Public Utility Regulatory Policies Act
Encyclopedia
The Public Utility Regulatory Policies Act (PURPA) is a law, passed in 1978 by the United States Congress
as part of the National Energy Act
. It is meant to promote greater use of domestic renewable energy
. The law forced regulated, natural monopoly
electric utilities
to buy power from other more efficient producers, if that cost was less than the utility's own "avoided cost" rate to the consumer; the avoided cost rate was the additional costs that the electric utility would incur if it generated the required power itself, or if available, could purchase its demand requirements from another source. At the time generally, where demand was growing, this was considered to be the construction and fossil fuel
costs incurred in the operation of another thermal power plant. This free market
approach presented investment opportunity and government encouragement for more development of environment-friendly, renewable energy projects and technologies; the law created a market in which non-utility Independent Power Producer
s developed, and some energy market players failed
.
Although a Federal law, PURPA's implementation was left to the individual states, because needs varied; a variety of regulatory regimes developed in states where renewable power resources were needed, available for development, or the generated power could be transmitted
. Little was done in many states where such resources were unavailable, where the demand growth was slower or previously accommodated in planning.
The biggest result of PURPA is the prevalence of cogeneration
plants, which produce electric power and steam. These plants are encouraged by the law, on the basis that they harness thermal energy (in the form of usable steam) that would be otherwise wasted if electricity alone was produced. PURPA also became the basic legislation that enabled renewable energy providers to gain a toehold in the market, particularly in California, where state authorities were more aggressive in their interpretation of the statute.
PURPA is depreciating, as many of the contracts made under it during the 1980s are expiring. Another reason for PURPA's reduced significance is that electric deregulation and open access to electricity transportation by utilities has created a vast market for the purchase of energy and State regulatory agencies have therefore stopped forcing utilities to give contracts to developers of non-utility power projects. However, it is still an important piece of legislation promoting renewable energy because it exempts the developers of such projects from numerous State and Federal regulatory regimes.
The portion of the act dealing with cogeneration and small power production appears in US code in Title 16 - Conservation, Chapter 12 - Federal Regulation and Development of Power, Subchapter II - Regulation of Electric Utility Companies Engaged in Interstate Commerce, Sec 824a-3 - Cogeneration and Small Power Production.
In February 2005, Senator Jim Jeffords
from Vermont
introduced an amendment to PURPA calling for a Renewable portfolio standard
.
PURPA was amended in 2005 by the Energy Policy Act of 2005
by sections 1251 through 1254. There is pending legislation in the US Senate that would amend PURPA to require FERC to develop standards for interconnection of distributed generation
facilities, and that would require “electric utilities” meeting the PURPA size requirement (retail sales of more than 500 million kw hrs) to implement those standards.
See related energy policy contained in 42 USC Chapter 134 - Energy Policy.
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
as part of the National Energy Act
National Energy Act
The National Energy Act of 1978 was a legislative response by the U.S. Congress to the 1973 energy crisis. It includes the following statutes:* Public Utility Regulatory Policies Act * Energy Tax Act * National Energy Conservation Policy Act...
. It is meant to promote greater use of domestic renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
. The law forced regulated, natural monopoly
Natural monopoly
A monopoly describes a situation where all sales in a market are undertaken by a single firm. A natural monopoly by contrast is a condition on the cost-technology of an industry whereby it is most efficient for production to be concentrated in a single form...
electric utilities
Electric utility
An electric utility is a company that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments,...
to buy power from other more efficient producers, if that cost was less than the utility's own "avoided cost" rate to the consumer; the avoided cost rate was the additional costs that the electric utility would incur if it generated the required power itself, or if available, could purchase its demand requirements from another source. At the time generally, where demand was growing, this was considered to be the construction and fossil fuel
Fossil fuel
Fossil fuels are fuels formed by natural processes such as anaerobic decomposition of buried dead organisms. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650 million years...
costs incurred in the operation of another thermal power plant. This free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
approach presented investment opportunity and government encouragement for more development of environment-friendly, renewable energy projects and technologies; the law created a market in which non-utility Independent Power Producer
Independent Power Producer
An Independent Power Producer is an entity, which is not a public utility, but which owns facilities to generate electric power for sale to utilities and end users...
s developed, and some energy market players failed
Enron scandal
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world...
.
Although a Federal law, PURPA's implementation was left to the individual states, because needs varied; a variety of regulatory regimes developed in states where renewable power resources were needed, available for development, or the generated power could be transmitted
Electric power transmission
Electric-power transmission is the bulk transfer of electrical energy, from generating power plants to Electrical substations located near demand centers...
. Little was done in many states where such resources were unavailable, where the demand growth was slower or previously accommodated in planning.
The biggest result of PURPA is the prevalence of cogeneration
Cogeneration
Cogeneration is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat....
plants, which produce electric power and steam. These plants are encouraged by the law, on the basis that they harness thermal energy (in the form of usable steam) that would be otherwise wasted if electricity alone was produced. PURPA also became the basic legislation that enabled renewable energy providers to gain a toehold in the market, particularly in California, where state authorities were more aggressive in their interpretation of the statute.
PURPA is depreciating, as many of the contracts made under it during the 1980s are expiring. Another reason for PURPA's reduced significance is that electric deregulation and open access to electricity transportation by utilities has created a vast market for the purchase of energy and State regulatory agencies have therefore stopped forcing utilities to give contracts to developers of non-utility power projects. However, it is still an important piece of legislation promoting renewable energy because it exempts the developers of such projects from numerous State and Federal regulatory regimes.
The portion of the act dealing with cogeneration and small power production appears in US code in Title 16 - Conservation, Chapter 12 - Federal Regulation and Development of Power, Subchapter II - Regulation of Electric Utility Companies Engaged in Interstate Commerce, Sec 824a-3 - Cogeneration and Small Power Production.
In February 2005, Senator Jim Jeffords
Jim Jeffords
James Merrill "Jim" Jeffords is a former U.S. Senator from Vermont. He served as a Republican until 2001, when he left the party to become an independent. He retired from the Senate in 2006.-Background:...
from Vermont
Vermont
Vermont is a state in the New England region of the northeastern United States of America. The state ranks 43rd in land area, , and 45th in total area. Its population according to the 2010 census, 630,337, is the second smallest in the country, larger only than Wyoming. It is the only New England...
introduced an amendment to PURPA calling for a Renewable portfolio standard
Renewable Portfolio Standard
A Renewable Portfolio Standard is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal...
.
PURPA was amended in 2005 by the Energy Policy Act of 2005
Energy Policy Act of 2005
The Energy Policy Act of 2005 is a bill passed by the United States Congress on July 29, 2005, and signed into law by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico...
by sections 1251 through 1254. There is pending legislation in the US Senate that would amend PURPA to require FERC to develop standards for interconnection of distributed generation
Distributed generation
Distributed generation, also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or distributed energy, generates electricity from many small energy sources....
facilities, and that would require “electric utilities” meeting the PURPA size requirement (retail sales of more than 500 million kw hrs) to implement those standards.
See related energy policy contained in 42 USC Chapter 134 - Energy Policy.
External links
- PURPA at U.S. Code
- Union of Concerned Scientists
- EnergyVortex.com