NOTICES
PENNSYLVANIA PUBLIC
UTILITY COMMISSION
Implementation of Act 40 of 2017; Petition of Community Energy, Inc. for Clarification and/or Reconsideration; Petition of Cypress Creek Renewables, LLC for Clarification or Reconsideration; Petition of Exelon Generation Company, LLC and Constellation NewEnergy, Inc. for Clarification and/or Reconsideration; and Petition of American Municipal Power, Inc. for Rehearing and Reconsideration
[48 Pa.B. 5098]
[Saturday, August 18, 2018]Public Meeting held
August 2, 2018Commissioners Present: Gladys M. Brown, Chairperson; Andrew G. Place, Vice Chairperson; Norman J. Kennard; David W. Sweet; John F. Coleman, Jr.
Implementation of Act 40 of 2017; Petition of Community Energy, Inc. for Clarification and/or Reconsideration; Petition of Cypress Creek Renewables, LLC for Clarification or Reconsideration; Petition of Exelon Generation Company, LLC and Constellation NewEnergy, Inc. for Clarification and/or Reconsideration; and Petition of American Municipal Power, Inc. for Rehearing and Reconsideration; M-2017-2631527
Opinion and Order By the Commission:
Before the Pennsylvania Public Utility Commission (Commission) for consideration and disposition are the Petitions for Clarification and/or Reconsideration filed by Community Energy, Inc. and Community Energy Solar, LLC (Community Energy); Cypress Creek Renewables, LLC (Cypress Creek); Exelon Generation Company, LLC and Constellation NewEnergy, Inc. (Constellation); and American Municipal Power, Inc. (AMP). For the reasons expressed in this Opinion and Order we will grant, in part, and deny, in part, the Petitions for Clarification and Reconsideration.
Background
Section 11.1 of Act 40 of 2017 amends the Administrative Code (Adm. Code), 71 P.S. §§ 1 et seq., by adding Section 2804 to the Adm. Code, 71 P.S. § 714, that amends the Alternative Energy Portfolio Standards Act (AEPS Act), 73 P.S. §§ 1648.1—1648.8, 66 Pa.C.S. § 2814, by establishing geographical limits on solar photovoltaic (solar PV) systems that qualify for the solar PV share requirement in Section 3 of the AEPS Act, 73 P.S. § 1648.3(b)(2). Act 40 became effective on October 30, 2017.
On December 21, 2017, the Commission adopted a Tentative Implementation Order (TIO) at the above referenced Docket seeking comments on proposed interpretations and implementation of Section 2804 of the Adm. Code.1 In addition to the TIO, Chairman Gladys M. Brown and Vice Chairman Andrew G. Place issued a joint statement that presented supplemental interpretations of Section 2804(2)(i) and 2804(2)(ii) of the Adm. Code, as well as the status of banked solar PV alternative energy credits (SRECs) for comment. Written comments were to be submitted within 30 days of the publication of the TIO in the Pennsylvania Bulletin, February 5, 2018.2
On April 19, 2018, upon consideration of the comments, the Commission adopted the Joint Motion of Chairman Gladys M. Brown and Vice Chairman Andrew G. Place setting forth the Commission's interpretation and implementation of Act 40. On May 3, 2018, the Act 40 Final Implementation Order (FIO) was entered. On May 16, 2018, the Commission issued a Secretarial Letter providing additional procedural information regarding the Section 2804(2)(ii) of the Adm. Code, 71 P.S. § 714(2)(ii), contract approval process.
On May 11, 2018, Community Energy filed a joint Petition for clarification and/or reconsideration of the May 3, 2019 FIO. In an Order entered on May 17, 2018, the Commission granted the Joint Petition by Community Energy pending review of, and consideration on, the merits. In addition, the Commission stayed the 60-day period for electric distribution companies (EDCs) and electric generation suppliers (EGSs) to file a petition seeking qualification of credits under Section 2804(2)(ii) of the Adm. Code, 71 P.S. § 714(2)(ii).
On May 16, 2018, Cypress Creek filed a Petition for clarification or reconsideration of the Commission's FIO. Also, on May 16, 2018, Cypress Creek filed a Petition for a stay or supersedeas. On May 18, 2018, Constellation filed a joint Petition for clarification and/or reconsideration of the Commission's FIO. Also, on May 18, 2018, AMP filed a Petition for rehearing and reconsideration of the Commission's FIO. On May 29, 2018, the Mid-Atlantic Renewable Energy Coalition (MAREC) filed an Answer in support of the Joint Petition of Community Energy.
On May 31, 2018, the Commission issued a Secretarial Letter stating that the Order entered on May 17, 2018, granting the Joint Petition of Community Energy in accordance with Pa.R.A.P. 1701(b)(3) shall also apply to the petitions for clarification, reconsideration and/or rehearing filed by Cypress Creek, AMP, and Constellation, as well as MAREC's Answer. The Commission also stated that it will address the issues raised in these petitions in conjunction with its disposition of the petition of Community Energy. Finally, the Commission noted that it will address Cypress Creek's Petition for stay in a subsequent order.
