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
Murfreesboro NC 5 20 2011 NCEMC
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 Unk2014 Dominion NC Power
Creswell NC 14 Unk2015 Dominion NC Power
Shawboro NC 20 Unk2015 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
2. https://starw1.ncuc.net/NCUC/ViewFile.aspx?Id=3600b0cb-3234-4a99-8897-0081610a9cf1
3. https://starw1.ncuc.net/NCUC/ViewFile.aspx?Id=2dd3d981-5509-42b4-80d1-c7cdd4dc68f4
4. https://dms.psc.sc.gov/Attachments/Matter/dc49f517-5ed9-4364-88ab-53d6013aeba8

Photo source: Pixabay

Posted by Daniel Tait

Daniel Tait is a Research and Communication Manager for the Energy and Policy Institute.

One Comment

  1. […] 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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