Congress passed the Public Utility Regulatory Policies Act (PURPA) in 1978. It quickly proved controversial in practice, and remains so today. PURPA introduced competition to the electric industry by creating a market for non-utility owned cogeneration (cogen) and small power production and mandating that utilities buy the power produced by these “qualifying facilities” (QFs) at the utility’s “avoided cost.” Small power producers are renewable generators of 80 MW or less that meet certain efficiency standards. Qualifying cogen can be any size.
EPAct 2005 directed FERC to eliminate mandatory purchase of power from QFs that have nondiscriminatory access to competitive wholesale markets. FERC passed regulations setting out criteria for this. Since then, the mandatory purchase of QF power has been eliminated for the most part in RTO territories; however, utilities located in states without ISOs largely remain subject to the obligation. Therein lies today’s controversy: much renewable generation that meets the QF standards has been built, and planned, in the West, where renewables are abundant and no ISO exists. Last week, the Congressional Republican energy leadership wrote FERC asking it to look at whether the mandatory purchase obligation should be further reduced—observing that the competitive position of QFs has advanced since 2005 due to low gas prices (i.e., cogen), lower technology costs, EPA regulations, federal tax credits for renewables, state renewable portfolio standards and growth of distributed energy resources. Of course, FERC cannot change the statutory terms of PURPA, but it can look at whether its regulations should be revamped. Look for this inquiry to begin soon. It may generate a food fight.
Reprinted with permission from the Friday Burrito, published by 2015 Foothill Services Nevada Inc.
