Congress's enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA) triggered a revolution in the development and construction of power plants. PURPA's creation of an independent class of generators—qualifying facilities (QFs)—exposed a century-old economic myth that had justified restricting ownership of generating facilities to governmental and investor-owned utilities (IOUs). The success of QFs also debunked the long-standing assumption that IOUs and the government are uniquely able to construct and operate generating facilities with the requisite safety and reliability.
PURPA was passed in response to the energy crises of the 1970s, which were precipitated by Arab oil embargoes and a fear that North America was running out of natural gas. QFs became the catalyst for the initial development of alternative fuel generating facilities. PURPA also accorded QF status to gas, coal, and oil-fired cogeneration facilities, recognizing that these facilities promise greater fuel efficiencies than traditional fossil-fueled power plants.
Today we are confronted with an energy crisis of a magnitude, and with potential consequences, exceeding the exigencies that prompted enactment of PURPA. Gasoline prices are approaching $4 a gallon, the geopolitical implications of America's addiction to imported oil are without bounds, and concerns about climate change are evolving—as they should—from a political debate to a scientific and economic challenge. At the same time, the first QFs, which became operational in the 1980s, are approaching the expiration of their original power purchase agreements.
Without near-term, definitive assurance that cogenerators will be able to extend expiring agreements or enter into new ones, many may cease operations. They cannot await the expiration of current contract terms because steam hosts must know with absolute certainty years in advance whether they can continue to rely on their cogenerator to supply steam or if they must initiate the permitting, financing, and construction activities necessary to procure an alternative steam source.
Given the nation's unquestioned need for substantial additions to its generating resources and the fact that development and construction costs of new generation will exceed the comparable costs of existing facilities, enabling cogenerators to remain viable resources should be a major and immediate policy objective.
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