Dauphin County Industrial Development Authority v. Pennsylvania Public Utility Commission , 2015 Pa. Commw. LEXIS 381 ( 2015 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
The Dauphin County Industrial :
Development Authority, :
Petitioner :
:
v. : No. 1814 C.D. 2014
: Argued: June 15, 2015
Pennsylvania Public Utility :
Commission, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION
BY JUDGE LEAVITT FILED: September 9, 2015
The Dauphin County Industrial Development Authority (Development
Authority) petitions for review of an order of the Pennsylvania Public Utility
Commission (Commission) approving a joint settlement proposed by PPL Electric
Utilities Corporation (PPL).1 On appeal, the Development Authority contends that
the joint settlement does not adequately compensate the Development Authority
for the electricity it generates and sells to PPL in violation of applicable statutory
law. For the reasons that follow, we reverse and remand.
1
The other parties to the settlement are the Office of Consumer Advocate, the Office of Small
Business Advocate, and the Coalition for Affordable Utility Services and Energy Efficiency in
Pennsylvania (CAUSE-PA). These parties are no longer involved in this proceeding.
Background
The Development Authority owns and operates a solar energy farm in
Dauphin County, Pennsylvania. The Development Authority constructed the farm
to advance green energy generation and position Dauphin County as a leader in
alternative energy. To construct the farm, the Development Authority invested
$8.5 million and incurred another $2.5 million in debt. The farm offers a power
source for Dauphin County’s emergency management systems and can connect to
the County’s mobile emergency management unit. In addition, the farm operates
in parallel with the electric grid, which allows the Development Authority to sell
excess electricity2 to its energy provider, PPL. Customers, such as the
Development Authority, that generate electricity to sell to their respective
electricity providers are known as “customer-generators.”
There are two types of electricity providers: Electric Distribution
Companies and Electric Generation Suppliers. Typically, in a given region, there
is one Electric Distribution Company. The Commission appoints that Electric
Distribution Company as the default service provider for that region. The default
energy provider in Dauphin County is PPL. Accordingly, energy consumers in
Dauphin County are automatically enrolled as customers of PPL. However, these
consumers can also choose to purchase their electrical service from an alternative
2
Excess electricity is the electricity produced by the farm above and beyond what the
Development Authority consumes. Since construction of the farm, the Development Authority
has never consumed more power than it has created.
2
source, i.e., an Electric Generation Supplier.3 This is true for both customer-
generators and “service-customers.”4
The rates that PPL charges of all customers, whether customer-
generators or service-customers, are set by tariffs, which must be approved by the
Commission. The rates that Electric Generation Suppliers charge customers are
negotiable. Because Electric Generation Suppliers distribute their electricity
through PPL, they must pay PPL a non-negotiable fee for this service.
In order to track the amount of excess electricity generated and
consumed by customer-generators, PPL provides them a “net metering” service.
Net metering employs a bidirectional meter to measure the amount of electricity
used by the customer-generator and the amount of electricity generated by the
customer-generator’s alternative energy system. If a customer-generator generates
more electricity than it uses, PPL purchases the excess electricity by issuing a
monthly account credit or remitting an annual cash payment. PPL’s cost to
purchase excess electricity is passed on to its other customers in its tariff.5
In October of 2011, when the Development Authority began using net
metering, PPL offered it a choice of two rates per kilowatt hour (kWh) for selling
or purchasing electricity: a fixed rate and a Time-of-Use rate. The Development
3
An Electric Generation Supplier has been defined as a “person or corporation ... that sells to
end-use customers electricity or related services utilizing the jurisdictional transmission or
distribution facilities of an electric distribution company.” 66 Pa. C.S. §2803.
4
The briefs use the term “service-customers” to describe those customers that consume
electricity only and do not generate and sell electricity back to the energy grid.
5
Presumably, after purchasing excess electricity from customer-generators, PPL mixes the
electricity it purchases with the electricity it generates. Customers are unaware of the origin of
their electricity. PPL, with the Commission’s approval, determines the rates it will charge
customers, and those rates are based on numerous factors, including PPL’s costs to generate or
purchase the electricity it sells.
