D.N. Hommrich v. Com. of PA, PA PUC ( 2020 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
David N. Hommrich, :
:
Petitioner :
:
v. : No. 674 M.D. 2016
: Submitted: August 2, 2019
Commonwealth of Pennsylvania, :
Pennsylvania Public Utilities :
Commission, :
:
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge
OPINION
BY JUDGE WOJCIK FILED: May 12, 2020
Before this Court for disposition, in our original jurisdiction, are the
parties’ cross Applications for Summary Relief to Petitioner David N. Hommrich’s
(Hommrich) “Amended Petition for Review in the Nature of a Complaint for
Declaratory and Injunctive Relief” (Amended Petition) under the Declaratory
Judgments Act (DJA).1 Specifically, Hommrich seeks a declaration that
Respondent Pennsylvania Public Utility Commission’s (PUC)2 regulations on
alternative energy projects are invalid and unenforceable. In turn, the PUC seeks
1
42 Pa. C.S. §§7531-7541.
2
We note that the proper designation for the PUC is the “Public Utility Commission,” not
“Utilities” as designated by Hommrich in the pleadings and caption. See 66 Pa. C.S. §301.
the dismissal of Hommrich’s Amended Petition because the regulations are valid
and enforceable or, alternatively, an evidentiary hearing. For the reasons that
follow, we grant in part and deny in part the parties’ cross Applications for
Summary Relief.
I. Background
In January 2017, Hommrich filed his Amended Petition challenging
the PUC’s regulations3 pertaining to net metering as unauthorized under the
Alternative Energy Portfolio Standards Act (AEPS Act),4 and seeking a declaration
of invalidity in addition to other relief. The PUC responded by filing preliminary
objections, which this Court sustained in part and overruled in part, thereby leaving
only the issue of whether the challenged regulatory provisions are invalid and
unenforceable under the AEPS Act. See Hommrich v. Pennsylvania Public
Utilities Commission (Pa. Cmwlth., No. 674 M.D. 2016, filed July 28, 2017).5 The
PUC then filed an Answer and New Matter to the Amended Petition, to which
Hommrich responded. Thereafter, the parties filed the cross Applications for
Summary Relief now before us.
3
The regulations were adopted on December 15, 2006, and appear in Title 52 of Chapter
75 of the Pennsylvania Code, 52 Pa. Code §§75.1-75.72. Those pertaining to net metering are
set forth in subchapters A and B, 52 Pa. Code §§75.1-75.17, which were amended on November
19, 2016.
4
Act of November 30, 2004, P.L. 1672, as amended, 73 P.S. §§1648.1-1648.8.
5
In Hommrich, the procedural history of this case as well as the facts alleged in the
Amended Petition are set forth in detail.
2
II. Issues
Hommrich asserts that the PUC does not have statutory authority to
promulgate certain regulations establishing eligibility criteria for net metering.
Even if it did, Hommrich contends that the regulations run afoul of the AEPS Act
and this Court’s holding in Sunrise Energy, LLC v. FirstEnergy Corp.,
148 A.3d 894, 901 (Pa. Cmwlth. 2016), appeal denied, 169 A.3d 1025 (Pa. 2017).
Specifically, Hommrich challenges the following regulations:
52 Pa. Code §75.1 – Definitions of “customer-generator” and “utility”
52 Pa. Code §75.12 – “Virtual meter aggregation”
52 Pa. Code §75.13(a)(1)
52 Pa. Code §75.13(a)(5)
52 Pa. Code §75.16 – Large customer-generators
52 Pa. Code §75.17
Hommrich maintains that there are no issues of material fact that would serve to
preclude this Court from determining that these regulations are invalid, even when
viewing the evidence in a light most favorable to the PUC. For these reasons,
Hommrich asks this Court to declare the challenged regulations as invalid and
unenforceable.
The PUC counters that Hommrich has failed to prove on the pleadings
that the PUC lacked authority to promulgate the challenged regulations or that the
challenged regulations are unreasonable. The PUC’s authority derives from the
AEPS Act as well as the Public Utility Code (Code).6 The PUC argues that its
6
66 Pa. C.S. §§101-3316.
3
regulations reflect a reasonable interpretation of the AEPS Act and that it is
entitled to great deference as the administrative agency with expertise on the
subject. Accordingly, the PUC asks this Court to dismiss Hommrich’s Amended
Petition or, in the alternative, hold an evidentiary hearing to establish material
facts.
III. Discussion
A. Legal Standards
1. Summary Relief
Rule 1532(b) of the Pennsylvania Rules of Appellate Procedure
provides that “the court may on application enter judgment if the right of the
applicant thereto is clear.” Pa. R.A.P. 1532(b); see Scarnati v. Wolf, 173 A.3d
1110, 1118 (Pa. 2017) (“The standard for granting summary relief turns upon
whether the applicant’s right to relief is clear. Summary relief on a petition for
review is similar to the relief provided by a grant of summary judgment.
Pa. R.A.P. 1532, Official Note.”) (footnote omitted). “Summary judgment is
appropriate where, after the close of pleadings, ‘there is no genuine issue of any
material fact as to a necessary element of the cause of action or defense which
could be established by additional discovery or expert report.’” Scarnati, 173 A.3d
at 1118 (quoting Pa. R.C.P. No. 1035.2(a)). Conversely, “[w]here there are
material issues of fact in dispute or if it is not clear that the applicant is entitled to
judgment as a matter of law, the application will be denied.” Sherman v. Kaiser,
664 A.2d 221, 225 (Pa. Cmwlth. 1995). “A fact is considered material if its
resolution could affect the outcome of the case under the governing law.” Hospital
& Healthsystem Association of Pennsylvania v. Commonwealth, 77 A.3d 587, 602
(Pa. 2013).
