Public Utility Regulatory Policies Act (PURPA)

Transcription

1 Public Utility Regulatory Policies Act (PURPA) National Association of Regulatory Utility Commissioners Staff Subcommittee on Accounting and Finance September 21, 2016

2 Overview of PURPA What is PURPA? - PURPA Title I: The Other 111(d) Standards - PURPA Title II: Mandatory Purchase Obligation What s Going on at FERC? - PURPA Technical Conference - Post Technical Conference Comments Q&A 2

3 What is PURPA? Public Utility Regulatory Polices Act of 1978 (PURPA) - Pub. L. No , 92 Stat Congress enacted PURPA in 1978 in response to the energy crisis - Promote increased energy efficiency and conservation - Reduce reliance on oil and natural gas (spur growth in renewable energy) - Increase participation of non-utility generators - All while protecting customers 3

4 What is PURPA? Two Major Sections of PURPA that Impact Electric Companies: - PURPA 111(d) Standards - PURPA 210 Mandatory Purchase Obligation Both FERC and State Utility Commissions are responsible for enforcing PURPA 4

5 PURPA Title I: The Other 111(d)

6 PURPA Title I: The Other 111(d) Requires each state commission and nonregulated electric utility to consider each federal standard enumerated in 111(d) and determine whether or not to implement each standard Nothing prohibits state commissions or nonregulated utilities from determining not to implement a standard State commissions and nonregulated utilities may adopt a standard, decline to implement a standard, or adopt a different or modified standard 6

7 PURPA 111(d) Standards (cont.) Specifies procedural requirements that state commissions and nonregulated utilities must follow State commissions usually have 1 year after enactment to begin consideration; 2 years to make determination; if no determination, they must consider in rate case after 3 years After a Public Notice and Hearing, determination must be made: - In writing - Based upon findings included in such determination and on evidence presented at the hearing - Available to the public 7

8 PURPA 111(d) Standards (cont.) Prior state actions generally are grandfathered if: - State implemented the standard or a comparable standard - State already conducted a proceeding to consider implementation of standard or a comparable standard - State s legislature voted on implementation of standard or a comparable standard 8

9 PURPA 111(d) Standards (cont.) PURPA 111(d) standards have been included in each energy bill enacted (1978, 1992, 2005, 2007) for a total of 19 standards House Energy Bill (H.R. 8) contains new PURPA 111(d) standards on: - Improving the resilience of electric infrastructure - Promoting investments in advanced energy analytics technology - Assuring electric reliability with reliable generation - Subsidization of customer-side technology - Providing interconnection service & net billing service for community solar facilities 9

10 PURPA 111(d) Standards (cont.) Senate Energy Bill (S. 2012) did not contain any new PURPA 111(d) standards, BUT Numerous standards were proposed as amendments none received a vote - Energy storage, community solar, customer-side technology, net metering, interconnection standards for CHP/WHP King-Reid PURPA 111(d) amendment would have created prescriptive barriers for states that want to update net metering policies - King-Reid amendment was opposed by electric trade groups, NARUC, local government organizations, NASUCA, etc. 10

11 PURPA Title II: Section 210 Mandatory Purchase Obligation

12 PURPA Title II: Section 210 Mandatory Purchase Obligation Requires all electric utilities to purchase all of the electricity from Qualifying Facilities (QFs) at an avoided cost price QFs are small power producers or cogenerators - Small power producers must use biomass, waste, geothermal, or renewable resources (wind, solar, or hydro), and are limited in size to not more than 80MW - Cogenerators must produce useful thermal energy as well as electricity-energy used for industrial or commercial purposes (no size limitation) - QFs could not be owned by electric utilities 12

13 PURPA Section 210 (cont.) PURPA requires FERC to set avoided cost rates that utilities must pay QF PURPA 210(b) - Avoided cost rate must be just and reasonable to electric consumers, and nondiscriminatory to QFs - Must not exceed the incremental cost to the utility of alternative energy FERC gave State Commissions flexibility in determining a utility s avoided cost 13

14 PURPA Section 210 (cont.) States have tried many different avoided cost approaches: - The Proxy Method - The Peaker Method - Partial Displacement Differential Revenue Requirement - Auctions/RFP Rates Cal. Pub. Utils. Comm n., 133 FERC 61,059 (2010) - Allowed states to provide higher avoided cost rates for particular cogeneration QFs if the location allowed the utility to avoid specific, quantifiable, transmission or distribution upgrades - Allowed states to set avoided cost rates specific to a technology if state policies encourage a particular technology (such as RPS solar set-aside) 14