Discussion
The Petitions filed by Community Energy, Cypress Creek and Constellation seek reconsideration or clarification of the Commission's FIO interpretation of the contract provisions under Section 2804(2)(ii) of the Adm. Code. MAREC's Answer supports the requests for reconsideration or clarification filed by Community Energy and Cypress Creek. The Petition filed by AMP seeks rehearing of reconsideration of the Commission's FIO interpretation of Section 2804(2)(i) of the Adm. Code. We will address the Community Energy, Cypress Creek and Constellation Petitions together and address the AMP Petition separately.
1. Legal Standard
As noted by the Petitioners, the Commission's standard for granting clarification or reconsideration is set out in Duick v. Pennsylvania Gas and Water Company, 56 Pa. P.U.C. 553 (1982):
A Petition for Reconsideration, under the provisions of 66 Pa.C.S. § 703(g), may properly raise any matters designed to convince the Commission that it should exercise its discretion under this code section to rescind or amend a prior order in whole or in part. In this regard, we agree with the court in the Pennsylvania Railroad Company case, wherein it was stated that ''[p]arties. . .cannot be permitted by a second motion to review and reconsider, to raise the same questions which were specifically decided against them. . . .'' What we expect to see raised in such petitions are new and novel arguments, not previously heard, or considerations which appear to have been overlooked by the Commission.Duick, 56 Pa. P.U.C. at 559 (quoting Pennsylvania Railroad Co. v. Pennsylvania Public Service Commission, 179 A. 850, 854 (Pa. Super. Ct. 1935)).
Under the standards of Duick, a petition for reconsideration may properly raise any matter designed to convince this Commission that we should exercise our discretion to amend or rescind a prior Order, in whole or in part. Such petitions are likely to succeed only when they raise ''new and novel arguments'' not previously heard or considerations which appear to have been overlooked or not addressed by the Commission. Duick, 56 Pa. P.U.C. at 559.
The Commission has held that a Petition for Clarification must meet the same standard as a Petition for Reconsideration. Petition of PECO Energy Company for Approval of its Revised POR Program, Docket No. P-2009-2143607 (Order entered August 24, 2010). Applying the above standards, we shall address the merits of the Petitioners.
2. Positions of Community Energy, Cypress Creek and Constellation
a. Community Energy
Community Energy states that its affiliates have been the developers of certain solar PV installations in states outside of Pennsylvania, which were certified as AEPS Tier I solar PV AECs prior to October 30, 2017, but which it no longer owns, but for which it retains the rights to the AECs. Community Energy asserts that it has long term contracts with Pennsylvania EDCs and EGSs for the sale of AECs, which were effective prior to October 30, 2017. Community Energy Petition ¶ 1. Community Energy requests that the Commission clarify that all parties in the contractual chain from producer to the EDC and EGS acting in good faith within the boundaries of existing law should not have contracts nullified by a change in law. Community Energy asserts that these parties owning the AECs in the contractual chain of custody should be eligible to grandfather the AECs by a single petition, so long as the statutory criteria are otherwise met. Community Energy Petition ¶ 3.
Community Energy stated that the FIO did not address the situation, such as Community Energy's, where there might be more than one party in the chain from production to retirement of the AECs. Accordingly, Community Energy believes that it is appropriate for the Commission to clarify its FIO to address this situation. Community Energy Petition ¶ 4.
b. Cypress Creek
Cypress Creek states that, through its affiliates, it is the owner of eleven solar PV systems located outside of Pennsylvania, which, prior to the effective date of Act 40, were certified as authorized suppliers of PA SRECs for use by parties with an AEPS Act compliance obligation. Cypress Creek Petition ¶ 10. Cypress Creek also asserts that prior to the effective date of Act 40, its affiliated owners of the systems were all parties to contracts for the sale of SRECs for use in meeting the requirements of the AEPS Act. Cypress Creek goes on to assert that its generators entered into contracts for the sale of their PA SRECs with brokers or aggregators and that those brokers or aggregators may not have yet entered into contracts for the sale of all the Cypress Creek-generated PA SRECs to Pennsylvania load-serving entities. Cypress Creek Petition ¶ 12. Cypress Creek argues that the retagging of SRECs has implications for contracts requiring the delivery of PA SRECs, as it can no longer deliver the attribute required to satisfy the terms of the contract, with the only way to avoid contract termination is if contracting parties negotiate mutually satisfactory results. Cypress Creek asserts that this problem may likely impact the contracts between solar generators and EDCs/EGSs that the Commission explicitly intended to grandfather. Cypress Creek Petition ¶ 17.
