U.S. Sen. John Barrasso, R-Wyo., and James Risch, R-Idaho, have introduced legislation to modernize the Public Utility Regulatory Policies Act of 1978 (PURPA), which currently requires utilities to purchase power from small renewable energy projects – qualifying facilities – at the price it would otherwise cost the utility to deliver equivalent amounts of power to serve customers either through its own generation or market purchases.
The senators claim that the 40-year-old law requires utilities to pay these small renewable facilities an administratively set avoided-cost rate for their power that is much higher than the market rates paid to all other generation resources. PURPA also requires utilities to purchase this power even when it is not needed to serve their customers, according to the senators.
In originally passing this law, Congress’ intent was to reduce the amount of oil used in power generation in the U.S. and diversify the generation fleet. In these respects, PURPA has succeeded, the senators say. In 1978, wind and solar generation was virtually non-existent, and oil-fired generation accounted for 17% of the power on the grid. Today, oil-fired generation accounts for less than 1% of U.S. power generation, and wind and solar account for about 9%, according to the lawmakers.
However, the senators argue that PURPA is no longer a driver of renewable energy. Competitive energy markets, open access to transmission, financial incentives and renewable portfolio standards have created an environment in which renewable energy is “commonplace,” they say.
The legislation, “Updating Purchase Obligations to Deploy Affordable Resources to Energy Markets Under PURPA Act,” (or the UPDATE PURPA Act), makes the following reforms to PURPA, according to the senators:
• Protects electricity customers from having to pay for “unnecessary” PURPA costs;
• Empowers state public utility commissions and nonregulated utilities to waive PURPA’s mandatory purchase obligation if additional power is not required to meet customers’ electricity needs;
• Ensures a level playing field for energy resources by requiring more PURPA resources to participate in energy markets; and
• Prevents abuse of the Federal Energy Regulatory Commission’s one-mile rule.
U.S. Rep. Tim Walberg, R-Michigan, introduced the companion bill, H.R.4476, last November.
“Energy markets in 2018 are drastically different than when the Public Utility Regulatory Policies Act was enacted in 1978. Nearly half of all new power added to the grid last year came from renewable energy resources. PURPA needs to be modernized to ensure that electricity consumers in Wyoming and across the country do not foot the bill for outdated rules and regulations” says Barrasso. “Our legislation makes common-sense reforms to PURPA to protect consumers while continuing to encourage the development of all sources of American energy – including renewables.”
“When PURPA was created in 1978, our country was in the midst of an energy crisis; times have changed,” says Risch. “It is time to update our energy laws to reflect the energy renaissance occurring in Idaho and all across our country. Our legislation is a common-sense bill that will protect consumers from unnecessary costs, allowing Idaho families to keep more of their hard-earned money, and empowers states to make the best decisions for their constituents.”
