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The Federal Energy Regulatory Commission recently  a June 2025 decision requiring seven small power producers (the “Companies”) to pay refunds for wholesale power sales made during periods when they could not “rely upon” prior self-certifications of qualifying facility (“QF”) status that were not promptly updated following upstream ownership changes.[1] While FERC’s decision does not change existing policy regarding Form 556 updates, it is a pointed reminder for project sponsors, tax equity investors, lenders, and their counsel that a change in “any material facts or representations” in prior submittals to the Commission, such as certain changes in upstream ownership, triggers an immediate recertification obligation to maintain QF status, and failure to file necessary updates can lead to loss of QF status and refund liability under Section 205 of the Federal Power Act (“FPA”), even if a facility otherwise met all substantive criteria for QF status during the gap period.

FERC has now twice, in Irradiant Partners, LP[2] and Branch Street, made clear that maintaining QF status and the important regulatory exemptions available to some QFs requires a current, accurate Form 556 to be on file for facilities larger than 1 MW.[3] The operation of Section 292.207(f)(1)(i) of FERC’s regulations, which states that if a QF “fails to conform with any material facts or representations . . . in its submittals to the Commission, [its prior] notice of self-certification or Commission order certifying the qualifying status of the facility may no longer be relied upon,”[4] does not result in “revocation” of QF status “for any delay in certification,”[5] but means that if a QF fails to update its information “[a]t that point,” the facility “is not in compliance with the Form 556 filing requirement in the Commission’s regulations and thus may be subject to time-value refunds for sales made without prior authorization under FPA section 205 during the period of non-compliance.”[6]

Thus, for transactions that result in changes to “any material facts or representations” on file for a QF, including, but not limited to, 10% or greater changes in indirect ownership of a facility,[7] timely recertification is critical so the facility’s Form 556 can continue to be “relied upon” for QF status and exemption from, for example, the requirement to obtain market-based rate authority under FPA Section 205 for QFs not larger than 20 MW. Transaction teams and their regulatory counsel should remember that compliance with Section 292.207(f)(1)(i) is inseparable from maintaining important regulatory exemptions for QFs involved in their deals.

Comparison to Irradiant: No New Law, Just Application of Longstanding Rules

FERC noted that its regulations have long provided that “if a QF fails to conform with any material facts or representations in its submittals to the Commission, then the notice of self-certification or Commission order certifying the QF status of the facility may no longer be relied upon, and the QF may[, at that point,] file a notice of self-certification or application for recertification.”[8] Since Order No. 671 in 2006,[9] that means that “a QF that continues to conform to the Commission’s qualifying criteria and wishes to rely on its QF status must recertify when material facts or representations in the Form No. 556 change.”[10]

On rehearing of the June 2025 order, the Companies argued that no refunds should be due because prior FERC precedent establishes that, once certified, a QF does not lose its status as a QF due to a delay in recertification, that FERC’s interpretation of Section 292.207(f)(1)(i) in Irradiant was wrong and contrary to such Commission precedent, that the Commission lacked authority to issue a regulation that requires recertification at the moment when a “material change” occurs, and that Irradiant should not be applied retroactively to the Companies’ facilities, which had been recertified before Irradiant.[11]

FERC disagreed, noting that it had simply used Irradiant in the June 2025 order “as a means of explaining the existing requirement—in section 292.207(f)(1)(i) of the Commission’s regulations—that if a QF fails to conform with any material facts or representations in its submittals to the Commission, then the notice of self-certification or Commission order certifying the QF status of the facility may no longer be relied upon.”[12] It emphasized that Irradiant’s statement that “[h]aving current and accurate information on file . . . is necessary . . . to maintain QF status” was merely a reiteration of the Form 556 filing requirement in effect since Order No. 671. The Commission further held that that obligation to recertify a facility upon a “material change,” and the consequence that past certifications “may no longer be relied upon,” has been its “long-standing practice.”[13] And it distinguished its older cases as having been decided under pre-2006 rules, when certification was voluntary and failing to update a Form 556 did not trigger refund exposure under FPA Section 205.[14]

FERC reiterated that since Order No. 671 in 2006, and as discussed in Irradiant in 2022, maintaining QF status for a facility depends not only on meeting the technical criteria for QF status, but also on having a correct and up-to-date Form 556 on file.  “By failing to timely file for recertification,” FERC found, “the Companies—whose Facilities range in size from approximately 1.5 MW to 20 MW—could no longer rely upon their status as QFs and thus sold electric 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.”[15] It did not “revoke” their QF status for the gap periods, but found that they were not eligible for exemption from FPA Section 205 during those periods.

Notably, the Companies’ initial refund reports apparently were not triggered by a contact from FERC Staff or a complaint. Rather, the relevant refund payments and refund reports were voluntarily made in November 2024. The refunds were “voluntary” and were calculated to apply to a period from July 2019 through February 2020, a period during which fully accurate ownership information via updated Form 556s was not on file with the Commission. The Branch Street orders reject how the refunds were calculated, noting two problems. First, the interest compounding calculations apparently were calculated only on the interest due on the revenue originally received, rather than on the larger amount of revenue plus interest. Second, interest continues to accrue until refunds are paid, rather than ending when the updated Form 556s were filed.

Implications for Transactions and Key Takeaways

Subject to any change following potential judicial review of Branch Street, for project finance and other transactions involving QFs, Branch Street reinforces the necessity of aligning closing mechanics with regulatory obligations and tasks where a transaction changes “any material facts or representations” included in a prior Form 556 for a facility. Specifically:

• Recertification Timing: The requirement to recertify when a material change occurs is immediate. For transactions that result in changes to upstream ownership of QFs, it is critical to treat Form 556 compliance as an at-closing or immediately post-closing task. In addition, as discussed in Irradiant, necessary updates can even be filed before the change occurs, but filing in advance is not required.[16] Form 556 updates should be included in closing checklists alongside other regulatory requirements, if any.
• Refund Exposure: Even if a facility continues to meet the substantive criteria for QF status, failure to recertify on time after a material change in facts can cause loss of the FPA Section 205 exemption, which can expose revenue streams to refund risk, including on the time-value of revenues received during the period of non-compliance.
• Magnitude of Liability: Time-value refunds can be substantial, sometimes reaching into the millions of dollars for long gap periods. If a facility’s Form 556 can no longer be relied upon to qualify for the FPA Section 205 exemption, time-value refunds continue to grow with every passing day. Once the non-compliance is recognized, the refund amounts due can stress cash reserves and trigger covenants in transaction or financing documents. And refund liability can arise even absent any customer protest and even where counterparties “have not suffered any harm and received the benefit of their bargain.”[17]
• Operational Monitoring: Owners of and investors in QFs, or their asset managers, should develop and implement processes to track changes to Form 556 information to ensure timely filings to avoid refund risk. This should include an awareness to include continued QF compliance as a due diligence item for any upstream corporate transactions or reorganizations.

The �鶹��ý energy regulatory team will continue to track developments in this area and welcomes questions on these issues.