FERC proposes changes to Carter-era law promoting renewables

Source: By Jeremy Dillon, E&E News reporter • Posted: Thursday, September 19, 2019

An energy law passed during the Carter administration to promote the expansion of renewable energy was opened for reinterpretation today by the Federal Energy Regulatory Commission.

FERC issued a notice of proposed rulemaking on the Public Utility Regulatory Policies Act (PURPA), with Chairman Neil Chatterjee saying the law is prime for an update to better reflect the realities of modern energy markets.

“We have seen tremendous technological advancements in renewables, increasing sophistication in competitive electric power markets and abundant supplies of domestic natural gas,” Chatterjee said. “It’s time to modernize the commission’s implementation of PURPA to reflect those significant developments.”

Among potential changes to the 1978 law, the commission will consider giving states more flexibility in how they set power rates from qualifying renewable energy facilities, allowing a 95% reduction in the size of qualifying facilities and setting up a tiered approach to the distance between them.

Chatterjee and fellow Republican Commissioner Bernard McNamee approved the proposal, while Democratic Commissioner Richard Glick concurred and dissented in part. There are two vacant seats on the panel. Sources tell E&E News that President Trump intends to nominate FERC General Counsel James Danly to fill one of those vacancies (Energywire, Sept. 19).

Glick disagrees on some proposed changes that he said amount to attempts to “administratively gut the statute” and ignore that Congress has dismissed similar proposals.

Passed in response to the 1973-74 oil embargo imposed on the United States by OPEC, PURPA has long served as a vehicle for bringing more renewable energy facilities onto the grid.

The law requires states and utilities to purchase power from qualifying renewable power facilities.

PURPA critics — including the Edison Electric Institute and state regulators — have faulted the law and its implementation as too intrusive, requiring power purchases that they say aren’t needed at higher-than-reasonable prices.

Those complaints have also been abutted by allegations about entities gaming the law’s so-called 1-mile rule, which limits the distance between qualifying facilities.

FERC’s proposal would:

  • Reduce the size of qualifying facilities from 20 megawatts to 1 MW in certain markets, although the 20-MW threshold would remain in place for cogeneration facilities.
  • Grant states more flexibility in setting energy rates from qualified facilities’ power sales contracts in accordance with changes to the purchasing utility’s avoided costs as well as to base those rates on market factors.
  • Change the “1-mile rule” with a tiered approach of establishing facilities located within a mile as the same facility; 1 to 10 miles as a separate facility that can be challenged; and 10 miles or more as a “different” facility.

The Edison Electric Institute praised the proposed changes.

“By initiating this important NOPR, Chairman Chatterjee has reaffirmed that there are concrete steps FERC can take to better protect electricity customers from unnecessary energy costs and drive additional investments in renewable energy, all while meeting the commission’s responsibilities under the Act,” EEI President Tom Kuhn said in a statement.

The solar industry, meanwhile, expressed concern that the changes could damage the push for more renewable energy.

“Rather than focusing on PURPA’s goal of ensuring competition, this proposed rule will have the effect of dampening competition and allowing utilities to strengthen their monopoly status,” said Katherine Gensler, vice president of regulatory affairs for the Solar Energy Industries Association.

“We will continue to push for PURPA reforms that increase competition, transparency and enforcement,” Gensler said.