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Maryland to Implement Supplier Consolidated Billing

Finding that supplier consolidated billing (SCB) represents the next logical step for Maryland to fully implement customer choice, the Maryland Public Service Commission on May 7, 2019 issued an order authorizing SCB for retail electric and natural gas service in Maryland. In this historic order, the Commission found that SCB could support the growth of retail competition in Maryland and is consistent with the Commission’s policies to promote competition. SCB, by augmenting the existing billing arrangements, should assist suppliers in establishing brand identity and clarifying the products available to customers. At the same time, SCB should facilitate the development of new and innovative products and services and increase the number of Maryland households that shop for electricity and natural gas. Based on these and other conclusions, the Commission found that “it is now appropriate to proceed with the development of SCB.”

The case was initiated by five retail suppliers – NRG Energy, IGS Energy, Just Energy Group, Direct Energy and ENGIE Resources – and the Commission held a hearing in February 2018. We’ve blogged about this case here and here and also posted a video blog here.

In the order, the Commission established the SCB Workgroup and immediately tasked it with developing an implementation timeline within the next 60 days. The timeline, filed in early July 2019, calls for full-on SCB implementation by September 1, 2022.

To guide the SCB Workgroup, the Commission addressed numerous substantive elements of the SCB program, the highlights of which include:

Supplier Qualifications to Provide SCB:

The Commission held: “any proposed regulations should comprehensively address the capabilities necessary to ensure that these functions are performed on par with existing utility offerings. Further, the regulations should be tailored to demonstrate that a supplier can meet the rigorous demands of increased customer service and dispute resolution functions, complex billing requirements, and the quality assurance and record keeping necessary to handle utility charges that may contribute to potential utility disconnections.”

Authority of SCB Providers to Disconnect Customers for Nonpayment:

The Commission rejected the petitioners’ request to allow SCB suppliers to initiate disconnects for non-payment. This had been a central element of the petitioners’ case because it is necessary to manage bad debt, similar to the utilities. In response to those concerns, the Commission will require that utilities purchase the outstanding distribution charges of a delinquent customer account upon the customer’s return to standard offer service (SOS), as further discussed below. For other charges, the SCB provider must resort to the traditional remedies of other non-regulated businesses, including reporting to credit agencies, seeking monetary judgments in court, and pursuing collection activities.

Purchase of Receivables (POR) and Supplier Bad Debt:

The Commission held that SCB suppliers must provide POR to the utili8ty on substantially the same terms as provide in utility consolidated billing (UCB). The Commission directed the workgroups, including the SCB Workgroup, to identify and propose an equitable payment posting priority system and other protections that may be necessary to ensure that any charges contributing to a disconnection are properly handled. Additionally, the Commission agreed with the petitioners that suppliers need some ability to protect themselves from the risk of non-payment. The Commission held that, after reasonable efforts to collect, the supplier should not be required to hold any debt attributable to the customer’s distribution charges paid under POR. Where a supplier can demonstrate the amount of unpaid distribution charges, the utility should repurchase those charges at a zero discount rate unless the SCB Workgroup can provide alternative calculations which are supported by a compelling analysis.

Customer Protection and Customer Education:

The Commission held that a supplier that offers SCB is required to provide all the same consumer protections, disclosures (including the utility’s price to compare), notices,
and billing information required of a regulated utility. This includes providing all surcharge line items and compliance with all current COMARs related to consumer protections. The Commission directed the SCB Workgroup to identify and justify any deviations from or additions to existing consumer protection standards. The SCB Workgroup should consider new disclosure and notice requirements for how utilities and SCB suppliers communicate the varying relationships to the customer, the content of past due notices by SCB suppliers, and the utility notices for customers selecting SCB.

Cost Recovery:

The Commission made no findings regarding cost recovery. The Commission directed the SCB Workgroup to identify and estimate, with as much detail as possible, these and any other costs and benefits related to SCB. The Commission directed the SCB Workgroup to consider varying cost recovery mechanisms and present either a consensus approach or options for Commission consideration. The Commission recognized that the SCB Workgroup might not reach a consensus on cost recovery but said, “this should not delay progress towards proposing regulations in other areas.”

If you have questions about SCB or electric or natural gas retail service in general, please contact one of GreeneHurlocker’s energy and regulatory lawyers.