3
Authority elected a fixed rate, and it was paid approximately 8.441 cents per kWh
for the excess electricity it generated. In April 2013, the Development Authority
elected the second rate option, i.e., the Time-of-Use rate. To calculate the Time-
of-Use rate, PPL uses a weighted average of the number of on-peak and off-peak6
hours in a year. At the time of the proceedings in this case, the weighted average
produced a rate of approximately 13.736 cents per kWh.7 By the time the
Development Authority elected this option, however, the Commission had frozen
the rates; accordingly, the Development Authority has remained on the fixed rate at
8.441 cents per kWh.
The Commission approved PPL’s initial Time-of-Use program in
2010. In 2011, at PPL’s request, the Commission froze the Time-of-Use rates,
meaning that no customer could switch from a fixed rate to a Time-of-Use rate.
The Commission invited PPL to revise its Time-of-Use program. On May 1, 2012,
PPL petitioned the Commission for approval of a Default Service Plan, which
included, inter alia, a new Time-of-Use program. The Commission approved the
majority of the Default Service Plan, but it rejected the proposed Time-of-Use
program included therein. The Commission encouraged PPL to meet with
interested stakeholders to discuss and resolve the development and implementation
6
On-peak hours are when electricity demand is greatest; off-peak hours are when electricity
demand is lowest. On-peak hours are generally the traditional daytime working hours. Off-peak
hours are times such as weekends, early morning, and nighttime.
7
PPL illustrated the weighted average calculation in discovery responses. According to PPL’s
calculation, 35% of the hours in a year are on-peak and 65% are off-peak. PPL applied this
weighting factor to the on-peak rate of 15.389 cents per kWh and off-peak rate of 11.588 cents
per kWh applicable at the time, resulting in a rate for net-metered Time-of-Use customers of
approximately 13.736 cents per kWh. PPL’s calculation is based strictly on the percentage of
on-peak and off-peak hours and bears no relation to the precise time a particular customer-
generator delivers power to the grid. See Reproduced Record at 237a-241a (R.R. ___).
4
of a new Time-of-Use plan. On August 23, 2012, after discussions with interested
parties, PPL petitioned the Commission for approval of a revised Time-of-Use
program (pilot program).
Under the pilot program, PPL will no longer provide its customer-
generators the option of buying and selling electricity at the Time-of-Use rate.
PPL’s customer-generators must use a fixed rate for the purchase and sale of
electricity. To obtain a Time-of-Use rate, the customer-generator must choose
electrical service from an Electric Generation Supplier and negotiate that rate
structure. However, Electric Generation Suppliers are not required to offer Time-
of-Use rates. Even if Electric Generation Suppliers wish to offer Time-of-Use
rates, they must apply to the Commission for permission to do so. If approved,
Electric Generation Suppliers then must abide by strict requirements in order to
remain eligible to offer Time-of-Use rates. The requirements are onerous.8
As of the time the record in this case was compiled, no Electric
Generation Supplier had undertaken the steps necessary to be able to offer Time-
of-Use rates or expressed any interest in doing so. For this reason, PPL included a
contingency plan in its proposal to the Commission. The contingency plan states,
in relevant part:
48. If no [Electric Generation Suppliers] execute the
Participation Form at the initiation of the Pilot [Time-of-Use]
Program or if all participating [Electric Generation Suppliers]
8
Before being permitted to offer Time-of-Use rates, Electric Generation Suppliers must “create
and maintain a webpage…that provides details about the available [Time-of-Use] rate options,”
“must provide PPL Electric with an initial report and quarterly reports thereafter describing the
[Time-of-Use] rate options being offered,” and “are responsible for publicizing and marketing
their participation in the Pilot [Time-of-Use] Program and the [Time-of-Use] rate options
provided thereunder.” ALJ Recommended Decision, May 1, 2014, at 10; Brief of the
Development Authority, Appendix B.
