Overview
Without having seen the new PURPA NOPR, two reforms discussed at the September 19 Open Meeting appear to be the most significant. First, is the ability of states to permit a floating (i.e., formula) energy rates in contracts, such as tying the energy price to market rates. If adopted, this change would reverse the various court decisions that have held that under FERC’s existing regulations, a rate set at the time of a legally enforceable obligation must be fixed as to both the capacity and energy component. This change may well serve its intended purpose, making states more willing to permit longer-term PURPA contracts in an era where wholesale power prices are unlikely to rise significantly due to fuel price volatility. Second, the reduction in the size of small power production facilities (i.e., renewables) from which utilities that have obtained a purchase exemption under PURPA Section 210(m) from 20 MW to 1 MW is very significant to many ISO/RTO utilities. The up-to-20 MW purchase requirement, among other things, interfered with rational integrated resource planning by compelling purchases from often sophisticated generators that can readily participate in markets.
