Public Utility Regulatory Policies Act
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| Acronyms (colloquial) | PURPA |
|---|---|
| Nicknames | Public Utility Regulatory Policies Act of 1978 |
| Enacted by | the 95th United States Congress |
| Effective | November 9, 1978 |
| Citations | |
| Public law | 95-617 |
| Statutes at Large | 92 Stat. 3117 |
| Codification | |
| Titles amended | 16 U.S.C.: Conservation |
| U.S.C. sections created | 16 U.S.C. ch. 46 § 2601 et seq. |
| Legislative history | |
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| Major amendments | |
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Energy Policy Act of 1992 Energy Policy Act of 2005 American Recovery and Reinvestment Act of 2009 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 |
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The Public Utility Regulatory Policies Act (PURPA, Pub.L. 95–617, 92 Stat. 3117, enacted November 9, 1978) is a United States Act passed as part of the National Energy Act. It was meant to promote energy conservation (reduce demand) and promote greater use of domestic energy and renewable energy (increase supply). The law was created in response to the 1973 energy crisis, and one year in advance of a second energy crisis.
Upon entering the White House, President Jimmy Carter made energy policy a top priority. The law started the energy industry on the road to restructuring.
The Public Utility Regulatory Policies Act of 1978 (PURPA) encouraged
Energy companies were classified as natural monopolies, and for this reason, most were established with vertically integrated structures (that is, they undertook all the functions of generating, transmitting, and distributing electricity to the customer). Utilities became protected as regulated monopolies because it was thought that a company could produce power more efficiently and economically as one company than as several.
PURPA started the industry on the road to restructuring and is one of the first laws that began the deregulation of energy companies. The provision which enabled non-utility generators ("NUGs") to produce power for use by customers attached to a utility's grid broke the previous monopoly in the generation function.
Utilities offered customers a "rate structure" that decreased the cost per kWh price of electricity with increasing usage, with subsequent increments costing less per unit. PURPA eliminated promotional rate structures except when they could be justified by the cost structure of utility companies.
One provision of PURPA is the requirement for increased use of energy cogeneration. The law forced electric utilities to buy power from other more efficient producers, such as cogeneration plants, if that cost was less than the utility's own "avoided cost" rate to the consumer; the avoided cost rate was the additional costs that the electric utility would incur if it generated the required power itself, or if available, could purchase its demand requirements from another source. At the time generally, where demand was growing, this "avoided cost" was considered to be the construction and fossil fuel costs incurred in the operation of another thermal power plant.
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