NARUC urges federal regulators to reform PURPA

Source: By Robert Walton, Utility Dive • Posted: Tuesday, February 20, 2018

Dive Brief:

  • The National Association of Regulatory Utility Commissioners (NARUC) is calling on federal regulators to overhaul the Public Utility Regulatory Policies Act of 1978 to reflect major changes in the energy industry since the law was passed nearly 40 years ago.
  • In a letter to the Federal Energy Regulatory Commission, NARUC leadership called for regulations that would move away from administratively-determined avoided costs and encourage the use of competitive solicitations for PURPA compliance and project selection.
  • Many states have been making ad hoc changes to how the law is applied, as some utilities say they are required to purchase unnecessary power after a slew of smaller renewable projects are proposed.

PURPA was originally enacted to compel utilities to diversify fuel resources and shift away from imported oil in the 1970s. Since its inception, the law became a major driver for renewable energy growth in vertically-integrated markets.

According to state regulators, there have been four significant changes since PURPA was originally enacted —including energy markets and new technologies — that make it time for a serious overhaul.

Among those changes are the open-access regulation of the transmission system; use of competitive methods to select projects throughout the states; creation of wholesale markets; and the widespread adoption of qualifying facilities technologies as sources of power.

In a statement, NARUC President John Betkoski III called for a speedy review of the issue.

“We appreciate the challenges for FERC to address the many issues that have been stalled over the past year. However, PURPA is an issue that deserves immediate attention and action,” Betkoski said. “Our state members have a deep interest in ensuring that PURPA is reformed in a manner that reflects our needs today.  We need renewables, but we need to procure them in a better way.”

The group of state regulators outlined several ways to reform PURPA, including calling on FERC to adopt regulations that move away from the use of administratively-determined avoided costs. Instead, regulators say the commission should encourage the use of competitive solicitations for PURPA compliance and project selection. And, they say FERC should also address its 20-MW threshold for qualifying facilities, which now have access to markets.

“FERC already has the statutory authority to enact comprehensive reforms of PURPA’s implementing regulations, and it would be an enormous missed opportunity if FERC enacted only small changes to them,” Travis Kavulla, past president of NARUC and vice-chairman of the Montana Public Service Commission, said in a statement.

“There are ways forward on this problem that encourage both competition and the development of renewable technologies, while protecting consumers,” Kavulla said.

Disputes over PURPA have been cropping up in individual states. Last month, the Michigan Public Service Commission approved the new avoided cost formula Consumers Energy Co. must use to buy power under PURPA. It was the first time those rates have been updated in almost 30 years. In 2015, the Idaho Public Utilities Commission slashed PURPA contracts to two years after regulators found longer contracts led to customers paying higher costs for renewable power.  In North Carolina, a massive renewable energy bill beget a new bidding process under PURPA that allows major utility Duke Energy to competitively bid projects.

And Montana is quickly becoming another hotspot after regulators voted to cut PURPA rates by 40% the past summer.  Solar advocates filed a lawsuit earlier this week against the PSC in response to the decision, saying regulators violated Montana state law and that the rate cut was “unreasonable.”