On Feb. 19, 2026, the Federal Energy Regulatory Commission (FERC) made it clear that it expects qualifying facilities (QFs) to recertify their QF status immediately upon any material change, including a change in upstream ownership, or else be subject to a time-value refund obligation for QFs that, without such status, would be required to have market-based rate (MBR) authority. Additionally, FERC confirmed that its generally applicable time value refund analysis, which would apply to sales made prior to such recertification, should include interest based on the gross amount of sales until the refund is paid.
Based on this order, all QF owners and companies considering acquiring existing QFs should understand the strict timing requirements for recertification, and the potentially significant refund obligations for failing to timely recertify.
Applicable QF Regulations
Pursuant to FERC’s regulations, a facility may obtain QF status if it meets the operational requirements of a QF and certifies to FERC that it is in fact a QF. [1] Typically, facilities self-certify by submitting Form 556, which includes reporting the facilities’ upstream ownership. [2] All QFs are exempt from certain FERC regulations, and QFs with a gross output under 20 MW or making sales pursuant to either a contract executed on or before March 17, 2006, or pursuant to a state regulatory authority’s implementation of section 210 the Public Utility Regulatory Policies Act of 1978 are exempt from additional FERC regulations, including FPA Section 205. [3] Accordingly, such QFs are not obligated to obtain MBR authority to make FERC-jurisdictional sales. For those entities, failure to maintain QF status can create a refund obligation for any sales made while the facility was not considered a QF.
Under the applicable regulations, following a material change, a QF’s existing Form 556 “may no longer be relied upon” as evidence of QF status, and it is required to file a recertification or bear the risk of a determination that the facility was not a QF. [4] Separately, the regulations permit FERC to revoke a QF’s status, either on its own motion or in response to a complaint. [5] FERC regulations do not explicitly state when the recertification must be made following a “material change.” [6] A material change includes any transaction in which an existing owner increases its equity interest by at least 10% from the interest reported in the previously filed Form 556, including changes to the intermediate ownership structure. [7]
The 2025 Branch Street Order
The regulations do not include an explicit time requirement for recertifications, and common industry practice varied, with many entities ascribing to a 30-day rule for filing recertifications. On June 26, 2025, FERC issued an order rejecting refund reports submitted by Branch Street Solar Partners, LLC and its affiliates (Branch Street Affiliates) for certain small power production qualifying facilities (2025 Branch Street Order). [8] Through a series of transactions that closed in late 2019 and 2020, each of the Branch Street Affiliates had changes in ultimate upstream ownership. The Branch Street Affiliates filed recertifications related to upstream ownership changes, with the filings occurring between seven months to a year after the applicable transactions closed. On Nov. 14, 2024, each of the Branch Street Affiliates filed refund reports covering the time period between when the change in upstream ownership occurred and when the entity recertified by filing a new Form 556 reflecting the upstream change in ownership (Refund Period). The Branch Street Affiliates expressly stated that by filing the refund reports, they were not conceding that the facilities lost their QF status during the Refund Period.
In the 2025 Branch Street Order, FERC held that the Branch Street Affiliates incorrectly calculated the refund amount by failing to calculate interest up until the date when refunds were actually paid. Additionally, FERC acknowledged the Branch Street Affiliates’ statement about the validity of their QF status during the Refund Period. FERC expressly stated that by failing to recertify as a QF at the time the change in upstream ownership occurred, the Branch Street Affiliates’ facilities could not rely on their QF status until they filed a new Form 556. As support for this position, FERC cited its regulations and an earlier holding in Irradiant, [9] in which FERC stated that “[h]aving current and accurate information on file with the Commission via an updated Form No. 556 is necessary for a facility to obtain and to continue to maintain its QF status.”14 In Irradiant, FERC further stated that, “[w]hile we recognize that the regulations do not explicitly state when a QF must file for recertification to reflect a material change, recertification is required when the material change is made.” [10] FERC clarified that a generator may file a petition for partial waiver of QF requirements to be treated as a QF during the period of noncompliance. [11] Importantly, however, any waiver would not eliminate the refund obligation.
The Branch Street Affiliates filed for rehearing on the timing for recertification and calculation of refund interest, which were denied by operation of law on Aug. 28, 2025.
