Utah regulators slim down PURPA contracts to 15 years

Dive Brief:

Utah utility regulators voted yesterday to reject Rocky Mountain Power's (RMP) bid to shorten contracts under the federal Public Utility Regulatory Policies Act (PURPA) with renewables developers from 20 years to three years.
Instead, the Utah Public Service Commission chose to reduce the contracts to 15 years, pleasing clean energy advocates who have claimed that the long term contracts are essential to securing renewables' place in the utility's evolving power mix.
RMP's parent company PacifiCorp, owned by Warren Buffett's Berkshire Hathaway, said it has seen an uptick in requests for PURPA projects across its 6-state territory as wind and solar prices continue to drop, and that the long term, fixed-price contracts are effectively renewable subsidies that will ultimately be paid by ratepayers.

Dive Insight:

Bids to shorten PURPA contract lengths have sprung up in the West and appeared to have gained momentum after Idaho's utility regulators approved a request by the state's major utilities to reduce the 20-year contract length down to 2 years.

PacifiCorp, operating as Rocky Mountain Power in Idaho, was one of the utilities seeking the reduction in the state, and also sought to shorten contracts in Oregon and Utah.

In Utah, RMP said it has 40 requests for PURPA contracts lined up, totaling 2,253 megawatts of generating capacity. The Salt Lake Tribune reports that the utility's parent company, PacifiCorp, is already contracted to pay $2.9 billion to PURPA-qualified facilities (QFs) over the next 10 years, with about $170.5 million set for 2015.

The PSC chose to strike a compromise between clean energy advocates' bid to keep the 20-year contract lengths, and the utility's concerns that ratepayers are not unduly burdened with the costs of paying the QFs.

"Although we find the record supports taking action to protect ratepayers against undue fixed-price risk, we believe a more measured response is appropriate than either the 85 percent reduction for which PacifiCorp advocates or the 75 percent reduction sought by the Division," the PSC wrote in their decision. "Based on the information available to us at this time and the record in this docket, we believe and find the public interest will best be served by a five-year reduction, establishing a maximum contract term of 15 years."

Sarah Wright, executive director of Utah Clean Energy applauded the PSC's decision, according to the Salt Lake Tribune.

"While any reduction from 20 years is worrisome, the 15-year term will allow progress and encourage continued economic growth, new jobs and clean energy in Utah," Wright said. "The federal and state policies that enable these contracts recognize the benefits independent power production brings to Utah, particularly in our rural communities."

PURPA was initially signed into federal law in 1978 to ensure utilities were sourcing power from a diversity of companies and resources, not just themselves. The law opened the door to more renewable energy.

While federal regulators have set the standard for the size of QFs, state regulators have the authority to set rates and sign off on contracts. This year, PURPA has come under increasing scrutiny with three Republican members of the U.S. Congress writing a letter to the Federal Energy Regulatory Commission asking that they schedule a technical conference to examine PURPA and to consider changes based on changes in the market in the last four decades.

Berkshire-Hathaway has also pushed for changes to the law on the federal level, lobbying for the inclusion of a proposal to exempt many utilities from PURPA purchases in a broad energy bill unveiled by the House earlier this year. Lawmakers removed the proposal along with language aimed at curbing FERC's regulation of hydro power.