Cypress Creek requests clarification of the FIO regarding the Commission's apparent limitation on the protections provided by Section 2804(2)(ii) of Act 40, to existing contracts with only a discrete subset of counterparties. Cypress Creek submits that otherwise qualifying contracts with other types of counterparties, including SREC brokers, should be protected by the Act's preservation of certifications until current contracts expire. Cypress Creek Petition ¶ 18. In support of its position, Cypress Creek states that SRECs may be contractually secured through direct, aggregator, broker or financial institution contracts, including a broker contract with generators like Cypress Creek's affiliates that may require a broker to deliver qualified AECs to an EDC or EGS. Cypress Creek posits that while a broker may or may not be assigned the ownership of a particular AEC, it is contractually obligated to provide a set number of AECs to the EGS or EDC during a specified time period. Cypress Creek Petition ¶ 22.
Cypress Creek argues that several legislators, through their comments, urged the Commission to preserve these contracts. In particular, Cypress Creek cites Senator Scavello as stating that ''this [grandfathering] language was included only at the request of AEPS contract holders to further emphasize that contracts shall be allowed to sunset.'' Cypress Creek also cites Representative Frankel as stating that ''out-of-state facilities can maintain AEPS certification only until their current contract expires.'' Cypress Creek Petition ¶ 26.
Cypress Creek asserts that applying Act 40 in a way that undermines contracts that were entered into prior to passage of the Act would be a retroactive modification of existing contractual rights that is plainly illegal, especially without a clear and unambiguous directive from the General Assembly to mandate that result. Cypress Creek also asserts that arbitrarily limiting the grandfathering clause to only contracts with certain counterparties raises serious constitutional issues because it treats two sets of out-of-state contracts differently without any rational basis for doing so in violation of the Equal Protection Clause of the United States Constitution. Cypress Creek Petition ¶ 28. Cypress Creek goes on to assert that such disparate treatment, resulting in interfering with existing contracts would also violate the Contracts Clause of the United States Constitution.3 Cypress Creek argues that if the FIO was interpreted to grandfather only a certain subset of contracts (those between an EDC/EGS and a solar system) this interpretation of Subsection 2804(2)(ii) would severely if not totally impair the value of the Cypress Creek pre-existing SREC contracts. Cypress Creek Petition ¶ 29.
Cypress Creek states that it is important to make clear that it does not oppose and in fact agrees with the Commission's interpretation and application of the Act to, on a going forward basis, close the state's borders to the use of out-of-state RECs as PA SRECs. Cypress Creek narrowly requests that the Commission clarify or modify the grandfathering provision to be interpreted as including all binding contracts for the sale and purchase of SRECs until contract expiration, and not just those contracts between an out-of-state system and an EDC or EGS. Cypress Creek Petition ¶ 30.
c. Constellation
Constellation states that ExGen provides wholesale power and risk management services to wholesale customers, including through participation in wholesale load procurements, in both regulated and restructured energy markets. Constellation Petition ¶ 2. Constellation also states that Constellation is an EGS in Pennsylvania and that its national retail energy platform offers its retail residential, commercial, industrial and public-sector customers electric and natural gas commodity, energy efficiency and load management solutions, and both grid-scale and behind-the-meter distributed energy resource development. As an active EGS in Pennsylvania, Constellation is subject to the AEPS Act requirements as amended by Act 40. Constellation Petition ¶ 3.
Constellation states that it supports the Commission's first requirement that maintained certification under Section 2804(2)(ii) is only available for contracts for SRECs generated by out-of-state facilities that were certified prior to October 30, 2017, the Act 40 effective date. Constellation, however, requests clarification regarding the contracts eligible for maintained certification under the Commission's second requirement for Section 2804(2)(ii). Constellation Petition ¶ 9.
Constellation asserts that Community Energy's filing correctly acknowledges that there are often more than two parties and more than one contract involved in the SREC supply chain, and that any process to honor pre-existing SREC contracts must recognize the intricate wholesale market that lies between the facility at the beginning of the supply chain and the EDCs and EGSs at the end of the supply chain. Constellation Petition ¶ 10. Constellation posits that it is common practice for SRECs produced by solar facilities to be bought and sold many times before being acquired and retired by an EGS or EDC to meet current load. Constellation further posits that it is also common practice for aggregators to purchase SRECs pursuant to a contract under the premise that they can resell those SRECs to market participants. Constellation Petition ¶ 11. Constellation states that it and its affiliates take a portfolio approach to SREC procurement, contracting with many different parties to procure the SRECs necessary to meet the requirements of its wholesale default service supplier, EGS and on behalf of other entities such as EDCs. Constellation further states that it and its affiliates procure SRECs directly from certified out-of-state solar PV facilities and through contracts with intermediaries. Constellation Petition ¶ 12.
