Public Utility Regulatory Policies Act (PURPA)
The Public Utility Regulatory Policies Act (“PURPA”) is a statute passed to promote greater use of renewable energy. It applies to each electric utility in any calendar year, and to each proceeding relating to each electric utility in such year[i].
However, the requirements of the statute do not apply to the operations of an electric utility, or to proceedings respecting such operations, to the extent that such operations or proceedings relate to sales of electric energy for purposes of resale.
The purposes of PURPA are to encourage[ii]:
- conservation of energy supplied by electric utilities;
- the optimization of the efficiency of use of facilities and resources by electric utilities; and
- equitable rates to electric consumers.
In particular, PURPA proposes the elimination of declining block rates, stating that the energy component of a rate, or the amount attributable to the energy component in a rate, charged by any electric utility for providing electric service during any period to any class of electric consumers may not decrease[iii].
The PURPA, requires electric utilities to purchase all electric energy made available by cogenerators at rates[iv]:
- that are just and reasonable to electric consumers,
- that do not discriminate against qualifying cogeneration facilities, and
- that do not exceed the incremental cost to the electric utility of alternative electric energy.
Further, the PURPA, requires each state regulatory authority and nonregulated utility to consider the use of six different approaches to structuring rates[v]:
- promulgation, for each class of electricity consumers, of rates that, to the maximum extent practicable, would reflect the costs of service to such class;
- elimination of declining block rates;
- adoption of time-of-day rates;
- promulgation of seasonal rates;
- adoption of interruptible rates; and
- use of load management techniques.
Similarly, the PURPA, requires each state regulatory authority and nonregulated utility to consider the adoption of a second set of standards relating to the terms and conditions of electricity service[vi]:
- prohibition of master-metering in new buildings;
- restrictions on the use of automatic adjustment clauses;
- disclosure to consumers of information regarding rate schedules;
- promulgation of procedural requirements relating to termination of service; and
- prohibition of the recovery of advertising costs from consumers.
To enforce the requirements of PURPA, any electric utility, qualifying cogenerator, or qualifying small power producer may petition the Federal Energy Regulatory Commission[vii].
[i] 16 USCS § 2612.
[ii] 16 USCS § 2611.
[iii] Citywide Coalition for Util. Reform v. Public Utils. Comm’n, 67 Ohio St. 3d 531 (Ohio 1993).
[iv] Public Serv. Co. v. State ex rel. Okla. Corp. Comm’n, 2005 OK 47 (Okla. 2005).
[v] FERC v. Miss., 456 U.S. 742 (U.S. 1982).
[vi] 16 USCS § 2623.
[vii] Niagara Mohawk Power Corp. v. FERC, 306 F.3d 1264 (2d Cir. N.Y. 2002).