The Public Utility Regulatory Policies Act of 1978 (PURPA) was created and implemented to address the energy crisis in the 1970s. It supports energy conservation methods and encourages the use of cogeneration and renewable resources. It promotes competition in the market for electric generation. Under PURPA, electric utility providers are required to buy electricity from small power plants with a capacity of 80 megawatts (MW) or less. The purchase rates should not be more than the cost that the utility would have incurred to produce the electricity itself.
PURPA is implemented by the Federal Energy Regulatory Commission or FERC and state regulatory bodies. So, PURPA established a category of electric generating facilities or qualifying facilities (QFs) to allot special rates, leading to better competition among non-utility power producers. Additionally, it resulted in the end of promotional rate structures. FERC determines the eligibility of facilities and services as qualifying facilities (QFs) and also offers guidance on pricing. State public utility commissions (PUCs) also determine the pricing and contractual terms for power purchase agreements.
QFs can be classified into two sub-divisions: small power production facilities and co-generation facilities.
- Small power production facilities produce electric energy from renewable resources like biomass, waste, or geothermal energy, and have a capacity of a maximum of 80 MW.
- Cogeneration facilities produce both electricity and useful thermal energy, such as steam or heat, in a more effective way than separate production.
Under the Public Utility Regulatory Policies Act of 1978 (PURPA), utilities must sell power energy to QFs at fair rates without discrimination. However, disputes over rates charged to QFs have led to legal challenges in federal district courts, despite FERC’s decision not to enforce action in certain cases.
Also See: What is Public Utility?
Which Act Amended the Public Utility Regulatory Policies Act of 1978 (PURPA)?
The Energy Policy Act of 2005 amended PURPA, allowing utilities to end new QF purchase contracts if FERC determines fair access to wholesale electric markets. FERC currently considers QFs with a power capacity of 20 MW or less as lacking fair access, with a reduction to 1 MW.
Since its enactment in 1978, the PURPA has seen many changes and calls for reform. However, there are discussions on updating and reforming PURPA and its terms. FERC is reviewing regulations, and legislation aims to modify PURPA. FERC and Congress proposed revisions to update PURPA regulations. The American Public Power Association supports both FERC’s efforts and legislative proposals to update the Public Utility Regulatory Policies Act (PURPA). Their objective is to ensure that PURPA reflects the changing energy market and avoids the purchase of unnecessary power at higher costs.