In re Investigation to Review the Avoided Costs that Serve as Prices for the Standard-Offer Program in 2020 (Allco Renewable Energy Limited & PLH LLC, Appellants)
No. 2020-311
Supreme Court
April Term, 2021
2021 VT 59
On Appeal from Public Utility Commission
Anthony Z. Roisman, Chair
Thomas Melone of Allco Renewable
NOTICE: This opinion is subject to motions for reargument under
PRESENT: Reiber, C.J., Robinson, Eaton, Carroll and Cohen, JJ.
¶ 1. CARROLL, J. Allco Renewable Energy Limited & PLH LLC (collectively Allco), appeal the Public Utility Commission‘s (PUC) September 2020 decision awarding two provider-block contracts to Green Mountain Power (GMP). Allco argues that the PUC erred in determining that the proposals submitted by GMP on behalf of an undisclosed independent developer were proper provider-block projects under
¶ 2. We begin with a brief background on the standard-offer program. In 2009, the Legislature established a standard-offer requirement as part of the Sustainably Priced Energy Enterprise Development (SPEED) Program to promote the rapid development of renewable energy in Vermont. 2009, No. 45, § 4. In 2012, the Legislature made significant changes to the standard-offer program, now codified at
¶ 3. The PUC is directed to allocate the cumulative capacity among different categories of renewable-energy technologies, including methane derived from landfills, solar, wind power, hydroelectric power, and biomass.
[T]he incremental costs to retail electricity providers of electric energy or capacity, or both, which, but for the purchase through the standard offer, such providers would obtain from distributed renewable generation that uses the same generation technology as the category of renewable energy for which the [PUC] is setting the price.
¶ 4. The PUC is authorized to “use a market-based mechanism, such as a reverse auction or other procurement tool,” to fill the annual capacity if it finds that such mechanism is consistent with federal law and “the goal of timely development at the lowest feasible cost.”
¶ 5. In June, GMP submitted two provider-block proposals—one for a project based in Bristol, Vermont, and the other for a project in Pittsford, Vermont. In a letter accompanying both proposals, GMP disclosed the following:
In the interest of transparency, GMP also wishes to explain the structure underpinning its Application. GMP executed an agreement with a solar developer under which the developer assigned its interest in a Land Purchase Option for this project site. GMP thus maintains the required site control for the project. If awarded the project under the RFP, GMP intends to execute a Standard Offer PPA with VEPP Inc., also as required. Once executed, GMP then intends to assign the PPA and the Land Purchase Option to the developer who would continue on with permitting, construction, operation and all deliveries under the Standard Offer PPA. GMP would have no further involvement in
* In a separately docketed appeal, In re Investigation to Review the Avoided Costs that Serve as Prices for Standard-Offer Program in 2020 (Investigation I), 2021 VT 28, __ Vt. __, __ A.3d __, Allco challenged the PUC‘s March 2020 decision retaining the market-based mechanism, arguing that the PUC failed to make a finding, as required by
In this appeal, Allco renews its arguments that the PUC‘s March 2020 decision retaining the market-based mechanism violated
the project other than to receive its pro rata share of output from the project under the Standard Offer Program.
¶ 6. In July 2020, the Facilitator filed a report recommending that the PUC award contracts to the two provider-block proposals submitted by GMP. Allco filed comments, arguing that the GMP proposals were not bona fide provider-block projects because the legislative intent behind
¶ 7. In September 2020, the PUC issued an order directing the Facilitator to make standard-offer contracts available to the two GMP proposals. In response to Allco‘s comments, the PUC concluded that nothing in the RFP, PUC precedent, or
¶ 8. Allco filed a motion for reconsideration. Citing legislative history—namely, testimony before the Senate Committee on Natural Resources and Energy—Allco again argued that the Legislature intended for utilities to own provider-block projects. In an order denying the motion, the PUC explained that it was declining to look to legislative history to determine the meaning of
¶ 9. On appeal, Allco argues that the PUC erred in concluding that utilities do not need to own provider-block projects for three reasons. First, Allco argues that legislative history confirms that the Legislature intended for utilities to own provider-block projects. Second, Allco argues that prior PUC orders demonstrate that the PUC has similarly understood that provider-block projects must be owned by utilities. Finally, Allco argues that because “GMP has admitted that it is merely acting as an agent for an undisclosed developer,” agency principles indicate that the undisclosed developer, not GMP, is proposing the project.