5
opt out of the program or default on the program’s
requirements, PPL Electric will expeditiously seek approval of
a new subsequent [Time-of-Use] proposal and request that the
replacement plan be made effective within 60 days. If no
[Electric Generation Supplier] qualifies to participate in the
Pilot [Time-of-Use] Program or it appears that any or all of the
participating [Electric Generation Suppliers] will choose to opt
out of the program, PPL Electric will endeavor to work with an
interested but non-qualifying [Electric Generation Supplier] or
the opting out [Electric Generation Suppliers] to keep them in
the program prior to engaging in the contingency plan described
in paragraph 49 below.
49. PPL Electric’s subsequent [Time-of-Use] proposal, as
discussed in paragraph 48, will contain the following
characteristics. First, the Company will solicit, through a
request for proposal (“RFP”) process, a single supplier to
provide [Time-of-Use] service to customers. The program also
will be a summer-only program (including the months of June,
July and August), where the “on-peak” period will be from 2
p.m. to 6 p.m., Monday through Friday, excluding PJM
holidays,[9] and all other hours during this summer period will
be defined as the off-peak hours. The RFP will determine the
summer “on-peak” and “off-peak” rates. Moreover, the rate
during the non-summer months will be the then current [fixed
rate]. ... PPL Electric also will be permitted to fully recover the
costs of implementing the subsequent [Time-of-Use] proposal
through the Generation Supply Charge. Finally, parties will
have the right to challenge the subsequent [Time-of-Use]
proposal.
ALJ Recommended Decision, May 1, 2014, at 14; Brief of the Development
Authority, Appendix B (emphasis added). Stated otherwise, under this
9
PJM “is a regional transmission organization (RTO) that coordinates the movement of
wholesale electricity in all or parts of 13 states and the District of Colombia.”
http://www.pjm.com/about-pjm.aspx (last visited August 12, 2015). One of PJM’s services is
ensuring that on certain traditional holidays, such as Memorial Day and Christmas Day,
customers are charged “off-peak” electricity prices, no matter how much electricity is actually
used on that day. These days are referred to as “PJM holidays.”
6
contingency plan, PPL, i.e., the “Company” referenced above in paragraph 49,
promises that it will “endeavor” to find an Electric Generation Supplier willing to
do business with customer-generators on the basis of Time-of-Use rates, should
none have chosen to do so when the pilot program goes into effect.
Procedural History
The Office of Consumer Advocate and CAUSE-PA filed separate
answers to PPL’s petition for approval of the Default Service Plan, including the
new Time-of-Use proposal. Shortly thereafter, the parties entered into a partial
settlement, and it left PPL’s pilot program for Time-of-Use rates unchanged. On
October 17, 2013, the Development Authority filed a petition to intervene to
challenge PPL’s pilot program. The Development Authority argued that the pilot
program did not satisfy PPL’s statutory duty to offer Time-of-Use rates to all
customers, including customer-generators. Directing customer-generators to
Electric Generation Suppliers, it argued, was not a permissible way for PPL to
meet its statutory obligation to offer Time-of-Use rates to all customers and to
purchase excess electricity generated by customer-generators at the full retail rate.
The dispute went before Administrative Law Judges Susan D. Colwell
and Joel H. Cheskis. On May 1, 2014, the ALJs issued an adjudication
recommending that the Commission approve the partial settlement without
modification. Noting that PPL’s Time-of-Use rate program had been problematic
in the past, the ALJs concluded that PPL’s proposal “represents an honest effort to
overcome these difficulties and to present a pricing option which will give
ratepayers an opportunity to save money while shifting load from peak to off-peak
times.” ALJ Recommended Decision, May 1, 2014, at 29; Brief of the
Development Authority, Appendix B.
7
The ALJs saw no problem with the absence of any Electric
Generation Suppliers offering Time-of-Use rates. The ALJs wrote:
The concern that no [Electric Generation Supplier] would offer
net metering services has not yet come to fruition, as there is no
experience with [Electric Generation Supplier]-related [Time-
of-Use] plans in the PPL service territory. There is no reason to
assume that no [Electric Generation Supplier] would seek to fill
this need. This lack of knowledge is consistent with the very
nature of a Pilot program, which is intended to explore the
viability of a proposal.
Id. at 28. The ALJs criticized PPL’s contingency plan as no plan at all.
