Legal Considerations

Chapter 13: Power Purchase Agreement

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:


What questions should I ask before signing a wind lease agreement?

Wind agreements are long term and legally binding, making it crucial for you to review them carefully and investigate anything you don’t clearly understand. You should always consult an attorney before signing anything.

There are many questions you should ask before signing on the dotted line. Here are a few to start with: How much of my land will be tied up and for how long? How much will I be paid and how will I receive payments? How will this contract affect my ability to use my land for other purposes? Are there any adverse tax consequences for me? Are the payments adequate now and will they be adequate in the future? Is signing this contract compatible with my family’s and my goals for our land?

Windustry offers more detailed information on questions landowners should ask in our Leases and Easements web page.

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.


A financial instrument held by a third party on behalf of two other parties in a transaction, The funds are held by the escrow service until the service receives the appropriate written or oral instructions or until obligations have been fulfilled by participating parties. Securities, funds, and other assets can be held in escrow.

Subscribe to Legal Considerations