SCC Approves New Large Customer Renewable Energy Tariff

wind turbines and solar arraysThe Virginia State Corporation Commission (“SCC” or “Commission”) just approved a new tariff that will give customers of Dominion Energy Virginia (“Dominion”) an additional option to purchase renewable energy. On November 6, 2018, the SCC entered a Final Order approving Dominion’s application to offer a voluntary tariff designated “Rate Schedule RG.” The tariff is available to large, non-residential customers who agree to purchase the output, including all environmental attributes, from particular renewable energy facilities.

Participating customers may request to purchase the output from specific types of generation resources, such as solar and wind energy facilities. Dominion would either construct a new renewable facility or enter into a contract with a third-party generator to obtain the renewable energy necessary to serve the customer. Schedule RG, therefore, presents an opportunity for customers to choose the type of renewable energy they want to purchase. For example, a customer could request that Dominion enter into a contract with a particular generator. Or the customer could request the utility to build a new renewable facility on the customer’s premises or in a particular geographic location. The minimum facility size is 1 MW in nameplate capacity.

Participation in Schedule RG is capped at 50 customers. The tariff is also designed to ensure that non-participating customers do not subsidize any of the costs associated with Schedule RG. For example, Dominion may not place any of the Schedule RG facility costs in its rate base or the cost of service charged to non-participating customers.

The financial transactions supporting Schedule RG are complex. Participating customers would stay on their existing tariff and continue to pay all existing utility riders. At the same time, however, customers would pay a fixed price to purchase the renewable energy and would receive a “Schedule RG Credit” that is based on the wholesale price of energy and the capacity of the facility. In this way, the Schedule RG arrangement is like a financial “swap.” That is, participating customers would agree to pay a pre-determined renewable energy contract price, but would also receive the market price for the energy, which would be sold by Dominion in the PJM wholesale market. Thus, Schedule RG is designed to approximate the actual market cost of renewable energy from particular generating facilities.

Several parties intervened in the case, including Walmart and two renewable and advanced energy trade associations. While several parties offered comments on the proposal, no party to the case opposed Schedule RG.

The SCC approved the application subject to several reporting requirements. The SCC also held that Schedule RG will expire after three years if no customers participate.

Finally, it is important to note that Schedule RG was not approved under Va. Code § 56-577 A 5 and would not constitute a 100% renewable energy tariff under this statutory provision. As we explained in our Regulatory Guide, this Code section authorizes any Virginia customer to purchase electricity “provided 100% from renewable energy” from non-utility suppliers, so long as the customer’s incumbent electric utility does not offer an SCC-approved tariff for 100% renewable energy. Therefore, if Dominion received approval to offer a 100% renewable energy tariff pursuant to Va. Code § 56-577 A 5, Dominion customers would lose their existing rights to shop for such energy.

Currently, no Virginia utility offers an SCC-approved 100% renewable energy tariff. Dominion and Appalachian Power have both applied for approval to offer such tariffs, which thus far have been rejected. In the last three years, the SCC has rejected two 100% renewable tariffs proposed by Appalachian Power and one proposed by Dominion. Dominion currently has one application pending, which would be available to residential and small commercial customers.

The SCC’s Final Order in Schedule RG, Case No. PUR-2017-00163, is available here. If you have any questions about Schedule RG or other renewable energy options offered by Virginia utilities, please contact one of our energy regulatory attorneys.

Virginia Supreme Court Upholds Electric Utility Rate Freeze

But There Is A Powerful Dissent

On September 14, 2017, the Supreme Court of Virginia issued an opinion affirming the controversial “rate freeze law.”transmission towers for electricity

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 Approves Settlement in Columbia Gas Rate Case

Results in Benefits for Competitive Suppliers

On March 17, 2017, the Virginia State Corporation Commission (“Commission”) entered a final order on a rate increase application filed last year by Columbia Gas of Virginia (“Columbia”). The Commission approved a comprehensive settlement (“Stipulation”) agreed to by Columbia, the Commission Staff, the Attorney General’ Office, and several intervening parties. We are very pleased that our firm was able to help negotiate a favorable settlement on behalf of a group of retail gas suppliers. The Stipulation approved by the Commission will reduce the fees associated with competitive gas service in Virginia and provide more operational flexibility for suppliers in several key areas.

