Ruling limits PUC’s regulation

Authority on alternative energy is narrowed

The Pennsylvania Public Utility Commission might have narrower authority to regulate some facets of alternative energy generation than the agency has asserted, according to a recent decision by a state appellate court.

In a 5-2 decision last week that cheered alternative energy advocates, a majority of judges on the state’s Commonwealth Court cast doubt on the PUC’s ability to place limits not explicitly defined in state law on the types of alternative energy generators that qualify for abovemarket-rate reimbursements for the excess electricity sent back to the grid.

Roughly 9,260 alternative energy customer-generators were connected to the grid as of May 31, 2015, with a combined generating capacity of about 218 megawatts, according to a PUC report released last month.

The PUC is currently finalizing controversial regulations that exclude some classes of alternative energy generators from the incentive — known as net metering — that allows customers who generate power from sources like solar panels to be reimbursed at retail rates for their surplus electricity.

A state independent regulatory review board twice voted unanimously against the PUC’s proposed regulations, saying they are not in the public interest, but the PUC has continued to take steps to publish the rules. Earlier this month, the state attorney general’s office approved the form and legality of the rules as long as the commission revises its definition of the word “utility,” which had drawn complaints for being too sweeping.

The Commonwealth Court case did not directly address the legality of those regulations.

The main point of the Oct. 14 ruling was to resolve a jurisdictional question over who should hear a contract dispute between Green Tree-based solar developer Sunrise Energy LLC and West Penn Power Co. The court sided with Sunrise Energy and decided Washington County Common Pleas Court should hear the case.

But in their discussion of the issues, the judges in the majority repeatedly described the narrowness of PUC’s authority to develop rules for net metering.

The Legislature authorized the PUC to develop “technical and net metering interconnection rules,” the majority said in an opinion written by President Judge Mary Hannah Leavitt, but “this limited authority does not give the PUC jurisdiction to decide eligibility for net metering.”

The state’s alternative energy law already established who qualifies for net metering, the majority wrote. Eligible systems have a capacity of up to 50 kilowatts at residential sites and up to 3 or 5 megawatts at other locations.

Critics of the PUC’s pending rules were encouraged by that language, even though it was tucked into the majority’s analysis and not the substance of the court’s holding.

“It is a pretty strong statement,” said Todd Stewart, a regulatory attorney with Hawke McKeon & Sniscak LLP in Harrisburg. “It is likely that the court is foreshadowing the way it might rule if these regulations are brought before them.”

The Pennsylvania Waste Industries Association — which has opposed the PUC’s proposed rules because of their potential effects on landfill gas energy systems — said in a statement that “the case addresses the limitations on the PUC’s authority, and we believe that it also has clear implications regarding the ongoing discussion surrounding net metering regulation.”

Edward Johnstonbaugh, an energy educator with the Penn State Extension who markets renewable energy credits for Sunrise Energy and once worked for West Penn Power, said the majority opinion has left the PUC diminished on this issue.

“I think they’ve caused their relevance to be challenged,” he said.

The utility commission has said its proposed regulatory changes are necessary to keep costs down for all electric customers and to make explicit what the law currently implies — that the state’s generous net-metering payment terms were intended for homeowners, businesses and other entities that have adopted renewable energy systems primarily to offset their own electricity needs, not for companies whose main purpose is to make alternative energy.

PUC spokesman Nils Hagen-Frederiksen said the commission is reviewing the Sunrise Energy decision and evaluating options.

He said the commission’s proposed alternative energy regulations remain under review. A date for a vote on the regulations has not been announced.

PUC spokesman Nils Hagen-Fredriksen said the commission is reviewing the Sunrise Energy decision and evaluating options.