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Avoided Cost Rates for PURPA Qualifying Facilities Decline after House Bill 589 and NC Utilities Commission Order

There will be a decline in avoided cost rates to be paid to renewable energy and other qualifying facilities (QFs) subject to the Public Utility Regulatory Policy Act of 1978 (PURPA). New rates have been filed by Duke Energy Progress, Duke Energy Carolinas and Dominion in Docket E-100, Sub 148 and will go into effect on November 28th unless a party in that docket files specific objections as to the accuracy of the revisions or supporting calculations.

To comply with PURPA, the NC Utilities Commission reconsiders these rates every two years. The rates reflect energy and capacity costs that utilities avoid paying by purchasing power from QFs.  This year, in addition to a drop in the price of energy, which is based on the price of natural gas, the NC General Assembly and the Commission made other changes that reduced avoided cost rates.

North Carolina House Bill 589, Session Law 2017-192, requires that capacity payments be made only when capacity is needed by the utility in its most recent integrated resource plan. The new law also reduced from 5 MW to 1 MW the size of facilities entitled to standard contracts. For larger projects, the new law sets up a competitive procurement process for 2,660 MW over a 45 month period.

The Commission further reduced avoided cost rates, particularly for solar facilities, by reducing the performance adjustment factor for QFs with no storage capability (other than hydro) from 1.2 to 1.05 and adjusting seasonal allocation weightings to 80% winter and 20% summer. The Commission Order can be found here.

The Commission expressed this view in its order, “the Commission’s policies have resulted in North Carolina cresting the hill, it is now appropriate to moderately ease off the regulatory accelerator and depend in part on momentum created so as to moderate the financial impact on electric ratepayers….” The next two years will determine how much momentum remains at these lower rates.

For more information about these avoided cost rates or other PURPA-related issues, contact Deborah Ross.

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