PURPA rules change could help electricity consumers

My research brief this week looks at a proposed rule change from the Federal Energy Regulatory Commission (FERC) regarding the Public Utilities Regulatory Policies Act of 1978 (PURPA).

Now that I’ve gotten the acronyms out of the way, you can learn more about PURPA’s effect on North Carolinians here in my Spotlight report on Reforming PURPA Energy Contracts.

From the brief:

This fall, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking to change how it implements a Carter-era law. This would be the Public Utilities Regulatory Policies Act of 1978, known as PURPA. It’s is the law that requires electric utilities to buy any and all power produced from a qualifying renewable energy facility at a price considerably higher than the market price for power, even if the utility doesn’t need any additional power at that moment.

Way back when, the idea was to get utilities to be more open to interconnecting with small power producers, because we were worried about America being too dependent on foreign energy sources. The oil crises of the 1970s and the now-discredited “Peak Oil” theory were big factors behind the law. The price is supposed to be equivalent to the cost the utility “avoided” incurring by not generating the power itself, which sounds fair but in practice goes well beyond a fair market price.

In the ensuing decades, deregulation, open access, a multitude of state and federal incentives for solar and wind power, and the onset of fracking have dramatically changed the energy scene here. Domestic energy resources are plentiful (the U.S. is a net exporter of natural gas and now even oil), and competitive markets have opened for renewable energy. The problem now is that solar and wind facilities are using PURPA to game the system to their advantage, which is to the distinct disadvantage of consumers. …

FERC’s rule change would, among other things, give states more flexibility to let utilities rates for PURPA qualifying facilities’ energy to vary according to market conditions, lower the size of qualifying facilities, and make it harder for large, sprawling solar and wind facilities that don’t qualify for PURPA avoided-cost rates to pass themselves off as multiple, small qualifying facilities.

 

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...

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