In addition to requesting an increase to its revenue requirement, Columbia also requested several changes to its terms and conditions that would have adversely impacted both customers and suppliers in the competitive gas market. Our firm represented a group of competitive suppliers who provide gas transportation service to commercial customers in Columbia’s service territory. Among other issues, our clients were concerned that Columbia’s proposed changes to its terms and conditions would increase fees for gas transportation service and reduce suppliers’ ability to provide cost-effective service to customers. The Stipulation, however, resulted in several favorable tariff modifications, including reduced fees for daily gas transfer service and more reasonable penalties in the event suppliers over- or under-deliver natural gas on certain days.

The Stipulation approved by the Commission also authorized a total revenue requirement increase of $28.5 million and established a rate of return on common equity (“ROE”) of 9.5%. Columbia had originally requested a total revenue requirement increase of $37 million and an authorized ROE of 11.25%.

Please contact one of our regulatory attorneys for more information about this case, or should you have any questions about competitive energy markets in Virginia and the Mid-Atlantic.

Notable Energy Bills Clear 2017 General Assembly

wind turbines and solar arraysThe Regular Session of the 2017 Virginia General Assembly wrapped up on Saturday, February 25. While the approval of an amendment to Virginia’s biennial budget received the most attention, the session also resulted in some notable bills affecting the energy industry. In particular, the General Assembly sent several bills to Governor McAuliffe’s desk that could accelerate the development of renewable generation in Virginia. Each of these bills is currently awaiting the Governor’s signature. Below is a our summary of a few of the noteworthy energy bills passed this session:

SB 1395 – Expansion of Virginia’s Permit By Rule (“PBR”) option for renewable developers

Currently, developers proposing to construct renewable energy facilities of 100 MW or less may use the Virginia Department of Environmental Quality’s (“DEQ”) PBR process. The PBR can often reduce the time and expense necessary to receive the state approvals required to begin construction and operation of a solar or wind facility.SB 1395 (Wagner) expands the facility size threshold to allow renewable facilities up to 150 MW to utilize the PBR process. The bill also provides that a small renewable facility owned or operated by a public utility may obtain a PBR, and will be exempted from State Corporation Commission review, so long as the project costs are not recovered from the utility’s ratepayers.

HB 2390 – Limited expansion of Dominion’s renewable energy purchase pilot program in Appalachian Power’s (“APCo”) service territory

Virginia law currently allows customers in Dominion’s service territory to purchase generation from renewable energy facilities that are located on their property, but that are owned and operated by a third party.HB 2390 (Kilgore) would expand this pilot program to allow non-profit institutions of higher education in APCo’s service territory to participate in the same pilot program. The bill, for example, would allow private colleges to purchase 100% renewable energy from facilities owned and operated by third parties. This bill is intended to address an economic challenge faced by colleges who wish to use renewable energy. Colleges, because they have no federal tax liability, are often unable to benefit from federal tax credits for capital investments in renewable energy. Third-party sellers, however, are able to pass the tax savings on to non-profithigher education customers, which reduces customers’ power purchase expenses. The program is capped at 7 MW for non-profit customers in APCo’s service territory.

SB 1393 – Community solar pilot program

SB 1393 (Wagner) requires both APCo and Dominion to conduct a pilot program that would allow all retail customers to purchase 100% solar energy from new solar facilities located in Virginia and owned by the utilities. Customers would be permitted to voluntarily “subscribe” to a solar energy rate schedule. Currently, neither utility offers customers an option to purchase 100% solar energy. APCo and Dominion would be required to conduct a competitive request for proposals (“RFP”) prior to dedicating any particular solar resource to the pilot program.

SB 1394 – Renewable energy program for agricultural customers

SB 1394 (Wagner) authorizes a new program for agricultural customers operating renewable energy facilities on their property. The bill establishes a buy-all, sell-all program whereby agricultural generators may sell 100% of the renewable energy generated to their incumbent electric utility, while continuing to purchase 100% of their electricity requirements from their utility. The utilities are required to purchase the renewable energy generated at a rate not less than the utility’s avoided cost rate. (The utility’s “avoided cost” is a rate approved by the State Corporation Commission which represents the theoretical cost the utility would incur to obtain replacement power.) The buy-all, sell-all program would only be available for agricultural customers with renewable energy facilities 1.5 MW or smaller.