4
Hommrich maintains that there are no genuine issues of material fact
in dispute and that this matter is ripe for summary relief. However, in its
alternative request for relief, the PUC suggests that an evidentiary hearing may be
necessary to establish material facts. The dispute centers over whether the PUC
has the authority to enact the challenged regulations and whether those regulations
contradict the AEPS Act. Such issues may be resolved based on comparison of
statutory and regulatory provisions as a matter of law. See Marcellus Shale
Coalition v. Department of Environmental Protection, 193 A.3d 447, 460 (Pa.
Cmwlth.), appeal quashed, 198 A.3d 330 (Pa. 2018). Thus, we conclude that the
parties’ cross Applications for Summary Relief seeking a determination as to
whether the regulations are unlawful and unenforceable are ripe for disposition
without an evidentiary hearing.
2. DJA
Section 7533 of the DJA states:
Any person interested under a deed, will, written
contract, or other writings constituting a contract, or
whose rights, status, or other legal relations are affected
by a statute, municipal ordinance, contract, or franchise,
may have determined any question of construction or
validity arising under the instrument, statute, ordinance,
contract, or franchise, and obtain a declaration of rights,
status, or other legal relations thereunder.
42 Pa. C.S. §7533 (emphasis added). The DJA was enacted “to curb the courts’
tendency to limit the availability of judicial relief to only cases where an actual
wrong has been done or is imminent.” Bayada Nurses, Inc. v. Department of
Labor and Industry, 8 A.3d 866, 874 (Pa. 2010). The purpose of the DJA is “to
5
settle and to afford relief from uncertainty and insecurity with respect to rights,
status, and other legal relations” and, accordingly, the DJA should “be liberally
construed and administered.” 42 Pa. C.S. §7541(a); accord Office of Governor v.
Donahue, 98 A.3d 1223, 1229 (Pa. 2014) (citation omitted); Funk v. Wolf, 144
A.3d 228, 251 (Pa. Cmwlth. 2016), aff’d, 158 A.3d 642 (Pa. 2017). As we
previously determined in Hommrich, “[a] DJA action is the appropriate means to
settle and afford relief from uncertainty and insecurity with respect to the
regulations and [Hommrich’s] putative status as a customer generator.” Slip op. at
16.
B. AEPS Act and Regulations
In 2004, the Pennsylvania legislature recognized the need for
environmentally cleaner alternatives to fossil fuel energy production, and as a
result, it passed the AEPS Act. The AEPS Act incentivizes alternative energy
producers to generate their own energy utilizing one of the approved alternative
energy production methods, such as wind and solar power, and sell any excess
energy not used to the Electric Distribution Companies (EDCs). Section 2 of the
AEPS Act, 73 P.S. §1648.2. Section 5 of the AEPS Act requires EDCs to purchase
any net energy produced by these alternative energy providers at the full retail
value. Section 5 of the AEPS Act, 73 P.S. §1648.5. Colloquially speaking, this
provision allows the meter to run backwards. Of particular import here, Section 5
of the AEPS Act further provides:
The [PUC] shall develop technical and net metering
interconnection rules for customer-generators intending
to operate renewable onsite generators in parallel with
the electric utility grid, consistent with rules defined in
other states within the service region of the regional
6
transmission organization [(RTO)] that manages the
transmission system in any part of this Commonwealth.
The [PUC] shall convene a stakeholder process to
develop Statewide technical and net metering rules for
customer-generators. The [PUC] shall develop these
rules within nine months of the effective date of this act.
73 P.S. §1648.5 (emphasis added). Pursuant to this legislative rule-making
authority, the PUC adopted the regulations establishing technical and net metering
interconnection rules for customer-generators that are subject to this litigation.
1. Legislative Rule-Making
The Supreme Court of Pennsylvania “has long recognized the
distinction in administrative agency law between the authority of a rule adopted
pursuant to an agency’s legislative rule-making power and the authority of a rule
adopted pursuant to interpretive rule-making power.” Popowsky v. Pennsylvania
Public Utility Commission, 910 A.2d 38, 53 (Pa. 2006) (citations omitted).
“Legislative rule-making is an exercise of legislative power by an administrative
agency, pursuant to a grant of legislative power by the legislative body, and is
valid and is as binding upon a court as a statute if it is: (a) within the granted
power, (b) issued pursuant to proper procedure, and (c) reasonable.” Id.; accord
Tire Jockey Service, Inc. v. Department of Environmental Protection, 915 A.2d
1165, 1186 (Pa. 2007). “Generally, a legislative regulation establishes ‘a
substantive rule creating a controlling standard of conduct.’” Borough of
Pottstown v. Pennsylvania Municipal Retirement Board, 712 A.2d 741, 743 (Pa.
1998) (quoting Slippery Rock Area School District v. Unemployment
Compensation Board of Review, 983 A.2d 1231, 1236 (Pa. 2009)).
7
“An interpretative rule on the other hand depends for its validity not
upon a Law-making grant of power, but rather upon the willingness of a reviewing
court to say that it in fact tracks the meaning of the statute it interprets.”