¶ 10. The Department of Public Service (DPS) responds that the plain language of
¶ 11. “Out of respect for the expertise and informed judgment of agencies, and in recognition of this Court‘s proper role in the separation of powers, we accord agency decisions substantial deference.” In re Conservation Law Found., 2018 VT 42, ¶ 15, 207 Vt. 309, 188 A.3d 667. That deference extends to “an agency‘s interpretation of a statute that [it] is tasked with interpreting.” In re Stowe Cady Hill Solar, LLC, 2018 VT 3, ¶ 20, 206 Vt. 430, 182 A.3d 53 (quotation omitted). “[W]e will overturn an agency‘s interpretation of a statute if there is a compelling indication of an error or if the interpretation is unjust or unreasonable.” In re Acorn Energy Solar 2, LLC, 2021 VT 3, ¶ 23, __ Vt. __, 251 A.3d 899 (quotation omitted).
¶ 12. According deference to the PUC‘s decision, we conclude that Allco has not demonstrated that the PUC‘s interpretation of
I. Legislative History
¶ 13. In arguing that the Legislature intended for utilities to own provider-block projects, Allco cites to the following testimony of then-Representative Cheney, now a PUC Commissioner, before the Senate Committee on Natural Resources and Energy in March 2012:
[Ms. Cheney]: The other difference [to the standard-offer program is] that we say that in each block . . . of new capacity, utilities may qualify for 2 and-a-half megawatts. So out of each 10 megawatts, a utility could build a standard offer plant or plants up to 2.5 megawatts every year.
[Representative Lyons, Chair]: Can I just ask how that—how the amount is determined that utilities would own?
[Ms. Cheney]: Well it was more a judgment. It was based on a judgment that we didn‘t want utilities to take up everything.
. . . .
But we wanted to be reasonable in allowing them to have a small proportion.
(Emphases added.) Allco argues that this exchange demonstrates that the Legislature intended for utilities to own provider-block projects.
¶ 14. The legislative history Allco cites does not demonstrate that the PUC‘s interpretation of
II. PUC Precedent
¶ 15. The PUC concluded that its interpretation of
¶ 16. We decline to address Allco‘s argument regarding the VPPSA projects because it is not adequately briefed. In addition, the prior PUC orders Allco cites do not demonstrate that the PUC has inconsistently interpreted
A. VPPSA Bids
¶ 17. In concluding that utilities do not need to own and operate provider-block projects, the PUC relied in part on the fact that it had previously awarded contracts to the VPPSA for projects that were developed by third parties. On appeal, Allco argues that the VPPSA projects do not support the PUC‘s conclusion because those projects were beneficially owned by VPPSA. We do not consider this argument because it is not adequately briefed.
B. Prior PUC Orders
¶ 18. Allco also argues that prior PUC orders indicate that the PUC has understood, at least implicitly, that utilities must own provider-block projects. We begin with a brief review of those orders. In 2013, the PUC issued an order implementing, among other things, the provider-block program, which the Legislature created in the 2012 amendments to the standard-offer program. In the order, the PUC established a market-based mechanism for allocating the annual capacity in the provider block, the size of the provider block, the application of technology allocations in the provider block, and the price paid for electricity produced by provider-block projects. Programmatic Changes to the Standard-Offer Program, Nos. 7873 & 7874, 2013 WL 840116, at *29 (Vt. Pub. Util. Comm‘n Mar. 1, 2013).
