Great two days in Atlanta with solar and wind developers, financiers, regulators and utilities discussing state of the market in the Southeast. New tax reform and panel tariff cases at the forefront of discussions. If you would like an update on the conference or have other renewable energy development questions, don’t hesitate to contact one of our energy lawyers.
Earlier this week Dominion Energy Virginia (“Dominion”) released a request for proposals (“RFP”) for 300 MW of new solar and onshore wind energy. The company is seeking to either sign power purchase agreements or purchase renewable energy projects that are under development. The facilities must be capable of producing power by 2019 or 2020.
Dominion released its RFP after announcing that it will offer a new renewable energy tariff (“Schedule RF”), which the company intends to file with the State Corporation Commission in the coming weeks. Schedule RF is intended to serve Facebook, which is building a one million square foot data center in eastern Henrico County, and other large commercial customers. Under the proposed Schedule RF tariff, participating customers would purchase the renewable energy attributes of new facilities that are added to the grid.
Notices of intent to bid are due by 5:00PM on October 27, 2017, and responses to the RFP are due on December 1, 2017. The RFP directs bidders to provide their best and final price when providing a proposal. In addition to the price, the RFP document states that Dominion will consider “non-price” criteria when evaluating proposals, including the economic development impacts for Virginia and the financial strength of the firm submitting a bid.
Blair Powell, business and energy lawyer, explains what it means to be required to register in a jurisdiction as a foreign entity and what penalties may accrue if you fail to do so.
In this Energy Update, Brian Greene explains how Maryland’s Public Service Commission is soliciting comments on the implementation of supplier consolidated billing. For more information about billing plans and regulation, contact Brian or any of our mid-Atlantic energy lawyers.
An article in yesterday’s News & Advance profiled a Lynchburg business that has invested over half a million dollars to produce solar energy at its headquarters. BMS Direct, a company that processes invoices and billing statements, now has over 900 solar panels on the roof of its 80,000-square-foot facility in Lynchburg. The solar panels now supply about half of the company’s electric needs, and the resulting energy savings are expected to pay for the cost of the system in six years.
Several factors, including declining solar panel prices and federal investment tax credits, make it a great time to invest in solar energy. According to the Solar Energy Industries Association (“SEIA”), solar has experienced an average annual growth rate of 68%, while installed solar prices have dropped 55% over the last five years. The installed cost of a solar installation is now between $2.30 per watt and $2.75 per watt for residential systems and $1.40 per watt and $2.20 per watt for commercial systems. Federal law currently authorizes a 30% tax credit for residential and commercial solar systems, although this percentage is scheduled to decline beginning in 2020.
Virginia law allows all customers to generate their own renewable energy on site by “net metering.” Electric utilities in Virginia are required to offer net metering programs, which allow residential customers and businesses like BMS Direct to install renewable energy facilities on their property. Net metering customers only have to pay their utility for their electricity usage that is in excess of what they generate on site. Appalachian Power (“APCo”) says that about 750 of its customers participate in the net metering program.
Moreover, Virginia customers are also currently permitted to purchase 100% renewable energy, including solar, from non-utility companies. Under Virginia law, most customers are allowed to purchase renewable generation from third-party suppliers only if their incumbent electric utility does not have an approved tariff for 100% renewable energy. See Va. Code Section 56-577(A)(5). However, no Virginia utility currently offers a 100% renewable energy option for its customers. As we have written about here, the Virginia State Corporation Commission (“SCC”) recently rejected a renewable energy tariff proposal by APCo that, if approved, would have prevented its customers from purchasing solar energy from third-party suppliers.
The SCC is also currently considering a similar renewable tariff application filed by Dominion Energy Virginia (“Dominion”) in SCC Case No.PUR-2017-00060. If approved, Dominion’s tariff would limit clean energy choices for its large customers, and potentially other classes of customers in the future.
If you want to learn more about the regulations governing solar installations, and whether developing a solar energy project may make sense for you or your business, please contact one of our renewable energy lawyers or regulatory attorneys.
