The New PURPA Standards

Overview – What Areas Will be Considered?

The Energy Independence and Security Act of 2007 (EISA) amended PURPA by adding five (5) additional “standards” for consideration by covered electric utilities.  Of these five (5) new standards, one (1) does not apply to Sawnee EMC, and one (1) applies only under special circumstances.  Shown below are the areas that are to be evaluated by covered utilities, as well as a brief description of what is to be considered.

Here are the PURPA Standards.

The PURPA standards to be considered by covered utilities, as well as what the EISA states must be considered when evaluating each standard, is outlined below. The text that follows each standard is from the EISA.

1.     Integrated Resource Planning (26 U.S.C. § 2621(d)(16)) Standard:  Each electric utility shall (A) integrate energy efficiency resources into utility plans; and (B) adopt policies establishing cost-effective energy efficiency as a priority resource.

2.     Rate Design Modifications to Promote Energy Efficiency Investments (26 U.S.C. § 2621(d)(17)) Standard: (A) IN GENERAL - the rates allowed to be charged by any electric utility shall (I) align utility incentives with the delivery of cost-effective energy efficiency; and (II) promote energy efficiency investments.  (B) POLICY OPTIONS - In complying with subparagraph (A), each utility shall consider (i) removing the throughput incentive and other regulatory and management disincentives to energy efficiency; (ii) providing utility incentives for the successful management of energy efficiency programs; (iii) including the impact on adoption of energy efficiency as one of the goals of retail rate design, recognizing that energy efficiency must be balanced with other objectives; (iv) adopting rate designs that encourage energy efficiency for each customer class; (v) allowing timely recovery of energy efficiency related costs; and (vi) offering home energy audits, offering demand response programs, publicizing the financial and environmental benefits associated with making home energy efficiency improvements, and educating homeowners about all existing Federal and State incentives, including the availability of low-cost loans, that make energy efficiency improvements more affordable.

3.     Smart Grid Information (26 U.S.C. § 2621(d)(17)) Standard:  (A) INFORMATION. - All electricity purchasers shall be provided direct access, in written or electronic machine-readable form as appropriate, and to the extent practicable, to the following information from their electricity provider: (I) PRICES. - time-based electricity prices in the wholesale electricity market, and time-based electricity prices or rates that are available to the purchasers; (II) USAGE. - Purchasers shall be provided with the number of electricity units, expressed in kwh, purchased by them; (III) INTERVALS AND PROJECTIONS. - Updates of information on prices and usage shall be offered on not less than a daily basis, shall include hourly price and use information, where available, and shall include a day-ahead projection of such price information to the extent available; and (IV) SOURCES. - Purchasers and other interested persons shall be provided annually with written information on the sources of the power provided by the utility, to the extent it can be determined, by type of generation, including greenhouse gas emissions associated with each type of generation, for intervals during which such information is available on a cost-effective basis.  (B) ACCESS. - Purchasers shall be able to access their own information at any time through the Internet and on other means of communication elected by that utility for Smart Grid applications.  Other interested persons shall be able to access information not specific to any purchaser through the Internet.  Information specific to any purchaser shall be provided solely to that purchaser.

4.     Smart Grid Investment (26 U.S.C. § 2621(d)(16)) Standard:   (A) IN GENERAL. - Each state shall consider requiring that, prior to undertaking investments in nonadvanced grid technologies, an electric utility of the State demonstrate to the State that the electric utility considered an investment in a qualified smart grid system based on appropriate factors, including - (I) total costs, (II) cost-effectiveness, (III) improved reliability, (IV) security, (V) system performance, and (VI) societal benefit.  (B) RATE RECOVERY. - Each State shall consider authorizing each electric utility of the State to recover from ratepayers any capital, operating expenditures, or other costs of the electric utility relating to the deployment of a qualified smart grid system, including a reasonable rate of return on the capital expenditures of the electric utility for the deployment of the qualified smart grid system.  (C) OBSOLETE EQUIPMENT. - Each State shall consider authorizing any electric utility or other party of the State to deploy a qualified smart grid system to recover in a timely manner the remaining book-value costs of any equipment rendered obsolete by the deployment of the qualified smart grid system, based on the remaining depreciable life of the obsolete equipment.  (Note:  This standard applies only to states utility commissions, and not to EMC’s whose rates are not state utility commission regulated (such as Sawnee EMC).)

5.     Additional Incentives for Recovery, Use and Prevention of Industrial Waste Energy (42 U.S.C. § 63444) Standard:  (a) Consideration of standard.   (1) In general. Not later than 180 days after the receipt by a State regulatory authority (with respect to each electric utility for which the authority has ratemaking authority), or nonregulated electric utility, of a request from a project sponsor or owner or operator, the State regulatory authority or nonregulated electric utility shall:  (A) provide public notice and conduct a hearing respecting the standard established by subsection (b) of this section; and (B) on the basis of the hearing, consider and make a determination whether or not it is appropriate to implement the standard to carry out the purposes of this part. . . . (b) Standard for sales of excess power. For purposes of this section, the standard referred to in subsection (a) of this section shall provide that an owner or operator of a waste energy recovery project identified on the Registry that generates net excess power shall be eligible to benefit from at least 1 of the options described in subsection (c) of this section for disposal of the net excess power in accordance with the rate conditions and limitations described in subsection (d) of this section.  (c) Options.  The options referred to in subsection (b) of this section are as follows: (1) Sale of net excess power to utility. The electric utility shall purchase the net excess power from the owner or operator of the eligible waste energy recovery project during the operation of the project under a contract entered into for that purpose. (2) Transport by utility for direct sale to third party. The electric utility shall transmit the net excess power on behalf of the project owner or operator to up to 3 separate locations on the system of the utility for direct sale by the owner or operator to third parties at those locations.  (3) Transport over private transmission lines. The State and the electric utility shall permit, and shall waive or modify such laws as would otherwise prohibit, the construction and operation of private electric wires constructed, owned, and operated by the project owner or operator, to transport the power to up to 3 purchasers within a 3-mile radius of the project, allowing the wires to use or cross public rights-of-way, without subjecting the project to regulation as a public utility, and according the wires the same treatment for safety, zoning, land use, and other legal privileges as apply or would apply to the wires of the utility….”  (Note:  This standard requires a covered utility to hold a hearing and make a determination only after the utility receives a specific request related to an identified waste energy resource.  As such, Sawnee EMC does not currently intend to address this standard at the hearing planned for consideration of the three (3) standards which are immediately applicable to Sawnee EMC.)

Things To Keep In Mind.

It is important to note that, even though the standards themselves are written as if they are mandatory, PURPA does not require that the standards be implemented. Rather, it is Sawnee’s responsibility “to consider” each standard and determine, based on evidence presented during the hearing process, whether the implementation of that standard is appropriate for its distribution system.

Got Questions?

Questions about these standards should be directed to Sawnee’s PURPA Officer (see Contact Us).