Constellation asserts that the language in Section 2804(2)(ii) supports the view that the appropriate focus should be on the facilities, not the EDC or EGS. Constellation asserts the statute expressly contemplates that facilities meeting the requirements in Section 2804(2)(ii) will maintain their certification and that the statute does not say that facilities meeting that criteria will be decertified and may then petition to be recertified or to have their SRECs retagged. Constellation Petition ¶ 13. Constellation acknowledges the footnote in the Commission's May 16, 2018 Secretarial Letter that provided guidance with respect to the ''trail of contracts'' that typically occurs throughout the lifetime of an SREC that would put entities at the very end of the supply chain in a position of having to potentially trace an SREC back to its origins. Constellation states that this guidance could be interpreted to require EGSs and EDCs to submit their contracts with an aggregator and the aggregator's contract with the entity from which it purchased the SRECs, and then the next entity, tracing the contract trail all the way back to the certified facility. Constellation argues that this ''trail of contracts'' is unnecessary, onerous and, in many cases, impossible. Constellation Petition ¶ 15. Constellation asserts that as each SREC has its own serial number and a state-specific certification, this information is enough to ensure that each SREC is only used once and there is not double counting and that this tracking system eliminates the need for demonstrating the contract path. Constellation Petition ¶ 16.
Constellation supports Community Energy's request that the Commission clarify that the grandfathering under Section 2804(2)(ii) is available for ''all parties in the contractual supply chain from producer to the EDC and EGSs [and wholesale default service suppliers] acting in good faith within the boundaries of existing law.'' Constellation, however, offers additional proposals to help address the difficult question of how to recognize the full SREC supply chain. Constellation Petition ¶ 20. First, Constellation proposes that the Commission focus on the beginning of the supply chain and clarify that a certified out-of-state facility's SREC contracts entered into prior to October 30, 2017 will be honored under Section 2804(2)(ii) and extending the protection to all parties in the supply chain. Constellation asserts that this interpretation of Act 40 will allow for a thoughtful, deliberate ''closing of Pennsylvania's solar border'' as opposed to the market uncertainty that would ultimately result if the Commission were to decertify hundreds of thousands of valid SRECs that have been purchased pursuant to negotiated contracts entered into before the effective date of Act 40. Constellation Petition ¶ 21.
Next, Constellation offers an alternative to address the supply chain issue that allows EGSs, EDCs and/or their wholesale suppliers be permitted to present contracts for the sale of SRECs commensurate with the filing entities' Pennsylvania load. Under this alternative, the supplier could only pursue the grandfathering of contracts commensurate with load served in Pennsylvania, but the supplier would decide which contracts (within its portfolio of SREC contracts) to bring forward. Constellation notes that this alternative offers a phased-in approach to Section 2804(2)(ii) that protects customers from higher prices. Constellation Petition ¶ 23. Constellation asserts that this approach recognizes that EDCs rely primarily on contracts with wholesale default service suppliers such as ExGen to fulfill a significant portion of the default service supply obligation, noting that EDCs generally require wholesale suppliers to provide electric generation supply bundled with the SRECs, Tier I, and Tier 2 AECs required to satisfy the AEPS obligations for the electric generation provided. Constellation Petition ¶ 24. Finally, Constellation asserts that this alternative recognizes that EGSs generally purchase their SRECs from a number of sources, including aggregators, and that by allowing EGSs to present contracts commensurate with their Pennsylvania load, the Commission ensures that EGSs will not incur additional costs. Constellation Petition ¶ 25.
Constellation also raises some other issues relating to the implementation of Section 2804(2)(ii). First, Constellation requests that the Commission direct the AEC Program Administrator to retag SRECs in PJM-GATS from facilities that are subject to Section 2804(2)(ii). Constellation Petition ¶¶ 27—31. Next, Constellation requests that any confidential contracts filed redact the price per SREC as it asserts that this information is not relevant to a solar PV facility's eligibility status under Section 2804(2)(ii) or to any other determining factor in this proceeding. Constellation is also concerned that as these contracts have confidentiality provisions it will be onerous, if not impossible, to produce the contracts timely as each EGS and EDC might need to notify the transacting parties and afford them a reasonable time to respond. Constellation Petition ¶¶ 32—35. Finally, Constellation states that because of the uncertainty arising out of the implementation of Section 2804(2)(ii), it recommends that the Commission consider extending the AEPS compliance reporting due date. Constellation Petition ¶ 36.
3. Disposition
We find that Community Energy, Cypress Creek and Constellation have met the standards for granting a Petition for Clarification. All three parties have raised new and novel arguments about the implementation of Section 2804(2)(ii) of the Adm. Code, 71 P.S. § 714(2)(ii), that were not previously raised or considered by the Commission. This is evident by the fact that they seek further clarification of implementation and procedural issues initially addressed in the Commission's May 16, 2018, Secretarial Letter issued subsequent to the adoption of the FIO. Accordingly, we provide the following clarification as to the Implementation of Section 2804(2)(ii) as set forth below.
