Onerous PURPA Requirements Have Outlived Their Usefulness

Tim Andrews

November 25, 2019

This article was originally published on InsideSources on November 25, 2019.

The year was 1978.  Olivia Newton-John and John Travolta were topping the charts with “You’re the One That I Want” from the movie “Grease.” “Star Wars” swept the Oscars by winning six out of 10 nominations, while three-piece suits with wide lapels, flared trousers, vests and aviator sunglasses were the height of men’s fashion at nightclubs.

But 1978 was also the year President Jimmy Carter signed into law one of his signature policies, the Public Utility Regulatory Policies Act (PURPA). The act was created in response to the 1973 energy crisis and was designed to promote greater use of domestic energy through effectively subsidizing the creation of small energy generators. Given the uncertainty of energy markets and global geopolitical challenges, this bill made sense at a time when energy independence was a key strategic challenge for the United States.

Forty years have now gone by and while some things may have remained the same (Travolta still starred in three movies released this year), a lot has changed. Not only have man-buns replaced mullets, but the energy market is also drastically different.

But as a result of antiquated PURPA legislation, unscrupulous “renewable” operators have taken advantage of rules written for a long-gone era to force ratepayers to pay significantly above market rates in long-term contracts. These operators have also forced utility companies to buy energy from them — even if absolutely no demand existed.

The situation has grown so dire that, according to a new study, PURPA solar and wind contracts are costing ratepayers an extra $3.9 billion in higher energy costs. These costs, tacked onto electricity bills across the country, are absolutely unneeded and serve as little more than crony corporate welfare handouts.

Aside from the absurdity of forcing utility companies to buy electricity for which there is no need or no demand or locking in long-term contracts well above the market rate. The creation of “wind farms” has led to another, easily exploited multi-million dollar loophole. By spacing each windmill just far away enough from each other, each mill is considered its own separate generator, triggering PURPA requirements for small enterprises. This bizarre arrangement prevails despite the clear, logical alternative of treating one wind farm as … one wind farm.

In the past decade alone, more than $100 billion of mostly unnecessary and unneeded projects have been developed as a result of this misguided law.

Meanwhile, close to a further $50 billion is still in development, with costs ultimately borne by ratepayers or taxpayers through subsidies. Yet, as bad as things currently are, they are set to get even worse. Unless something changes, these extraordinary costs are set to spiral even more out of control as even more unnecessary developments result in further pain on consumers, businesses and ratepayers who may reach a breaking point.

Households are already struggling to make ends meet due to rising energy costs. For seniors on Social Security, electricity is already more than 60 percent of their total residential bills, forcing many to choose between food, heat or medicine.

Businesses across the country have suffered, and losses have expanded far beyond the energy sector. Even small cafes and restaurants where a freezer room makes up a significant part of operating expenses have been forced to shut their doors because they simply can’t keep up with rising energy costs. When these mom-and-pop businesses suffer, casualties are not limited to GDP and economic output. The human toll of layoffs and lost opportunities due to this antiquated law is all-too-real.

Fortunately, while our do-nothing Congress continues to sit idle on this issue, the Federal Energy Regulatory Commission is currently mulling rule changes that would at least modernize PURPA-related requirements. Comprehensive rulemaking would remove many of the loopholes that have led to the unjust enrichment of renewable companies.

While this has raised the ire of the special interest groups who profit off exploiting ratepayers, reform is critically necessary and long overdue. Unless PURPA is radically reformed, more and more seniors will be forced to live without power, more businesses will be forced to shut their doors, and more Americans will lose their jobs for no reason whatsoever

Culturally, economically and socially, the world is a very different place now than what it was like 40 years ago. It’s time our energy policy starts to reflect that.

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