The Public Utility Regulatory Policies Act (PURPA) was enacted in 1978 to address the national energy crisis of the time. Its purpose was to encourage the development of smaller power producers and co-generators to reduce the country’s demand for fossil fuels. These small producers are called qualifying facilities (QFs). In September 2019, the Federal Energy Regulatory Commission (FERC) proposed to modernize the regulations established more than 40 years ago.
The decision to revamp PURPA comes from recent market changes in the energy landscape and the corresponding concerns from consumers. The goal is to continue to encourage the development of additional QFs while still addressing how current regulators work in the recent competitive wholesale market. For example, technology has dramatically changed and improved since 1978, meaning PURPA too needs to be modernized.
A greater focus on providing flexibility to state regulators to account for recent developments in the wholesale power market. States now have the ability to incorporate market pricing into avoided cost energy rates, i.e., energy rates can change during the lifespan of a QF contract. States must establish objective and reasonable standards for QFs to obtain legally enforceable obligations for the purchase of their power. QFs may become self-certified and self-recertified without the need to refile and pay for a separate petition for a declaratory order.
Tom Kuhn, president of Edison Electric Institute (EEI), applauds the change, and said, “by initiating this important notice of proposed rulemaking (NOPR), Chairman Chatterjee has reaffirmed that there are concrete steps FERC can take to better protect electricity customers from unnecessary energy costs and drive additional investments in renewable energy, all while meeting the commission’s responsibilities under the Act.”
With these policy changes, small and independent energy suppliers are being supported in the competitive landscape against larger utility companies. Because of this, small businesses that are currently tapping or will soon transition to renewable energy will have access to affordable and greater quantity options.
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