FERC proposes PURPA rule reform

U.S. energy regulators have proposed revised regulations implementing a 40-year-old law that was designed to encourage domestic cogeneration and renewable energy production. The Federal Energy Regulatory Commission's notice of proposed rulemaking regarding its implementation of the Public Utility Regulatory Policies Act of 1978 could significantly reshape the Commission's approach to this law.

PURPA was enacted by Congress in 1978 to promote goals including energy conservation and greater production of domestic and renewable energy.  It established a new class of generating facilities called Qualifying Facilities or QFs, to receive special rate and regulatory treatment, and the Commission adopted regulations governing QFs in 1980.

But the Commission has recently noted changed circumstances since its adoption of PURPA regulations, including "sweeping changes that have taken place in the natural gas industry, and the resulting greater availability of natural gas"; improved outlook for the development of alternatives to natural gas and oil-fired resources, such as renewable resources; and the development of significant non-QF independent power production and organized competitive markets.

In light of these changed circumstances, the Commission has explored "PURPA modernization" or reform several times. For example, in 2016, the Commission held a technical conference to address PURPA implementation issues, and Commissioners have hinted at the prospect of reform in recent remarks.

Now, the Commission has issued a notice of proposed rulemaking based on a preliminary finding that its PURPA regulations should be modernized "to rebalance the approach adopted in the 1980s." Notably, the Commission describes its proposal as allowing states more flexibility in setting prices, such as the use of "competitive market forces in setting QF rates." Other changes proposed by the Commission including allowing electric utilities relief from PURPA's "must purchase" obligation to the extent their supply obligations are reduced by a state's retail choice program; making it easier for others to challenge whether multiple claimed QFs are actually part of a single development; and reducing the capacity level at which a rebuttable presumption of nondiscriminatory market access applies from 20 MW to 1 MW for small power production facilities (but not cogeneration facilities); among others proposed in the rulemaking.

Commissioner Glick issued a separate statement dissenting in part "because it would effectively gut the Public Utility Regulatory Policies Act (PURPA) ... Whether PURPA’s goals remain relevant is a decision for Congress, not an administrative agency. The Commission should not be seizing the reins from Congress in order to isolate an important debate about national energy policy within an independent regulatory agency."

Public comments are due 60 days following the notice of proposed rulemaking's publication in the Federal Register.