In the FIO, we stated the following regarding Sections 2804(2)(i) and (2)(ii):
For the reasons expressed in Section F.2. above, when reviewing the totality of comments described above, it becomes evident that Section 2804(1)(i), 2804(1)(ii), and 2804(1)(iii) explicitly describe the qualifications for Tier I Solar facilities after passage of Act 40; Section 2804(2)(i) clarifies that all Tier I Solar facilities certified before passage of Act 40 that are located within the geographic boundaries of Pennsylvania are to be held harmless from this legislation; and Section 2804(2)(ii) enjoins the legislation from breaching existing contracts from out-of-state Tier I Solar facilities which were entered into before passage to serve the AEPS Act needs of Pennsylvania entities.FIO at 26. We went on to state that ''we interpret this section to only permit out-of-state facilities that are (a) already certified as AEPS Tier I Solar Photovoltaic and that (b) have entered into a contract with a Pennsylvania EDC or EGS serving Pennsylvania customers, for the sale of solar credits, to maintain certification until the expiration of the contract.'' FIO at 26-27. We further stated that ''this maintained certification should only be applicable to the amount of credits contractually committed to by an out-of-state certified facility to an EDC or EGS.'' FIO at 27.
a. Section 2804(2)(ii) Clarification
We agree with Community Energy, Cypress Creek and Constellation that further clarification is needed regarding the contracting parties covered by these statements regarding the implementation of Section 2804(2)(ii), which we provide here. However, we cannot adopt the position of Cypress Creek and Constellation that all contracts entered into by any out-of-state solar PV facility prior to October 30, 2017, qualify under Section 2804(2)(ii) as these parties suggest, as it would make this Section meaningless. To explain, we begin with the words of the statute. Section 2804(2) states as follows:
(2) Nothing under this section or section 4 of the ''Alternative Energy Portfolio Standards Act'' shall affect any of the following:....(ii) Certification of a solar photovoltaic system with a binding written contract for the sale and purchase of alternative energy credits derived from solar photovoltaic energy sources entered into prior to the effective date of this section.A key phrase in this section is ''for the sale and purchase of alternative energy credits.'' Alternative energy credits (AECs) are defined in the AEPS Act and our regulations as ''[a] tradable instrument that is used to establish, verify and monitor compliance with [the AEPS Act].'' The definition goes on to state that ''[a] unit of credit shall equal one megawatt hour of electricity from an alternative energy source.'' See 73 P.S. § 1648.2 and 52 Pa. Code § 75.1. A solar photovoltaic system that produces electricity is an alternative energy source under the AEPS Act. See 73 P.S. § 1648.2 (definition of alternative energy source). Therefore, one megawatt hour of electricity produced by a solar photovoltaic system can produce one AEC, if it is used to meet the requirements of the AEPS Act and meets all the other requirements of the AEPS Act, as amended.
With that said, we find it significant that solar photovoltaic is an alternative or renewable energy source in every state that has a renewable energy standard.4 We also find it significant that many persons and entities, including Pennsylvania EGSs, buy and sell credits created by solar PV systems as a value-added service or product, to offset their carbon dioxide footprint, or to simply support solar PV development.5 Accordingly, one megawatt of electricity generated from a solar PV system can be sold and used to satisfy any alternative or renewable standard requirement or can be sold as a product to any entity seeking to purchase it for their own purpose. As such, one megawatt hour of electricity from a solar PV can only become an AEPS Act AEC, if it is in the end used to establish, verify and monitor compliance with the AEPS Act. Otherwise, it is simply a product that can be bought and sold for any state renewable energy standard requirement or for any purpose by any person or entity that does not have a requirement to purchase such energy under such standards.
We find it significant that there are 5,094 out of 5,965 out-of-state solar PV facilities6 that are certified in Pennsylvania as well as other states, indicating that a vast majority of these facilities can sell their solar credits to multiple entities for use in other states, not just Pennsylvania. We also find it significant that all of these solar PV facilities can sell their solar credits to other entities for uses other than to meet an alternative or renewable energy standard.
We also disagree with Cypress Creek's characterization of comments submitted by Senator Scavello and Representative Frankel. Cypress Creek quotes Senator Scavello as stating that ''this [grandfathering] language was included only at the request of AEPS contract holders to further emphasize that contracts shall be allowed to sunset.'' Cypress Creek also cites Representative Frankel as stating that ''out-of-state facilities can maintain AEPS certification only until their current contracts expire.'' Cypress Creek posits these selective quotes as legislative support for its position that the Commission preserve all contracts. Cypress Creek Petition ¶ 26. We, however, find that based on the entirety of the comments submitted by Senator Scavello and Representative Frankel that their comments in fact support the Commission's position as stated in the FIO. Senator Scavello's entire comment on the contract provision was as follows:
On the language regarding contracts: This language was included only at the request of the AEPS contract holders to further emphasize that contracts shall be allowed to sunset. Most of these contracts are only 3—5 years and once those contracts sunset, they will not be renewed if the (solar system) distribution system is not within the geographical boundaries of the Commonwealth. If the Commission finds that the language of the Act refers to ''contracts'' other than those used for AEPS compliance, then the purpose of Act 40 will be rendered useless.Senator Scavello's December 27, 2017 Comments (emphasis in original). The last sentence in this comment, which Senator Scavello put in bold to provide further emphasis, clearly indicates his support for the Commission's position.
