Favor for PURPA reform from the Left

Mississippi Democrat Ronnie Shows wrote in RealClear Energy in support for a new proposal by the Federal Energy Regulatory Commission (FERC) to rethink how FERC implements the Public Utilities Regulatory Policies Act (PURPA).

In so doing, reflecting the age we live in, Shows felt compelled to attest to his bona fides as a Democrat as well as a supporter of renewable energy. He proudly supports Joe Biden for president, he stated in his second sentence. And he urged readers, “Please understand, I am not against renewable energy and support government programs that promote energy independence and clean power.”

Nevertheless, Shows wrote:

But what FERC is looking at, called Public Utility Regulatory Policies Act (PURPA), is a law that mandates utilities in certain states to buy renewable energy from companies at artificially high rates. The result is that these clean energy providers charge the utilities above market rates.

Since utilities automatically pass the cost of acquiring energy onto its customers in the form of higher electricity bills, mandates to pay above market rates push unnecessary costs onto consumers. Additionally, at times, PURPA mandates that utilities buy energy they don’t need. How does that make sense?

Another flaw of PURPA is that it locks utilities into contracts as long as 20 years. This prevents utilities – and hence their customers – from benefitting from advances in renewable technology and falling prices that come with innovations in science and transmission.

Guess where things are particularly bad?

North Carolina, where due to PURPA it is estimated that ratepayers there will pay more than $1 billion dollars in above market energy prices over the next decade.

PURPA is not solely to blame for this, however. Legislators had acted to address this problem before it got too late.

House Bill 589 of 2017 struck a major compromise between utilities and solar energy facilities. It lowered the size of PURPA-qualifying facilities in exchange for guaranteeing solar energy facilities a full seat at the table competing to provide electricity to North Carolinians.

Gov. Roy Cooper, however, gutted this compromise during his questionable handling of the permitting process for the Atlantic Coast Pipeline. As WBTV reported, Cooper and senior staff “use[d] the pipeline permit as leverage to force Duke [Energy] into cutting a deal with the state’s solar industry.”

Cooper obliterated the compromise by forcing Duke to contract with 240 solar companies under the older, costlier scheme — leaving ratepayers facing having to pay roughly $1.25 billion more than they should.

For more on PURPA and North Carolina, see my Spotlight report on Reforming PURPA Energy Contracts.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

Reader Comments