RENEWABLE ENERGY PRICING EXPLAINED
The solar boom in America is continuing and South Carolina has the potential to be on the forefront, but an outdated federal law could prevent growth and strap South Carolina consumers with over-priced solar. Under debate in Columbia is language for how the 1978 federal law called the Public Utility Regulatory Policy Act (PURPA) will be implemented at the state level. If policymakers do not get it right, South Carolina consumers will not enjoy fairly-priced solar.
A recent column written by two former state utility commissioners shined the light on issues with the 40-year-old law and how other states have found creative solar solutions for affordable clean energy:
So, What Is PURPA?
“Under a 1978 law called the Public Utility Regulatory Policies Act, or PURPA, certain power generators have a legal right to sell their output at “avoided cost,” a price point intended to reflect the costs a utility would otherwise incur to buy the same quantity of electricity. Well-intentioned in principle and initially effective at encouraging new electricity providers, PURPA’s implementation has been badly in need of an overhaul for many years. As former utility regulators, we have seen some unfortunate consequences of these policies. And while we come from different political parties and disagree on a lot, we both agree that PURPA needs reform.”
Why Does It Harm Customers?
“Over the long term, the prices that regulators arrive at may be high, or they may be low. If they are low, few if any contracts result for the facilities that PURPA is intended to advantage. If the price skews high, however, it can launch a development feeding frenzy. Consumers are then locked into the contracts for decades.”
What Should Be Done About It?
“Forty years ago, PURPA’s drafters intended the law to encourage alternative technologies to provide electricity to consumers. Ironically, the current state of PURPA implementation works at cross-purposes with that intent. Indeed, by tying up so much of consumers’ demand for electricity with long-term, out-of-market renewable contracts, the biggest damage done by PURPA has been inflicted on the cause of clean energy itself. There are more affordable ways to reduce carbon, as Colorado has proven.” The Colorado utility, Xcel Energy, has renewable energy program that found a way to attract some of the lowest-priced bids in U.S. history. South Carolina should explore ways to find consumers the cheapest solar energy option!”
“Congress has given the FERC the tools it needs to address this problem. The time has come for the FERC to use them and to adopt federal regulations that promote the use of competitive pricing processes to fulfill PURPA’s legal requirements.”