Nevertheless, the ALJs determined that “the issue of whether [Electric Generation
Suppliers] will offer [Time-of-Use] rates is not ripe as the Pilot [Time-of-Use] Plan
has not gone into effect.” Id. at 32.
The Commission adopted the ALJs’ findings of fact and conclusions
of law. The Commission held:
Upon our review of the Partial Settlement, we find it to be
reasonable and in the public interest, and we will approve it.
We commend PPL and the other Joint Petitioners for their
willingness to explore the possibility of utilizing [Electric
Generation Suppliers] to allow the Company to meet its [Time-
of-Use] rate requirement, and for their ability to work out a fair
and reasonable compromise of the separate interests of each
Party. We believe the Pilot [Time-of-Use] Program, as
described in the Partial Settlement, will provide PPL’s
customers with the option of choosing market-based [Time-of-
Use] rates that are just and reasonable – an option that has been
long overdue in PPL’s service territory.
Commission Adjudication at 45. The Commission explained that
the Pilot [Time-of-Use] Program’s use of multiple [Electric
Generation Suppliers] rather than a single supplier [is] a
particularly attractive model for the provision of [Time-of-Use]
8
service, and has the potential to provide customers with a
variety of market-based options.
Id. at 46. Agreeing with the ALJs that the proposed contingency plan was not
viable, the Commission nevertheless approved the partial settlement because the
contingency, i.e., failure of an Electric Generation Supplier to do business with a
customer-generator, had not yet occurred. When that happens, PPL will have to
submit a plan to the Commission and “parties will have the right to challenge the
subsequent proposal.” Id. at 47 (internal citation omitted).
The Commission rejected the Development Authority’s contention
that PPL was impermissibly shifting its statutory duty to offer Time-of-Use rates to
consumer-generators to an unrelated third party, i.e., an unknown Electric
Generation Supplier. The Commission explained:
[I]t is apparent that [the Development Authority’s] main
interest in taking service under a [Time-of-Use] rate is to allow
it to maximize its cash-out revenue as a net-metered customer
by continually generating more electricity than it consumes,
thus ensuring that it will be compensated for the excess
generation at the higher [Time-of-Use] rate. However, we
agree with PPL that the primary purpose of a [Time-of-Use]
rate is to encourage customers to shift load from on-peak to off-
peak periods. Thus, a [Time-of-Use] rate is primarily meant to
affect a customer’s consumption of power, not a customer-
generator’s production of power.
Id. at 51 (emphasis in original). The Development Authority petitioned for this
Court’s review.
9
On appeal,10 the Development Authority raises five issues challenging
the Commission’s approval of PPL’s partial settlement. First, the Development
Authority contends that the pilot program does not comply with the mandate of
Section 2807(f)(5) of the Public Utility Code, 66 Pa. C.S. §2807(f)(5), which
requires PPL to offer Time-of-Use rates to all customers, regardless of whether
those customers generate electricity. Second, and in the alternative, the
Development Authority asserts that the Time-of-Use program is defective because
it does not require Electric Generation Suppliers to offer net-metering with Time-
of-Use rates to customer-generators, which undermines the purpose of the
Alternative Energy Portfolio Standards Act (Alternative Energy Act), 73 P.S.
§§1648.1 – 1648.8.11 Third, the Development Authority argues that the
Commission erred in imposing the burden upon the Development Authority to
rebut PPL’s prima facie case in support of the partial settlement. Fourth, the
Development Authority contends that the Time-of-Use program approved by the
Commission will discourage investment in alternative energy resources. Fifth, the
Development Authority argues that the partial settlement is arbitrary and unduly
discriminates against customer-generators. The Commission disagrees with all of
the Development Authority’s positions.12
10
Our scope of review of an order of the Commission determines whether there was an error of
law, a constitutional violation, or the necessary findings are supported by substantial evidence.
Lloyd v. Pennsylvania Public Utility Commission, 904 A.2d 1010, 1013 n.4 (Pa. Cmwlth. 2006).
11
Act of November 30, 2004, P.L. 1672, as amended, 73 P.S. §§1648.1-1648.8.
