Feb. 17, 2021
By: Todd Stewart
On February 17, 2021, the Supreme Court affirmed the Commonwealth Court’s invalidation of Pennsylvania Public Utility Commission (“PUC” or “Commission”) regulations that had the effect of blocking alternative energy project developments of 5 MW or less that propose to use net metering. The PUC’s regulation had defined a developer of a net metering project as a “utility”; because the legislature in the PUC-administered Alternative Energy Portfolio Standards Act (“AEPS”), 73 P.S. §§1648.1, et seq. prohibited a “utility” from participating in net metering, the PUC’s regulation made it impossible for an alternative energy project developer from availing itself of net metering, essentially rendering such projects uneconomic. The Independent Regulatory Review Commission (“IRRC”) had voted to disapprove this attempt by the PUC to block developers from using net metering in their projects, but the PUC submitted the regulations for legislative approval anyway, and because the general assembly was not in session, the IRRC process allowed the regulations to become law.
David Hommrich, a developer of solar energy projects, sued in the Commonwealth Court seeking a declaration that the PUC’s definition of “utility” and other related net metering regulation provisions are unlawful, arguing that the PUC acted beyond the scope of its statutory authority, and that the regulations were otherwise unreasonable. In a May 2020 opinion,  Judge Wojcik, writing for a panel of the court, agreed and granted most of the relief requested by Mr. Hommrich, ruling that several of the sections of the Commission’s regulations, namely, Sections 75.12, 75.13(a)(1) and the definitions of “utility” and “customer generator” and are invalid and unenforceable. The Supreme Court has now rejected the PUC’s appeal, affirming the Commonwealth Court in a single sentence order.
What this means in a practical sense is that those sections of the Commission’s regulations that were declared unenforceable are no longer part of the regulations. Absent amendment, future codifications of those sections will likely note that they have been declared unenforceable and those seeking the guidance of those rules will need to make sure that they read the notes. The Commission need not engage in a further regulatory process to revise its regulations, but it may choose do so, and should. 52 Pa. Code § 75.12, which was struck down, contains definitions that are relied upon throughout the entirety of Subchapter B, the section of the regulations that addresses Net Metering. Also stricken was the independent load requirement for net metering that would have imposed an extra-statutory requirement that there be some specific, non-alternative energy system load to offset the production of the renewable facility, in order for net metering to be permitted. The definitions of “utility” and “customer generator”, while at the heart of the Commission’s regulatory over-reach, could simply be deleted. “Customer generator”, is already defined in the statute, and no definition of “utility” is necessary. For those who rely on these sections, utilities and renewable project developers in particular, it will be as if those sections don’t exist; any attempt to rely upon them as authority would be futile.
So what does this mean for the future of renewable energy projects in Pennsylvania? It means that project developers who focus on net metering projects, i.e., up to 5 MW, are back in business and can develop and participate in those projects as they could pre-2016, that funders can finance those projects, and that utilities and the Commission cannot reject them on the basis that developer is a “utility” as the Commission vainly attempted to define that term. Hopefully this will also serve as a reminder to regulators that they cannot through regulations rewrite a statute they are tasked with administering in the way they wish the legislature had written it. Rather, they need to pay attention to the words and intent, because the courts most certainly will.
About the Author:
Todd Stewart, a partner at Hawke, McKeon & Sniscak, LLP, represents clients who generate, sell, deliver, and purchase energy, including producers of renewable energy, competitive retail suppliers of electricity and natural gas, infrastructure providers and the transmission and distribution utilities that ultimately deliver the energy to consumers. Todd represents clients before the Pennsylvania Public Utility Commission (Pa. PUC), the Federal Energy Regulatory Commission (FERC) and other state and federal agencies. Todd also represents these same clients before the Pennsylvania General Assembly as a registered lobbyist, and represents The Retail Energy Supply Association, known as RESA, in natural gas competition related matters before the PUC.