Electricity Markets

Need for PURPA reforms is debated at House hearing

On Sept. 6, the House Energy and Commerce Committee’s Subcommittee on Energy held the third in its series of “Powering America” hearings, entitled “Powering America: Reevaluating PURPA’s Objectives and Its Effects on Today’s Consumers.” Electricity industry stakeholders discussed the Public Utilities Regulatory Policies Act of 1978, or PURPA, its current effects on consumers, and whether it should be updated by Congress.
Rep. Fred Upton, R-Mich., chairman of the Energy and Commerce Committee, said in his opening statement that PURPA was intended to promote energy conservation and support the use of domestic energy, including renewable resources. He noted that Congress, in enacting the Energy Policy Act of 2005, made “some modest revisions” to PURPA. But Upton said that “tremendous changes” have occurred in the electricity industry over the last decade, a point that he said was underscored by the recent DOE staff report on the state of the U.S. grid.

Upton suggested opportunities for revisions to, among other things, the PURPA’s “mandatory purchase” provision, its “one mile rule,” and avoided cost calculations.

“Now that PURPA has been in place for multiple decades, we can see how it has helped transform the U.S. energy sector, bolstered renewable energy, and reduced greenhouse gas emissions,” said Energy Subcommittee Chairman Greg Walden, R-Ore., in his opening statement. By passing the 1978 law, he said, Congress “took the first step towards competition within the electricity sector by allowing electricity generation to be independent of regulated monopolies.”

“We on the committee want to continue down this same path of increased competition and innovation,” Walden said.

Rep. Frank Pallone, D-N.J., the top-ranking Democrat on the subcommittee, highlighted PURPA’s benefits and noted that the PURPA reforms in the Energy Policy Act of 2005 give the Federal Energy Regulatory Commission some flexibility in carrying out the commission’s obligations under the 1970s-era law.

When Congress passed it nearly 40 years ago, PURPA required utilities to begin to purchase output from a new class of generating facilities called “qualifying facilities.” Those generators, which are called “QFs” or non-utility generators, receive special rates and treatment by regulators. FERC is charged with implementing regulations to establish how resources seek certification for QF status.

The following witnesses spoke at the hearing:

•  Frank Prager, vice president of policy and federal affairs, Xcel Energy
•  Todd G. Glass, counsel, Solar Energy Industries Association (SEIA)
•  Kristine Raper, commissioner, Idaho Public Utilities Commission
•  Stephan Thomas, senior manager, energy contracts, Domtar Corporation
•  Terry Kouba, vice president of Iowa operations, Alliant Energy
•  Darwin Baas, director, Department of Public Works, Kent County, Mich.
Frank Prager of Xcel Energy told the subcommittee that QFs have largely displaced Xcel’s ability to procure generation from more efficient sources, thus raising costs for consumers. He said that Xcel must invest millions in new transmission to accommodate these resources and is unable to perform adequate resource planning because PURPA facilities are not required to participate in these processes under the current law.

Kristine Raper, a commissioner with the Idaho Public Utility Commission, explained that, while renewable resources provide valuable benefits to the grid, PURPA is being manipulated to the detriment of ratepayers, and it stifles development of non-PURPA generation, including other renewables.

Raper said that PURPA should allow shorter contract terms for purchases of PURPA energy to ensure that utilities can account for the dynamism of electricity markets. She said that, to ensure consistency and predictability, there should be a statute of limitations for filing a PURPA violation with the FERC.

Terry Kouba of Alliant Energy said that PURPA encourages production of energy in locations chosen by the producer, and not those that are best for the consumer.

Stephan Thomas of Domtar Corporation highlighted the difference between co-generation PURPA facilities, which utilize some of the energy output produced by the QF, and QFs that sell all of the energy they produce.

Darwin Baas of Kent County, Mich., and Todd Glass of SEIA expressed support for PURPA and highlighted its successes.
In response to a question by Chairman Upton about the need for revisions to the “one mile rule,” Raper and Prager suggested that the distance between QFs is inconsequential because QF owners are “gaming” the system by aggregating larger projects owned by the same entity.

Rep. David McKinley, R-W.Va., questioned the witnesses on the need to end “subsidies” to the renewables market, which, through PURPA, displace other, more economical generation.

Reps. Gene Green, D-Texas, and Bill Johnson, R-Ohio, asked the witnesses about reforms related to resource planning; and Prager and Raper emphasized the need for PURPA QF generation to be included in states’ integrated resource plans.

Noting reliability concerns in response to a question by Rep. Adam Kinzinger, R-Ill., Prager and Raper said that PURPA creates additional reliability risks for the grid because of the stress added to it by unnecessary generation.

Kouba said that PURPA QFs should be required to participate in planning processes in order to improve reliability. Glass, on the other hand, said that diversity of generation types ensures greater reliability.
Rep. Joe Barton, R-Texas, said he would be “open” to completely repealing PURPA, and he referenced several previous attempts to do so.

In response to a question by Rep. Bill Flores, R-Texas, Kouba, Raper, and Prager agreed that PURPA is not the force driving the growth of renewables today. Instead, they said, economics and state policies are the driving forces.

Rep. Tim Walberg, R-Mich., noted his work on PURPA revisions, entitled the PURPA Reform Act of 2017, and said he would take into account the comments made at the Sept. 6 hearing.

Opening statements, witnesses’ written testimony, a background memo, and a recording of the hearing can be found here.

‘Powering America’ series of hearings to continue Sept. 12

The House Subcommittee on Energy’s series of “Powering America” hearings began on July 18 with a hearing entitled “Powering America: Examining the State of the Electric Industry through Market Participant Perspectives.” At that hearing, AMP Senior Vice President and General Counsel Lisa McAlister testified on current issues and developments in the electricity sector. The American Public Power Association provided a statement for the record.

The second hearing, “Review of the Operation and Effectiveness of the Nation’s Wholesale Electricity Markets,” took place on July 26. Witnesses from all seven regional transmission organizations (RTOs) and independent system operators (ISOs) testified on the status of wholesale electricity markets.

The third hearing was the Sept. 6 discussion of PURPA.

The fourth hearing, entitled “Powering America: Defining Reliability in a Transforming Electricity Industry,” is scheduled for Sept. 12. The subcommittee will talk about electric reliability issues, grid resiliency, and the Department of Energy’s recently released staff report on electric markets and reliability.