must be reported to FERC immediately in a QF recertification. FERC reaffirmed this rule in Branch Street.
- Failure to Timely Recertify Triggers Refund Obligations. As FERC explained in Irradiant Partners and affirmed in Branch Street, QFs of 20 MW or smaller are exempt from sections 205 and 206 of the Federal Power Act (FPA), including the requirement to obtain authority to make sales of wholesale energy, capacity, and ancillary services at negotiated or market-based rates, but this exemption applies only if the QF’s certification is accurate. By failing to timely recertify following a material change, including upstream ownership, QF owners are deemed to be selling energy “without the benefit of the QF exemption from FPA section 205 during the period between the Facilities’ changes in ownership and each Facility’s filing of an updated Form No. 556.” Branch Street at P 16. Accordingly, entities that fail to timely recertify a QF can become subject to time-value refund obligations for making sales without prior FERC authorization.
- Time-Value Refunds Must Be Calculated on Total Revenues. FERC rejected the companies’ methodology, which calculated interest on gross revenues only until the updated Form No. 556s were filed, and then calculated interest only on the accumulated interest for the subsequent period. Instead, consistent with the refund guidance set forth in FERC’s regulations, interest must be “computed from the date of collection until the date refunds are made” on the total revenues received—not merely on accumulated interest. Branch Street at P 57. FERC also denied the companies’ requests to stop the accrual of interest as of the date they filed refund reports or during the pendency of any judicial review. Id. at P 66. FERC confirmed that interest will continue to accrue until refunds are actually paid. Id.
Lessons Learned for QF Owners and Developers
- Treat QF Recertification as a Transaction Closing Item. In Branch Street, FERC made clear that owners should not wait to file an updated Form No. 556 until after a change in ownership or other material change. While FERC declined to establish a bright-line rule for when a QF owner must file a QF recertification, the best practice is to file contemporaneously with the closing of any change in upstream ownership or other change that affects material facts previously presented to FERC in a QF self-certification.
- Diligence Historic QF Compliance. Entities acquiring QFs should carefully review the certification status of target facilities to ensure compliance with FERC’s recertification requirements and the prompt filing of QF recertifications upon closing a transaction that results in a change in upstream ownership. Failure to do so could expose the acquiring entity to refund liability.
FERC’s order in Branch Street underscores the importance of prompt QF recertification filings upon any material change in ownership or other circumstances. QF owners who delay recertification risk losing the benefit of statutory exemptions from FPA section 205 and facing time-value refund obligations. By reaffirming its decisions in Irradiant Partners, FERC has made clear that accurate and timely Form No. 556 filings are essential to maintaining QF status and enjoying the benefits of that status.