Regarding the Comment attributed to Representative Frankel, Cypress Creek conveniently left out the first part of the sentence, in which Representative Frankel stated that ''[t]he Brown/Place supplemental interpretation would ensure that only in-state Alternative Energy Portfolio Standards (AEPS) certification are grandfathered in. . . .'' This clearly indicates Representative Frankel's support for the position expressed by Chairman Brown and Vice Chairman Place in their Joint Statement regarding the TIO. That Joint Statement had the following, regarding Section 2804(2)(ii):
2804(2)(ii)—Here we propose to interpret this section to only permit out-of-state facilities already certified as AEPS Tier I Solar Photovoltaic that have entered into a contract with a Pennsylvania electric distribution company, electric generation supplier serving Pennsylvania customers, load serving entity, electric cooperative, or municipal cooperative, for the sale of SRECs may maintain certification until the expiration of the contract.This is the position adopted by the Commission in the FIO. Accordingly, we find that both Senator Scavello and Representative Frankel's comments support the position adopted by the Commission.
Section 2804(2)(ii) specifically requires that the contract relate to the sale and purchase of AECs. Accordingly, in order to qualify under Section 2804(2)(ii), the sale and purchase of a solar PV credit must be connected, in some way, to use by an EDC or EGS for compliance with the AEPS Act before it can even be considered an AEC. As we stated in the FIO, Section 2804(2)(ii) only applies to the amount of credits committed to by an out-of-state certified facility to an EDC or EGS. See FIO at 27.
We recognize the industry practices described by Cypress Creek and Constellation that credits are bought and sold many times before being acquired and retired by an EGS or EDC to meet the AEPS Act requirements. We note, however, that such a practice, on its own, does not meet the requirements of Section 2804(2)(ii). Section 2804(2)(ii) has a predicate that only contracts entered into prior to the Act 40 effective date meet the exception provided. What Cypress Creek and Constellation describe, without more specific information, are new contracts for the sale and purchase of credits entered into after the effective date of Act 40. Cypress Creek acknowledges this when it states that its generators entered into contracts for the sale of their PA SRECs with brokers or aggregators and that ''those brokers or aggregators may not have yet entered into contracts for the sale of all of Cypress Creek-generated PA SRECs to Pennsylvania load-serving entities.'' Cypress Creek Petition ¶ 12 (emphasis added).
Constellation makes a similar acknowledgement when it states that ''[i]t is common practice for aggregators to purchase SRECs pursuant to a contract under the premise that they can resell those SRECs to market participants.'' Constellation Petition ¶ 11. Again, without more, we find that this is not enough to meet the Section 2804(2)(ii) requirement that only contracts entered into prior to the effective date of Act 40 qualify for the exception. Any sale of an AEC through a contract that was entered into after October 30, 2017, cannot qualify under Section 2804(2)(ii).
Based on this new information and the above analysis, we provide the following clarification as to the implementation of Section 2804(2)(ii). We will adopt a modified version of Community Energy's proposal and Constellation's second proposal. Specifically, we clarify that all contracts with EGSs, EDCs and/or their wholesale suppliers, as well as any other entity holding contracts entered into prior to October 30, 2017, and within the chain of production of the solar AECs supplying those contracts may file a petition. Such Petitions may seek to have the AECs covered by the contracts with the EGS, EDC or their wholesale supplier certified for use by the EGS or EDC for compliance with the AEPS Act solar PV share requirement. We emphasize that only the AECs directly attributable to an EGS serving load in Pennsylvania, an EDC serving load in Pennsylvania or its wholesale supplier will be eligible to be used for the AEPS Act solar PV share requirement pursuant to Section 2804(2)(ii). To do otherwise would make Section 2804(2)(ii) meaningless by making the exception become the rule, in that it would permit the sale and purchase of all credits generated by out-of-state facilities eligible and include contracts not entered into prior to October 30, 2017.
b. Retagging of Credits
Regarding the request by Cypress Creek and Constellation to retag all out-of-state facilities from PA-NNNNNN-NSTI-I to PA-NNNNNN-SUN-I, we decline to do so as such an action would increase, not decrease confusion. We note that out-of-state solar PV facilities that were certified as an AEPS Act alternative energy system prior to October 30, 2017, now have two certification designations. These facilities have the SUN designation for all electric production reported prior to November 1, 2017 in GATS. All of these AECs continue to be eligible for use by EDCs and EGSs to meet their AEPS Act solar PV share requirement. See FIO at 29-30. These same facilities, along with any newly certified out-of-state facilities, have the NSTI designation that will apply to all electric production reported from November 1, 2017 and thereafter.
