Duke Energy is arguing that its monopoly utility in Florida should only have to buy electricity from renewable energy projects in two-year contracts, while its unregulated subsidiary that develops renewable energy projects in other states refuses to sell power in contracts of less than 15 years, an EPI review of public documents has found. Utilities across the country have routinely attacked PURPA, the federal legislation that requires utilities to purchase electricity from independent power producers, by attempting to reduce rates or drastically shorten contract terms in order to stifle financing for renewable energy projects.
What is PURPA?
Congress passed PURPA, the Public Utilities Regulatory Policy Act of 1978, to reduce the use of foreign oil and encourage the development of small power production and cogeneration facilities. At the time of its passage, independent power producers faced discrimination from utilities who refused to offer fair prices and terms for non-utilities wishing to generate and sell electricity. The discrimination arguably persists to this day, but PURPA attempted to level the playing field and increase competition.
PURPA played a key role in the development of combined heat and power projects in the 1980s and 1990s, but was largely relegated to back-seat player in renewable energy until prices fell precipitously. PURPA became a tool for renewable energy developers to sign contracts with utilities for fair, stable prices and long time periods, usually 15 years or longer. Contractual certainties and long-term cash flows provided the stability financiers sought in order to provide credit to renewable energy projects.
Utilities began attacking PURPA once they saw the law as a threat to their monopoly business models.
Duke Energy Fights PURPA While Taking Advantage of PURPA
In a late 2018 filing, Duke Energy’s Florida monopoly asked the Florida Public Service Commission to limit all solar PURPA contracts to just two years, which would severely limit, if not eliminate, the ability of a project to access credit in the market. Duke asked for the limits to apply only for solar projects.
Duke claimed, without providing specific evidence, that solar developers were demanding fixed price terms of 20 to 30 years. However, the only states in the Southeast that offer PURPA contract terms of longer than 5 years are North Carolina and South Carolina at 10 years.
Duke stated increased solar penetration would create reliability concerns and threaten its flexibility to manage solar output. In contrast to Duke’s claims, the Southern Environmental Law Center noted that 8 of 9 southern states received less than 1% of their total generation from solar and wind PURPA contracts.
In late 2016 and early 2017, Duke requested that the North Carolina Utilities Commission (NCUC) limit its PURPA contracts to 10 years with prices updated every 2 years. At the time, solar developers said the proposal would result in a 30% payment reduction for solar in Duke’s service territory. The North Carolina Legislature simultaneously passed HB 589, which mandated new solar project be limited to a 10 year contract term. The North Carolina Utilities Commission refused to allow Duke to reset its prices every two years.
Federal disclosures show Duke has continued to lobby Congress, most recently for Senate Bill 2776 which aims to further limit PURPA by allowing utilities to refuse new contracts.
In stark contrast, Duke Energy Renewables LLC, the unregulated renewable energy development subsidiary of Duke Energy, routinely takes advantage of long-term PURPA contracts. According to EPI’s research, Duke Renewables does not enter into PURPA contracts for fewer than 15 years, even though Duke Energy claimed, “If DEF [Duke Energy Florida] customers are locked into long-term fixed price contracts with specific terms and conditions relevant today, DEF will have no flexibility to respond to changes that may arise in the future.”
