Pennsylvania Public Utility Commission (“ PUC ”

Net Metering is Back in Pennsylvania

Todd Stewart on February 17, 2021

The Supreme Court today 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,[1] 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, [2] 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 to 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 all 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.

[1] See, IRRC Shoots Down AEPS Regulations a Second Time.

[2] Hommrich v. Pa. P.U.C., 231 A. 3d 1027 (Pa. Cmwlth. 2020).

Supplier Consolidated Billing Revisited

Todd Stewart on January 29, 2021

Back in 2018 I wrote an article explaining all the reasons why supplier consolidated billing (“SBC”) was a good idea.[1] Then, this morning, I saw an article in Energy Choice Matters, and it provided yet another reason why SBC should be the law.[2] In the ECM story, the recently announced strategic initiatives of FirstEnergy Corp. (“FE”) were discussed, including an initiative to expand its offerings of products and services other than commodity to its captive electric distribution customers. The FE press release extolled that these are “products and services that customers want” including energy efficient lighting, smart home products, maintenance, warranty, and home services. These are all products and services that electric generation suppliers (“EGS”) and natural gas suppliers (“NGS”) provide to their customers and similarly wish to bill along with the commodity charges on a single bill. The discussion makes it clear that FE believes that the billing relationship with customers is a key means of providing value to customers in the form of desirable products and services conveniently billed along with energy while providing incremental income opportunities for the provider of that commodity. The article reveals another data point and strengthens the argument for SBC on grounds that not allowing it demonstrates discrimination and lack of fairness.

It is ironic that it is FE that is making this announcement, because FE presently is involved in litigation over this very issue, i.e., that billing for its own products and services on the utility bill while refusing to bill for suppliers serving customers on its system, for the exact same products and services, is discriminatory. That matter is presently before the Pennsylvania Public Utility Commission and should be decided soon. Unfortunately, resolution of that case is not likely to result in supplier consolidated billing being permitted, but at least could provide more fairness, via access to the utility bill for non-commodity products and services, which is the second-best choice.

[1] https://www.hmslegal.com/why-the-skeptics-are-wrong-about-supplier-consolidated-billing

[2] http://www.energychoicematters.com/stories/20210128a.html.

Legislation “Pipeline”

Todd Stewart on October 12, 2017

There are three bills before the Pennsylvania General Assembly that could impact basic services that many Pennsylvanians take for granted. All three involve jurisdiction over pipes that run underground in the Commonwealth. The first two bills before the Pennsylvania General Assembly concern whether the Pennsylvania Public Utility Commission (“PUC”) or the municipalities/authorities will ultimately get to set rates and reasonable service standards for water and sewer service provided by municipalities. The third bill before the General Assembly came into the spotlight on October 10, 2017 when Rep. Barrar filed a resolution, strongly urging the PUC to deny Laurel Pipeline’s Application to reverse the flow of its Philadelphia-to-Pittsburgh pipeline from the current westerly flow to easterly.

House Bills

There are two House Bills (“HB”) that would address the issue of who regulates the rates and service of municipal entities: HB 798, introduced by Rep. Tina Davis of Bucks County and HB 1490, introduced by House Speaker, Rep. Mike Turzai of Allegheny County. The broader of the two bills, in terms of scope, HB 798 would simply revise the definition of “public utility” found at 66 Pa. C.S. § 102, to include:

[A]ny municipal corporation now or hereafter owning or operating in this Commonwealth equipment or facilities for:

Diverting, developing, pumping, impounding, distributing or furnishing water to or for the public for compensation.
Sewage collection, treatment or disposal for the public for compensation.

The Pennsylvania Public Utility Code defines “Municipal corporation” as: “All cities, boroughs, towns, townships, or counties of this Commonwealth, and also any public corporation, authority, or body whatsoever created or organized under any law of this Commonwealth for the purpose of rendering any service similar to that of a public utility.” 66 Pa. C.S. § 102. Accordingly, this “simple” revision would effectively subject all municipal sewer and water systems — including those owned or operated by municipal authorities — to PUC regulation similar to all other for-profit water and sewer companies currently serving in Pennsylvania. Today, municipalities are free to set rates and conditions of service, subject to oversight only by the county courts of common pleas upon the complaint of patrons.

