HMS Legal Blog

            There have been at least two bills recently introduced in the Pennsylvania General Assembly[1] introducing a new model for expanding the deployment of solar energy production in the Keystone State.  Community Solar is not a technology but rather a business model that allows “community solar organizations” (community-based organizations or for-profit entities), to develop “Community solar facilities” (solar installations no larger than 3 MW under most circumstances) that have “subscribers”  (individuals or businesses who pay a subscription fee to receive a specified percentage of the solar output).  The subscription is transferable and provides a credit on the local electric utility bill for their subscribed portion of the output.  Legislation is required because this arrangement is not contemplated by the current renewables law, the Alternative Energy Portfolio Standards Act (“AEPS Act”), 73 P.S. §§ 1648.1, et seq., or the Electricity Generation Customer Choice and Competition Act (“Choice Act”), 66 Pa. C.S. §§ 2801, et seq.,- creating new obligations for both electric distribution companies (“EDC”) and the Public Utility Commission (“PUC”).

            The Pennsylvania Public Utility Commission opened a docket[1] this year to examine whether it should encourage or require supplier consolidated billing (“SCB”)[2].  SCB is when competitive energy suppliers, rather than the utility, bill the customer for all the services associated with their energy supply, including the utility’s distribution charges – sort of the opposite of how it happens today.  The reason I suggest that SCB is “sort of” the opposite of how things are done at present, is that when utilities bill and collect for suppliers now, they normally do so under a program called “purchase of receivables” or (“POR”) where the utility bills and collects from the customer and pays the supplier – regardless of whether the customer pays the utility.  The supplier pays a fee for this benefit equal to the utility’s bad debt percentage, which is known as the “POR discount”. For example, if a utility can’t collect 4% of what it charges to customers as a group, suppliers only get 96 cents on the dollar for the product they sell, even if the utility collects a larger percentage of charges to the supplier’s customers, which is often the case.  However, under the proposed SCB, the supplier would be required to remit 100% of charges back to the utility and manage the entire risk of uncollectible debts on its own.

Most US taxpayers are by now conscious of the passage of President Trump’s signature tax legislation which dramatically reduces the corporate tax rate from 35% to 21%.  What many folks may not know is that the rates they pay to their local utility include recovery for the income tax expense of those utilities.  This raises the question that some states, notably Kentucky and Oklahoma, have already begun to address: “How do regulators make sure that utility rates promptly reflect the substantial reduction in tax liability?”  In Oklahoma, the Attorney General has called upon the Oklahoma Corporation Commission to address the tax savings issue which he estimates to total $100 million statewide.  The Kentucky Public Service Commission already has ordered utilities to track their savings due to the tax change and to timely pass these savings on to customers.  Montana and Michigan are taking similar actions. 

     On June 2, 2016 the Independent Regulatory Review Commission (“IRRC”) appropriately voted 5-0 to disapprove the Pennsylvania Public Utility Commission’s (“PUC”) attempt to modify its regulations implementing the Alternative Energy Portfolio Standards (“AEPS”) Act, 73 P.S. §§1648.1, et seq.  The IRRC’s rejection was based primarily on its view that the PUC’s proposed regulations would exceed its statutory authority by limiting net-metering of electricity to entities with alternative energy systems sized to generate no more than 200% of their annual consumption.  The IRRC went on to state that if the PUC decides to proceed with the rulemaking by deleting this limit, it “should ensure that other provisions of the regulation do not limit a customer-generator’s ability to net-meter excess generation it produces.”  The IRRC also found that the PUC had failed to show any need for the modifications and suggested that because the PUC’s proposal appeared to be a change in policy of such a substantial nature consultation with the General Assembly was warranted.

            On March 17, 2016 Pipeline and Hazardous Materials Safety Administration (PHMSA) released a 549 page Notice of Proposed Rulemaking (NPRM) that significantly changes regulations for transmission lines and imposes regulations on previously unregulated gathering lines carrying, inter alia, natural gas and petroleum products. 

            The Pennsylvania Public Utility Commission (PUC) recently issued a final rule making order concerning recovery of fuel costs by gas utilities at Docket No. L-2013-2346923.  The full order can be found here:  http://www.pabulletin.com/secure/data/vol46/46-4/110.html  The Order is designed to simplify and streamline information and procedures for small gas utilities (gross intrastate operating revenues of $40 million or less) when submitting gas cost rate (GCR) filings with the PUC. 

On February 18, 2016, EPA Announced its Triennial National Enforcement Initiatives (“Initiatives”).  The EPA issues these Initiatives once every three years in order to help “focus time and resources on national pollution problems” according to Cynthia Giles, assistant administrator for enforcement and compliance assurance at EPA.  The latest round of Initiatives will begin on October 1, 2016 and once again will list natural gas producers and water authorities as targets for EPA inspections and enforcement.

