Concentric Energy Advisors
The Concentric Connection • December, 2018
Concentric Energy Advisors
Has the Public Utilities Regulatory Policy Act (“PURPA”) Outlived Its Purpose?

By: Danielle Powers, Senior Vice President

That is the question receiving increasing attention by regulatory commissions at the state and federal level. When Congress enacted PURPA in 1978, the nation was in the midst of an energy crisis, with oil predicted to rise to over $100 per barrel. PURPA was passed to help lessen the dependence on fossil fuels and promote the development of power generation from non-utility power producers. At that time, most utilities were vertically integrated (generating, transmitting, and distributing energy to their customers), and PURPA compelled utilities to purchase energy from non-utility power producers whose generation facilities met the requirements of a Qualifying Facility (“QF”) at a price that was at or below the utility’s cost of generation. This was known as the utility “avoided cost.”  PURPA allowed QFs to choose between providing power at an avoided cost rate at the time of delivery or at the time the obligation was incurred.

Much has changed in the energy landscape since PURPA was established over forty years ago. The generation of electricity is now open to competition in many regions across the country, and wholesale markets provide a vehicle for many of these non-utility power producers to sell their power. Meanwhile, technological advances and renewable policy mandates have driven wholesale power prices to all-time lows. The prices that many QFs are receiving for their energy contracts signed in the past 20 years are well above current market prices. As QFs continue to seek long-term contracts for their energy, many utilities have pushed back on the purchase obligation established by PURPA. The utilities argue that PURPA is no longer compatible with the current competitive energy landscape, especially in light of excess capacity positions in several markets, and that non-utility power producers are advantaging themselves under existing PURPA rules to the detriment of utility customers. Alternatively, non-utility power producers contend that the “PURPA put” on utilities provides the only reasonable means of contracting with a distributor for their energy and that PURPA contracts allow QFs to operate efficiently and cost-effectively to the benefit of the utility’s customers.

Although no timeline has been announced, the Federal Energy Regulatory Commission (“FERC”) has pledged to “reenergize” its review of PURPA.[1]  In the meantime, state regulators are attempting to address these issues in the absence of more guidance at the federal level, resulting in a patchwork of different regulations across the country. Under PURPA, state regulatory commissions were directed to implement the FERC rules, including the calculation of avoided costs and the establishment of implementation regulations. As purchase obligations under PURPA have become more contentious, developers of QF facilities have increasingly filed complaints against utilities and regulatory commissions alleging that they are violating the letter and intent of PURPA. These complaints include, among other things, the violation of PURPA size requirements in the calculation of the appropriate avoided cost rate. In at least two important cases, the FERC ruled that requiring QFs to participate in and win a competitive solicitation to obtain a long-term contract imposes an “unreasonable obstacle” to obtaining a legally enforceable obligation to purchase energy from the QF.[2] Several states have responded to these developments by establishing proceedings to clarify PURPA-related issues. In states like Washington, Michigan, and Colorado, the issues being debated involve what constitutes a “legally enforceable obligation,” what role a competitive procurement process should play in establishing a purchase agreement with the utility, and how avoided costs should be determined.

As the energy landscape continues its transformation and states progress toward meeting aggressive renewable mandates, clarity around the evolution of PURPA is critical. A wholesale review of the original objectives of PURPA and their application in today’s modern energy sector is vital and time is of the essence. With the potential for massive regulatory change, regulators, non-utility power producers, and utilities would be wise to keep a close watch on this process. To learn more about PURPA and Concentric’s expertise in the wholesale and retail energy markets, please contact Danielle Powers.

[1] FERC May 2018 Open Meeting.

[2] Hydrodynamics, Inc., 146 FERC ¶ 61,193 (2014); Windham Solar LLC and Allco Finance Ltd., 156 FERC ¶61,042 (2016).

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Meet Our Expert
Danielle Powers

Danielle S. Powers, Senior Vice President, has over 25 years of experience in the wholesale electric market design and operation, power generation, and energy consulting fields.  Ms. Powers has expertise in wholesale market operations, wholesale market analysis, generation operations, generation asset sales and acquisitions, asset valuation, and wholesale and retail energy planning and procurement.