There have been some high-profile cases in recent years involving allegations that municipal authorities, perhaps because their members are appointed, not elected, had engaged in questionable decision-making, but it is not clear if this particular issue inspired the legislation. Nonetheless, this bill, if passed, would have far ranging impact: on the PUC by expanding its jurisdiction to many new water and sewer systems that so far have not been subjected to the rigors of regulation; and to the municipalities themselves, that would be required to seek approval for rates and subject their water and sewer service to new requirements from accounting and billing to tapping fees and disconnections. HB 791 has been in the Local Government Committee since March of this year and it is not clear whether it will ever have the support to move out of committee.

Speaker Turzai’s HB 1490 on the other hand appears to be very near the finish line; it already has passed the House, and in the Senate, has passed on Second consideration. It now requires a final vote in the Senate and the Governor’s signature to become law. HB 1490 appears to take a more surgical approach, modifying 66 Pa. C.S. § 1301 to require that when the PUC is determining what constitutes “just and reasonable” rates for municipal corporations providing water and/or sewer service beyond the corporate limits, which service currently is subject to PUC jurisdiction, the PUC shall use an imputed capital structure of comparable utilities providing similar service. This provision would allow the PUC to treat this type of extra-territorial service on a similar footing as its for-profit competitors from a rate making perspective.

The primary purpose of HB 1490, however, would be to subject Cities of the Second Class, of which Pittsburgh is the only one (Scranton is a City of the Second Class A) and any municipal authorities which own or operate water systems, sewer systems or storm water systems in such cities, to the full range of PUC regulation, except for Chapters 11 (certificates of public convenience in certain circumstances) and 21 (affiliated interests) of the Public Utility Code. It would appear that the Pittsburgh Water and Sewer Authority (“PWSA”) is the target of this bill. Published accounts of expected large rate increases and vastly understaffed customer service departments may hint at the reasons why Speaker Turzai has turned his attention Pittsburgh’s way, but nonetheless, it would appear fairly certain that PWSA soon may find itself spending more time in Harrisburg.

House Resolution

Rather than seeking to regulate that which is now arguably not regulated, HR 531 seeks to enlist the entire House in doing what a large number of legislators already have done on their own, which is to urge the PUC to deny Laurel Pipeline’s (an intrastate petroleum pipeline) request to reverse the flow on its line west of Eldorado, which, according to the resolution, would have the effect of closing, from the Eastern PA refineries, the Pittsburgh market for gasoline, diesel fuel and heating oil thus making Pittsburgh a captive market of Midwest refineries. It appears, based upon the name of the project, “Broadway”, and certain media accounts, that Buckeye (Laurel Pipeline’s parent that also operates interstate pipelines) aspires to eventually reverse the flow of the Laurel line over its entire length so that it can allow Midwest refiners to reach New York Harbor. As part of the Application, Buckeye would remove much of the pipeline from PUC jurisdiction and convert it to oversight by the Federal Energy Regulatory Commission (“FERC”), which in the case of petroleum pipelines, is much less extensive than PUC regulation.

The Application currently is in litigation before an Administrative Law Judge and will eventually end up before the Commissioners, perhaps as soon as early next summer. The battle lines have been drawn, with Laurel on the side of closing the Western PA market to Pennsylvania refineries, in favor its allies, the Midwest refineries. On the other side, the largest sellers of gasoline and diesel in Western PA, Sheetz and Giant Eagle, have sided with the Pennsylvania refineries because the local supply from Eastern PA, which now competes with the Midwestern supply in the Pittsburgh market, is generally lower priced than Midwestern supply for most of the year, which benefits customers. The reversal will eliminate the current competition and make Western PA captive to those Midwest refineries. The long and short of it is, according to the Resolution, Laurel is attempting to leverage the regulatory process to pick market winners and losers, while Rep. Barrar of Delaware County is seeking to throw down the gauntlet for the PUC by bringing the matter to the attention of the entire House.

Net Metering is Back in Pennsylvania

Supplier Consolidated Billing Revisited

Legislation “Pipeline”

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