Yesterday the U.S. Supreme Court in a majority decision reversed the D.C. Circuit Court of Appeals’ decision and determined that a regional transmission organization’s (RTO) demand response program compensation comes under FERC’s jurisdiction. A demand response program is when, during high electricity demand, customers of electricity are paid not to use electricity. These demand response programs serve to lower electricity prices and increase the reliability of the electric grid. Center to the present issue is FERC’s issuance of Order No. 745 (Order 745). Order 745 requires market operators to pay the same price to demand response providers for conserving energy as to the generators for making energy. The D.C. Circuit Court held that FERC lacked authority to issue the order because Order 745 would directly regulate retail electricity rates. The D.C. Circuit Court also held that FERC’s demand response compensation scheme was arbitrary and capricious under the Administrative Procedure Act. The U.S. Supreme Court disagreed.

In a binding poll of the issues taken at its September 17, 2015 Public Meeting, the Pennsylvania Public Utility Commission (“PUC”) unanimously voted in support of the Natural Gas Supplier Parties’ (“NGS Parties”) request to modify the way Columbia Gas of Pennsylvania (“Columbia”) refunds back to customers’ their share of off-system sales revenue. 

Almost one year to the day from its 2014 rate increase filing, Columbia Gas of Pennsylvania is back before the Pennsylvania Public Utility Commission seeking an additional $46 million in revenue.

Despite high demand due to persistent cold weather, heating oil and propane will continue to flow to Pennsylvania homes due in part to the extension of the drivers’ hours-of-operation exemption issued by the Governor’s Office.

The PUC is not required to disclose a utility employee’s “tip letter” or other records relating to an investigation of the utility’s practices where the documents are not considered by the Commissioners when approving the resulting settlement. 

In a 5-2 en banc opinion issued December 22, the Commonwealth Court flatly rejected the notion that a utility must prove “absolute necessity” before resorting to condemnation.  Affirming the PUC’s grant of PPL Electric’s application to exercise its eminent domain power to acquire rights-of-way and easements over the private lands of protestants to construct a new eleven-mile transmission line across the Susquehanna River and a related substation, the Court reaffirmed prior case law adopting an easier hurdle for would-be utility condemnors.  As the Court reasoned:  “Under Protestants’ proposed standard, utilities could only seek approval … when a problem is looming and the resolution is ‘absolutely necessary.’  Utilities would essentially have to wait until an existing system fails before seeking approval of a project.  Not only would this approach be impractical and unrealistic, it would actually pose a danger to the health, safety and welfare of the public.”  Hess v. Pennsylvania Public Utility Commission, 1370 C.D. 2013 (December 22, 2014) (en banc).

In a 4-2 decision,[1] the Pennsylvania Supreme Court upheld a Superior Court decision overturning the trial court and denying Duquesne Light summary judgment on the issue of whether a utility has a duty to warn a customer of potential danger on the customer’s side of the service point where the utility has taken affirmative action to restore service and has actual or constructive knowledge of such danger.  Alderwoods, Inc. v. Duquesne Light Co., No. 12 WAP 2013 (Pa. December 15, 2014).  The case arose from a fire caused by an electrical panel in the basement of Alderwoods’ funeral home after Duquesne restored service to the premises by making substantial repairs to a utility pole downed by a car crash outside the funeral home.   Slip op. at 2. 

As the PA PUC embarks on its investigation of the natural gas markets, what evidence can we discern about how the agency sees competitive energy markets and how those markets should evolve?

Sunoco’s proposed Mariner East pipeline that would transport natural gas liquids (NGLs) from Pennsylvania’s rich Marcellus Shale production in Western Pennsylvania to processing plants in southeastern Pennsylvania, received a blow from Pennsylvania Public Utility Commission ALJs on July 23, 2014.

In Robinson Township v. Commonwealth, 83 A.3d 901(Pa. 2013) the Pennsylvania Supreme Court invalidated key provisions of Act 13, the statute that removed from local zoning control the power to regulate oil and gas operations through restrictions on the placement and operation of  oil and gas facilities.  The Court remanded to the Commonwealth Court to consider whether other provisions of Act 13, including provisions that give the PUC power to review local zoning ordinances and withhold impact fees, remain viable.

The PUC’s deadline of December 12, 2013, to receive comments from interested parties on the current state of competitiveness of the natural gas market in Pennsylvania is drawing near.

The Public Utility Commission (“PUC”) recently issued a Tentative Order in the matter of: The Use of Fixed Price Labels for Products With a Pass-Through Clause, Docket No. M-2013-2362961 (Tentative Order entered May 23, 2013), in which it requested interested parties to comment on what it views as an emerging problem: certain Electric Generation Suppliers (“EGS”) offering products labeled as “fixed price” when the products clearly are “variable price” products.  Comments were filed June 24 and a PUC decision is expected soon.