If there is one thing that utilities do not like, it is being forced to buy power from renewable energy projects under administratively set prices. And as the cost of installing wind and solar has allowed developers to use the Public Utilities Regulatory Policies Act of 1978 (PURPA) en masse, it has led to booms in wind and solar markets in a number of states that had weak or no renewable energy mandates.
However, PURPA is also not popular with a number of regulators, including those in states with small populations and power demand that are seeing a boom of PURPA projects. It is particularly opposed by those who have an ideological opposition to a strong role for the federal government in state matters and prefer market-based solutions.
As such, regulators in a number of states including Idaho and Montana have pushed back against implementation of PURPA, by creating contract terms and setting prices that make the law unusable to renewable energy developers.
Now one of those regulators, Travis Kavulla (R) of the Montana Public Service Commission (MSPC) is calling on the Federal Energy Regulatory Commission (FERC) to allow states to exempt themselves from PURPA, using a 2005 law. Kavulla has co-authored a white paper to this effect in his role as vice-chair of the National Association of Regulatory Commissioners (NARUC).
The justification cited for this is the Energy Policy Act of 2005, specifically section 210(m), which allows FERC to terminate the must-take obligation in a variety of circumstances, including the presence of wholesale markets.
“FERC should let competitive mechanisms, whether in regional transmission organizations (RTO) or non-RTO markets, do the work of achieving statutory goals of Public Utility Regulatory Policies Act of 1978 (PURPA), replacing administrative price forecasts that have been the backbone of PURPA compliance in many places,” reads the report.
It is important to note NARUC is also calling on FERC to allow exemptions for states with regulated utilities which do not directly participate in wholesale markets. “FERC should identify competitive practices in non-RTO areas, which states and utilities may voluntarily meet in order to obtain an exemption from PURPA’s mandatory purchase obligation,” said Kavulla.
FERC doesn’t regulate the market in the territory of regulated utilities in the same way that it oversees wholesale markets under RTOs and ISOs, but it does have jurisdiction over PURPA. Overall, the white paper states that the changes in markets and regulatory structures since the law was passed make aspects of PURPA obsolete, noting that even regulated utilities are required to file open-access transmission tariffs.
“Moreover, the generator interconnection procedures FERC has adopted are a powerful tool to prevent utilities from discriminatorily blocking access to QFs and other independent generators,” argues Kavulla.
Ari Peskoe, director of the Electricity Law Initiative at Harvard Law, questions whether the statue being cited can be used to provide exemptions to PURPA in regulated markets. “Congress provided an exemption from PURPA where generators have a ‘meaningful opportunity’ to sell to entities other than the local utility,” explains Peskoe.
“RTO markets easily pass that test because they can mimic the utility’s must-purchase obligation. I’m not sure that access to bilateral trading hubs meets Congress’s standard.”
Update: This article was updated at 11:30 AM EST on October 15 to include commentary by Ari Peskoe.