Updates to PURPA will bring law up to date with current energy market climate, lawmakers say

Sens. John Barrasso (R-WY) and Jim Risch (R-ID) recently introduced an updated version of the Public Utility Regulatory Policies Act (PURPA), S. 2776, which was meant to increase usage of renewable energy as well as promoting energy conservation and has not been updated since its enactment in 1978.

“When PURPA was created in 1978, our country was in the midst of an energy crisis — times have changed,” Kaylin Minton, communications director for Sen. Risch’s office, said. “It is time to update our energy laws to reflect the energy renaissance occurring in Idaho and all across our country.”

PURPA’s goals were to remove the “natural monopolies” of utilities by creating a power market for non-utility producers, removing promotional rate structures, increasing the use of cogeneration, encouraging hydroelectric power, and conserving electricity and natural gas.

With the changes in renewable energy in the last 40 years, the lawmakers believe the law needs to be updated to account for the current energy market.

The “Updating Purchase Obligations to Deploy Affordable Resources to Energy Markets Under PURPA Act,: or the UPDATE PURPA Act, “protects electricity customers from having to pay for unnecessary PURPA costs; empowers state public utility commissions and nonregulated utilities to waive PURPA’s mandatory purchase obligation if additional power is not required to meet customers’ electricity needs; ensures a level playing field for energy resources by requiring more PURPA resources to participate in energy markets; [and] prevents abuse of the Federal Energy Regulatory Commission’s one-mile rule,” Minton said.

Companion legislation was introduced in the House by U.S. Rep. Tim Walberg (R-MI).

In May, Barrasso, Risch, and Walberg sent a letter to the Federal Energy Regulatory Commission (FERC) urging them to reform PURPA “to protect electricity customers from unnecessary costs.”

“In 1978 Congress enacted PURPA to reduce our reliance on foreign oil for power generation and jumpstart renewable energy development,” the letter said. “Since then, energy markets have evolved dramatically. We now have open access to transmission, competitive wholesale markets, and abundant renewable energy.”

The letter stated that nearly half of all new energy added to the grid in 2017 was from renewable energy, and lower costs, tax incentives, and renewable portfolio standards are now the primary drivers for renewable energy.

The lawmakers urged FERC to update their regulations “to reflect the realities of modern energy markets,” because current policy “increases electricity costs for consumers by requiring utilities to purchase power they do not need at inflated prices.”

They added, “It is simply bad policy to force American homes and businesses to foot the bill for billions of dollars of excess costs that are not needed to keep the lights on.”

In December, the National Association of Regulatory Utility Commissioners (NARUC) sent correspondence to FERC urging reform.

“With dramatic changes to the energy industry since PURPA was first enacted, the issues surrounding PURPA’s implementing regulations are important and should remain among FERC Chairman McIntyre’s chief priorities,” the NARUC letter said.

The commission cited four changes in the industry since 1978, including the rise of wholesale markets; the adoption of qualifying facilities (QF) technologies as widespread sources of power; the open-access regulation of the transmission system; and competitive methods for the selection of projects within states.

“We appreciate the challenges for FERC to address the many issues that have been stalled over the past year. However, PURPA is an issue that deserves immediate attention and action,” NARUC President John W. Betkoski III said. “Our state members have a deep interest in ensuring that PURPA is reformed in a manner that reflects our needs today. We need renewables, but we need to procure them in a better way.”

NARUC also came up with three ways PURPA could be reformed.

The first way was allowing FERC to adopt regulations that would change administratively-determined avoided costs, instead replacing it with the use of competitive bids for PURPA compliance and project selection. The second way is to eliminate (or lower) the threshold for a qualifying facility under 20 megawatts (MW), with the goal of increasing competition and reduce transaction costs to state commissions. The third way is to discuss the one-mile rule and how facilities have dealt with the state and federal regulations.

Travis Kavulla, vice chairman of the Montana Public Service Commission, testified on behalf of NARUC, explained that they believe some QF developers have figured out how to work around those rules by creating multiple smaller projects to avoid falling within the regulations.

The U.S. House of Representatives Committee on Energy and Commerce Committee Majority staff is concerned about the same issue. In a letter sent earlier this year, the committee explained to the Subcommittee on Energy that “utilities have alleged that [qualifying facilities] are being developed just far enough from each other to comply with FERC’s regulations and qualify as separate facilities despite evidence to indicate that the development is actually a single facility.”

The FERC declined to comment on the status of PURPA, but the lawmakers are hoping to work with the organization to move it forward.

“Subsequent to the letter, later in May, FERC announced that it directed Commission staff to “reenergize” FERC’s PURPA review initiative,” Minton said. “We are committed to working with the FERC to see how to modernize PURPA.”

Jaclyn Brandt

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