FERC’s New PURPA Rule Undermines Clean Energy Projects, Advocates Say

The Federal Energy Regulatory Commission has changed the rules for a federal law that allows independent energy projects to secure utility contracts for their power. Utility groups say the changes will reduce costs for customers, but clean-energy groups and independent power developers say they’ll stifle open competition. 

FERC’s  new rule  for the Public Utilities Regulatory Policies Act (PURPA), which closely matches its  proposal from last year , passed by a 3-1 vote Thursday over the objections of the commission’s sole Democrat, Richard Glick. 

In FERC’s Thursday meeting, Chairman Neil Chatterjee said the new rule represents a “wide-ranging and comprehensive set of reforms” to how the 1978 federal law is implemented. Under PURPA, utilities in states without wholesale energy markets must contract with independent power projects, known as qualifying facilities (QFs), if they can produce electricity at less than the utility’s avoided cost of generation. 

But Glick echoed criticisms from clean-energy and environmental advocacy groups that FERC’s new rule fails to reform key problems in how PURPA has been implemented on a state-by-state basis over the past decade. He also cited new changes that could undermine PURPA’s goal of creating a level playing field for independent energy developers in regions where vertically integrated utilities hold monopoly power. 

“One of PURPA’s requirements is to encourage QFs,” he said at the meeting. But after reading the draft final rule, which has not yet been publicly released, he added, “I have a hard time seeing how it encourages it. I think it actually discourages QF development.” 

Fixed contract terms still up in the air

FERC’s new rule doesn’t change a status quo that has given state regulators wide latitude in how to ensure that utilities offer long-term fixed prices to QFs, according to Glick. Independent power producers say these long-term contracts have been critical to ensuring that their projects can obtain financing. 

But in recent years, utilities have sought  changes to state  regulations on the length and pricing of these contracts that have led to significant reductions in PURPA-driven development. 

For example, PURPA compliance efforts catapulted North Carolina to the leading spot in U.S. solar development earlier this decade. But  a 2017 law  shortened the required fixed contract length from 15 to 10 years, along with project sizing and pricing changes that have  stifled development since  then. Utilities in other states have sought to shorten PURPA contracts to as little as two years, an effort that  succeeded in Idaho  but  failed in Arizona . 

“Two years is not an appropriate contract term,” Katherine Gensler, vice president of regulatory affairs for the Solar Energy Industries Association, said in a Thursday interview. “Neither the proposed rule [nor] the final rule has addressed one of the...