Dukeplicity on PURPA

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	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
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

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