Popowsky, 910 A.2d at 53. Legislative regulations are binding whereas
interpretative regulations are merely entitled to deference. Slippery Rock, 983
A.2d at 1236. All regulations, whether legislative or interpretative, “must be
consistent with the statute under which they were promulgated.” Popowsky, 910
A.2d at 53.
Here, Section 5 of the AEPS Act constitutes a legislative grant of
power. Consequently, we engage in a legislative rule-making analysis to
determine the validity of the challenged regulations. See Tire Jockey; Popowsky.
Although the parties agree that the challenged regulations were adopted following
the appropriate procedures, they disagree regarding the other prongs of the validity
test. Therefore, our focus is on whether the challenged regulations fall within the
PUC’s granted power and are reasonable. Tire Jockey; Popowsky.
a. PUC’s Granted Power
“To determine whether a regulation is adopted within an agency’s
granted power, we look for statutory language authorizing the agency to
promulgate the legislative rule and examine that language to determine whether the
rule falls within the grant of authority.” Marcellus Shale Coalition v. Department
of Environmental Protection, 216 A.3d 448, 459 (Pa. Cmwlth.), appeals quashed,
223 A.3d 655 (Pa. 2019) (citing Slippery Rock, 983 A.2d at 1239-41). We
consider “the purpose of the statute and its reasonable effect” and whether “the
regulation is consistent with the enabling statute.” Id. “Clearly[,] the legislature
8
would not authorize agencies to adopt binding regulations inconsistent with the
applicable enabling statutes.” Slippery Rock, 983 A.2d at 1241. “When . . . a
regulation presents ‘an actual conflict with the statute,’ we cannot reasonably
understand the regulation to be within the agency’s ambit of authority, and the
statute must prevail.” Marcellus Shale, 216 A.3d at 459 (quoting AMP Inc. v.
Commonwealth, 814 A.2d 782, 786 (Pa. Cmwlth. 2002), aff’d, 852 A.2d 1161 (Pa.
2004)). Indeed, “a regulation that is at variance with a statute is ineffective to
change the statute’s meaning.” Geisinger Health System v. Bureau of Workers’
Compensation Fee Review Hearing Office (SWIF), 138 A.3d 133, 139 (Pa.
Cmwlth. 2016). “That is so because ‘the power of an administrative agency to
prescribe rules and regulations under a statute is not the power to make law, but
only the power to adopt regulations to carry into effect the will of the Legislature
as expressed by the statute.’” Id. (quoting Volunteer Firemen’s Relief Association
of the City of Reading v. Minehart, 227 A.2d 632, 635-36 (Pa. 1967)). “When an
agency adopts regulations at variance with the statute, the regulations, and not the
statute, fall by the wayside.” Id. (citing Union Electric Corporation v. Board of
Property Assessment, Appeals and Review of Allegheny County, 721 A.2d 823 (Pa.
Cmwlth. 1998), rev’d on other grounds, 746 A.2d 581 (Pa. 2000)).
Sometimes, the General Assembly confers broad power. For
example, in Section 201(a) of the Unemployment Compensation Law,7 the General
Assembly vested power in the Department of Labor and Industry (L&I) “to adopt,
amend, and rescind such rules and regulations . . . as it deems necessary or
suitable. Such rules and regulations shall not be inconsistent with the provisions of
7
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.
§761(a).
9
this act.” In Slippery Rock, our Supreme Court described this power as “broad”
and one that encompassed L&I’s authority “to define by regulation terms otherwise
undefined by the statute.” Slippery Rock, 983 A.2d 1239. In Pennsylvania Human
Relations Commission v. Uniontown Area School District, 313 A.2d 156, 168-71
(Pa. 1973), the Supreme Court held that similar statutory language in Section 7(d)
of the Pennsylvania Human Relations Act8 allowed the PHRC to promulgate a
regulation that defined “de facto segregation” in such a way that it imposed strict
desegregation standards and new accompanying duties on public schools. In other
chapters relating to alternative energy, the General Assembly has yielded similar
broad authority to other agencies. See, e.g., Section 7 of Alternative Fuels
Incentive Act9 (“The [Department of Environmental Protection (DEP)] shall
promulgate regulations necessary to carry out the purposes of this act.”); Section
607 of Alternative Energy Investment Act10 (“The [Pennsylvania Housing Finance
Agency] shall promulgate guidelines necessary for the administration and
enforcement of this act.”).
In contrast, the powers the General Assembly conferred to the PUC
under the AEPS Act are much narrower. Sunrise Energy, 148 A.3d at 901.
Section 5 of the AEPS Act authorizes the PUC to “develop technical and net
metering interconnection rules for customer-generators intending to operate
8
Act of October 27, 1955, P.L., as amended, 43 P.S. §957(d) (authorizing the
Pennsylvania Human Relations Commission (PHRC) “[t]o adopt, promulgate, amend and
rescind rules and regulations to effectuate the policies and provisions of this act”).
9
Act of November 29, 2004, P.L. 1376, 73 P.S. §1647.7.
10
Act of July 9, 2008, P.L. 1873 (Spec. Sess. No. 1), 73 P.S. §1649.607.
10
renewable onsite generators in parallel with the electric utility grid . . . .” 73 P.S.
§1648.5. What is missing is the broad grant of authority to do whatever is
necessary to effectuate the enabling statute.11 See id.
