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Public utility regulations revised for small power producers, cogenerators

The Federal Energy Regulatory Commission (FERC) last week revised the rules for the its regulations governing qualifying small power producers and cogenerators under the Public Utility Regulatory Policies Act of 1978 (PURPA) to address the significant changes that have taken place in the nation’s energy markets since those rules first took effect.

“I am extremely pleased that we are issuing today’s final rule to modernize the Commission’s implementation of PURPA,” FERC Chairman Neil Chatterjee said. “While PURPA laid the foundation for the competitive wholesale power markets that we have today, the energy landscape in this country has changed drastically since the Commission implemented these regulations four decades ago.”

Congress enacted PURPA to encourage development of small power producers and cogenerators, called qualifying facilities (QFs), and to reduce demand for traditional fossil fuels that were considered to be in short supply. FERC’s regulations were enacted in 1980 and, with limited changes over the ensuing years, remain in effect today.

“It’s been my view from the start that FERC should modernize our regulations in ways that not only meet our statutory obligations, but also protect consumers and preserve competition,” Chatterjee said. “Today’s rule accomplishes those goals. We will continue to encourage QF development while addressing concerns about how PURPA works in today’s electric markets.”

The final rule grants additional flexibility to state regulatory authorities in establishing avoided cost rates for QF sales inside and outside of the organized electric markets. The final rule also grants states the ability to require energy rates (but not capacity rates) to vary during the life of a QF contract.

FERC also modified the “one-mile rule” and reduced the rebuttable presumption for nondiscriminatory access to power markets, from 20 megawatts to 5 megawatts, for small power production, but not cogeneration, facilities. Finally, in order for a QF to establish a legally enforceable obligation, the final rule requires that the QFs must demonstrate commercial viability and financial commitment to build under objective and reasonable state-determined criteria.

The final rule does not change other elements to the Commission’s existing PURPA regulations. A fact sheet about the rule is available here.

In related news, the commission decided not to take up the New England Ratepayers Association (NERA) petition that sought to set net-metering rates in the U.S. in line with wholesale electricity rates instead of retail rates. Read more about that petition here.

The Solar Energy Industries Association, SEIA, a lobbying group for the solar industry, said it believes FERC made the right decision in “dismissing the misguided net-metering petition” and CEO Abigail Ross Harper vowed to “continue working in the states to strengthen net metering policies to generate more jobs and investment and we will advocate for fair treatment of solar at FERC where it has jurisdiction.”

Of the PURPA reform, SEIA was not as happy.

“While we are glad to see FERC include elements of SEIA’s proposals, the overall rule changes approved today will undermine the stated intention of the PURPA statute and stifle competition, allowing utilities to strengthen their monopolies and raise costs for customers,” said SEIA’s vice president of regulatory affairs, Katherine Gensler, adding “We will continue advocating for reforms that strengthen PURPA and allow solar to compete nationwide.”

Mark Pischea, president and CEO of the Conservative Energy Network (CEN) released the following in reaction to the news: 

“FERC today once again proved that the government can giveth and the government can taketh away. 

“On one hand, CEN is thrilled today to see FERC dismiss the New England Ratepayers Association petition on net metering. In doing so, FERC has decided to uphold decades of precedent and respect the Jeffersonian principle of federalism. CEN is proud to have been in opposition to this petition. 

“On the other hand, the changes made to PURPA will stifle competition and allow monopoly utilities to continue their history of blocking lower priced clean energy from entering the market and competing with their more expensive legacy resources.

“In a perfect world energy markets would be free from government intervention and instead be open to all participants and all technologies—each competing to ensure that families and businesses have access to the most affordable, reliable and sustainable solutions available. At CEN we will continue to fight to make this free-market vision a reality as we move towards a clean energy future. All proponents of an open and competitive energy market should join us in opposing today’s ruling.”

The rule takes effect 120 days after publication in the Federal Register.