12
Although PPL and the Commission each filed briefs with this Court, their arguments in
opposition to the Development Authority are largely the same. For the sake of brevity we shall
refer primarily to the Commission’s arguments.
10
Mandate in 66 Pa. C.S. §2805(f)(5)
The Electricity Generation Customer Choice and Competition Act
(Competition Act), effective January 1, 1997, added Chapter 28 to the Public
Utility Code, 66 Pa. C.S. Chapter 28. In summary, Chapter 28 deregulated the
generation of electricity, established certain caps on rates, allowed electric
distribution companies to recover their stranded generation costs over a transition
period, and created the framework for a competitive retail electric market in which
customers could shop and choose among competing Electric Generation Suppliers
for their energy needs. In 2008, the legislature amended Chapter 28 in significant
ways. See Act of October 15, 2008, P.L. 1592, No. 2008-129. The amendment
relevant hereto was the requirement that,
[t]he default service provider shall offer the time-of-use rates
and real-time price plan to all customers that have been
provided with smart meter technology…. Residential or
commercial customers may elect to participate in time-of-use
rates or real-time pricing.
66 Pa. C.S. §2807(f)(5) (emphasis added). By statute, smart meter technology
signifies “metering technology and network communications technology capable
of bidirectional communication ....” 66 Pa. C.S. §2807(g) (emphasis added).
Stated otherwise, a “smart meter” is a way to achieve net-metering.13
13
The Competition Act defines “customer” as a “retail electric customer.” 66 Pa. C.S. §2803. A
customer-generator is a type of “retail electric customer” because it does not always generate
excess alternative electricity. For example, if the sun fails to shine, a customer-generator’s solar
panels will not satisfy the customer-generator’s energy demands, and the customer-generator
becomes purely a retail customer.
Relevant also is the Commission’s regulation that requires that all customer-generators to
receive the same rate options as other customers. The regulation reads, “[a]n [Electric
Distribution Company] shall provide net metering at nondiscriminatory rates identical with
respect to rate structure, retail rate components and any monthly charges to the rates charged to
(Footnote continued on the next page . . .)
11
The Alternative Energy Act is focused on the electric utility’s
purchase of excess electricity from customer-generators. The purpose of the
Alternative Energy Act is to encourage growth and investment in renewable
sources of energy. The Alternative Energy Act achieves this goal by requiring that
“[e]xcess generation from net-metered customer-generators shall receive full retail
value for all energy produced on an annual basis.” 73 P.S. §1648.5 (emphasis
added). Moreover, the statute tasks the Commission with developing “technical
and net metering interconnection rules for customer-generators intending to
operate renewable onsite generators in parallel with the electric utility grid.” 73
P.S. §1648.5.
In accordance with this mandate to develop rules for the purchase of
electricity from customer-generators, the Commission promulgated 52 Pa. Code
§75.13. That regulation requires an Electric Distribution Company, such as PPL,
to offer net-metering to customer-generators and to compensate customer-
generators at the “full retail rate.” The regulation states, in relevant part, as
follows:
(a) [Electric Distribution Companies] shall offer net metering
to customer-generators that generate electricity on the
customer-generator’s side of the meter…, on a first come, first
served basis. [Electric Generation Suppliers] may offer net
metering to customer-generators, on a first come, first served
basis, under the terms and conditions as are set forth in
agreements between [Electric Generation Suppliers] and
customer-generators taking service from [Electric Generation
Suppliers].
(continued . . .)
other customers that are not customer-generators.” 52 Pa. Code. §75.13 (emphasis added).
Thus, PPL is required to offer Time-of-Use rates to customer-generators.
12
***
(c) The [Electric Distribution Company] shall credit a
customer-generator at the full retail rate, which shall include
generation, transmission and distribution charges, for each
kilowatt-hour produced…, up to the total amount of electricity
used by that customer during the billing period. If a customer
generator supplies more electricity to the electric distribution
system than the [Electric Distribution Company] delivers to the
customer-generator in a given billing period, the excess
kilowatt hours shall be carried forward and credited against the
customer-generator’s usage in subsequent billing periods at the
full retail rate. Any excess kilowatt hours shall continue to
accumulate until the end of the year. For customer-generators
involved in virtual meter aggregation programs, a credit shall be
applied first to the meter through which the generation facility
supplies electricity to the distribution system, then through the
remaining meters for the customer-generator’s account equally
at each meter’s designated area.