Table 1. PPA Terms for Solar Projects Owned by Duke Renewables 1
|State||MW ac||Contract Length Yrs||In-Service Date||Offtaker|
|Blue Wing||TX||14||30||2010||CPS Energy|
|Sunset Reservoir||CA||4.5||25||2010||San Francisco Public Utilities Commission|
|Ajo||AZ||5||25||2011||Arizona Public Service Company|
|Bagdad||AZ||15||25||2011||Arizona Public Service Company|
|Seville II||CA||30||25||2015||Imperial Irrigation District|
|Victory||CO||13||25||2016||Intermountain Rural Electric Association|
|Caprock||NM||25||25||2016||Western Farmers Electric Cooperative|
|Stanton||FL||6||20||2011||Orlando Utilities Commission|
|Black Mountain||AZ||10||20||2012||Unisource Energy Services|
|Gato Montes||AZ||6||20||2012||Tucson Electric Power Company|
|Highlander I & II||CA||21||20||2013||Southern California Edison|
|Pumpjack||CA||20||20||2014||Southern California Edison|
|Wildwood||CA||20||20||2014||Southern California Edison|
|Capital Partners, Phase I||NC||20||20||2014||American University, GWU|
|Capital Partners, Phase II||NC||33.5||20||2014||American University, GWU|
|Conetoe||NC||80||20||2015||Corning, Inc.; Lockheed Martin|
|Seville I||CA||20||20||2015||San Diego Gas & Electric|
|Longboat||CA||20||20||2016||Southern California Edison|
|Rio Bravo I||CA||20||20||2016||Southern California Edison|
|Rio Bravo II||CA||20||20||2016||Southern California Edison|
|Wildwood II||CA||15||20||2016||Southern California Edison|
|Washington Whitepost||NC||12.5||15||2012||NC Eastern Municipal Power Agency|
|Millfield||NC||5||15||2013||NC Eastern Municipal Power Agency|
|Washington Airport||NC||5||15||2013||NC Eastern Municipal Power Agency|
|Dogwood||NC||20||15||2013||Dominion NC Power|
|Windsor Cooper Hill||NC||5||15||2013||Dominion NC Power|
|Bethel Price||NC||5||15||2013||Dominion NC Power|
|Halifax||NC||20||15||2014||Dominion NC Power|
|Battleboro||NC||5||15||2015||Dominion NC Power|
|Sunbury||NC||5||15||2015||Dominion NC Power|
|Tarboro||NC||5||15||2015||Dominion NC Power|
|Hertford||NC||5||15||2016||Dominion NC Power|
|Long Farm||NC||5||15||2016||Dominion NC Power|
|Winton||NC||5||15||2016||Dominion NC Power|
|Garysburg||NC||5||15||2016||Dominion NC Power|
|Gaston||NC||5||15||2016||Dominion NC Power|
|Woodland||NC||5||15||2016||Dominion NC Power|
|Seaboard||NC||5||15||2016||Dominion NC Power|
|River Road||NC||5||15||2016||Dominion NC Power|
|Everetts Wildcat||NC||5||Unk||2014||Dominion NC Power|
|Creswell||NC||14||Unk||2015||Dominion NC Power|
|Shawboro||NC||20||Unk||2015||Dominion NC Power|
Duke Enjoys Long Recovery Terms for Fossil Fuel Projects
In comparison to its attempts to corrode private renewable energy projects, Duke Energy recovers the capital cost of its power plants over multiple decades from ratepayers. The cost recovery term for power plants owned by Duke Energy Carolinas and Duke Energy Progress in South Carolina ranges from 25 years for its own solar plants, 40 to 53 years for its natural gas plants, and 60 years for its nuclear plants.
Table 2. Depreciable Life Span of Generation Units Owned by Duke Energy 2, 3, 4
|Duke Energy Carolinas (DEC)||Duke Energy Progress (DEP)|
|Gas combined cycle units||40 years||40 years|
|Gas combustion turbines||40 to 41 years||40 to 53 years|
|Steam base-load units||36 to 69 years||52 to 63 years|
|Nuclear units||60 years||60 years|
Attacks on PURPA Start with the Edison Electric Institute
The Edison Electric Institute (EEI), the lobby group for investor-owned utilities such as Duke Energy, has long fought PURPA. In 2013, EEI dedicated a portion of its Board of Directors and Chief Executives strategic session about the threat of PURPA to its members. The next year’s advocacy briefing is full of references to EEI’s desire to limit PURPA in order to slow the growth of non-utility owned solar generation.
In February, EEI asked the Federal Energy Regulatory Commission (FERC) to limit PURPA and, in some cases, overrule state decisions. EEI also requested FERC allow utilities to provide avoided energy prices of $0 to new projects. On March 4, a host of right-wing organizations, many of which are funded by the Koch political machine and the fossil fuel industry, came to the aid of electric utilities with a letter to FERC decrying PURPA as forcing utilities to buy renewable energy and raise customer bills.
EEI applauded Duke when it awarded the company its 2018 Advocacy Excellence Award to for the utility’s work to pass HB 589, the bill that reduced PURPA terms in North Carolina from 15 years to 10 years.
1. From media publications, regulatory filings and Duke Energy Renewables
Photo source: Pixabay
[…] would have the effect of slowing down decarbonization. It has lobbied Congress for limits on the Public Utilities Regulatory Policy Act (PURPA) – a key law underpinning the growth of U.S. renewable energy – and was characterized as […]
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