In Sunrise Energy, this Court examined the PUC’s regulatory
authority under the AEPS Act in addressing a jurisdictional issue. There, the
PUC12 argued that it had primary jurisdiction over a contract dispute between a
customer-generator and an EDC regarding their net metering arrangement under
the AEPS Act. We examined the AEPS Act to determine whether it conferred any
authority on the PUC to resolve such disputes and, ultimately, we determined it did
not. Sunrise Energy, 148 A.3d at 901. We opined that the PUC’s authority under
the AEPS Act is “narrow” in scope and, essentially, is limited to establishing
“technical and net metering interconnection rules.” Id. The Act “does not give the
PUC power to act beyond this narrow authorization.” Id. (emphasis added) (citing
Section 5 of the AEPS Act, 73 P.S. §1648.5).
The PUC argues that reliance on Sunrise Energy is misplaced because
this Court merely held that the PUC lacked exclusive adjudicatory authority over
certain issues arising under the AEPS Act pursuant to the judicial doctrine of
11
We also note that the General Assembly did not delegate exclusive authority under the
AEPS Act to the PUC, but rather authorized interagency responsibility with regard to
environmental and health and safety standards. Specifically, Section 7(b) of the AEPS Act,
discussed infra, confers upon the DEP the power to “ensure that all qualified alternative energy
sources meet all applicable environmental standards and shall verify that an alternative energy
source meets the standards set forth in section 2,” which is where the AEPS Act defines, inter
alia, “alternative energy sources.” 73 P.S. §1648.7(b). Section 6 of the AEPS Act directs the
PUC to cooperate with L&I to develop health and safety standards, as needed, regarding
facilities generating energy from alternative energy sources. Section 6 of the AEPS Act,
73 P.S. §1648.6.
12
In Sunrise Energy, the PUC filed an amicus curiae brief.
11
primary jurisdiction. We did not address the PUC’s legislative rule-making
authority, much less hold that the PUC lacked legislative rule-making authority to
promulgate net metering regulations. Although our specific focus was on
jurisdiction, our broader focus was on the PUC’s authority under the AEPS Act,
which is the issue at hand. Therefore, our determination that the PUC’s authority
under the AEPS Act is limited to establishing “technical and net metering
interconnection rules” is equally applicable.
Nevertheless, the PUC maintains that its authority to promulgate the
challenged net metering regulations is not solely under the AEPS Act. Rather, the
PUC maintains that it has the authority to promulgate the regulations implementing
the AEPS Act under its general legislative rule-making authority to regulate public
utilities and the services they provide, including the service of interconnection and
net metering of onsite generation. Specifically, the PUC posits that its authority to
regulate public utilities derives from Sections 501, 508, 1501, 1504 and 2807(e) of
the Code, 66 Pa. C.S. §§501, 508, 1501, 1504 and 2807(e).
Section 501 of the Code sets forth the general powers delegated to the
PUC. 66 Pa. C.S. §501. Pursuant thereto, the PUC is authorized to “enforce,
execute and carry out, by its regulations, orders, or otherwise, all and singular, the
provisions of [the Code] . . . .” 66 Pa. C.S. §501(a). Further, the PUC:
shall have general administrative power and authority to
supervise and regulate all public utilities doing business
within this Commonwealth. The [PUC] may make such
regulations, not inconsistent with law, as may be
necessary or proper in the exercise of its powers or for
the performance of its duties.
66 Pa. C.S. §501(b). Section 508 of the Code authorizes the PUC to vary, reform
and revise contracts entered into between any public utility and any person,
12
corporation or municipal corporation. 66 Pa. C.S. §508. Section 1501 gives the
PUC the “sole and exclusive jurisdiction to promulgate rules and regulations for
the allocation of natural or artificial gas supply by a public utility.” 66 Pa. C.S.
§1501. Section 1504 of the Code allows the PUC to prescribe regulations and
rules governing standards of service and facilities of public utilities. 66 Pa. C.S.
§1504. Section 2807 of the Code authorizes the PUC to establish regulations
governing EDCs. 66 Pa. Code §2807.
Further, the PUC maintains that it has the authority to enact and
enforce its regulations pursuant to Sections 501 (general powers), 502 (pertaining
to enforcement proceedings by the PUC), 701 (pertaining to complaints regarding,
inter alia, any violation of any law or “of any regulation or order of the [PUC]”)
and 3301(a) (pertaining to civil penalties for, inter alia, any failure to “comply
with any regulation or final direction, requirement, determination or order made by
the [PUC] . . . ”). 66 Pa. C.S. §§501, 502, 701, and 3301(a).
We recognize the PUC’s broad authority in regulating public utilities
under the Code. As this Court recently opined, “the General Assembly intended
the PUC to occupy the field of public utility regulation, in the absence of an
express grant of authority to the contrary.” Delaware Riverkeeper Network v.
Sunoco Pipeline L.P., 179 A.3d 670, 692 (Pa. Cmwlth.), appeal denied, 192 A.3d
1106 (Pa. 2018). However, we are not dealing with “public utilities” here. See 66
Pa. C.S. §102 (definition of “public utility”). Rather, the AEPS Act applies to
“customer-generators,” which by definition are not public utilities. See Section 2
of the AEPS Act, 73 P.S. §1648.2. We, therefore, conclude that the PUC’s
authority in this matter derives solely from the AEPS Act, and not the Code.