(d) At the end of each year, the [Electric Distribution
Company] shall compensate the customer-generator for any
excess kilowatt-hours generated by the customer-generator
over the amount of kilowatt hours delivered by the [Electric
Distribution Company] during the same year at the [Electric
Distribution Company’s] price to compare.
***
(i) An [Electric Distribution Company] shall provide net
metering at nondiscriminatory rates identical with respect to
rate structure, retail rate components and any monthly charges
to the rates charged to other customers that are not customer-
generators. An [Electric Distribution Company] may use a
special load profile for the customer-generator which
incorporates the customer-generator’s real time generation if
the special load profile is approved by the Commission.
13
52 Pa. Code §75.13 (emphasis added).14 The regulation mandates Electric
Distribution Companies, such as PPL, to do business, i.e., provide net-metering
service, to customer-generators. By contrast, the regulation merely authorizes
Electric Generation Suppliers to offer net-metering service to customer-generators.
In its first issue, the Development Authority argues that PPL’s
proposed Time-of-Use program is defective because it means that a customer-
generator can choose service from PPL, but only at the fixed rate. It can choose
service from an Electric Generation Supplier, but without any assurance that it can
sell its excess electricity to the Electric Generation Supplier. According to the
Development Authority, this Hobson’s choice violates the 2008 amendment to the
Competition Act that PPL “shall offer” Time-of-Use rates to all customers. It also
violates the mandate in the Alternative Energy Act that customer-generators “shall
receive” full retail value for their excess electricity. The clear and unambiguous
meaning of “shall” in each statute means that the Development Authority must be
offered Time-of-Use rates by PPL and be able to sell its excess electricity on the
same terms.
The Commission disagrees. It argues that default service providers
are not required, directly, to offer Time-of-Use rates to customer-generators.
Moreover, it argues that its interpretation of the mandate in the Competition Act
that the default service provider, i.e., PPL, offer time-of-use rates to customers, and
the mandate in the Alternative Energy Act, i.e., to pay customer-generators the
“full retail price,” is entitled to deference. The Commission contends that its
14
Westlaw does not display the regulation as it currently stands, but rather displays a proposed
amendment to the regulation that, if adopted, will not go into effect until after September 5,
2016. Lexis has the correct regulation on its website.
14
interpretation of these statutes advances the Public Utility Code’s requirements that
all rates charged of customers be “just and reasonable.” 66 Pa. C.S. §1301. As the
Commission explained in its order:
The record indicates that, as a net-metering customer taking
service under PPL’s current [Time-of-Use] rates, [the
Development Authority] has derived significant benefit from its
ability to be compensated for excess generation at above-market
rates, in contrast to net-metering customers who receive service
under PPL’s fixed-price default service, and receive
compensation at a lower [fixed rate]. While [the Development
Authority] is entitled to the higher level of compensation it
receives under the provisions of PPL’s tariff and the current
[Time-of-Use] rates, we do not believe it is reasonable for [the
Development Authority], or any other customer, to receive the
higher cash-out amount at the expense of other Small
[Commercial and Industrial] customers, who must subsidize
this benefit. Therefore, to the extent that [the Development
Authority] seeks to continue receiving [Time-of-Use] service at
PPL’s current above-market rates, or seeks to have [Electric
Generation Suppliers] provide [Time-of-Use] service at such
rates, we find such a position to be unreasonable and contrary
to the public interest.