HB 2291 – Cost recovery for Dominion’s nuclear expenditures

HB 2291 (Kilgore) would allow Dominion to seek cost recovery for future upgrades to its nuclear facilities. The bill would allow Dominion to recover such costs through a rider, called a rate adjustment clause (“RAC”), as opposed to through base rates. Before receiving approval of a nuclear upgrade RAC, Dominion would have to prove that it “considered and weighed” the option of obtaining new generation through third-party market purchases. Without the bill, such costs would recovered through a utility’s base rates, which are currently frozen due to due 2015 legislation supported by APCo and Dominion. Recovering costs through RACs provides several benefits to utilities, including guaranteed recovery of all expenses, plus a guaranteed rate of return. (Recovering costs through base rates, meanwhile, does not guarantee full cost recovery. If a utility sells fewer kilowatt hours than forecasted, for example, the utility might not fully recover its costs plus a rate of return.)

SB 990 – Tracking Virginia’s achievement of energy efficiency goals

Finally, SB 990 (Dance) would direct the Virginia Department of Mines, Minerals and Energy (“DMME”) to provide an annual report regarding the Commonwealth’s progress towards its energy efficiency goals. In 2007, the General Assembly adopted a goal for the Commonwealth to reduce its energy consumption by 10% by 2022. In 2015, Governor McAuliffe created an Executive Committee on Energy Efficiency to help accelerate the achievement of the 10% energy reduction goal.

Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about these energy bills.

Delaware Approves New Consumer Protection Rules for Comment

The Delaware Commission on November 1, 2016, approved for publication and comment new consumer protection rules that largely resemble the rules that were published in October and which we blogged about here.  We expect the newly-approved rules to appear in the December 1, 2016 Delaware Register, followed by a comment period. This marks the near-end of a proceeding that has lasted for more than four years.

The primary stakeholders in the proceeding had agreed to certain modifications to the version of the rules published in October, but two non-consensus issues remained for the Commission’s consideration. The two issues involved the length of the rescission period and issues pertaining to the customer lists that the utility, Delmarva Power, provides to licensed retail suppliers. The Commission ruled on those matters on November 1, and a written, formal order is expected at the Commission’s November 15 meeting.

The newly-approved rules are a total re-write of Delaware’s current rules. They include numerous protections for consumers and include rules for suppliers who want to sell electricity to Delaware customers.  The rules will require suppliers to provide specific information to customers during the marketing and enrollment processes to ensure that customers fully understand the electricity products they are considering. The rules also obligate suppliers to provide information to current customers during at certain times during the contractual relationship. Not only that, but the rules to into great detail concerning marketing channels such as door-to-door and telemarketing, as well as other matters.

Once published, there will be a comment period and we expect the rules to become final at some point in the first quarter of 2017. Our firm has represented the Retail Energy Supply Association in this proceeding. If you want further information on the proposed Delaware rules or have questions about retail energy competition and consumer protection, call one of our energy regulations lawyers.

Cheers to everyone who joined us last night!

We were grateful for the large crowd of clients, colleagues and friends who came to enjoy our Great Tastes of Virginia reception at the Williamsburg Lodge during the MACRUC Annual Education Conference. The weather cooperated this year and we saw a lot of smiles around the patio as you enjoyed food and beverages native to or close to the hearts of Virginia. Click here to see our photos.

MA Legislators Pass Compromise on Net-Metering, Reimbursement Rates

The Massachusetts State-house in Boston, Massa...

The Massachusetts State-house in Boston, Massachusetts (Photo credit: Wikipedia)

This week, the Massachusetts legislature reached an end to the solar impasse that existed in the Commonwealth, when the Massachusetts House of Representatives and Senate struck a deal regarding the net metering cap and reimbursement rates.  Specifically, the legislation will:

  • Lift the cap on solar net metering by three percent (3%) for both public and private solar projects; and
  • Decrease the reimbursement rate paid by utilities to most solar energy producers by 40%.  (This decrease in rates, however, does not apply to government and municipality owned projects, residential and small commercial projects – which will all still receive the full retail rate.)