Earlier this month, five competitive retail suppliers (NRG Energy, Inc., Interstate Gas Supply, Inc., Just Energy Group, Inc., Direct Energy Services, LLC, and ENGIE Resources LLC) filed a petition with the Maryland Public Service Commission to implement supplier consolidated billing. If approved, the petition would allow retail suppliers to directly bill customers for both retail generation supply charges and utility distribution charges. Utility consolidated billing (where the utility bills customers for both the utility’s charges and the supplier’s charges) has been in the norm since Maryland restructured its energy market to enable retail competition.
The Maryland petition seeks to flip that model on its head. According to the petitioners, the supplier consolidated billing (“SCB”) model is a significant step in the evolution of competitive retail energy markets. In Texas, where SCB has been the standard for many years, suppliers have more flexibility to inform customers about their energy usage, develop innovative products and service structures, and adapt their customers’ bills to accommodate changes in the market. With SCB in place in Maryland, suppliers will be able to introduce new products and services that are not possible under the current utility billing model. As examples, suppliers will be able to offer flat billing options – where customers pay a set amount each month no matter how much energy they use or when they use it – and prepay service options – where customers pay in advance for their energy usage and then the energy they use counts against their account balance, with regular updates on the funds in their account and no surprise bills at the end of the month. In addition to these billing options, suppliers will be able to better inform customers about their usage and offer other energy-related products and services to Maryland customers.
Here are some quick points addressed in the SCB petition:
- Supplier Qualifications – Suppliers must meet specific experience, operations, and financial security requirements to offer SCB services.
- Receivables – Suppliers must purchase the full value of the utility’s receivables (for utility distribution charges) and take on responsibility for billing those amounts through to the customer.
- Disconnect for Non-Payment – Currently, when a customer does not pay their utility bill, they will eventually have their service disconnected. With SCB, the same result would occur – with all existing customer safeguards remaining – but the supplier would initiate disconnects by notifying the utility that no payment has been received. From there, the utility would utilize existing disconnect procedures, including notifications to the customer. According to the petition, it is imperative that suppliers offering SCB services have the same tools at their disposal as to the utilities to manage their bad debt and encourage timely collections.
The Commission issued a Notice on September 15th requesting comments on the petition by November 15, 2017. If you are interested in learning more about the Maryland SCB petition or other issues affecting competitive retail energy markets in Maryland and other Mid-Atlantic jurisdictions, please contact GreeneHurlocker’s energy lawyers and regulatory attorneys.
But There Is A Powerful Dissent
As we previously discussed here and here, a group of industrial customers of Appalachian Power Company (“APCo”) appealed to the Supreme Court of Virginia, asking the Court to strike a controversial portion of the Virginia Electric Utility Regulation Act (“Regulation Act”). The group, the Old Dominion Committee for Fair Utility Rates (“Committee”), challenged a 2015 amendment to the Regulation Act, Senate Bill 1349 — the so-called “rate freeze law” which prevents the State Corporation Commission (“SCC” or “Commission”) from reviewing or reducing the base rates of APCo and Dominion Virginia Power (“Dominion”) until 2020 and 2021, respectively.
There is little dispute the law has helped APCo’s and Dominion’s profits and led to rates that are higher than they otherwise would be if the Commission had authority to review them. Using Dominion’s own figures, Commission Staff calculated in a recent report that the company’s customers would be due about a $130 million refund on bills paid in 2015 and 2016. APCo had overearnings of more than $20 million in 2016, according to the report.
The case centered around the language in Article IX, § 2 of the Constitution of Virginia, which the Committee argued reserved rate-making authority to the Commission, and that the General Assembly had overstepped its authority by passing legislation that stripped the Commission from reviewing the utilities’ rates for five and seven years. Article IX, § 2 provides as follows:
“Subject to such criteria and other requirements as may be prescribed by law, the [State Corporation] Commission shall have the power and be charged with the duty of regulating the rates, charges, and services and, except as may be otherwise authorized by the Constitution or by general law, the facilities of railroad, telephone, gas, and electric companies.” Va. Const. art. IX, § 2.
Justice Mims, in a powerful dissent, summed up the issue properly: “This case boils down to a simple question: what does that sentence mean?”
