PURPA under attack in Arizona

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Very few things from 1978 have seen continued or greater relevance to the world than they did during that forgotten heyday 40 years ago. Bell bottoms never made a comeback and KISS is somehow still touring and putting out bad records.

However, lost in the class of ’78 was a late bloomer, one which just recently has gained a profound relevance in the solar industry: the Public Utility Regulatory Policies Act (PURPA) of 1978. PURPA is the federal law guaranteeing that independent renewable energy projects can interconnect to the grid and be compensated by utilities for their output in accordance with the cost the utility would otherwise pay for electricity.

The law was not much help for solar until recently, as solar projects can now generate power at a low enough price to meet these avoided cost benchmarks. While PURPA provides federal guidelines, much of the act’s implementation, like how that compensation is calculated, is left up to the states.

Last night, the Arizona Corporation Commission (ACC) brought up proposals by three investor-owned utilities to reform PURPA at its open meeting, with relatively little notice. The three Arizona utilities filed applications to shorten contracts for facilities in excess of 100 kW to a maximum of two years. As far as why this hearing was unexpected, there has been little action on these dockets since their introduction. Arizona Public Service filed in August 2016, Tucson Electric Power filed in December 2017 and UNS Energy filed in April 2018, but the dockets have languished with no action or discussion since their filing and until the hearing.

Ultimately, little progress was made on remedying the issues raised in the dockets, but an open hearing has been scheduled. A date and time for this hearing will be provided when it is made available.

Attacks on PURPA are not new, nor indigenous to Arizona, but they still pose a threat to the law by setting the precedent that it is in need of utility-driven reform. PURPA hasn’t been a main driver of renewable energy deployment in Arizona, but has come under attack in a number of other states.

They key to the commend-ability of any state’s proposed PURPA reform comes after looking at what aspects of the bill are under question. For example, North Carolina has seen a boom in utility-scale solar development from these small QFs after implementing 15-year standard contract for facilities up to 5 MW. Also, in 2017, the state enacted compromise legislation replacing the standard offer with a competitive solicitation model for new QFs. In Michigan, similar amendments to the avoided cost calculations ended a suspension of revisions to PURPA, amid a complaint from Consumers Energy, which argued that it doesn’t need any additional capacity over the next 10 years, so it should not be forced to buy from QFs.

That same unnecessary capacity argument was used to gut PURPA in Idaho and Montana, effectively burying the already marginal utility-scale solar markets in the states.

While PURPA has had very little influence in Arizona, any decision that the Arizona Corporation Commission makes when they chose to vote on PURPA reform will be reflected nationally and could provide a springboard for the bill to be axed in markets that could use the development it brings when utilized correctly.