What's All This PURPA Talk?

Although revisions to PURPA were actually included as part of the Energy Policy Act (EPAct) passed by Congress last year, there has been much more interest in these requirements by electric distribution cooperatives recently.  Perhaps much of this interest is due to the NRECA workshops that have been conducted to inform cooperatives about the new requirements and how they apply to cooperatives. 

To summarize the requirements – after having reviewed the EPAct, attended several of the NRECA workshops, and read various legal opinions – utilities with sales to consumers of over 500,000 MWhs must consider and make a determination whether to adopt the five standards.  As defined in the EPAct, for a cooperative to “consider” merely means to have set a date for public hearing, and to make a “determination” means to have the Board of Directors make a written declaration of its position – based upon findings and evidence presented at the hearing – made available to the public.  Adoption of any of the standards should be expected to promote PURPA’s objectives of encouraging the conservation of energy supplied, optimizing the efficiency of electric utility facilities, and providing equitable rates to electric consumers – and these are the criteria upon which the determination should be made.

So what are the standards and when do we have to act?  Two of the standards – Smart Metering and Interconnection – are on a more advanced timeline (consideration by August 2006 and determination by August 2007), while the deadlines for the remaining standards require consideration by August 2007 and determination by August 2008.  Some cooperatives are choosing to deal with all of the standards according to the same schedule and meet all of the requirements before August 2007, while others are planning to stagger the schedule more according to the deadlines outlined in the EPAct.  Of course, some cooperatives and jurisdictions may already be in compliance due to policies/procedures already in place or activities recently considered or undertaken.  Below are brief descriptions of the standards and just some of the deciding factors for each:

Time-Based Metering and Communications (Smart Metering). To offer, and provide upon request, time-based rate schedules to each of the utility’s customer classes.

• Do you currently have any rate schedules incorporating time of use pricing?  Critical peak pricing? Real-time pricing? Credits for large interruptible loads?  If so, how recently have they been updated?  Are these schedules effectively providing intended incentives?

• What is the average age and expected replacement of the installed base of meters?

• Evaluation of the various smart metering technologies.  What is the cost/benefit of the respective technologies?  Where is each technology in its product life cycle?  How proven and reliable is each technology?  How is the cost/benefit picture expected to change over the next few years?  What features are most attractive to consumers and provide the greatest benefits?  Who pays for the hardware/installation?

• Where does the value accrue?  What is the value to the G&T/power provider(s)?  How is this quantified and realized?  What is the value to the EMC?  How is this quantified and realized?

• What does the customer want?

Interconnection.  To make interconnection service (to local distribution facilities) available to any electric consumer with on-site generating facilities based on IEEE Standard 1547.

• Identify interconnection standards that apply to you.  What State interconnection standards/rules are in place?

• What technical requirements, beyond IEEE 1547, may be required?

• Should specific DG size/technical limitations be put in place to protect your distribution system?

• Are interconnection standards consistent with net metering/billing programs?

Net Metering.  To make available net metering service to any electric consumer (whereby electricity generated from an on-site facility is used to offset electricity provided by the utility to the consumer during the applicable billing period).

• What is the value of electricity being generated versus the retail price being avoided by the consumer/generator?  Note that the value of electricity varies, depending on the type of generator.  Would "normal" consumers effectively be subsidizing the generators of electricity?

• What is the cost/benefit of installing net meters, and who pays for the hardware/installation?  What are expected penetration rates for various types of generation?  How does this affect breakeven points and revenue requirements?

• Should only certain types of generators (size and/or technology) qualify for net metering service?

• What alternative technologies/solutions could provide the same benefits as net metering (equitably compensating providers of distributed generation)?

Fuel Sources (Fuel Diversity).  Develop a plan to minimize dependence on one fuel source and ensure that the generation of electricity uses a diverse range of fuels and technologies, including renewable technologies.

• To what extent can you control/influence fuel diversity?  What flexibility is available in your current wholesale power contracts with respect to fuel diversity or power supply alternatives?

• Are RPS standards in place that essentially make the decision (or part of the decision) for you?

• What studies and/or analyses on fuel diversity have been performed by your G&T?  Other power providers or consultants?  Has any exposure/risk been identified?

Fossil Fuel Generation Efficiency.  Develop and implement a 10-year plan to increase the efficiency of the fossil fuel generation portion of the utility’s total mix of generation resources.

• How is "efficiency" measured?  Heat rate?  Life extension (avoided investment)?  Lower cost?

• What changes does your G&T/power provider already have planned?

• Do current wholesale power contracts cover the 10 year planning horizon?  Is the G&T/power provider(s) properly incented (either explicitly or implicitly) to improve efficiency?

• What is the cost/benefit of various options to increase efficiency at respective facilities?

We at EnerVision would be happy to discuss your particular situation with you as you sort through all of the PURPA requirements.  We have consultants with extensive experience that can help manage the determination process, provide strategic direction and/or develop expert testimony for each of the five standards, and assist in implementation if and when your Board of Directors determines to adopt any of the standards.  Feel free to contact Greg Shepler at (888) 999-8840 or e-mail him at Greg.Shepler@enervision-inc.com if you have any questions about the PURPA requirements.