Energy Partner Jerry Bloom was quoted in Utility Dive’s July 28, 2016, article titled “PURPA's Puzzle: FERC Workshop Revisits 1978 Law, Embattled as Ever.”
The article discusses the revival of the Public Utility Regulatory Policies Act (PURPA) and the continuous debates the law has created since its enactment. According to the article, utilities in at least six states have recently engaged against key provisions of PURPA. Just last month, at the request of the Senate and House energy committees, the Federal Energy Regulatory Commission (FERC) met to discuss the rates and terms that qualifying facilities (QF) are paid under PURPA and the proper size of QFs. The meeting was held in response to concerns that PURPA was no longer relevant, considering changes over the last three decades to the electric power market. While no clear consensus for reform of the law was reached, these discussions provided an informative outline of the issues posed by PURPA nationwide.
Since PURPA’s enactment the power market has evolved. The bill was passed during the 1970’s oil crises and was originally intended to spur the development of small renewable power plants and cogeneration plants–now known as combined heat and power (CHP). At the time, utilities were vertically integrated, controlling all generation, distribution and transmission in their designated franchise territories.
The article points out that one of the unintended consequences of PURPA was to open competition in power generation, but decades later the competition that followed has all but overwhelmed key provisions of PURPA. In addition, one of the issues utilities have with avoided costs is that they are set above prevailing electric power rates and on the other side developers and their advocates counter those claims.
Jerry Bloom, who testified on behalf of the California Cogeneration Council, pointed out that “avoided energy cost pricing is often held as simply a proxy for spot energy market prices, and thus fails to capture true long-run avoided costs as represented by the capacity and efficiency contributions of CHP.”
The article highlights the importance of this consideration for developers as it is usually unfeasible to finance a project on the basis of spot, or energy, prices alone.
Legislative changes to PURPA are unlikely until the 2016 election concludes, and FERC, as a regulator, has limited ability to make substantive changes to the law itself. Mr. Bloom notes, “FERC has an obligation to make PURPA useful.”