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Hidden regulation costs Arizona, American consumers billions

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A lot has changed in America since the 1970s, and much has been for the better. We’ve gone from network TV to countless streaming services, vinyl records to Spotify, and dial telephones to cellphones that allow you to carry the power of the Internet in your pocket.

Often, this change happened quickly, as new, better, and over time, more affordable, products came to the public. And in each instance, entrepreneurs made progress because they created disruptive technology. They could do so in part because harmful regulatory obstacles weren’t blocking their way.

The Federal Energy Regulatory Commission understands this, and is trying to modernize an outdated law that is inhibiting innovation and raising energy costs for consumers. This law is the Public Utility Regulatory Policies Act, or PURPA, which was passed in the 1970s and desperately needs updating.

Congress passed PURPA in the face of a national energy crisis. Its goals were to enhance and diversify electric generation capacity and promote competition at a time when the price and availability of future energy sources were grim. Many PURPA contracts are long-term in nature, and establish fixed prices for electricity. At the time, these mandated, fixed-price purchases were effective in increasing competition and driving down costs.

David Holt

David Holt

Now, not surprisingly, these outdated requirements are forcing consumers in Arizona and other states to pay more for power they don’t need.

PURPA’s dual-edged sword forces utilities to purchase renewable energy at inflated prices regardless of whether they need the electricity or not. These contracts are long – sometimes spanning several decades – and do not take into account any changes in reality even when the cost of renewables or the need for power has significantly changed. At a time when the nation is looking to advance renewables, driving up the cost unnecessarily will only serve to slow their growth and force higher costs on those who can least afford to pay. This is not a policy that any of us want.

Energy developers have been taking advantage of this system for long enough. In the past five years alone, you and your fellow customers have overpaid by as much as $2.3 billion. This is the result of inflated, hidden prices that are passed on to you and other consumers for long periods of time.

These payments represent a significant and regressive wealth transfer – from you to unregulated renewable energy developers and their wealthy shareholders. This perverse system needs to be put to an end, and the proposed PURPA reforms will do just that, with your support.

The commission is now trying to bring PURPA out of the 1970s. Although it is an obscure regulatory agency, the commission’s actions impact the utility bills you get every month. The commission regulates the sale of electricity and the transportation of oil by pipelines between states. It is especially important because it can lower the price we’re all currently paying for energy by reforming PURPA.

The commission’s proposed reform would give states more flexibility and allow states, instead of the federal government, to determine how to sign power agreements to decrease the probability of paying for overpriced, long-term contracts. The commission is proposing to revise the “one-mile rule” as well, preventing large companies from breaking themselves up into smaller projects to take advantage of higher returns. The proposal would also ease burdens to challenge qualifying facilities that choose to self-certify to ensure that projects are legitimate.

It’s simple: the world and the market have changed. By the same token, it’s time for PURPA to change for the 21st Century.

David Holt is the founder and president of Consumer Energy Alliance, a U.S. consumer advocate supporting affordable, reliable energy for working families, seniors and businesses across the country.

3 comments

  1. I am not familiar with this consumer group. I questioned the article because the author did not discuss the pros and cons of the legislation. Most consumer advocacy groups do so. What I found is a descriptions indicating that Consumer Energy Alliance (CEA) appears to be an advocacy group for some of the country’s largest fossil fuel corporations and trade associations. Something to consider in evaluating the article and its perspectives.

  2. Right, this article masquerades as being for cheaper fuel, but the CEA is a front group for oil interests. He does not compare his “overpaid by as much as $2.3 billion” number to the subsidies we pay to big oil, or the costs of oil cleanup, or the long term costs of dirty air, soil, and water. He does not compare “renewable energy developers and their wealthy shareholders” to big oil wealth. I agree: we need revisions to PURPA. It has too many loopholes for oil interests to exploit so they can continue polluting at a time when know the planet is in trouble. It is socially irresponsible to propose deregulation (which is what he means by “ease burdens”.)

  3. What a farce of an article written by a fossil fuel lobbyist! The subsidies given by taxpayers to fossil fuel companies, cheap land sold to oil and gas drilling, which in most cases is our public lands, is not mentioned in this article. The wealth isn’t withe executives of wind and solar companies, but with dirty fossil fuel executives that want a republican control president and congress and down to the state level to keep their business afloat and to kill off or at diminish renewal energy. All at the expense of our own health and the air and water we need to survive.

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