by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The latest issue of Bloomberg Businessweek explains why billionaire solar energy fan Warren Buffett and his firm Berkshire Hathaway are no fans of PURPA.
Berkshire Hathaway Energy says it’s not so simple. The company, which owns several utilities using conventional and renewable power sources, is the second-largest owner of clean-energy assets in the U.S. But along with other utilities, it argues that the law is outdated, often raises costs for its customers, and forces utilities to buy more electricity than needed.
The law is called the Public Utility Regulatory Policies Act, or Purpa. Congress enacted it after the 1970s OPEC oil embargo to draw new players into the utility-dominated business of generating power. It required some utilities to buy power from certain power providers if doing so was less expensive than building new plants themselves. The idea was to boost the then-emerging natural gas industry—and perhaps spur renewables including solar.
The act worked—too well, from the standpoint of the utilities. As solar panel prices plunged in recent years, developers deluged utilities with projects to sell them power. Utilities complain the law is producing a surplus of power. Moreover, utilities say the contracts with developers, whose terms are generally set by state utilities regulators, often lock them in for years at high prices that don’t necessarily reflect the current market. “Why should our customers be saddled with billions and billions of dollars of above-market prices?” asks Kathy Steckelberg, vice president for government relations at the Edison Electric Institute, which represents U.S. investor-owned electric companies.
“The fact that renewables are increasing in our market we don’t see as a problem,” Steckelberg says. Utilities would rather build or buy solar and wind farms themselves so they can pass on the development cost to ratepayers, rather than pay outsiders for the power. Yet under Purpa, they often can’t refuse an eligible deal.