This NSTI designation signals to all market participants, and in particular EGSs and EDCs that purchase AECs for compliance, that these AECs cannot be used to meet their AEPS Act solar PV share requirement, unless they were bought through a contract that meets the Section 2804(2)(ii) exemption. As this exemption involves contracts that were entered into prior to October 30, 2017, the number of AECs eligible will be dictated by such contracts and only that number of qualifying AECs with the NSTI designation will be permitted by the AEC Program Administrator to be used by an EDC or EGS for compliance with the solar PV share requirement.
c. Confidentiality
Regarding Constellation's request that parties filing contracts for approval be permitted to redact the price per SREC as it asserts that this information is not relevant to a solar PV facility's eligibility status under Section 2804(2)(ii) or to any other determining factor in this proceeding, we will grant this request as modified herein. We find that to facilitate the filing of contracts by parties seeking to have the AECs associated with those contracts approved for use to meet the AEPS Act solar PV share requirement under Section 2804(2)(ii) that the parties may redact the price per credit in its filing. We note, however, that if the price per credit becomes an issue in the proceeding, then such information must be provided under appropriate confidentiality safeguards.
We also note that 52 Pa. Code § 5.41 requires that petitions must state clearly and concisely the interest of the petitioner in the subject matter, the facts and law relied upon and the relief sought. We strongly encourage that the petition clearly identify sections or portions of any submitted contract that identify the relevant facts to support the petitioner's claims.
d. Filing Deadline
Regarding Constellation's request that more time may be needed by parties to secure confidentiality agreements related to contracts being filed for approval under Section 2804(2)(ii), we will revoke the requirement in the FIO that EDCs and EGSs seeking to qualify credits under Section 2804(2)(ii) file a petition within sixty days of the entry date of this Order. Parties are free to file a petition whenever they deem necessary to obtain the benefits of Section 2804(2)(ii). We note that Section 2804(2)(ii) only impacts credits generated on or after November 1, 2017, and that such credits are eligible for use by an EDC or EGS in the reporting period they were produced or the two immediately following reporting periods. See 52 Pa. Code § 75.69(a). Accordingly, depending on the length of the contract covered by Section 2804(2)(ii), associated credits have a useful life of at least two reporting periods after the present reporting period covering June 1, 2017 through May 31, 2018, decreasing the immediacy of the need to file petitions seeking such approval.
e. True-up Period Extension
Regarding Constellation's request that the Commission consider extending the AEPS Act compliance reporting due date, we will decline to establish a blanket extension. We will, however, entertain petitions filed by any EDC or EGS seeking to extend the AEPS Act true-up period beyond September 1, 2018, due to Act 40 and the Commission's implementation of that Act.
4. Position of AMP
AMP asserts that despite the lack of ambiguity of the plain language, the Commission, in an apparent attempt to add meaning to Act 40's Section 2804(2) that is not plainly stated, found in its FIO that Section 2804(2) contains vague and unclear language and relied on comments submitted by legislators to effectively rewrite the plain language of Act 40 to change ''certification'' to ''facility'' in Section 2804(2). AMP Petition ¶ 10. AMP argues that in doing so, the Commission erred by inferring intention into legislation when the plain meaning is clear in violation of the Rules of Statutory Construction that instruct the Commission to not disregard the letter of legislation. AMP Petition ¶ 11. AMP requests that the Commission revert to the TIO to recognize the certifications granted to out-of-state solar facilities by Pennsylvania prior to Act 40's enactment in accordance with the plain language of Act 40. AMP Petition ¶ 14.
Next AMP asserts that under the Rules of Statutory Construction, when interpreting legislative text, administrative agencies should presume against a retroactive effect unless the legislation specifically declares as much. AMP Petition ¶ 15. AMP argues that there is no declaration, express or even implicit, that Act 40 shall apply retroactively and that Act 40 clearly states that it does not become effective prior to October 30, 2017. AMP further asserts that the Commission rightly concluded in the TIO that facilities already certified on and prior to October 30 should retain their certification and that the Commission did not address the concerns of retroactive application on certification in the FIO. AMP Petition ¶ 16. AMP argues that the Commission should apply Act 40's border limitation on a prospective basis only. AMP Petition ¶ 18.
Finally, AMP asserts that the Commission's FIO runs afoul of the U.S. Constitution in its discrimination against out-of-state solar facilities, citing Article I, Section 8, clause 3 of the United States Constitution or the ''commerce clause'' allows Congress to regulate interstate commerce. AMP Petition ¶ 19. AMP asserts that state laws and regulations that discriminate against interstate commerce have been routinely struck down by the U.S. Supreme Court as a violation of the commerce clause, unless the state-administered discrimination is ''demonstrably justified by a valid factor unrelated to economic protectionism. AMP Petition ¶ 20. AMP argues that the Commission's FIO confers economic benefits and disparately treats in-state solar facilities to the detriment of out-of-state facilities. AMP Petition ¶ 21. AMP argues that the Commission has failed to provide a valid reason for its discrimination against out-of-state solar facilities that does not rest on economic protectionism. AMP Petition ¶ 22. AMP asserts that the Commission should revert to the TIO to recognize the certifications granted to out-of-state solar facilities by Pennsylvania prior to Act 40's enactment. AMP Petition ¶ 23.