13
Under the AEPS Act, the PUC’s authority is limited to developing “technical and
net metering interconnection rules.” Section 5 of the AEPS Act, 73 P.S. §1648.5.
b. Reasonable
In deciding whether a legislative regulation is reasonable:
The court may not substitute its own judgment for that of
the agency. To demonstrate that the agency has
exceeded its administrative authority, it is not enough
that the prescribed system of accounts shall appear to be
unwise or burdensome or inferior to another. Error or
lack of wisdom in exercising agency power is not
equivalent to abuse. What has been ordered must appear
to be so entirely at odds with fundamental principles as to
be the expression of a whim rather than an exercise of
judgment.
Tire Jockey, 915 A.2d at 1186 (internal quotations and citations omitted); accord
Slippery Rock, 983 A.2d at 1242. “[A]ppellate courts must accord deference to the
agency and may only overturn an agency determination if the agency acted in bad
faith or the regulations constituted a manifest or flagrant abuse of discretion or a
purely arbitrary execution of the agency’s duties or functions.” Popowsky,
910 A.2d at 55; accord Tire Jockey, 915 A.2d at 1186. However, when there is
express, contradictory language in the statute conferring regulatory authority, a
proposed regulation would be deemed “unreasonable.” See Keith v.
Commonwealth, 151 A.3d 687, 695 (Pa. Cmwlth. 2016). Nevertheless, “where
legislative rules are adopted within the agency’s granted power and issued pursuant
to proper procedure, they enjoy a presumption of reasonableness.” Marcellus
Shale, 216 A.3d at 460. With these principles in mind, we examine each of the
challenged regulations to determine whether the PUC acted within the scope of its
14
delegated authority under the AEPS Act and, if so, whether the regulations are
reasonable.
2. Challenged Regulations
a. 52 Pa. Code §75.1 – Definitions of “Customer-Generator” & “Utility”
Section 2 of the AEPS Act defines “customer-generator” as:
A nonutility owner or operator of a net metered
distributed generation system with a nameplate capacity
of not greater than 50 kilowatts[13] if installed at a
residential service or not larger than 3,000 kilowatts at
other customer service locations, except for customers
whose systems are above three megawatts[14] and up to
five megawatts who make their systems available to
operate in parallel with the electric utility during grid
emergencies as defined by the [RTO] or where a
microgrid is in place for the primary or secondary
purpose of maintaining critical infrastructure, such as
homeland security assignments, emergency services
facilities, hospitals, traffic signals, wastewater treatment
plants or telecommunications facilities, provided that
technical rules for operating generators interconnected
with facilities of an electric distribution company,
electric cooperative or municipal electric system have
been promulgated by the Institute of Electrical and
Electronic Engineers [(IEEE)]] and the [PUC].
73 P.S. §1648.2.
Section 2 of the AEPS Act defines “net metering” as:
The means of measuring the difference between the
electricity supplied by an electric utility and the
electricity generated by a customer-generator when any
13
A kilowatt or “kW” is “[a] unit of power representing 1,000 watts. A kW equals
1/1000 of a MW.” 52 Pa. Code §75.1.
14
A megawatt or “MW” is “[a] unit of power representing 1,000,000 watts. An MW
equals 1,000 kWs.” 52 Pa. Code §75.1.
15
portion of the electricity generated by the alternative
energy generating system is used to offset part or all of
the customer-generator’s requirements for electricity.
Virtual meter aggregation on properties owned or leased
and operated by a customer-generator and located within
two miles of the boundaries of the customer-generator’s
property and within a single electric distribution
company’s service territory shall be eligible for net
metering.
73 P.S. §1648.2 (emphasis added). Thus, a nonutility owner or operator of a net-
metered facility may utilize net metering so long as “any portion” of the electricity
that the customer-generator generates is used to offset part of the customer-
generator’s electrical requirement. Id. The General Assembly directed the PUC to
establish “rules for customer-generators.” 73 P.S. §1648.5 (emphasis added).
Under the regulations, the PUC provides its own definition of
“customer-generator”:
A retail electric customer that is a nonutility owner or
operator of a net metered distributed generation system
with a nameplate capacity of not greater than 50
kilowatts if installed at a residential service or not larger
than 3,000 kilowatts at other customer service locations,
except for customers whose systems are above 3
megawatts and up to 5 megawatts who make their
systems available to operate in parallel with the electric
utility during grid emergencies as defined by the [RTO]
or where a microgrid is in place for the primary or
secondary purpose of maintaining critical infrastructure,
such as homeland security assignments, emergency
services facilities, hospitals, traffic signals, wastewater
treatment plants or telecommunications facilities,
provided that technical rules for operating generators
interconnected with facilities of an EDC, electric
cooperative or municipal electric system have been
promulgated by the [IEEE] and the [PUC].
16
52 Pa. Code §75.1 (emphasis added). When compared to the statutory definition,
the definitions are virtually identical but for the PUC’s addition of “a retail electric
customer that is” to qualify nonutility owner or operator.
Moreover, the AEPS Act does not define “utility.” The PUC defines
“utility” as:
(i) A business, person or entity whose primary purpose,
character or nature is the generation, transmission,
distribution or sale of electricity at wholesale or retail.
(ii) The term excludes building or facility owners or
operators that manage the internal distribution system
serving the building or facility and that supply electric
power and other related power services to occupants of
the building or facility.