¶ 19. On the price issue, the PUC explained that some comments expressed concern “about the ability of providers to ‘hide’ project costs in rates,” meaning that utilities could include capital and operational costs associated with their standard-offer projects in the rates that electric consumers pay. Id. Although the PUC acknowledged these concerns, it explained that they were “easily addressed” by explicitly clarifying that “[a]ll capital costs and operating expenses associated with a project that accepts a standard-offer must be booked below-the-line and are not added to rate base or eligible for recovery as an expense.” Id. The PUC explained that the price paid to utilities for a standard-offer project already includes operational costs and expenses:
Under the standard-offer contract, the SPEED Facilitator will pay the provider for all kWhs produced at the contract price. The contract price is the price bid by the provider in the RFP, and, at a maximum, the avoided cost . . . . This price includes a rate of return that is intended to induce distribution utilities to propose and develop projects at the lowest feasible cost. The avoided cost also includes all expenses associated
with the project, including the development costs and on-going operation and maintenance expense.
¶ 20. In February 2014, GMP filed a motion for reconsideration, asking the PUC to reconsider its decision requiring utilities to exclude capital costs and operating expenses for standard-offer projects from their rates. The PUC granted the motion, explaining that after considering the parties’ comments, it was persuaded to alter its previous ruling and “permit utilities to include standard-offer projects in the Provider Block in their rates.” Order re Request for Reconsideration & Implementation of the Provider Block, Nos. 7873 & 7874, 2014 WL 794194, at *4 (Vt. Pub. Util. Comm‘n Feb. 20, 2014). It explained that its “concerns about the potential for double cost recovery [could] be adequately addressed” by “reducing a utility‘s cost-of-service by the amount of the contract payments that utility receives from the SPEED Facilitator” and by requiring “any utility desiring to develop standard-offer projects [to] file a proposed accounting treatment for [PUC] review and approval that demonstrates that the utility will not realize a double recovery for any portion of the standard-offer project‘s construction or operation.” Id. While the PUC acknowledged that its approach could potentially allow a utility to submit a bid that “was materially in excess of its anticipated costs,” and result in ratepayers contributing to an above-cost project, it concluded that
¶ 21. In June 2020, however, the PUC revised its accounting standard for provider-block projects, requiring that provider-block proposals “include a pricing methodology that equals, and does not exceed, the anticipated costs of the proposed project.” Order re Revised Accounting Standard for Provider Block Projects, No. 20-1481-INV, at 2 (Vt. Pub. Util. Comm‘n June 10, 2020), https://epuc.vermont.gov/?q=node/64/149820. The PUC explained that, based on its experience, allowing a utility to bid more than its anticipated costs in the RFP was inappropriate because it could “result in excessive cost recovery by the utility and an unreasonable cost shift between the ratepayers of that utility and the ratepayers of other utilities.” Id. at 1-2.
¶ 22. Allco argues that the PUC‘s interpretation of
¶ 23. We certainly agree with Allco that these orders establish a pricing structure based on the assumption that utilities will own provider-block projects. But, the PUC‘s interpretation of
III. Agency
¶ 24. Finally, Allco argues that agency principles indicate that GMP, the utility, is not really proposing the project. Allco cites to the general rule that an agent acts on behalf and subject to control of a principal. See Restatement (Second) of Agency § 1 (1958) (“Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control . . . .“). Because, according to Allco, GMP admitted that it is acting as an agent for an undisclosed developer, GMP is not really proposing the project—the undisclosed developer is.
¶ 25. Although the PUC recognized that Allco raised this argument below, it did not directly address it, concluding more generally instead that Allco had not demonstrated that GMP‘s bids were inconsistent with the requirements of the RFP, the statute, or the PUC‘s prior orders. We similarly conclude that Allco‘s agency argument does not demonstrate that the PUC‘s interpretation of
Affirmed.
FOR THE COURT:
Associate Justice