Public Utility Regulatory Policies Act (PURPA) Background
The following offers a general background on PURPA as it relates to QFs program in California.
PURPA, among others, provides for the development of independent power production projects called QFs and delegates implementing authority to Federal Energy Regulatory Commission (FERC). FERC adopted rules encouraging the development of non-utility cogeneration and small power projects. It also required electric utilities to interconnect with QFs, supply QFs with supplemental backup power and purchase QF power. Rates for the QF power are to be just and reasonable to the consumers, not discriminatory against QFs and not to exceed the utility’s avoided cost. The QFs, on the other hand, are required to meet certain operating, efficiency and fuel use standards set forth by FERC. FERC also delegated some aspects of PURPA implementation to state public utility commissions. In California, prices paid to QFs for the generating capacity and electric energy they provide must be approved by the California Public Utilities Commission (CPUC). The Investor Owned Utilities (IOUs) in California purchased power from QFs according to the terms and conditions specified in standard offer (SO) power purchase contracts which includes an energy price for actual electric energy delivered to IOUs and capacity price that reflects the cost of capacity avoided. To date, most QFs under contract with CA electric IOUs received Short Run Avoided Energy and Capacity Costs (SRAC) for QFs power delivered to IOUs. The existing methodology for SRAC energy prices are calculated pursuant to CPUC’s Decision (D) 96-12-028 as modified by D.01-03-067.
FERC QF Order
In October 2006, the FERC issued an order that provides for the process on QF mandatory purchase obligation under PURPA Section 210m. Among others, it establishes filing requirements for electric IOUs to seek relief from the purchase obligation and also provides for reinstatement of the obligation upon a showing that the conditions for terminating the requirement are no longer met. See the FERC website for further information regarding QFs.
Commission Adopts QF Pricing Mechanisms and Policies
In September 2007, the Commission issued D.07-09-040 that adopted the new pricing mechanisms and policies applicable to energy and capacity transactions between electric utilities and QFs. The decision adopted the market index formula (MIF) based on D.01-03-067 modified transition formula but this time it contains both a market based and an administratively determined heat rate. The decision offered two prospective standard contract options that afford the QFs with flexibility to suit their energy provider status:
a) One-to-five-year As-Available Power Contract. This option is available to all renewable and new QFs.
b) One-to-ten year Firm, Unit Contingent Power Contract. This option is available to renewing QFs that can provide unit firm capacity and desire a longer-term contract.
In addition, QFs desiring a longer-term or more flexible contract have the option to participate in IOU power solicitations or negotiate a bilateral contract with IOU. See D.07-09-040 for further information.
The California IOUs websites provide current and historical SRAC QF prices and other QF data. See them for further information.