NC Sustainable Energy Association

Federal Regulators and Policies

The Federal Energy Regulatory Commission ("FERC")

FERC is an independent federal agency that regulates the interstate transmission of electricity, natural gas, and oil. It is comprised of up to five commissioners who are nominated by the President of the United States upon the advice and consent of the Senate. These commissioners serve five year terms. In order to ensure that its decisions are fair, unbiased, and independent, decisions made by FERC are not subject to oversight from the President or Congress.

Among its duties, FERC is responsible for overseeing electricity markets and ensuring the reliability of the nation's electric transmission grid. FERC carries out its duties by conducting proceedings in a similar fashion to the North Carolina Utilities Commission (NCUC). In general, once a decision is made at FERC, the NCUC and other state utilities commissions are responsible for conducting their own proceedings to determine how to carry out FERC's intent. For this reason, NCSEA does not participate in proceedings at FERC but extensively participates in the subsequent related proceedings at the NCUC.

Federal Regulatory Policies

The Public Utility Regulatory Policies Act ("PURPA")

The Public Utility Regulatory Policies Act of 1978, more commonly known as "PURPA", was enacted in the midst of an energy crisis affecting all industrial nations. In relevant part, it is intended to reduce dependence on foreign oil by promoting diversity in the electric power industry and stimulating the use of alternative energy sources. PURPA contains measures designed to encourage the conservation of energy, more efficient use of resources, and equitable rates. Principal among these were suggested retail rate reforms and new incentives for production of electricity by co-generators and users of renewable resources.

Encouraging the Use of Renewable Energy by Establishing Qualifying Facilities and Purchasing Power at Avoided Cost

PURPA is the only federal law that encourages the use of renewable energy. It does this by compelling the Federal Energy Regulatory Commission ("FERC") to adopt regulations requiring electric utilities to purchase electric energy from unaffiliated companies that meet the criteria for a qualifying facility ("QF").The rates an electric utility must pay the QF for its electricity are set at the utility's avoided (also marginal or incremental) cost. The avoided cost rates are commonly considered to be the cost the utility would have incurred if it had been required to generate the purchased power itself or purchase the power from another generating source instead of buying the power from a QF. Generally, the avoided costs are the sum of the fuel costs incurred in the operation of a traditional power plant plus the avoided costs of not having to add additional capacity.

Setting the Standard for Electric Utilities

PURPA also sets standards for electric utilities. State regulatory authorities, such as the North Carolina Utilities Commission ("NCUC"), are required to evaluate each standard and determine whether it is appropriate to adopt the standard as part of the State's regulatory scheme.

Energy Independence and Security Act of 2007

Most recently, on December 19, 2007 the President of the United States signed into law the Energy Independence and Security Act of 2007 ("EISA"). EISA 2007 amended PURPA by including four new standards for consideration by State regulatory authorities. Pursuant to this act, the Commission opened a proceeding in November 2008 to consider whether it was in the public interest to adopt certain standards related to: (1) modifying the integrated resource planning process to establish cost-effective energy efficiency as a priority resource; (2) modifying rate designs to promote energy efficiency investments; (3) requiring utilities to consider smart grid investments before investing in traditional grid technologies; and (4) establishing standards for smart grid information related to supplying pricing and usage data to electricity consumers.

Having extensively participated in proceedings in front of the Commission concerning integrated resource planning and rate structures to promote efficiency, NCSEA took this opportunity to provide support for the consideration of smart grid technologies.

In an Order issued in December 2009, the NCUC determined that the measures contemplated by the four new federal standards were adequately covered by existing programs mandated by North Carolina law and regulations and thus there was no need to adopt the federal standards. The Commission did, however, adopt an NCSEA proposal to require the utilities to file their respective smart grid plans for review (NCUC Docket No. E-100, Sub 125).

Order Declining to Adopt Federal Standards, December 18, 2009

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