PURPA pummeled: Pro-solar law savaged before House committee

Poor Todd Glass.

The counsel for the Solar Energy Industries Association (SEIA) testified this morning before the House Energy Subcommittee in favor of keeping the Public Utility Regulatory Policies Act of 1978 (PURPA) the way it is to keep fostering the development of solar and other renewable energy sources on the grid. He was alone in his assessment of the law.

Four of his other five fellow panelists argued for changes to the law, ranging from moderate changes to, in the case of Xcel Energy representative Frank Prager, the repeal of the law entirely.

(The fifth panelist represented a waste-to-energy (WTE) facility in Kent County, Mich., who supported keeping the law as is but slammed solar and wind for being intermittent energy sources unlike, he said, WTEs).

PURPA was passed at the height of the 1978-1979 oil crisis that saw the nations of the Organization of the Petroleum Exporting Countries (OPEC) raise oil prices significantly, causing Western nations like the United States to try reducing their dependence on fossil fuels by promoting energy efficiency and renewable energy. It effectively broke the utilities’ monopoly on owning electric-generating plants and created a market for independent power producers (IPPs) which according to the Union of Concerned Scientists accounts for 7% of the country’s power.

Under PURPA, utilities are legally required to buy power from independent power producers (IPP) if it is below their cost of generation from other sources, also known as “avoided costs”.

Utilities like Xcel and regulators like Kristine Raper, commissioner from the Idaho Public Utilities Commission, argue PURPA is outdated and needs to be updated to fix its flaws. The law should provide utilities and regulators the flexibility to keep IPP-developed energy systems off the grid if the produced electricity is not needed.

“[Federal Energy Regulatory Commission] regulations and early case law provide state regulatory commissions with broad discretion regarding how to implement PURPA,” Raper testified. “In the [p]ast decade, however, FERC has admonished state commissions who attempt to use their discretion to manage the negative consequences of PURPA within their state.

“PURPA’s “must purchase” requirement leaves states with limited alternatives to balance the requirements of the act with the responsibility to ensure reliable service and ratepayer indifference as to the energy resource,” she added.

Raper also accused solar and wind developers of “gaming the system,” by disaggregating their projects to get under PURPA’s 80 MW or smaller project size requirement. Using this ploy, Raper added, larger renewable projects can compel utilities to purchase their power under PURPA’s provisions by breaking up their larger projects into smaller, PURPA-compliant project sizes.

“It doesn’t matter that the smaller projects are called ‘Alpha’, ‘Beta’, ‘Charlie’ and ‘Delta’,” Raper said, contempt dripping from every word. “We all know they are part of the same project. But they’re using a loophole in the law to their advantage.”

The length of PURPA contracts also came in for harsh criticism. Almost as a chorus, the critics of the law said the contracts needed to be shortened to allow utilities to adjust the amount they are paying IPPs for electricity to account for the volatility of the electricity markets over long periods of time. Raper proposed that PURPA contracts be no longer than two years.

When Glass objected, saying contracts that short would harm the ability of IPPs to find funding for their projects because of uncertainty over the commitment of the offtaker (in these specific cases, the utilities), Raper openly scoffed at the notion.

“PURPA contains a must-buy provision for utilities,” Raper said. “That alone should be enough for IPPs to get financing – utilities have to buy the electricity from such projects.”

Glass then added that he couldn’t understand why utilities couldn’t use their 20-year integrated resource plans (IRPs) as the basis for “avoided cost” projections, which would then be the same length as the current PURPA contracts. His fellow panelists apparently had no answer as his question was met with deafening silence.

Terry Kouba, vice president of Iowa operations for Alliant Energy, argued PURPA had outlived its purpose and could easily be repealed.

“PURPA is an outdated law that can financially harm customers and impact the reliability of the grid,” Kouba said. “Instead, [IPPs] are manipulating PURPA’s rules and FERC’s associated regulations to increase customer costs.”

Kouba did not elaborate with examples of how solar has harmed the reliability of the grid or financially harmed customers, though he did argue PURPA forced utilities to purchase electricity at higher costs than other generation options, an increased cost that the utilities then had to pass on to its customers.

From the tone of the questions coming from the subcommittee members, it appears some national revisions to PURPA, independent of the state-level revisions already taking place, are on the way. In fact, Subcommittee Chairman Fred Upton said he is currently drafting legislation with the intent of modernizing PURPA’s provisions. As yet, the bill is still in draft form, meaning there is no text for the solar industry to review as yet.

Despite his minority status, Glass defended PURPA strongly until the end of the hearing.

“The belief that PURPA facilitates purchases of uneconomic generation is false, and the truth of the economics illuminates the continuing tension between PURPA’s independent power model and the cost-of-service based utility business models,” Glass said. “I submit that the Subcommittee should focus its review of PURPA on ensuring that competition and innovation can continue and that incumbent utilities are not impeding these breakthroughs with anticompetitive conduct.”

In response to the hearing, Christopher Mansour, SEIA’s vice president of federal affairs, said:

PURPA is a policy that has driven healthy competition in the American electricity marketplace through fuel diversity, and as a result, it enhanced our national security. SEIA members have been able to drive down the price of solar power for all customers to levels that can favorably compete with all forms of electric power generation. We feel strongly that Congress should continue to support PURPA and the impressive growth of this domestic industry.

Update: This article was updated at 2:45 pm EST on 9/6/17 to include SEIA’s response from Christopher Mansour.