Proposals to repeal PUHCA, PURPA divide industry

By Kate Thomas
OGJ Online Staff

HOUSTON, July 27, 2001 — Power industry groups generally supported inclusion of a net metering provision in an electricity reform bill during hearings Friday in Washington, but they remained deeply divided over repeal of two laws that have governed the industry for years.

Utility industry executives called for repeal of the Public Utility Regulatory Polices Act (PURPA) and the Public Utility Holding Company Act (PUHCA) in testimony before the House Energy and Air Quality Subcommittee.

But consumer groups, state regulators, and large public power suppliers opposed doing away with the laws, unless Congress gives the Federal Energy Regulatory Commission stronger oversight over mergers and acquisitions and includes other measures to protect the public from market power abuses.

Large industrial consumers with cogeneration units also opposed eliminating provisions of PURPA that require utilities to buy power from so-called qualifying facilities at what is often above-market cost.

Subcommittee Chairman Joe Barton (R-Tex.) said he is “confident” the concept of net metering will be incorporated in any bill that is drawn up for consideration, but he questioned witnesses closely about how to treat existing contracts with rollover provisions if changes are made to PURPA.

Davis Svanda, a commissioner with the Michigan Public Service Commission, said the national organization supports legislation to establish uniform technical standards for interconnecting new generation to the grid, so long as states are permitted to implement them.

Remove metering barriers
State regulators also support legislation removing federal barriers to state implementation of net metering, he said, with the biggest hurdle being a lack of jurisdictional clarity over net metering. Svanda said the Federal Power Act has been alleged to preempt state net metering programs, slowing their development.

Interconnection rights and net metering must be part of national legislation to promote effective competition, said Marc Yacker, director of government and public affairs for the Electricity Consumers Resource Council. He noted many industrial firms with cogeneration facilities have had net metering at their facilities for “years,” allowing them to feed power into the grid and receive credit for it from the local utility.

“Objection comes from those who want to keep the generation base narrow and who utilize their monopoly power in any way possible to perpetuate their monopoly status,” Yacker said.

Top executives at GPU Inc. and Mid-American Energy Holdings Co. said the Depression era PUHCA limits investment at a time the industry needs it most and give foreign companies that are not subject to its provisions a competitive advantage in the US market.

Mid-American’s David Sokol noted if the company’s utility wanted to invest in California outside its home state of Iowa it would have to register under PUHCA and become subject to a requirement showing it interconnects its utility system in the Midwest with those of California utilities.

“This an impossible standard for Mid-American to meet,” he said. The Large Public Power Council opposes stand-alone repeal of PUHCA, said Herman Morris Jr., of Memphis Light, Gas & Water, Alamo, Tenn., without companion legislation clarifying FERC’s authority over holding company and generation-only mergers.

“We oppose limiting FERC’s authority to review such mergers and believe that such authority is necessary to ensure competitive and robust markets,” Morris said. Martin Kanner, coordinator for the Consumers for Fair Competition, said the organization believes repealing PUHCA will “thwart,” rather than hasten effective competition. The organization also advocated tying PUHCA repeal to passage of a series of provisions to limit market power abuse and a requirement for registered holding companies to join a FERC-approved regional transmission organization.

Bruce Levy, senior vice-president of GPU, said PURPA has outlived it usefulness and should be prospectively repealed. “PURPA was premised on utilities continuing to be the exclusive suppliers of electricity to all consumers within their franchise territories,” Levy said. “It was never imagined that PURPA would apply in a world of open access transmission for wholesale and retail customers. Requiring those utilities to make new purchases of QF power makes no sense.”

However, ELCON’s Yacker said the number of new, uneconomic PURPA-based contracts being signed today is close to “nil. The mandatory purchase provisions of PURPA clearly will not be needed in a truly competitive wholesale electricity market. But we do not have that yet.”

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