The Grid: Electrical Infrastructure for a New Era

by Gretchen Bakke

Once the initial requirements of figuring “avoided costs” were met by state regulatory agencies, often in conversation with the utilities, went about “offering” contracts in very different ways. In some states, such as Vermont and New York, the same price per kilowatt-hour was offered to any and all new electricity providers regardless of the utility doing the buying; in New York this was called the “six-cent” law as it paid out a flat, invariable, 6¢ per kWh for all early PURPA era contracts. In other states, like Virginia, non-utility providers bid for contracts. For example, in 1986, when Virginia Power wanted to add 1,000 kilowatt hours of generation, for use by 1990, they held an open auction, received 5,000 kilowatt hours’ worth of bids from fifty-three different companies from which they selected seven that promised 1,178 new kWh. This system of competitive bidding would become the most revolutionary of the many variants tried out by different states as it allowed for something like free-market competition to actually, and at long last, enter the governance of the grid. Once awarded the contract, these new, small power entrepreneurs “built out” the promised generation facilities, and on the appointed date, they began contributing a predictable kilowattage to the grid.