Thе DAUPHIN COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY, Petitioner v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.
Commonwealth Court of Pennsylvania.
Sept. 9, 2015.
Reargument Denied Oct. 30, 2015.
123 A.3d 1124
Argued June 15, 2015.
Accordingly, I respectfully dissent from that part of the majority‘s opinion affirming the trial court on the issue of the charter school enrollment caps and the denial of funding where the caps are exceeded; I concur in the remainder of the majority‘s opinion.
Christopher T. Wright, Harrisburg, for intervenor PPL Electric Utilities Corporation.
Jennedy S. Johnson, Assistant Counsel, Harrisburg, for respondent.
BEFORE: MARY HANNAH LEAVITT, Judge, and PATRICIA A. McCULLOUGH, Judge, and ANNE E. COVEY, Judge.
OPINION BY Judge MARY HANNAH LEAVITT.
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 Develop-
ment 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.
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 eleсtricity 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 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 elеctricity 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
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 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 Plаn, 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 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
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 Generatiоn Suppliers] execute the Participation Form at the initiation of the Pilot [Time-of-Use] Program or if all participating [Electric Generation Suppliers] 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 Generаtion 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 contingency plan, PPL, i.e., the “Company” referenced above in paragraph 49, promises that it will “en-
Procedural History
The Office of Consumer Advocate and CAUSE-PA filed separate answers to PPL‘s petition for approval of the Default Service Plan, inсluding 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 Jоel 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.
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 cоme 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.
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] 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 Genеration 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.
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,
Mandate in 66 Pa.C.S. § 2807(f)(5)
The Electricity Generation Customer Choice and Competition Act (Competition Act), effective January 1, 1997, added Chapter 28 to the Public Utility Code,
[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.
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.”
In accordance with this mandate to develop rules for the purchase of electricity from customer-generators, the Commission promulgated
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 rаte components and any monthly charges to the rates charged to 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.
(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].
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(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 suрplies 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.
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(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.
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
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 interpretation of these statutes advances the Public Utility Code‘s requirements that all rates charged of customers be “just and reasonable.”
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 undеr 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 unreasonablе 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.
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
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 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.”
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:
(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.
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
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.”
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 provid-
Conclusion
The Competition Act requires PPL to offer Time-of-Use rates to its customer-generators.
For the reasons set forth above, we reverse the Commission‘s order and remand for proceedings consistent with this opinion.
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.
Robert C. McCULLIGAN, Petitioner, v. PENNSYLVANIA STATE POLICE and, Charles Steinmetz, PSP State Trooper, Individual and Official Capacity and, Michael J. Minanno, PSP State Trooper, Individual and Official Capacity and, Anthony J. Spagnoletti, Montgomery County Detective, Individual and Official Capacity and, Walter Zdunowski, Montgomery County Detective, Individual and Official Capacity and, Erick Echevarria, Montgomery County Detective, Individual and Official Capacity, Respondents.
Commonwealth Court of Pennsylvania.
Submitted on Briefs July 24, 2015.
Decided Sept. 10, 2015.
Notes
(a) Words and phrases shall be construed according to rules of grammar and according to their common and apprоved 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.