In an opinion written by Justice Elizabeth A. McClanahan, the Supreme Court of Virginia rejected the Committee’s argument that the rate freeze law violates Article IX, § 2 of the Constitution of Virginia. The Court explains that “[t]here is nothing in Article IX, § 2 that clearly indicates that the Commission’s authority to set rates displaces or is exclusive of the General Assembly’s authority.” The Court further states that the Commission correctly decided that the rate freeze law “is constitutional because it is not plainly repugnant to Article IX, § 2 of the Virginia.” In her opinion for the Court, Justice McClanahan also noted that the Court has “no constitutional authority to judge whether a statute is unwise, improper, or inequitable because the legislature, not the judiciary, is the sole author of public policy.”
In his dissent, Justice Mims argues that the language in Article IX, § 2 means that the “General Assembly may impose standards and prerequisites that the Commission must adhere to when exercising its power and duty to set rates.” He goes on to clarify that it “does not mean that the General Assembly may suspend that power and duty.” Justice Mims warns that based on the Court’s analysis, the General Assembly has the power to strip the Commission of its power set forth in Article IX, § 2 at its will. “That sobering outcome thwarts the purpose behind creating the Commission in the first place.”
GreeneHurlocker represented the Virginia Citizens Consumer Council (“VCCC”), which filed an amicus brief before the Court. The VCCC argued that the rate-freeze law was unconstitutional. If you have any questions about any of the legal aspects of this case, do not hesitate to contact one of GreeneHurlocker’s Virginia energy and regulatory attorneys.
Virginia Commission unanimously rejects utility “Green Tariff” proposal, representing major victory for renewable energy advocates
On September 14, 2017, the Virginia State Corporation Commission entered a final order rejecting a renewable energy tariff proposal (“Green Tariff”) filed by Appalachian Power Company, finding that the tariff rates were not just and reasonable. APCo’s Green Tariff was intended to offer customers the option to purchase 100% renewable energy instead of energy produced from coal and gas-fired facilities. Given the structure of APCo’s proposal, the Commission’s decision represents a major victory for renewable energy developers, environmental advocates, and clean energy suppliers in Virginia.
APCo’s application requested permission to offer a voluntary, 100% renewable tariff to its customers. But APCo proposed to simply repackage generation it was already purchasing via four power purchase agreements (“PPAs”), and then reallocate that energy to participating customers. Customers would have paid 18% more than their standard rates to participate in the program.
The so-called Green Tariff, if approved, would have represented the first time a Virginia utility offered a 100% renewable tariff option for its customers. But, if approved, the tariff would have also largely foreclosed competition for renewable energy and prevented customers from purchasing generation from competitive suppliers. Under current law, most customers are allowed to purchase renewable generation from third-parties only if their incumbent electric utility does not have an approved tariff for 100% renewable energy. See Va. Code Section 56-577(A)(5).
GreeneHurlocker represented the Maryland-DC-Virginia Solar Energy Industries Association (“MDV-SEIA”) in the case. MDV-SEIA argued that APCo’s proposal was not in the public interest and should be rejected for several reasons. For example, the per-MWh price of the Green Tariff was unreasonably high and not reflective of current prices for renewable energy. MDV-SEIA also noted that the Green Tariff did not contain any solar generation or any Virginia-based renewable resources of any kind.
The Commission agreed with MDV-SEIA, finding that “[APCo] has not established that the rate proposed under [the Green Tariff] is just and reasonable,” The Commission also cited MDV-SEIA’s arguments that the Green Tariff price “is much higher than prevailing prices for renewable energy.” But the Commission noted that APCo is not precluded from applying for approval of a redesigned renewable energy tariff.
APCo is permitted to appeal the decision to the Supreme Court of Virginia by filing a notice of appeal at the Commission on or before October 16, 2017.
The Commission is also currently considering a similar renewable tariff application filed by Dominion Energy Virginia (“Dominion”) in Case No. PUR-2017-00060. If approved, Dominion’s tariff would severely limit clean energy choices for its large customers and potentially other classes of customers in the future.
Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about this case. The Commission case number for the APCo matter is PUE-2016-00051, while Dominion’s proposal is currently being considered in PUR-2017-00060.
The advisory panel that will develop a carbon reduction program for Virginia power plants held its first meeting last week. The panel is tasked with developing a draft regulation that would cap greenhouse gas emissions from Virginia’s fossil fuel generating facilities for the first time ever. The advisory panel, appointed by Governor McAuliffe, includes environmental advocates, utility representatives, and renewable energy developers. Preston Bryant, who served as Virginia’s Secretary of Natural Resources under Governor Tim Kaine, will serve as a moderator.
