The Federal Power Regulatory Fee has modified the foundations for a federal regulation that permits unbiased power tasks to safe utility contracts for his or her energy. Utility teams say the modifications will scale back prices for purchasers, however clear power teams and unbiased energy builders say they’ll stifle open competitors.
FERC’s new rule for the Public Utilities Regulatory Insurance policies Act (PURPA), which carefully matches its proposal from final 12 months, handed by a Three-1 vote Thursday over the objections of the fee’s sole Democrat, Richard Glick.
In FERC’s Thursday assembly, Chairman Neil Chatterjee mentioned the brand new rule represents a “wide-ranging and complete set of reforms” to how the 1978 federal regulation is applied. Underneath PURPA, utilities in states with out wholesale power markets should contract with unbiased energy tasks, generally known as qualifying amenities (QFs), if they will produce electrical energy at lower than the utility’s prevented price of technology.
However Glick echoed criticisms from clear power and environmental teams that FERC’s new rule fails to reform key issues in how PURPA has been applied on a state-by-state foundation over the previous decade. He additionally cited new modifications that might undermine PURPA’s objective of making a stage taking part in discipline for unbiased power builders in areas the place vertically built-in utilities maintain monopoly energy.
“One in every of PURPA’s necessities is to encourage QFs,” he mentioned on the assembly. However after studying the draft last rule, which has not but been publicly launched, “I’ve a tough time seeing the way it encourages it. I believe it really discourages QF improvement.”
Mounted contract phrases nonetheless up within the air
For one, FERC’s new rule doesn’t change a establishment that has given state regulators extensive latitude in how to make sure that utilities provide long-term fastened costs to QFs, he mentioned. Impartial energy producers say these long-term contracts have been important to making sure that their tasks can receive financing.
However lately, utilities have sought modifications to state laws on the size and pricing of those contracts which have led to important reductions in PURPA-driven improvement.
For instance, PURPA drove North Carolina to guide the nation in photo voltaic improvement earlier this decade. However a 2017 regulation shortened required fastened contract size from 15 to 10 years, together with mission sizing and pricing modifications which have stifled improvement since then. Utilities in different states have sought to shorten PURPA contracts to as little as two years, an effort that succeeded in Idaho however failed in Arizona.
“Two years shouldn’t be an applicable contract time period,” Katherine Gensler, vice chairman of regulatory affairs for the Photo voltaic Power Industries Affiliation (SEIA), mentioned in a Thursday interview. “Neither the proposed rule or the ultimate rule has addressed one of many greatest hurdles to QF deployment just lately, which is states selecting to severely prohibit the time period of the PURPA contract.”
PURPA-driven photo voltaic improvement peaked in 2016 when it represented almost one-third of U.S. utility-scale photo voltaic tasks, in line with Colin Smith, senior photo voltaic analyst at Wooden Mackenzie. However PURPA additionally led to overcrowding of interconnection queues and complaints from utilities that it was forcing them to purchase costly energy that raised ratepayer prices.
The utility commerce teams Edison Electrical Institute, the American Public Energy Affiliation and the Nationwide Affiliation of Rural Electrical Cooperatives praised FERC’s new rule in a joint assertion Thursday. “FERC has helped to make sure that renewable power can proceed to develop with out forcing electrical energy clients to pay a premium to the builders that discovered the right way to sport the system,” EEI President Tom Kuhn mentioned.
Whereas some states have enacted more and more restrictive phrases for PURPA builders, others have seen utilities and power builders align to make use of it to satisfy clear power targets. Final 12 months, Michigan utility Customers Power reached a settlement with state photo voltaic trade teams to make use of PURPA to develop a whole lot of megawatts of recent photo voltaic.
‘Prevented price’ modifications and transparency points
Glick additionally criticized the brand new rule’s modifications to how states can calculate “prevented prices,” an important measure of what costs PURPA-enabled tasks can safe for his or her energy.
For instance, the rule would enable states to make use of calculations derived from “liquid market hubs” or “a method primarily based on pure fuel value indices and warmth charges” to set “as-available” charges that might change from hour to hour at totally different places on utilities’ energy grids.
However these strategies lack the transparency supplied by wholesale markets to permit unbiased power producers to evaluate whether or not or not their tasks will probably be aggressive in opposition to utility-owned options, Glick mentioned. This violates PURPA’s directive that “utilities can’t deal with QFs in another way than they deal with their very own amenities,” which might earn assured charges of return for his or her capital prices.
Rob Rains, analyst with Washington Evaluation, famous that the situation and time-varying charges that states can develop beneath this rule are “prone to be considerably decrease than the fixed-cost contracts which were the usual for the trade.” The sum of FERC’s modifications “are unlikely to have an effect on states with aggressive renewable requirements; nonetheless, they introduce extra uncertainty and threat for smaller builders that, in totality, could chill adoptions in states that lack aggressive clear power mandates.”
FERC Commissioner Bernard McNamee disagreed, saying the rule modifications “defend clients from paying extreme charges by guaranteeing they don’t seem to be paying extra beneath PURPA contracts than in the event that they obtained energy from the utility or the market.”
“We don’t dictate any strategy,” he mentioned. “States can have flexibility to set QF charges beneath quite a lot of strategies, and to permit such charges to fluctuate to match price of energy on the time power is delivered.”
Whereas the ultimate rule has but to be printed, one change highlighted in FERC’s Thursday presentation could provide extra transparency in how PURPA contracts are priced, SEIA’s Gensler mentioned. That’s a pledge to “enable states to set power and capability charges primarily based on aggressive solicitations carried out pursuant to clear and non-discriminatory procedures,” which resembles proposals that SEIA submitted, she mentioned.
“There are many solicitations and RFPs the place the utilities craft all the necessities, after which magically they’re the one ones that may meet the necessities,” she mentioned. The ultimate rule, which is able to go into impact in 120 days, seems to order states to pursue methods to “modernize PURPA that depend on the outcomes of aggressive value discovery with the intention to set these costs — however it must be executed in a method that’s each clear and non-discriminatory.”