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Concentric Energy Advisors
Concentric Energy Advisors
New Faces at Concentric

Concentric is pleased to welcome to the firm a returning alumnus and two new additions to meet the demands of our continuing growth.

Joshua Nowak is returning to Concentric as an Assistant Vice President at our Marlborough, MA Headquarters. Joshua specializes in providing rate case services on cost of capital matters related to return on equity, cost of capital and financial market issues. He is also experienced in providing strategic direction on financing activities including bond offerings, credit rating analysis, and investor relations. Most recently, Joshua was the Director of Regulatory Strategy & Integrated Analytics at National Grid. He holds a Bachelor’s Degree in Economics & History from Boston College.

Emma Nicholson, Ph.D. has joined the Washington, DC office as a Senior Project Manager. Emma brings expertise in the areas of wholesale electricity and capacity market design, price formation, market rules and practices, and market power mitigation. She is also experienced in assessing competition, electric and gas price forecasting, production cost modeling, and cost allocation and rate design. Before joining Concentric, Emma was an Economist at the Federal Energy Regulatory Commission in the Office of Energy Policy and Innovation. She holds a Ph.D. and Master’s in Economics from Georgetown University, and a Bachelor’s Degree in Economics and Government from the University of Maryland, College Park.

Colin Burns is a new Consultant in the Calgary, Alberta office. Colin specializes in depreciation studies for public utilities and railroads. He is also experienced in gas demand forecasting, pipeline abandonment, and financial analysis of natural gas pipeline systems in Canada. Colin holds a CET–Computer Networking Diploma from the Southern Alberta Institute of Technology.

“I am delighted to welcome our newest team members,” said John J. Reed, Chairman and Chief Executive Officer of Concentric. “We continue to experience robust growth, and that momentum is attracting great people.”

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Recent Projects
Concentric was recently engaged by the Vermont Department of Public Service

to prepare an assessment of the financial aspects of the proposed transfer of the Vermont Yankee nuclear station from a subsidiary of Entergy Corporation to NorthStar Decommissioning Company, LLC, including the financial assurances proposed by NorthStar if the transfer were approved, and the financial capabilities of NorthStar to complete the decommissioning, site restoration, and spent nuclear fuel management at Vermont Yankee.

After multiple rounds of testimony, the parties reached a Memorandum of Understanding that called for additional financial assurances to be provided by the buyer and seller, and Concentric submitted testimony assessing those additional assurances.  Concentric also provided live testimony before the Vermont Public Utility Commission in Montpelier, VT.  The transfer was approved by the Commission on December 6, 2018.

To learn more about this engagement, please contact Dan Dane or Julie Lieberman.

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Concentric Energy Advisors
The Foster Report Featured Story of the Week
Concentric Energy Advisors
McNamee Gains Senate Confirmation in Close Vote After Harsh Words From Democrats

The Senate on December 6 narrowly confirmed the nomination of Bernard McNamee to be a commissioner at FERC after harsh comments from Democrats about his background and what they believe to be a bias in favor of fossil fuels.

Following a cloture vote to limit debate on the nomination that passed 50-49 on December 5, with Sen. Thom Tillis (R-N.C.) not voting, the Senate approved the nomination in a floor vote with the same tally on December 6. The 50-49 roll call vote was along party lines, with the two Independents joining Democrats in opposing the nomination. Tillis also did not vote in the roll call vote on the nomination.

Sen. Joe Manchin (D-W.Va.) who voted in favor of McNamee when his nomination was moved out of the Senate Energy and Natural Resources Committee, voted no on the Senate floor after seeing the video of McNamee denying the impact that humans are having on climate in a February 2018 event. After watching the video “I can no longer support his nomination” Manchin said in a statement.

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Concentric is Hiring!

Concentric is looking to hire Analysts and Utility of the Future Experts.

Analysts serve a critical role on project teams as the primary contributor of modeling, data analysis, and research tasks that are essential to a successful client engagement.

Utility of the Future Experts will support our Future of Energy practice and our advisory, litigation, and M&A services as well as address regulatory and utility business models, integration and value of distributed energy resources (“VDER”), pricing and rate design, and financial issues in the electric industry.

We are seeking individuals with relevant experience that can be valuable long-term contributors to our company and our clients. Apply Today!

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