52 Pa. Code §75.1.
In short, the PUC’s regulation alters the AEPS Act’s requirement that
a customer-generator simply be a “nonutility owner or operator” of a net metering
facility by adding the requirement that the customer-generator must be “a retail
electric customer that is a nonutility owner or operator” of a net metering facility.
52 Pa. Code §75.1. The PUC then defined the term “utility,” which is not defined
in the AEPS Act, to include any business whose purpose is the “generation,
transmission, distribution or sale of electricity at wholesale or retail.” Id.
According to the PUC, to qualify as a “customer-generator,” the entity must have a
need for electricity from the EDC independent from its need for electricity needed
to power its generation facilities. See 52 Pa. Code §75.12. The PUC claims that
had the General Assembly intended to permit generation facilities to qualify for net
metering benefits regardless of their electric need at the generation site, it would
17
not have used the term “customer-generator” to identify the entities that qualify for
net metering under the AEPS Act.
By the same token, the General Assembly did not add such
restrictions to its statutory definition of “customer-generator.” In fact, the General
Assembly took steps to broaden, not restrict, the pool of alternative energy sources
with the 2007 amendments. When the General Assembly amended the definition
of customer-generator in 2007, it increased the kilowatt capacity from 1,000 to
3,000 kilowatts and the amount of system megawatts from one to two megawatts
to three to five megawatts. Compare 73 P.S. §1648.2 with former Section 2 of the
AEPS Act, formerly 73 P.S. §1648.2 (2007). Prior to the 2007 amendments, the
definition of “net metering” measured “the electricity generated by a customer-
generator when the renewable electricity generated by the alternative energy
generating system is intended primarily to offset part or all of the customer-
generator’s requirements for electricity.” Former 73 P.S. §1648.2 (2007)
(emphasis added). Under the current definition, a nonutility owner or operator of a
net-metered facility may utilize net metering so long as “any portion” of the
electricity that the customer-generator generates is used to offset part of the
customer-generator’s electrical requirement. 73 P.S. §1648.2 (emphasis added).
Moreover, the PUC’s restrictions run contrary to the purpose of the
AEPS Act. The purpose of the AEPS Act is to encourage the development of
energy generated from renewable and environmentally beneficial sources. See
Historical and Statutory Notes to AEPS Act. Even the PUC recognizes that the
“unquestioned purpose of the AEPS Act is to promote alternative energy
generation.” Respondent’s Brief at 9. However, the PUC’s definitions restrict the
field of qualifying participants and, in the process, curtail the development of
18
alternative renewable energy in the Commonwealth. Id. To illustrate, under the
AEPS Act, Hommrich qualifies as a customer-generator; under the regulations, he
does not.
The General Assembly authorized the PUC to establish “rules for
customer-generators,” a term defined by statute. 73 P.S. §1648.5 (emphasis
added). The General Assembly did not task the PUC with redefining or restricting
eligibility standards as established in the AEPS Act. The challenged definitions do
just that. The regulatory definitions modify the express statutory language by
adding new criteria and requirements that limit the ability of certain customer-
generators to net meter excess generation of energy. In so doing, the PUC is
legislating who can and cannot utilize net metering by providing greater
restrictions than the legislature prescribed and has acted beyond its legislative rule-
making power.
Although the PUC argues that its regulations reflect a reasonable
interpretation of the AEPS Act and that it should be accorded great deference as
the administrative agency with expertise on the subject, the PUC cannot alter the
AEPS Act. By redefining these terms and adding requirements that the legislature
did not see fit to include, the PUC has stepped beyond its appropriate legislative
mandate and into the realm of making law. Such changes amount to policy
decisions that require legislative review. For these reasons, we conclude that the
PUC’s regulatory definitions of “customer-generator” and “utility” are
unenforceable because they redefine statutory eligibility standards and curtail the
development of alternative energy in conflict with the AEPS Act.
19
b. 52 Pa. Code §75.12 - “Virtual Meter Aggregation”
Next, the PUC’s regulations define “Virtual meter aggregation” as:
The combination of readings and billing for all meters
regardless of rate class on properties owned or leased and
operated by a customer-generator by means of the EDC’s
billing process, rather than through physical rewiring of
the customer-generator’s property for a physical, single
point of contact. Virtual meter aggregation on properties
owned or leased and operated by the same customer-
generator and located within 2 miles of the boundaries of
the customer-generator’s property and within a single
EDC’s service territory shall be eligible for net metering.
Service locations to be aggregated must be EDC service
location accounts, held by the same individual or legal
entity, receiving retail electric service from the same
EDC and have measureable electric load independent of
the alternative energy system. To be independent of the
alternative energy system, the electric load must have a
purpose other than to support the operation,
maintenance or administration of the alternative energy
system.
52 Pa. Code §75.12 (emphasis added).
As defined in the AEPS Act, the definition of “net metering” merely
requires that “any portion of the electricity generated by the alternative energy
generating system is used to offset part or all of the customer-generator’s
requirements for electricity . . . .” 73 P.S. §1648.2 (emphasis added). As part of
that definition, the AEPS Act provides: “Virtual meter aggregation on properties
owned or leased and operated by a customer-generator and located within two
miles of the boundaries of the customer-generator’s property and within a single
electric distribution company’s service territory shall be eligible for net metering.”
Id.
20
The PUC’s definition of “virtual meter aggregation” adds a new
component that the customer-generator must have a “measurable electric load
independent” of the customer-generator’s system. 52 Pa. Code §75.12. For there
to be independent load, the electric load must “have a purpose other than to
support” the customer-generator’s alternative energy system. Id. These
requirements concerning independent load are found nowhere in the AEPS Act.
