On June 6 the Energy Production and Regulation Subcommittee of the Senate Energy and Natural Resources Committee, chaired by Sen. Don Nickles (R-OK), held a hearing on legislation S. 708, The Electric Utility Ratepayer Act, which would repeal section 210 of the Public Utility Regulatory Policies Act (PURPA), which mandates purchases from qualifying facilities (QFs) at avoided-cost rates. Nickles said he introduced the bill because he believes "PURPA's purchase mandate is not in the best interest of consumers." Noting concern over the status of existing contracts, Nickles said he will modify the bill to make repeal of section 210 apply prospectively to contracts entered into after April 7.
Federal Energy Regulatory Commission (FERC) chair Elizabeth A. Moler admitted the increasing difficulty of reconciling PURPA's avoided-cost requirements with efforts to encourage the use of higher-priced renewable sources of energy, but contended that repealing section 210 would be premature in light of utility market power over transmission. Moler argued that repeal should not take place until the transmission grid is opened to all wholesale buyers and sellers of electricity.
Moler said that although the FERC will not tear up QF contracts retroactively, it will not validate state PURPA programs that create uneconomic QF contracts, exacerbating the stranded-cost problem. In the event that PURPA is repealed, Moler called for the grandfathering of past QF contracts, including the rates on which the contracts were based. Pointing out that S. 708 states that nothing in the Act "abrogates" any existing contract, Moler said the meaning of "abrogate" should be clarified.