PURPA, Carter's Public Utilities Regulatory Policy Act, allows small renewable and combined heat and power generators to sell their electricity to the utility companies at "avoided cost." PURPA it leaves it up to the states to define in detail how avoided costs must be calculated. As a consequence, many states, including Utah, have gutted PURPA by using a procedure that grossly underestimates the costs which renewable energy avoids.
Presently the Utah Public Service Commission is looking whether the Utah definition should be revised. It is docket 12-035-100 at http://psc.utah.gov/utilities/electric/elecindx/2012/12035100indx.html Yesterday I gave a testimony, as a ratepayer and breather of the polluted air in Salt Lake City, which was well received. Among all the public witnesses I was the only one who made the connection between PURPA and Fossil Fuel subsidies. Some of you might be interested to read my statement. As preparation I used, besides the testimony of Utah Clean Energy in the same docket, the following very useful pdf: http://www.recycled-energy.com/images/uploads/Reviving-PURPA.pdf Here is my statement: Thank you for the opportunity to testify here. Despite an abundance of solar and geothermal energy in Utah, Utah is almost last in the nation with its share of renewable electricity. The reason is simple: renewable electricity cannot compete with fossil fuels, because fossil fuels are subsidized in Utah more than elsewhere. If you understand the mechanism of these subsidies, I think you may also appreciate my reasons for speaking as a witness here. I arranged my personal life to minimize my carbon footprint. Yet I have no choice but to subsidize the fossil fuel consumption of others. Part of this subsidy are the damages which ozone pollution and PM2.5 pollution afflict on me and everyone else living in SLC, even those who do not immediately show symptoms. Another part of this subsidy is paid not only by people in SLC but by people living everywhere: my children for instance, who live in other states, must expect a grim future due to the Climate Disruption which is in part caused by electricity production in Utah. Generators of electricity from fossil fuels use the atmosphere which I am breathing as a free dumping ground. I am paying the price which they should be paying. These subsidies make electricity prices too low, which leads to overconsumption of electricity compared to what would constitute an efficient use of all available resources. Another implication of these subsidies is that the avoided costs as they are presently computed in Utah are also lower than what would be efficient for the economy. Before going into the details of this, I'd like to briefly discuss the effects of too low avoided cost. Say the true cost of an additonal fossil-fired kWh is 5 cents, but the avoided cost is calculated as 3 cents. In this case, renewable energy producers with a cost of 4 cents are denied access. Instead, this energy is produced at a cost of 5 cents. I.e., if avoided costs are too low, rate payers have to pay too much. Another implication of too low avoided cost is a retardation in the development of renewable energy. Renewable energy is getting cheaper every year, and the more renewable energy can be produced, the faster it will pass through its learning curve. Existing fossil generation is a mature technology and its productivity increases are much slower than those of renewable energy. I still have to substantiate my claim that the avoided costs in Utah are too low. I see three reasons for this. First reason: Around 35 the 50 states in the Union have mandatory Renewable Portfolio Standards. If such a RPS exists, PURPA allows the avoided costs for renewable generation mandated by the RPS to be determined by the cost of renewable electricity and not the cost of fossil electricity. Utah does not have a mandate but only a goal. I am not sure whether PURPA allows technology-specific rates if there is only a goal. I wish that such technology-specific rates can be developed, I certainly think they are in the interest of ratepayers like myself. If PURPA does not allow technology-specific rates here in Utah, i.e., if the utility company does not have to pay for the many extra benefits of renewable generation, then I think it would be fair that the QF should be able to sell their REC's elsewhere. Second reason: It is widely believed that the externalities, which force end consumers to subsidize fossil-fuel generated electricity with their health and the future of their children, will at some point lead to a carbon tax or other kind of carbon price. If there is a carbon tax, then PURPA allows the tax savings of renewable energy to count as an avoided cost. But right now, there are only externalities and no tax. PURPA does not allow to count externalities as avoided costs which are not actual costs to the utility companies. Even if those costs are not reflected in the books of my utility Rocky Mountain Power, these costs are born by someone. I am one of the many end consumers who are bearing these costs and I think I deserve as much protection under PURPA as my utility company. I hope that some way can be found to reflect these externalities in the avoided costs, perhaps as a hedge against future carbon taxes. This would not only be fair but it would also make good business sense. Investments in power generation have a long lifetime. Everyone loses if these investments are made on a basis which will be overturned after a few years when the carbon tax is introduced. I am not a lawyer and do not know whether the above refinements of the avoided cost calculation can be reconciled with the letter of the law. I think they are certainly in the spirit of the law, because ratepayer equivalence is impossible without these refinements. But there is a third reason why avoided costs in Utah are too low. PURPA in Utah tries to be simple and only uses a "bare bones" calculation of avoided costs. Some of the benefits of renewable energy which PURPA generally allows to count as avoided cost are not counted here in Utah. Other participants in this Docket have pointed this out. I cannot add to the details but I will describe the gist of it as I understand it. It makes sense to me to value solar energy capacity more highly because the sun happens to shine when demand is high, and to value wind more highly because Utah is windier during the Summer rather than the winter. It also makes sense to me to value distributed energy more highly because the law of large numbers makes many independent producers more reliable than one big producer. As I understand it, such valuations are permissible under PURPA as it stands. As a private citizen living in Utah my request is to use the broadest definition of avoided costs permissible under PURPA. Even the broadest definition of avoided cost allowed under PURPA leads to a number which is too low considering all the other effects which are disallowed by the negative synergies between PURPA and the present fossil-fuel friendly legislative and regulatory stance here in Utah and in the USA in general. I know that we cannot eliminate all subsidies for fossil fuels in this hearing. I came here to plead with you that you should at least try to eliminate as much of these subsidies as possible. Thank you for listening. Hans G Ehrbar _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
