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PURPA Reform: Good for Consumers, Good for States, Good for Clean Energy

1970s-era energy regulations are outdated and ineffective.

WHY WE NEED REFORM

Right now, energy customers across the country are overpaying their electricity bills by the billions.

This is happening, in large part, because of a federal law called the Public Utility Regulatory Policies Act (PURPA), enacted in 1978. PURPA was part of Congress’s response to the national energy crisis.  Its original goal was simple: achieving greater energy security from a diversity of sources.

Fast forward: In 2020, we are no longer living in energy scarcity; America is energy independent and our energy mix is diverse.  It includes renewables such as wind and solar that are both cheaper and more readily available than they were in the 1970s.

But while times have changed, the law hasn’t.  Unfortunately, PURPA’s requirements both force customers to pay more for power they don’t need, while also locking out innovative renewable energy technology.  That doesn’t make sense.

In response, the Federal Energy Regulatory Commission (FERC) has a common-sense proposal to update and improve PURPA to meet today’s energy needs. It would give states greater flexibility in determining how utilities contract with energy suppliers, so consumers aren’t overcharged for electricity, while ensuring that cutting edge renewable sources come online sooner. This makes sense for consumers, the economy, and the environment.

Reforming PURPA is good for consumers, good for states, and good for clean energy.

KEY STATS


PURPA contracts are costing customers
between $2.7 billion and $3.9 billion
in overpayments. 1


The overpayment of solar contracts is estimated at between $1.05 billion and $1.87 billion. 2

The overpayment of wind contracts is estimated at between $1.65 billion and $1.99 billion. 3

FROM THE EXPERTS

“CEA estimated that utilities and, in the end, customers overpaid by $2.7 billion and $3.9 billion for solar and wind contracts, respectively, from 2009 – 2019.” – Concentric Energy Advisors (CEA) study 

“Ratepayer protection is the primary and fundamental reason why PURPA needs to be reformed quickly and comprehensively to stem what otherwise will be a continued, very costly, and long-term financial liability for a large number of U.S. electricity customers.” – Dr. David Dismukes LSU study 

COMMENTS INTO FERC

WASHINGTON – A wide variety of groups have weighed in with the Federal Energy Regulatory Commission (FERC) on why the Public Utility Regulatory Policies Act (PURPA) of 1978 is needed to ensure consumers have access to market-driven electricity costs:

ID. Gov. Brad Little

“Idaho has a history of supporting renewable and cogeneration PURPA projects. However, some developers have circumvented the intent of PURPA by manipulating the regulations through actions such as disaggregating large projects through use of the one-mile provision. I believe manipulation of PURPA implementation can be mitigated by granting as much discretion as possible to the states within reasonable parameters established by FERC.” – Governor of Idaho Brad Little, letter to FERC, comments on RM19-15, 12/3/19 

South Dakota PUC

“Having faced potential QF siting in segments which allowed multiple projects, we are aware of issues and possible inefficiencies that may arise when adjacent facilities are split into two or more designated projects. We strongly appreciate the clarity and certainty this proposal with related definitions should bring to the state while addressing proposed QF projects.” – South Dakota Public Utilities Commission, letter to FERC, comment on RM19-15, 12/2/19

Paul Bledsoe, PPI

“The excess consumer costs of this anachronistic provision are considerable.  Customers in North Carolina alone will pay more than $1 billion over market costs in the next decade, according the utility Duke Energy.  Western utility PacifiCorp finds that mandated contracts under PURPA in the next 10 years are adding $1.2 billion in above market rate consumer costs. A new analysis by Concentric Energy Advisors found that for solar contracts between 2013 and 2019 alone above market costs for PURPA mandated contracts totaled up to $1.87 billion.  All of these costs are simply passed to consumers. They are paying far above market rate for solar from these projects, instead of the very low solar prices (89% lower from utility scale PV solar than 10 years ago according to Lazard) now available in most of country. – Paul Bledsoe, PPI, letter to FERC, comment on RM19-15, 11/27/19 

Crystal Enkvist, Alaska Power Assc.

“FERC is therefore proposing to revise its regulations to allow states to require that QF energy rates vary during the term of the contract. … APA is supportive of this change because it would provide a potential means to protect utilities from contracts with rates fixed at a time when energy costs are high. APA also supports FERC’s proposal to allow states the ability to set energy and capacity rates through a competitive solicitation process such as a request for proposals.” – Crystal Enkvist, Alaska Power Association, letter to FERC, comment on RM19-15, 11/25/19 

Transmission Access Policy Study Group

“As the NOPR indicates, there have been dramatic changes over the past four decades, including the Commission’s open access reforms and the development of regional transmission organizations and independent system operators. TAPS supports the modernization of the Commission’s PURPA regulations to better reflect these changes, which is consistent with Congress’s directive that the Commission “revise” its PURPA regulations “from time to time.” Transmission Access Policy Study Group, letter to FERC, comment on RM19-15, 12/3/19 

NARUC

“Some states find that the current regulations implementing PURPA’s goal of promoting QF development are out of balance with the charge to ensure that consumers pay rates that are just and reasonable. Fortunately, the NOPR’s proposals target some of the regulations that have created this imbalance.” – NARUC, letter to FERC, comments on RM19-15, 12/3/19 

Idaho PUC

“The Idaho PUC has struggled to find a balance between the “must take” provisions of PURPA and the mandate that utility customer not be harmed. The Commission’s proposals to grant state’s more flexibility while still adhering to the basic tenets of the Act will allow state commissions to continue to promote small renewable developers without harming ratepayers.” – Idaho Public Utility Commission, letter to FERC, comments on RM19-15, 12/3/19

Pennsylvania PUC

“Furthermore, the Commission’s companion proposal to grant states the flexibility to allow QFs to have fixed energy rates, but to base them on projections of what energy prices will be at the time of delivery during the term of a QF’s contract, balances the QF’s need for a steady stream of revenue with the purchasing electric utility’s responsibility to have a prudent mix of supply contracts for its POLR obligations. Therefore, the PAPUC is also supportive of this proposed revision.”  Pennsylvania Public Utility Commission, letter to FERC, comments on RM19-15, 12/3/19 

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