FERC must revamp regulatory rules for utilities ASAP, nonprofit leaders say

The time is now for the Federal Energy Regulatory Commission to reform the Public Utility Regulatory Policies Act (PURPA), wrote 10 leaders of national nonprofit groups in a March 4 letter to FERC commissioners.

FERC is responsible for implementing the 1978-enacted law, which was meant to promote energy conservation, as well as greater use of domestic energy and renewable energy.

“But over four decades since PURPA’s passage, the nation’s energy landscape has changed profoundly, including the development of regional, wholesale, competitive electricity markets,” wrote the groups’ leaders.

They pointed out that the United States also has reduced oil-fired electric generation to 1 percent of all generation in 2015 — down from 16.5 percent in 1978 — noting that was originally “the central motivation behind PURPA.”

“Yet in the face of this, PURPA’s stale, static federal mandates remain in place, distorting markets and harming consumers,” according to their letter, which was signed by: Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council; Rick Manning, president at Americans for Limited Government; Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute; Tom Pyle, president of the American Energy Alliance; Bob McEwen, executive director at the Council on National Policy; J. Kenneth Blackwell, chairman of Constitutional Congress Inc.; George Landrith, president for Frontiers of Freedom; Tim Huelskamp, president and CEO at the Heartland Institute; and Tom Schatz, president for the Council for Citizens Against Government Waste. Becky Norton Dunlop, a former Virginia State Secretary of Natural Resources and former U.S. Assistant Secretary of the Interior, also signed the letter.

FERC Chairman Kevin McIntyre in May 2018 opened the commission’s review of PURPA, which many in the industry think has been the central driver for the growth of renewable energy projects. Utilities also lament the misuse of the law by project developers.

Most recently, the Edison Electric Institute (EEI), which represents the nation’s investor-owned utilities, filed a February motion with FERC asking that it combine its individual pro-reform filings on PURPA into a single docket.

EEI and its members want to see PURPA modernized now because they agree with the letter writers that market abuses are creating billions of dollars in unnecessary costs for consumers.

In fact, the letter signatories wrote that 29 states already have renewable “portfolio” energy mandates that set significant percentage requirements for renewable energy generation, such as wind and solar.

“This is on top of longstanding federal taxpayer subsidies boosting renewable energy production,” according to the letter. “PURPA, then, amounts to another bureaucratic command that requires renewable energy development that many local communities don’t need.”

Such “unnecessary, costly projects,” they wrote, most often are backed by long-term, fixed-price contracts that are usually above market rates and end up being “a boon for developers at the expense of consumers, who ultimately pay higher utility bills.”

“This can be especially difficult for consumers in rural areas,” they wrote. “In short, for those stuck with higher electric bills, PURPA is all cost for no benefit.”

In calling for PURPA’s reform, the letter writers suggested that states be given tools under FERC’s related regulations that help regulators balance how ratepayers are protected while ensuring discrimination doesn’t happen against the so-called “qualifying facilities,” or QFs, which are the renewable energy developers that currently benefit from PURPA’s mandates.

They said states also need enough flexibility to waive PURPA requirements when determining items such as “the appropriate mix of generation resources, how additional intermittent resources will affect grid reliability, and potential impacts on consumers.”

And finally, the stakeholders urged FERC to pursue “comprehensive PURPA reform” that encompasses all the methods used by states to calculate avoided costs for QFs, PURPA’s mandatory purchase obligation, and the one-mile rule, for example.

“In taking these steps, we are confident FERC can help strengthen electricity markets, provide consumers with affordable, reliable energy, and put an end to rent-seeking and government-backed abuses of a law that is hopelessly misaligned with America’s new era of energy dominance,” according to their letter.