15 PURPA Section 210 Changes: EPAct 05 New 210(m): eliminates the mandatory purchase obligation if FERC finds a QF has nondiscriminatory access to: - Independently administered, auction-based day ahead & real time wholesale markets for sale of energy and access to wholesale markets for long-term sales of capacity & energy ( Day 2 markets ) - Transmission and interconnection services provided by FERC-approved regional transmission entity under OATT & competitive wholesale markets that provide meaningful opportunity to sell capacity & energy to buyers other than utility to which QF is interconnected ( Day 1 markets ) - Wholesale markets for sale of capacity and energy that are of comparable competitive quality 15

16 PURPA Section 210 Changes: EPAct 05 FERC has predetermined that PJM, NYISO, ISO-NE, MISO, SPP, ERCOT and CAISO meet the standards But, not every utility within those markets has been relieved of mandatory purchase obligation FERC adopted a rebuttable presumption that QFs of 20 MW capacity or less lack ability to access competitive markets - All utilities remain obligated to purchase power from these QFs at avoided cost rates 16

17 What s Going on at FERC?

18 FERC PURPA Technical Conference FERC s June 29, 2016, Technical Conference focused on mandatory purchase obligations & determinations of avoided costs Panel 1: FERC-identified mandatory purchase obligation issues: - FERC s one-mile rule - FERC s rebuttable presumption that QFs 20 MW & below do not have nondiscriminatory access to competitive markets - QF curtailment; interconnection practices; obligation to sell supplemental, standby, backup & maintenance power to QF - Impact of emerging energy imbalance market in the West 18

19 FERC PURPA Technical Conference Panel 2: State determination of avoided cost calculation issues: - System average method, use of natural gas prices & other fuel price indices in setting avoided cost, setting avoided costs through auctions and/or RFPs - Address whether various pricing methodologies are consistent with PURPA, strengths & weaknesses of different methodologies, potential improvements to current pricing methodologies - Consider methodologies for determination of avoided costs for capacity & long and short-term arrangements 19

20 Our National Fuel Mix Is Changing 2005 National Fuel Mix 2015 National Fuel Mix (estimate) Source: Department of Energy, Energy Information Administration 20

21 Declining Generation Costs: Gas, Wind, Solar Lead the Way 21

22 Competitive Wholesale Power Markets 22

23 FERC PURPA Technical Conference: Modify one-mile rule EEI Issues Reduce or eliminate the 20 MW threshold for QFs nondiscriminatory access to competitive markets Provide additional/better guidance to states on avoided cost calculations - QF pricing to be tied to time of delivery - Capacity payments can be zero - Intermittency of production should be a factor - RTO/ISO Performance Penalties - Explicitly allow the inclusion of transmission system and integration costs Encourage FERC to increase dialogue with states 23

24 FERC PURPA Post Technical Conference Comments One-Mile Rule: - Should the presumption inherent in the one-mile rule be made rebuttable? If so, who should benefit from the presumption and who should bear the burden of overcoming the presumption; i.e., should the interconnecting utility or the QF be required to rebut the presumption? - Alternatively, should the Commission consider modifying the rule to either require projects seeking QF status to be spaced further apart or allowed to be closer together? - Should the Commission consider a more fact-based analysis based on the criteria proposed by EEI and Idaho Commissioner Kjellander, or some other criteria? 24

25 FERC PURPA Post Technical Conference Comments Minimum Standards for PURPA-Purchase Contracts: - What is an appropriate minimum length of a PURPA-purchase contract, and are there other minimum contract terms and conditions that a developer needs to secure financing? - How would establishing a required minimum contract length or other required contract terms and conditions affect QF development? - Should the size threshold for requiring standard rates be changed, and, if so, to what? - Section of the Commission s regulations requires electric utilities to provide five and ten years of cost data to state regulatory agencies, and certain small electric utilities are required to provide data to enable QFs to estimate the avoided costs. Section 304(e) identifies this data, and state review of such data, as one factor to be used in determining avoided cost rates for QF purchases. To what extent is the data currently being provided? To what extent is this data taken into account and/or is helpful in calculating avoided cost rates? 25

26 Questions? Adam Benshoff Senior Attorney Edison Electric Institute PURPA Title II Compliance Manual: PURPA_Title_II_Manual.pdf 26

27 The Edison Electric Institute (EEI) is the association that represents the U.S. investor-owned electric industry. Our members provide electricity for 220 million Americans, operate in all 50 states and the District of Columbia, and directly employ nearly 500,000 workers. Safe, reliable, affordable, and clean electricity powers the economy and enhances the lives of all Americans. The EEI membership also includes dozens of international electric companies as International Members, and hundreds of industry suppliers and related organizations as Associate Members. Since 1933, EEI has provided public policy leadership, strategic business intelligence, and essential conferences and forums for the energy industry. For more information, visit our Web site at