(1) The commission hereby adopts and incorporates by reference 18 CFR, Part 292, which sets forth general requirements and criteria for cogeneration and small power production facilities which are eligible for consideration under sections 201 and 210 of the federal Public Utility Regulatory Policies Act of 1978, Pub. L. 95-617. A copy of this incorporated material may be obtained from the Commission, 1701 Prospect Avenue, P.O. Box 202601, Helena, Montana 59620-2601.

(2) Any cogeneration or small power production facility in Montana, which is a qualifying facility under the criteria for size, fuel-use, and ownership established by FERC regulations, 18 CFR, Part 292, as incorporated in ARM 38.5.1901(1) , is a qualifying facility eligible to participate, under these rules, in arrangements for purchases and sales of electric power with electric utilities regulated by the commission.

(3) Any qualifying facility in Montana which produces electric energy or capacity, or both, available for purchase by any public utility regulated by the commission, shall not be considered a public utility within the meaning of 69-3-101 , MCA, and shall be exempt from regulation by the commission as a public utility, except insofar as these rules or any other commission order, tariff, requirement, or rule governing the activities of public utilities may affect the facility in its dealings with such regulated utilities. Nothing in these rules is to be construed to limit the full powers of regulation, supervision, and control of public utilities vested by law in the commission.

(4) Nothing in these rules shall exempt any qualifying facility from the applicable licensing or permit requirements which may be imposed on facilities by Montana laws and regulations governing water use, land use, community development and planning, zoning, air quality, environmental protection, or any other existing pertinent law or regulation administered by state agencies other than the commission.

(5) All purchases and sales of electric power between a utility and a qualifying facility shall be accomplished according to the terms of a written contract between the parties or in accordance with the standard tariff provisions as approved by the commission. A long-term contract for purchases and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be contingent upon selection of the qualifying facility by a utility through an all-source competitive solicitation conducted in accordance with the provisions of ARM 38.5.2001 - 38.5.2012. Between competitive solicitations, purchases and sales of energy and capacity between a utility and a qualifying facility greater than 3 MW in size shall be accomplished in accordance with the short-term standard avoided cost tariff approved by the commission or through negotiation of a short-term written contract. The utility shall recompute the short-term and long-term standard tariffed avoided cost rates following public review and comment on each least cost plan filing, ARM 38.5.2001 - 38.5.2012. The recomputed avoided cost rates should reflect any amendments to the plan due to the comments of the commission and the public. If the qualifying facility is not selected, or does not participate, in the first available competitive solicitation, purchases and sales of energy and capacity shall continue only according to the terms of a newly negotiated short-term written contract or in accordance with the newly computed, short-term standard tariffed avoided cost rates. Long-term contracts for purchases and sales of energy and capacity between a utility and a qualifying facility 3 MW or less may be accomplished according to standard tariffed rates as approved by the commission. The contract shall specify:

(a) The nature of the purchases and sales;

(b) The applicable rate schedule or negotiated rates for the purchases and sales;

(c) The amount and manner of payment of interconnection costs;

(d) The means for measurement of the energy or capacity purchased or sold by the utility;

(e) The method of payment by the utility for purchases, and the method of payment by the facility for utility sales;

(f) Any installation and performance incentives to be provided by the utility to the qualifying facility;

(g) The services to be provided or discontinued by either party during system emergencies;

(h) The term of the contract;

(i) Applicable operating safety and reliability standards with which the qualifying facility must comply;

(j) Appropriate insurance indemnity and liability provisions.

(6) All purchases and sales of electric power between a utility and a qualifying facility shall be compatible with the goal of the commission's integrated least cost resource planning and acquisition guidelines, ARM 38.5.2001 - 38.5.2012.