States lack crystal ball as FERC ponders PURPA changes

SAN ANTONIO – State utility regulators have a lot of questions but few solid clues about potential changes to the Public Utility Regulatory Policies Act (PURPA) as the Federal Energy Regulatory Commission (FERC) prepares to give the landmark renewable-energy measure its first formal review since it passed in 1978.

The Act’s main goal was to encourage the development of renewable energy production at a time when the United States was still rattled by the oil embargo of the mid-1970s that put an end to cheap gasoline and the equally ominous spike in periodic shortages of natural gas. The energy picture is much different in 2019 and the regulators who oversee the renewables industry are hopeful that FERC will make some meaningful tweaks for the first time since it went into effect in 1980.

“The statute is supposed to be periodically reviewed and the time is beyond right,” said Philip Moeller, executive vice president of the Business Operations Group and Regulatory Affairs at the Edison Electric Institute (EEI). “Arguably, it hasn’t been done until now.”

The review was announced in September, and stakeholders have until Dec. 3 to file their comments with FERC. But attendees at this week’s National Association of Regulatory Utility Commissioners (NARUC) Annual Meeting and Education Conference in San Antonio said there are still few clues as to how much of an adjustment will be made to the complex package of rules aimed at bringing more independent renewable and cogeneration projects onto the grid.

“I’m optimistic that it will give the states a level of (regulatory) flexibility,” Commissioner Kristine Raper of the Idaho Public Utilities Commission told Daily Energy Insider. “I would hope that the discussion doesn’t get bogged down in the minutia.”

Megan Decker, chair of the Oregon Public Utility Commission, declined to venture an opinion on what might come out of the FERC deliberations but said she welcomed a “tune-up” to the law.

PURPA’s main goal in 1978 was to provide a way for pioneering renewable-power producers known as qualifying facilities (QF) to place modest amounts of electricity – 80 Megawatts (MW) or less – on the regional grid by requiring utilities to purchase the electricity at the same “avoided cost” that a utility would have paid to generate the power themselves. The mandate was lowered to 20 MW or less in 2005; however, QF generators still enjoy a kind of VIP status when it comes to selling power to utilities.

As the renewables industry has grown under PURPA, there are increasing concerns in some states that the system has been “gamed” on occasion by renewables developers who divide up their large-capacity properties into smaller units in order to get under the PURPA threshold. The situation led to larger volumes of power being shoehorned onto the grid in a way that was not necessarily helpful in maintaining a stable and economical grid. Decker called the rule a necessary “blunt instrument” in the expansion of renewables, and other panelists repeated the line that PURPA causes “more gray hairs per megawatt” than any other market rule.

However, Katherine Gensler, vice president at the Solar Energy Industries Association, told the peak-capacity, standing-room-only audience that around 2 percent of the total U.S. solar capacity was currently covered by PURPA. “It’s a tiny part of the solar industry,” she said. “The largest part of the solar market is being driven by factors outside of PURPA.”

The NARUC discussion did not include any sentiment toward scrapping PURPA altogether, although the speakers unanimously called for giving the states more flexibility to help meet their own localized needs since many states are still keen on developing renewables in order to meet their own climate goals.

“Our state law tells us that we are to support the development of qualifying facilities … that are important to our state legislators,” Decker said.