The legislation also authorizes distribution companies to submit to the Massachusetts Department of Energy Resources (“DOER”) proposals for a “monthly minimum reliability contribution” to be included on electric bills for solar-producing customers.  DOER then has the authority to approve a monthly minimum reliability contribution that meets certain enumerated factors.  The bill explains that any such contributions “shall ensure that all distribution company customers contribute to the fixed costs of ensuring the reliability, proper maintenance and safety of the electric distribution system.”  DOER is prohibited, however, from approving a proposal for a monthly minimum reliability contribution, until after the aggregate nameplate capacity of installed solar generating facilities in Massachusetts is equal to or greater than 1,600 MW.  DOER was given the authority by the legislature to exempt or modify any such contributions for low-income ratepayers.

While the legislation serves as a temporary solution to the net metering problem in Massachusetts, stakeholders, however, predict the cap will likely be reached by the end of 2016.

The attorneys at GreeneHurlocker will continue to monitor the legislative landscape in Massachusetts as many of our clients are currently pursuing solar projects in the Commonwealth of Massachusetts.If you have any questions about this legislation or other isses related to renewable energy and regulation, contact any of our solar energy lawyers.

Dominion Customers to Challenge Constitutionality of Electric Utility Regulation Act

A group of industrial customers of Dominion Virginia Power (“Dominion”) has recently taken steps to challenge the constitutionality of Virginia’s Electric Utility Regulation Act (“Regulation Act”) at the Supreme Court of Virginia. At issue is a 2015 amendment to the Regulation Act, Senate Bill 1349, which exempts Dominion and Appalachian Power Company from biennial base rate reviews through 2022. In effect, the legislation prevents the State Corporation Commission (“SCC” or “Commission”) from changing the utilities’ base rates until 2022 – even if the Commission determines that electric rates are too high and are producing excess profits for utility shareholders.

The potential constitutional challenge was triggered by an SCC order late last year that applied Senate Bill 1349 for the first time. In its Final Order in Dominion’s 2015 Biennial Review rate case, SCC Case No. PUE-2015-00027, a 2-1 majority of the Commission applied Senate Bill 1349 and declined to adjust Dominion’s base rates or set a new rate of return on equity for the company. Commissioner Dimitri, however, filed a dissenting opinion, arguing that Senate Bill 1349 violates Article IX of the Constitution of Virginia and therefore cannot prevent the SCC from adjusting Dominion’s base rates.

Following the Commission’s Final Order, the Virginia Committee for Fair Utility Rates (“Committee”), an association of large industrial customers, filed a Petition for Reconsideration at the SCC. The Committee’s Petition cited Commissioner Dimitri’s dissenting opinion and requested that the Commission find that Senate Bill 1349 is unconstitutional. On December 14, 2015, a 2-1 majority of the Commission denied the Committee’s motion. Commissioner Dimitri filed a second dissenting opinion, reiterating his finding that Senate Bill 1349 is unconstitutional. On December 22, 2015, the Committee filed a Notice of Appeal at the SCC, which preserves the Committee’s ability to file a formal appeal with the Supreme Court of Virginia.

The legal arguments advanced by the Committee are based on Article IX, Section 2 of the Constitution of Virginia, which establishes the powers and duties of the SCC. Article IX, Section 2 provides that “Subject to such criteria and other requirements as may be prescribed by law, the Commission shall have the power and be charged with the duty of regulating the rates, charges, and services … of electric companies.” According to the Committee, therefore, the Commission’s authority to regulate electric rates is subject only to “criteria” and “other requirements” that may established by the General Assembly.

The dissenting opinion argues that Senate Bill 1349 “does not establish criteria that the Commission must apply in regulating Dominion’s base rates” but instead “fixes [Dominion’s rates] and takes the base rate setting function away from the Commission.” The Committee has also argued that if Dominion’s rates remain unchanged through 2022, Dominion’s shareholders will reap excess profits of “well over a billion dollars.”

Appeals from the State Corporation Commission are “of right,” meaning that the Supreme Count cannot decline to hear properly filed appeals. In order to be heard by the Court, however, the Committee would have to file a formal “Petition for Appeal” within four months of the date of the Final Order in this case. If a Petition for Appeal is filed, oral arguments would likely be heard by the Court in its September, 2016 session.

If you have any additional questions about any of the legal aspects of this case or its potential to affect the electric rates paid by Dominion’s customers, do not hesitate to contact one of GreeneHurlocker’s Virginia energy and regulatory attorneys.