As regulators continue to investigate industrywide restructuring as an answer to regional electric rate disparities and calls from large consumers for price reductions, the trend of dealing with...
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FERC Sticks to CA PURPA Decision
The Federal Energy Regulatory Commission (FERC) has upheld its February 22 ruling that the California Public Utilities Commission (CPUC) violated federal law by not considering all electric power sources in determining the avoided costs of electric utilities (Docket Nos. EL95-16-001 and EL95-19-001). A unanimous FERC had found the CPUC's Biennial Resource Plan Update auction in violation of the Public Utility Regulatory Policies Act (PURPA).
In its May ruling, the FERC offered further guidance and reaffirmed that its order does not preclude states from making policy decisions that favor particular generation technologies, as long as such actions do not result in rates above avoided costs. It added that state action may influence costs incurred by a utility. For example, a state may impose a tax on all generation produced by a particular fuel or may subsidize renewables through a tax credit.
Commissioner William L. Massey concurred with the majority, but disagreed about allowing states to consider "real"environmental costs in setting avoided costs, but not environmental adders or subtractors. According to Massey, the guidance given to the states comes dangerously close to a rule that says "only cheap power is good." He noted that many factors are difficult to quantify, such as plant location, outage rates, and startup costs. Massey called for a generic proceeding to prevent price from becoming the only relevant factor.
Chair Elizabeth A. Moler threw down the gauntlet when she reminded the CPUC that the FERC had stopped short of taking the matter to federal court. Moler added that she hoped the parties would be able to avoid a showdown. Moler then congratulated the CPUC on its restructuring proposals, saying that the FERC looks forward to working with them. t
Lori A. Burkhart is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.
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