Although we recognize the PUC’s concerns regarding unrestricted net metering,
such eligibility restrictions are matters for the General Assembly, not the PUC, to
legislate. Therefore, this regulation is unenforceable because it is beyond the
PUC’s authority.
c. 52 Pa. Code §75.13(a)(1)
Next, the PUC’s regulations provide:
(a) EDCs and [default service providers (DSPs)] shall
offer net metering to customer-generators that generate
electricity on the customer-generator’s side of the meter
using Tier I or Tier II alternative energy sources, on a
first come, first served basis. To qualify for net metering,
the customer-generator shall meet the following
conditions:
(1) Have electric load, independent of the alternative
energy system, behind the meter and point of
interconnection of the alternative energy system. To be
independent of the alternative energy system, the electric
load must have a purpose other than to support the
operation, maintenance or administration of the
alternative energy system.
52 Pa. Code §75.13(a)(1) (emphasis added). Pursuant to the regulation, customer-
generators must have an “independent load” in order to net meter. As discussed
21
above, there is no corollary for this eligibility requirement in the AEPS Act. For
the same reasons, this regulation is likewise unenforceable.
d. 52 Pa. Code §§75.13(a)(5) and 75.17
Under the regulations, any application for a proposed net metering
facility with a nameplate capacity exceeding 500 kilowatts must be approved by
the PUC. 52 Pa. Code §75.13(a)(5). Specifically, Section 75.13(a)(5) of the
regulations provides:
An alternative energy system with a nameplate capacity
of 500 kW or more must have [PUC] approval to net
meter in accordance with §75.17 . . . .
52 Pa. Code §75.13(a)(5).
In turn, Section 75.17(a) of the regulations establishes the application
process for obtaining the PUC’s approval of customer-generator status.
Specifically, Section 75.17 provides:
(a) This section establishes the process through which
EDCs obtain [PUC] approval to net meter alternative
energy systems with a nameplate capacity of 500 kW or
greater.
(b) An EDC shall submit a completed net metering
application to the [PUC’s] Bureau of Technical Utility
Services [(Bureau)] with a recommendation on whether
the alternative energy system complies with the
applicable provisions of this chapter and the EDC’s net
metering tariff provisions within 20 days of receiving a
completed application. The EDC shall serve its
recommendation on the applicant.
(c) The net metering applicant has 20 days to submit a
response to the EDC’s recommendation to reject an
application to the [Bureau].
22
(d) The [Bureau] will review the net metering
application, the EDC recommendation and applicant
response, and make a determination as to whether the
alternative energy system complies with this chapter and
the EDC’s net metering tariff.
(e) The [Bureau] will approve or disapprove the net
metering application within 10 days of an EDC’s
submission recommending approval. If disapproved, the
[Bureau] will describe in detail the reasons for
disapproval. The [Bureau] will serve its determination
on the EDC and the applicant.
(f) The [Bureau] will approve or disapprove the net
metering application within 5 days of an applicant’s
response to an EDC’s recommendation to deny approval,
but no more than 30 days after an EDC submits an
application with a recommendation to deny approval,
whichever is earlier. The [Bureau] will serve its
determination on the EDC and the applicant.
(g) The applicant and the EDC may appeal the
determination of the [Bureau] in accordance with §5.44
(relating to petitions for reconsideration from actions of
the staff).
52 Pa. Code §75.17.
Hommrich argues that this regulatory application process runs afoul
of the AEPS Act because it gives the PUC the ultimate authority to approve net
metering on facilities with a 500 kW capacity or greater. Although the General
Assembly did not authorize the PUC to redefine statutory terms and alter eligibility
standards, it did task the PUC with the development of “technical and net metering
interconnection rules.” 73 P.S. §1648.5. The General Assembly authorized the
PUC to carry out its responsibilities under the AEPS Act, which encompasses not
only the development of but also ensuring the compliance with those rules. See
Section 7(a) of the AEPS Act, 73 P.S. §1648.7(a). The application process set
23
forth in Sections 75.13(a)(5) and 75.17 of the regulations is a systematic and
reasonable way for the PUC to ensure compliance with the AEPS Act and
applicable regulations.
Relying on Section 7(b) of the AEPS Act, 73 P.S. §1648.7(b),
Hommrich argues that the PUC has no power to ensure compliance because the
General Assembly conferred this authority exclusively to the DEP. However, this
Section merely provides that “[t]he [DEP] shall ensure that all qualified alternative
energy sources meet all applicable environmental standards and shall verify that an
alternative energy source meets the standards set forth in [S]ection 2.” 73 P.S.
§1648.7(b) (emphasis added). First, the AEPS Act and the PUC’s regulations are
not environmental standards. Second, to be considered an “alternative energy
source,” the source must meet one of the delineated sources for the production of
electricity, including solar photovoltaic, wind power, hydropower, etc., each of
which are defined under Section 2 of the AEPS Act, 73 P.S. §1648.2. Section 2 of
the AEPS Act expressly names the DEP in the municipal solid waste definition as
the entity with the authority to determine compliance with the environmental
standards of the federal Clean Air Act, 42 U.S.C. §§ 7401-7671q, and the Solid
Waste Management Act.15 The DEP’s responsibilities under the AEPS Act are
limited and specific. Neither “customer-generator” status nor “net metering” is a
standard that any “alternative energy source” must meet to be considered an
“alternative energy source” under the AEPS Act. See id. Although the DEP is
vested with the authority to ensure compliance with environmental standards and
alternative energy source standards, this authority does not divest the PUC of its
authority pertaining to “technical and net metering interconnection rules.” We,
15
Act of July 7, 1980, P.L. 380, as amended, 35 P.S. §§6018.101 - 6018.1003.
