On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) dismissed a petition filed by the New England Ratepayers Association (“NERA”) requesting that the Commission declare that certain sales of energy by net-metered, behind-the-meter generators are exclusively subject to federal jurisdiction. If granted, the petition would have resulted in the rates for such sales being set at an avoided cost rate in accordance with the Public Utility Regulatory Policies Act of 1978 (“PURPA”) or wholesale market prices under the Federal Power Act (“FPA”), as applicable, rather than the interconnected utility’s retail rate. The Commission declined to address the legal issues raised by the petition. Instead, it determined that the issues presented in NERA’s petition do not warrant a generic statement from the Commission at this time because NERA failed to identify a specific controversy or harm that the Commission should address. However, concurring opinions from two commissioners suggest that future fights may be imminent over the scope of FERC’s authority to regulate net metering transactions and the rates for such transactions.
NERA’s petition requested a Commission declaration of jurisdiction over energy sales from rooftop solar resources and other distributed generation that are on the customer side of the retail meter whenever the output of such generators exceeds the customer’s demand or where the energy from such generators is designed to bypass the customer’s load and thus is not used to serve demand behind the customer’s meter. Such transactions have typically been regulated by the individual states, and many states have set the rate for such transactions at the interconnected utility’s retail rates. However, NERA contended that, in the foregoing circumstances, electricity is delivered to the local utility for resale to the utility’s retail customers for compensation, therefore making the transactions wholesale sales in interstate commerce. NERA argued that such sales should be priced at the utility’s avoided cost of energy if the sale is made pursuant to PURPA or a just and reasonable wholesale rate if subject to the FPA.
While several intervenors filed comments in support of NERA’s petition, hundreds of commenters opposed it. Opponents argued that NERA failed to demonstrate how it would be specifically harmed. In addition, opponents asserted that the Commission does not have jurisdiction over net metering, which they contended is an intrastate transaction, because the Commission has jurisdiction over only transactions in interstate commerce; all other transactions fall under state jurisdiction, regardless if a sale for resale occurs.
The Commission dismissed NERA’s petition solely on procedural grounds, stating that “the issues presented in [NERA’s] Petition do not warrant a generic statement from the Commission at this time”, finding that the petition failed to identify a specific controversy or harm that FERC should address in a declaratory order to terminate a controversy or to remove uncertainty. Further, the Commission determined that to the extent that NERA is concerned that certain state regulatory authorities in New England are not pricing sales from qualifying facilities in accordance with PURPA, the petition did not meet the requirements for enforcement under PURPA section 210(h).
Nonetheless, the Commission reserved judgment on the substantive merits of NERA’s petition. Commissioners McNamee and Danly each filed separate concurring statements, suggesting a willingness to address the substance of NERA’s petition in the future. For instance, Commissioner McNamee stated that although he supports dismissing NERA’s petition on procedural grounds, NERA “does not address any of the important, substantive issues underlying the Petition. To that end, the Commission’s Order is not a decision on whether the Commission lacks jurisdiction over the energy sales made through net metering; nor is it a decision on the merits of the issues raised by and contained in the Petition.”[1] Commissioner McNamee stated that an FPA Section 206 complaint proceeding or rulemaking proceeding would be a more appropriate forum in which to address the issues NERA raised. Commissioner Danly shared similar concerns, stating that while the Commission had discretion to dismiss NERA’s petition on procedural grounds, he has “yet to reach any conclusion regarding either rate treatment or jurisdictional boundaries”, which the Commission “will eventually have to address”.[2] Further, Commissioner Danly expressed concern that different courts’ rulings would create a patchwork quilt of conflicting decisions.[3]
Although the Commission declined to address the merits of NERA’s petition at this time—thus providing states and opponents of NERA’s petition with some short-term comfort—the concurring statements from Commissioners McNamee and Danly suggest that this fight may be far from over. For example, NERA or another similarly situated entity may file an FPA Section 206 complaint with FERC or a lawsuit in federal district court, challenging a specific net metering program or components thereof. Further, Commissioner McNamee’s concurrence suggests the Commission might initiate a general rulemaking proceeding to address the jurisdictional questions raised by NERA’s petition, notwithstanding his statement that “it is best to decide important legal and jurisdictional questions, like the ones raised in the Petition, when applying the law to a specific set of facts”.[4] Thus, although FERC’s decision to dismiss NERA’s petition rested on innocuous procedural grounds, states and net metering participants should be cognizant that their generation facilities and the rates for net-metered energy produced by such generators that have historically been overseen by the individual states may ultimately become subject to the FPA and PURPA.
FOOTNOTES
[1] New England Ratepayers Ass’n, 172 FERC ¶ 61,042, at PP 1-2 (2020) (“NERA”) (McNamee, Comm’r, concurring) (“McNamee Concurrence”).
[2] NERA, 172 FERC ¶ 61,042 at PP 2-3 (Danly, Comm’r, concurring).
[3] Id. at P 4.
[4] McNamee Concurrence at P 2.