Panel sees local impetus for PURPA reform
WASHINGTON – A pan
el of energy experts agreed Wednesday, while Congress holds the keys to major reforms to the Public Utility Regulatory Policies Act (PURPA), state legislatures and public service commissions can make meaningful changes to the 40-year-old law in order to affect their own local energy markets.
“It’s federal, so if there is a legislative fix it has to start in Congress. But states have a role,” said Willie Phillips, chairman of the Washington, D.C., Public Service Commission.
“There’s still a lot that FERC and Congress can do. There’s still a lot the states can do,” said Kodwo Ghartey-Tagoe, State President for South Carolina for Duke Energy, who said his company is currently working with state legislators to amend the laws governing the South Carolina market.
The experts made their remarks about PURPA, which was enacted in 1978 to encourage competitive generation and energy diversification, during the American Association of Blacks in Energy 2019 Energy Policy Summit in Washington on Wednesday.
Ralph Cavanagh, co-director of Natural Resources Defense Council’s climate and clean energy program, said Congress has been discussing reforming PURPA for 38 years, but has been unable to agree to a plan because of “strong proprietary interests on both sides” of the issue that come in conflict with each other. “States have the ability and the authority to make changes (to the local market), Cavanagh said.
Cavanagh explained what he called the two bedrock principles of PURPA: first, that there is no discrimination in purchasing power from renewables producers; and second that no utility customer should be worse off. If people believe these principles are not being satisfied then local action can address the problems. “We don’t need Congress to solve this problem,” said Cavanagh. “FERC and state commissions have the authority to do it. Let’s work with the state commissions and FERC. That’s what we should do.”
D.C.’s Phillips emphasized that local communities themselves have the authority to shape energy policy. “They are looking for opportunities to compete, but it’s on the people. People have the power (to make changes),” he said. He called on state commissioners, who he noted know the local markets, to work with the Federal Energy Regulatory Commission (FERC) and with Congress to make meaningful changes.
D.C., according to Phillips, gets about 20 percent of its energy needs from renewables and has a goal of 100 percent. He declined, however, to characterize what role PURPA has played in expanding the city’s use of renewables. Still, he said, it would be “malpractice” to replace PURPA with something that is not as effective in encouraging renewables.
Duke’s Ghartey-Tagoe said one problem is that FERC regulations do not ensure utilities pay market price for power generated under PURPA. He also said that standards for how a state determines avoided cost can vary.
Duke is in favor of renewables but Ghartey-Tagoe said it has been overpaying for power it buys from solar sources under the current rules. “The legislative history of PURPA,” he said,” is that it was not intended to subsidize solar power.”
“We’re absolutely pro-renewables,” he said, but he added that Duke wants the authority to be able to buy power from local providers at competitive prices. He said Duke has seen an “expansion and explosion” of QF renewable facilities in North Carolina, where the price the utility pays is mandated under PURPA. As a result, “we realized we were overpaying by as much as $1 billion,” he explained. He maintains that states and federal regulators and Congress can pass laws to ensure that consumers are paying competitive prices. “That’s been our approach to this,” said Ghartey-Tagoe. “There are cheaper ways to do this and still help the industry to advance.”
Investor-owned utilities are supportive of PURPA reform because they say the outdated statute has led to billions of dollars in excess costs for customers. They want to see regulations implemented that recognize the greater competition in current electricity markets and to better protect customers.
NRDC’s Cavanagh said that PURPA is still relevant to rationalize energy production by a disparate group of renewable producers. He noted the western utility grid is distinguished by “38 different fiefdoms,” making a national law like PURPA necessary.
He added that changes in the role of local utilities, proposed in some states, will have major implications for PURPA. “If you blow up the local utility in the name of retail electricity competition, then PURPA becomes irrelevant from a resource procurement standpoint,” he said. “We should work together to maintain the traditional responsibilities of our hometown utilities for competitive acquisition of the resource portfolios that keep electricity services affordable and reliable.”