The panel’s work was set in motion in May, when Virginia Governor Terry McAuliffe issued an executive action directing the Virginia Department of Environmental Quality (“DEQ”) to draft a regulation restricting the emission of carbon dioxide from electric generating facilities. Executive Directive 11 ordered DEQ to draft a regulation pursuant to Va. Code §§ 10.1-1300, et seq. that will “abate, control, or limit carbon dioxide emissions from electric power facilities.” The directive states that DEQ must propose a regulation that is “trading ready” and will allow for the exchange of carbon emissions allowances with other states.
The panel’s first job will be to determine how to structure a program where carbon credits or allowances can be traded among emitters. One option for a “trading ready” program would be for Virginia to join the existing Regional Greenhouse Gas Initiative (“RGGI”). RGGI is a regional carbon “cap and trade” program with nine northeast member states. Under RGGI, carbon allowances can be bought and sold at auctions, and the auction revenues can result in income for member states. However, the Virginia General Assembly would likely have to approve Virginia’s participation in RGGI. The General Assembly would also likely have to approve any carbon allowance trading program that results in revenues for the Commonwealth, as State agencies are generally prohibited from enacting revenue raising programs without legislative approval.
The Governor’s directive was issued at the same time that the federal Clean Power Plan, a greenhouse gas regulation promulgated by the EPA during the Obama administration, is under legal challenge and subject to a stay by the U.S. Supreme Court. The Trump administration has also indicated that it will attempt to suspend or repeal the Clean Power Plan.
Under the Governor’s executive directive, the advisory panel has until December 31, 2017, to present the proposed regulation to the Virginia State Air Pollution Control Board, which would then open up the proposed rule for public comment. Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about this matter.
Proposals Would Drive Up Costs for Competitive Retail Energy Suppliers and their Customers
Good news for Maryland’s competitive energy suppliers and their customers. In the past few weeks, the Maryland Public Service Commission issued two Letter Orders rejecting requests by BGE, Pepco, and Delmarva Power to include in the Purchase of Receivables programs costs incurred to comply with the recent RM54 proceeding. In other words, they wanted to recover those costs from competitive retail suppliers. Under the utilities’ proposals, costs to implement certain market enhancements – including 3-business-day accelerated switching – would have been recovered through the discount rate applied when the utility purchases supplier receivables.
There were slight differences to the utilities’ arguments. BGE argued that its current tariff allowed for recover through the POR rates of RM54-related costs. The Commission agreed with the Retail Energy Supply Association that BGE’s tariff does not allow BGE to recover these costs through POR discount rates. Pepco and Delmarva had sought to modify their respective tariffs to include language allowing for recovery. The Commission said no. Also, in each case, the Commission stated that it “does not believe that it would be appropriate to force suppliers and their retail customers to bear the costs associated with the implementation of a program that benefits all ratepayers, as well as the competitive market as a whole.” Instead, the utilities can seek cost recovery through a base rate case.
RESA scored another win on a second issue in the case when the Commission rejected BGE’s proposed exclusion of revenues from late payment charges (“LPCs”) in the POR discount rate, effectively reducing the amount BGE pays suppliers for receivables purchased through the POR program. In a powerful rebuke to BGE’s proposal, the Commission explained that for “the past six years the Commission has consistently approved the inclusion of the LPCs in the discount rate calculation. Similarly, the Commission has consistently denied any request for exclusion of these charges. The Commission reaffirms the reasons previously given for requiring the inclusion of LPCs in the calculation, declines to make the significant policy change being requested by BGE, and denies the Company’s request that LPCs be omitted from its POR discount rate.” This is a great result for RESA, the competitive retail energy supply markets in Maryland, and Maryland energy consumers.
Brian Greene, managing member of GreeneHurlocker, PLC represented RESA in this matter as referenced in the Commission’s Letter Order. The lawyers of GreeneHurlocker are pleased to be able to report this good news from Maryland and look forward to continuing to serve our clients in Maryland and the other jurisdictions where they operate. If you have questions about the details of this Commission Letter Order or any other matters involving regulated industries, please contact one of GreeneHurlocker’s regulatory attorneys.