FERC finalizes PURPA overhaul in move Glick says “discourages” small solar development
FERC’s move Thursday is a win for utilities that in some states will have to pay QFs less for the avoided cost of power than they did under the previous rules. Utilities have long decried PURPA as a mechanism that unfairly benefits solar developers, while leaving customers on the hook to pay higher rates than necessary.
“For years, electricity customers have been paying billions of dollars in excess energy costs as a result of PURPA provisions enacted in the 1970s that allowed well-financed big developers to lock in guaranteed long-term, inflexible contracts at the expense of other more-competitive and cost-efficient renewable energy projects,” Edison Electric Institute (EEI) President Tom Kuhn said in a joint statement with the American Public Power Association and the National Rural Electric Cooperative Association.
“By updating these rules, FERC has helped to ensure that renewable energy can continue to grow without forcing electricity customers to pay a premium to the developers that learned how to game the system,” said Kuhn.
State regulators have also expressed their frustration with the law in the past — commissioners from Oregon, Idaho and Michigan agreed that QF rates were a problem for their states during a National Association of Regulatory Utilities Commissioners panel in November.
Project sizing was another potential problem cited by state regulators. FERC initially proposed projects not be able to qualify for PURPA financing rules unless they were below 1 MW, down from the original 20 MW. State regulators and solar advocates mostly agreed the 1 MW threshold was too small and FERC upped it to 5 MW in Thursday’s rule.
Another adjustment FERC made was to modify the one-mile rule to prevent facilities 10 miles apart or further from aggregating as one project. The rule also assumes facilities within one mile of each other are one project. Facilities between one and 10 miles apart can make the case either way.
The one-mile rule is one change the sole dissenting vote, Commissioner Richard Glick, sees as “reasonable.” But the other changes actively discourage qualifying facilities from being built, he said.
“One of PURPA’s requirements is to encourage QFs. … After I read the draft final rule, I have a hard time seeing how it actually encourages” QF development, he said. “I think it actually discourages QF development.”
Implementation of PURPA at the state level has the potential to be most harmful to qualifying facilities if contract lengths are shortened and avoided costs set too low, as has been demonstrated in Montana and elsewhere.