Overview
Nearly half the states in the country have community solar or other community renewables (CR) programs. Are the small renewable generators in these programs selling wholesale power pursuant to their exemption from FERC regulation under PURPA regulations or are they and their subscribers engaged in net energy metering with states requiring utilities to provide billing credits at levels subject to state regulation? Thus far, there has been no ruling by FERC or the courts on this question. A recent Proposed Decision by two California Public Utilities Commission (CPUC) Administrative Law Judges (ALJs) could (if retained by the CPUC in the final decision) lead to litigation before FERC and the courts that reshapes the regulatory landscape for all states with community renewables programs.
On March 4, 2024 ALJs Debbie Chiv and Kelly A. Hyme of the CPUC issued a Proposed Decision involving a proposed Net Value Billing Tariff (NVBT) CR program modeled after a New York CR program, spearheaded by the Coalition for Community Solar Access (CCSA).
Under CCSA's proposed NVBT, a CR generator would produce energy and its subscribers (retail customers of a utility) would not buy that energy, but rather associate their retail electric bill with that CR generator. The utility in turn would bill the subscriber for power, just like any other retail customer, but would also provide a retail bill credit reflecting a small portion of the value of the associated CR generator's production. The utility would then pay cash, rather than a retail bill credit to the CR generator. (Alternatively, the retail customer-subscriber would receive a significant bill credit and pay most of its value in cash to the CR generator.) The utility would use the CR generator's power to sell power to its retail and wholesale customers. The compensation proposed by CCSA was based on the CPUC’s Avoided Cost Calculator, which has no relationship "avoided cost" under PURPA.
The California investor-owned utilities (Cal IOUs) opposed the NVBT on numerous grounds, as the proposed compensation level was well above market. One Cal IOU projected that 1000 MW of CR generation would cause an $8.1 billion cost shift. The primary federal legal issue raised was that the state could not compel purchases by the Cal IOUs if the level of compensation was set at a rate above their PURPA avoided cost. The Cal IOUs argued that NVBT is not a behind-the-meter net energy metering (NEM) program and that under NVBT, CR generators are selling wholesale power in interstate commerce.
The ALJs agreed that NVBT is not NEM: "16 U.S.C. Section 2621(d)(11) defines net metering as an arrangement through which 'electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.' The NVBT proposals do not fall within this definition." Emphasis added. Based on Sun Edison and other FERC cases, they found that NVBT is not a form of NEM and thus not exempt from the requirements of PURPA.
The Proposed Decision has no immediate impact on any existing CR program and the relevant federal law finding likely will ultimately be resolved by a federal court of appeals. That said, the finding and its impact may be of significant interest and we are happy to discuss it and its ramifications further.
A blog post discussing the Proposed Decision in more detail can be located here.