Commission Adjudication at 49. Stated otherwise, reducing the amount PPL will
have to pay a customer-generator, such as the Development Authority, will reduce
the rate PPL will impose on its other customers, i.e., “service-customers.”
a. Administrative Deference
The Commission contends that this Court should defer to its
interpretation of the statutory mandate that default service providers “shall offer”
Time-of-Use rates to customers. 66 Pa. C.S. §2807(f)(5). We have acknowledged
that “[a]s the administrative body charged with implementing the Competition Act,
the [Commission] is entitled to substantial deference in the performance of its
duties, and the [Commission’s] interpretation of the Competition Act should not be
15
overturned unless it is clear that such construction is erroneous.” Pennsylvania
Power Co. v. Public Utility Commission, 932 A.2d 300, 306 (Pa. Cmwlth. 2007)
(quoting George v. Pennsylvania Public Utility Commission, 735 A.2d 1282, 1288
(Pa. Cmwlth. 1999)). We defer to the Commission’s interpretation of an
ambiguous statute. Id. “However, where [the] statutory language is clear, such
interpretive discretion ends and the [Commission] must abide by the statute.” Id.Popowsky v. Pennsylvania Public Utility Commission, 71 A.3d 1112(Pa. Cmwlth. 2013), is instructive. There, the Commission approved an Electric
Distribution Company’s default service plan that procured power from a single
source, i.e., spot market pricing. The Office of Consumer Advocate challenged the
Commission’s approval, arguing that the plan violated Section 2807(e)(3.2) of the
Competition Act, 66 Pa. C.S. §2807(e)(3.2), which requires that power produced
by an Electric Distribution Company consist of a “prudent mix” of power procured
through spot market purchases, short-term contracts, and long-term contracts.
Popowsky, 71 A.3d at 1113. The Commission countered that a “prudent mix” of
energy could be derived from only one of the enumerated sources, so long as the
Commission believed that source to be the most prudent source of energy.
This Court concluded that it owed deference to the Commission’s
interpretation of what constitutes a “prudent mix.” We explained that “[w]here this
Court determines that a given issue ‘has not been addressed by the legislature, we
are not to impose our own construction on the statute as would be necessary in the
absence of an administrative interpretation, but review the agency’s construction of
the statute to determine whether that construction is permissible.’” Id. at 1117(quoting Bethenergy Mines, Inc. v. Department of Environmental Protection, 676
A.2d 711, 715 (Pa. Cmwlth. 1996)). However, “if the intent of the legislature is
16
clear, effect must be given to the legislature’s unambiguously expressed intent.”
Popowsky, 71 A.3d at 1117.
The Commission’s interpretation of Section 2807(f)(5) is not entitled
to deference. Unlike the statute at issue in Popowsky, there is no ambiguity in the
Competition Act’s mandate. It provides, plainly, that “[t]he default service
provider shall offer the time-of-use rates … to all customers that have been
provided with smart meter technology.” 66 Pa. C.S. §2807(f)(5) (emphasis added).
Our rules of statutory construction require that words and phrases be read
according to their common and approved usages. 1 Pa. C.S. §1903(a).15 The
legislature’s unqualified use of the words “shall offer” in Section 2807(f)(5) places
the burden on the default service provider, in this case PPL, to offer Time-of-Use
rates to customer-generators. The legislature knows the difference between a
default service provider and an Electric Generation Supplier.16 Its decision to
place the onus on default service providers was neither accidental nor arbitrary.
Simply, Section 2807(f)(5) does not authorize a default service provider to pass
along this obligation to an Electric Generation Supplier.
15
It states:
(a) Words and phrases shall be construed according to rules of grammar and
according to their common and approved usage; but technical words and phrases
and such others as have acquired a peculiar and appropriate meaning or are
defined in this part, shall be construed according to such peculiar and appropriate
meaning or definition.
1 Pa. C.S. §1903(a).
16
See 66 Pa. C.S. §2807(e)(3.1) (“Following the expiration of an electric distribution company’s
obligation to provide electric generation supply service to retail customers at capped rates, if a
customer contracts for electric generation supply service and the chosen electric generation
supplier does not provide the service or if a customer does not choose an alternative electric
generation supplier, the default service provider shall provide electric generation supply service
to that customer pursuant to a commission-approved competitive procurement plan.”)
17
We disagree with the Commission’s contention that an Electric
Generation Supplier can be a “default service provider” for purposes of Section
2807(f)(5), even though it is not the default service provider for Dauphin County.
