Legal Considerations

Chapter 13: Power Purchase Agreement

PPA
A power purchase agreement (PPA) is a contract to buy the electricity generated by a power plant. These agreements are a critical part of planning a successful wind project because they secure a long-term stream of revenue for the project through the sale of the electricity generated by the project. Securing a good PPA is often one of the most challenging elements of wind project development.

This section covers the basics of a power purchase agreement and things to consider as you negotiate with a power purchaser. The main topics covered in this section are:

Ownership: 

Public Utility Commission (PUC), Public Services Commission (PSC) or Utility Board

A state government agency responsible for the regulation of public utilities within a state or region. A state legislature oversees the PUC by reviewing changes to utility laws, rules, and regulations and approving the PUC's budget. The commission is usually made up of Commissioners appointed by the governor or legislature for a specific term which varies from state to state. The PUC focuses on adequate, safe, universal utility service at reasonable rates while also trying to balance the interests of consumers, environmentalists, utilities, and other stockholders.

IRS Private Letter Rulings

A notice from the IRS that makes a ruling on how a particular portion of the tax code applies in a specific instance for an individual or business. Many community wind projects have asked the IRS for rulings on the ability of the project’s business structure to take advantage of the production tax credit (and other tax advantages) in a way that is within the law. Private letter rulings from the IRS only apply to the specific project the ruling is addressed to.

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