24
therefore, conclude that Sections 75.13(a)(5) and 75.17 of the regulations fall
within the PUC’s granted power, do not run afoul of the AEPS Act, and were
promulgated based upon a reasonable interpretation of it.
e. 52 Pa. Code §75.16 - Large customer-generators
Finally, Section 2 of the AEPS Act addresses the requirements of a
net-metered facility’s operation during a grid emergency in the definition of
“customer-generator.” 73 P.S. §1648.2. Specifically, non-residential customer-
generators operating systems above three megawatts and up to five megawatts,
must make their system “available to operate in parallel with the electric utility
during grid emergencies as defined by the [RTO]” or when a “microgrid is in place
for the primary or secondary purpose of maintaining critical infrastructure . . . .”
Id.
The PUC classifies systems operating with a capacity between three to
five megawatts as “large customer-generators.” 52 Pa. Code §75.16. The PUC
established rules for operation for large customer-generators. 52 Pa. Code
§75.16(a). Specifically, the PUC’s regulations provide:
(b) A retail electric customer may qualify its alternative
energy system for customer-generator status if it makes
its system available to operate in parallel with the grid
during grid emergencies by satisfying the following
requirements:
(1) The alternative energy system is able to
provide the emergency support consistent with the RTO
tariff or agreement.
(2) The alternative energy system is able to
increase and decrease generation delivered to the
distribution system in parallel with the EDC’s operation
of the distribution system during the grid emergency.
25
(c) A retail electric customer may qualify its alternative
energy system located within a microgrid for customer-
generator status if it satisfies the following requirements:
(1) The alternative energy system complies with
IEEE Standard 1547.4.
(2) The customer documents that the alternative
energy system exists for the primary or secondary
purpose of maintaining critical infrastructure.
52 Pa. Code §75.16(b), (c).
Under subsection (b), “large customer-generators” must provide
support that is consistent with the RTO tariff and the system must be able to
increase or decrease generation in parallel with an EDC’s operation of the
distribution system during a grid emergency. 52 Pa. Code §75.16(b)(1), (2). The
RTO’s tariff or agreement defines what a grid emergency is in that RTO. The
ability to increase or decrease generation is the technical ability to operate in
parallel with the electric utility during grid emergencies as required by the AEPS
Act.
Hommrich argues that the AEPS Act contains no requirement that a
customer-generator’s system be designated as an emergency-type support resource
by an RTO. Rather, the AEPS Act only requires that the customer-generator’s
system be “available.” Contrary to Hommrich’s argument, it is not enough for the
system to be “available.” The AEPS Act makes it clear that the system must be
physically capable of operating “in parallel” during a grid emergency.
73 P.S. §1648.2. The PUC’s regulatory provisions provide technical guidance for
what is required to “operate in parallel” during a “grid emergency.”
Under subsection (c), the PUC requires an alternative energy system
to comply with IEEE Standard 1547.4, which is the standard for microgrids, and
26
that the customer must document that the alternative energy system exists for the
primary or secondary purpose of maintaining critical infrastructure. This
subsection provides technical criteria that closely aligns with the requirements set
forth in the AEPS Act. See 73 P.S. §1648.2. Upon review, the large customer-
generator provisions set forth in Section 75.16 of the regulations are within the
PUC’s legislative rule-making authority, consistent with the language in the AEPS
Act, and reasonable.
IV. Conclusion
In sum, the General Assembly authorized the PUC to promulgate
“technical and net metering interconnection rules.” Section 5 of the AEPS Act,
73 P.S. §1648.5. By redefining and restricting eligibility standards established by
the AEPS Act, the PUC has acted beyond its grant of legislative rule-making
authority. Therefore, the definitions of “customer-generator” and “utility” as set
forth in Section 75.1, and “virtual meter aggregation” as set forth in Section 75.12
and Section 75.13(a)(1) of the PUC’s regulations, overreach and contradict the
AEPS Act and are therefore beyond the scope of authority and unreasonable.
However, Sections 75.13(a)(5), 75.16, and 75.17 of the regulations fall within the
grant of legislative rule-making authority and are reasonable. Accordingly, we
grant in part and deny in part the parties’ cross Applications for Summary Relief
consistent with the foregoing opinion.
MICHAEL H. WOJCIK, Judge
27
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
David N. Hommrich, :
:
Petitioner :
:
v. : No. 674 M.D. 2016
:
Commonwealth of Pennsylvania, :
Pennsylvania Public Utilities :
Commission, :
:
Respondent :
ORDER
AND NOW, this 12th day of May, 2020, consistent with the foregoing
opinion, the parties’ cross Applications for Summary Relief are GRANTED IN
PART and DENIED IN PART, and we hereby DECLARE the following
regulations invalid and unenforceable: 52 Pa. Code §§75.12 and 75.13(a)(1), and
the definitions of “customer-generator” and “utility” contained in 52 Pa. Code
§§75.1.
__________________________________
MICHAEL H. WOJCIK, Judge