A default service provider is defined as follows:
An electric distribution company within its certified service
territory or an alternative supplier approved by the commission
that provides generation service to retail electric customers
who:
(1) contract for electric power, including energy
and capacity, and the chosen electric generation
supplier does not supply the service; or
(2) do not choose an alternative electric
generation supplier.
66 Pa. C.S. §2803. Default service providers are also known as “providers of last
resort.” Pennsylvania Power Co., 932 A.2d at 307 n.14. There cannot be multiple
default service providers; such multiplicity is antithetical to the idea that a
particular energy provider will be the “provider of last resort.” While we do not
disagree with the Commission’s assertion that there are circumstances where an
Electric Generation Supplier can be appointed a default service provider, those
circumstances are not present here.
Our conclusion that the Commission’s interpretation is not entitled to
deference is further supported by the Commission’s acknowledgement that its
interpretation of Section 2807(f)(5) has changed. In a 2010 order, the Commission
disapproved PPL’s proposed Time-of-Use plan because it excluded customer-
generators. The Commission held that the proposal violated 66 Pa. C.S.
§2807(f)(5). Pennsylvania Public Utility Commission v. PPL Electric Services
Corp., Docket No. R-2009-212278 (March 9, 2010). The Commission observes
18
that this order was not binding on the Commission in reviewing the partial
settlement, citing Elite Industries, Inc. v. Pennsylvania Public Utility Commission,
832 A.2d 428 (Pa. 2003). An administrative agency may revise and correct its
prior interpretation of a statute. However, it cannot expect that its later
interpretation is entitled to very much deference. See, e.g., Mazza v. Secretary of
Department of Health and Human Services, 903 F.2d 953, 958 (3rd Cir. 1990)
(agency’s interpretation of its statute is entitled to little deference when it is at odds
with a prior interpretation).
b. Just and Reasonable Rates
We are similarly unpersuaded by the Commission’s argument that its
interpretation of Section 2807(f)(5) is justified by the statutory mandate to ensure
that “[e]very rate made, demanded, or received by any public utility … shall be
just and reasonable.” 66 Pa. C.S. §1301. The issue sub judice does not concern
PPL’s rates but, rather, the services PPL must offer. The statutory requirement that
utility rates be just and reasonable does not authorize the Commission to ignore or
alter other statutory directives. Popowsky v. Pennsylvania Public Utility
Commission, 910 A.2d 38, 53 (Pa. 2006). Utility rates are a function of many
factors, such as the costs associated with environmental compliance, the cost to
build a power plant and the cost to provide a return to the utility’s shareholders.
The cost of purchasing electricity from a customer-generator that has invested in
the production of green energy is only one of many factors that goes into a tariff.
The policy decision expressed in the Alternative Energy Act to encourage the
production of renewable energy sources is not conditioned on its producing the
lowest possible tariff.
19
In short, the Commission’s tariff argument is a red herring. If green
energy production increases rates, service customers may be encouraged to choose
a Time-of-Use rate, which encourages conservation, another policy goal of the
legislature. If the mandate that default service providers purchase excess
electricity places excessive pressure on tariffs, then it is for the legislature to
address that problem.
Conclusion
The Competition Act requires PPL to offer Time-of-Use rates to its
customer-generators. 66 Pa. C.S. §2807(f)(5). PPL may not satisfy this burden by
transferring it to Electric Generation Suppliers. The Commission erred in
approving the partial settlement. Because the Development Authority prevails in
its first contention, we need not consider its other arguments.
For the reasons set forth above, we reverse the Commission’s order
and remand for proceedings consistent with this opinion.
______________________________
MARY HANNAH LEAVITT, Judge
20
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
The Dauphin County Industrial :
Development Authority, :
Petitioner :
:
v. : No. 1814 C.D. 2014
:
Pennsylvania Public Utility :
Commission, :
Respondent :
ORDER
AND NOW, this 9th day of September, 2015, the order of the
Pennsylvania Public Utility Commission, dated September 11, 2014, in the above-
captioned matter is hereby REVERSED and this matter is REMANDED for further
proceedings consistent with this opinion.
Jurisdiction relinquished.
______________________________
MARY HANNAH LEAVITT, Judge