5. Disposition
We find that AMP has failed to meet the standards for granting a Petition for Rehearing and Reconsideration. AMP has not raised any new and novel arguments about the implementation of Section 2804(2) of the Adm. Code, 71 P.S. § 714(2), that were not previously raised or considered by the Commission. In fact, AMP's Petition is replete with references and reliance on the Commission's TIO. In the FIO, the Commission considered and explained why we adopted positions different from those proposed in the TIO. In fact, through their Joint Statement, Chairman Brown and Vice Chairman Place proposed, for stakeholder and Commission consideration, many of the positions adopted by the Commission in the FIO, after due consideration of the comments and issues, that are raised by AMP in its Petition. Accordingly, we deny AMP's Petition for rehearing and reconsideration.
Conclusion
For the reasons expressed in this Opinion and Order we will grant, in part, and deny, in part, the Petitions for Clarification and Reconsideration filed by Community Energy, Cypress Creek and Constellation. For the reasons expressed in this Opinion and Order we will deny the Petition for Rehearing and Reconsideration filed by American Municipal Power.
Therefore,
It Is Ordered That:
1. The Petition of Community Energy, Inc. and Community Energy Solar, LLC for Clarification and/or Reconsideration of the Commission's May 3, 2018, Final Implementation Order is granted, in part, and denied, in part, consistent with this Opinion and Order.
2. The Petition of Cypress Creek Renewables, LLC for Clarification or Reconsideration of the Commission's May 3, 2018, Final Implementation Order is granted, in part, and denied, in part, consistent with this Opinion and Order.
3. The Petition of Exelon Generation Company, LLC and Constellation NewEnergy, Inc. for Clarification and/or Reconsideration of the Commission's May 3, 2018, Final Implementation Order is granted, in part, and denied, in part, consistent with this Opinion and Order.
4. The Petition of American Municipal Power, Inc. for Rehearing and Reconsideration of the Commission's May 3, 2018, Final Implementation Order is denied consistent with this Opinion and Order.
5. The Commission hereby clarifies the interpretation and implementation of Section 2804(2) of the Administrative Code, 71 P.S. § 714, as set forth in this Opinion and Order.
6. A copy of this order be served on all jurisdictional electric distribution companies, all licensed electric generation suppliers, the Bureau of Investigation and Enforcement, the Office of Consumer Advocate, the Office of Small Business Advocate and any party that filed comments at this Docket.
7. The requirement that electric distribution companies and electric generation suppliers seeking to qualify credits under Section 2804(2)(ii) of the Administrative Code, 71 P.S. § 714(2)(ii), to file a Petition within sixty (60) days of the entry date of this Order is hereby rescinded.
8. A copy of this Opinion and Order shall be published in the Pennsylvania Bulletin and posted on the Commission's website at www.puc.pa.gov.
9. The Office of Competitive Market Oversight shall electronically send a copy of this Opinion and Order to all persons on the contact list for the Committee Handling Activities for Retail Growth in Electricity.
10. The contact persons for this Opinion and Order are Kriss Brown, Assistant Counsel, Law Bureau, kribrown@pa.gov, (717) 787-4518 and Darren Gill, Bureau of Technical Utility Services, dgill@pa.gov, (717) 783-5244.
ROSEMARY CHIAVETTA,
Secretary
[Pa.B. Doc. No. 18-1288. Filed for public inspection August 17, 2018, 9:00 a.m.] _______
1 See Implementation of Act 40 of 2017, Tentative Implementation Order at Docket No. M-2017-2631527 (entered December 21, 2017).
2 The TIO was published in the Pennsylvania Bulletin on January 6, 2018 at 48 Pa.B. 111.
3 Cypress Creek cites Nieves v. Hess Oil Virgin Island Corp., 819 F.2d 1237, 1243 (3d Cir. 1987) for the proposition that if a law operates as a ''substantial impairment of a contractual relationship,'' then the law is invalid unless: (a) the State can provide a ''significant and legitimate public purpose behind the regulation,'' and (b) the adjustment of the contracting parties' rights and responsibilities under the law is (i) based upon reasonable conditions, and (ii) is of a character appropriate to the public purpose justifying the legislation's adoption.
4 See for example Renewable Portfolio Standards (RPS) with Solar or Distributed Generation Provisions available at http://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2017/02/RPS_carveout_4.pdf. See also, http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx.
5 See the National Renewable Energy Laboratory Status and Trends in the U.S. Voluntary Green Power Market (2016 Data), available at https://www.nrel.gov/docs/fy18osti/70174.pdf. For EGSs offering Renewable energy choices see PA PowerSwitch at http://www.papowerswitch.com/.
6 See PJM-EIS Renewable Generators Registration in GATS report as of July 18, 2018 available at https://www.pjm-eis.com/reports-and-events/public-reports.aspx.
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