FERC Stays Firm: Order Denying Rehearing
FERC exercised its authority to modify the 2025 Branch Street Order by issuing the Branch Street Rehearing Order. FERC upheld its methodology for calculating refund obligations and reiterated that a QF must recertify “at the time that the material change occur[s].” [12]
Timing of Recertification
In the Branch Street Rehearing Order FERC affirmed its position that a QF must file for recertification “when the material change is made.” [13] Relying on the plain meaning of the regulations, FERC held that when a material change to the information provided in a Form 556 occurs, the Form 556 “may no longer be relied upon” and “at that point the owner of the facility must file a notice of self-recertification of qualifying status if the facility wishes to remain a QF.” [14]
FERC further stated that a failure to timely recertify does not “revoke” QF status. [15] However, as it relates to potential refund obligations, the practical effect of not being able to rely on QF status is indistinguishable from a revocation. Under this ruling, any QF that would otherwise require MBR authority is subject to refund liability if it fails to file a new Form 556 concurrent with any material change, including a change in upstream ownership.
Calculation of Refunds
The Branch Street Rehearing Order also affirmed FERC’s policy on the calculation of time value refunds. The Branch Street Affiliates had argued that FERC’s refund methodology permitted the calculation of time value refunds only up until the end of the Refund Period, rather than through the entire period until refunds were actually paid. In other words, the Branch Street Affiliates’ refund amount included interest on the sales during the Refund Period and interest on the interest that accrued during the Refund Period until the refund reports were filed. However, their refunds did not include interest on the sales made during the Refund Period from the date the recertifications were filed until the refund reports were filed (i.e., Dec. 28, 2020, to Nov. 14, 2024).
In the 2025 Branch Street Order and the Branch Street Rehearing Order, FERC rejected that methodology. FERC explained that its time value refund methodology requires calculation of interest on the total refund owed, with interest calculated through the date refunds are issued. For the Branch Street Affiliates, that means interest would be calculated on sales made starting with the date of the material change through the date the refunds are paid using the correct methodology.
Going Forward Impact
These orders make clear that a QF must file a recertification contemporaneously with any material change to the information provided in its previously filed Form 556 which, importantly, includes changes to a QF’s direct or indirect ownership. The strict recertification requirement could result in significant refund obligations for QFs that otherwise would be required to have MBR authority, which would be exacerbated by a long delay in the filing of a refund report, as occurred with the Branch Street Affiliates. To avoid potentially large refunds, due care should be taken.
- When evaluating new transactions involving QFs, buyers should review and consider past recertifications to determine any potential refund liability related to prior material changes.
- Buyers should plan on filing a new Form 556 contemporaneously with any material changes to the information provided in previously filed Form 556s, including any change in a facility’s upstream ownership. Recertification can present a significant administrative burden because often a single ownership change transaction creates recertification requirements for a large portfolio of QFs. Accordingly, potential buyers should build in sufficient time to complete and file all Form 556s.
The McGuireWoods Federal Energy Regulatory Commission team is monitoring these issues and is available to assist with any FERC compliance questions. For advice on this issue, contact the authors.
[1] See 18 C.F.R. § 292.207(a).
[2] The filing of Form 556s is not required for facilities of 1 MW or less. See 18 C.F.R. § 292.203(d)(1).
[3] 18 C.F.R. § 292.601(c)(1).
[4] 18 C.F.R. § 292.207(f)(1)(i).
[5] 18 C.F.R. § 292.207(f)(1)(ii)-(iii).
[6] Irradiant Partners, L.P., 178 FERC ¶ 61,215at P 17 (recognizing that FERC’s regulations do not “explicitly state when a QF must file for recertification”).
[7] See Selkirk Cogen Partners, L.P., 192 FERC ¶ 61,147 at n.24 (2025); see also Qualifying Facility Rates & Requirements; Implementation Issues Under the Pub. Util. Regul. Policies Act of 1978, Order No. 872, 172 FERC ¶ 61,041 at P 550 (2020).
[8] Branch Street Solar Partners, et al., 191 FERC ¶ 61,223 (2025), order on reh’g, Branch Street Solar Partners, et al., 194 FERC ¶ 61,124 (2026) (“Branch Street Rehearing Order”).
[9] Irradiant Partners, LP, 178 FERC ¶ 61,215 at P 10 (2022).
[10] Irradiant Partners, LP, 178 FERC ¶ 61,215 at P 17 (2022).
[11] 2025 Branch Street Order at P 12 n.17.
[12] Branch Street Rehearing Order at P 24.
[13] 2025 Branch Street Orderat P 11 (citing Irradiant).
[14] Branch Street Rehearing Order at P 33 (citing 18 C.F.R. §§ 292.207(f)(1)(i), 292.203).
[15] Branch Street Rehearing Order at P 40.