Commonwealth Court’s Invalidation of Pennsylvania PUC Defined Terms – Potential Net Metering Implications
On May 12, 2020, a three-judge panel of the Commonwealth Court of Pennsylvania held that certain net metering regulations of the Pennsylvania Public Utility Commission (PUC) are unenforceable. The regulations at issue are related to the implementation of Pennsylvania’s Alternative Energy Portfolio Standards Act (AEPS Act), which incentivizes the use of electricity generated by renewable sources such as wind, solar, and biomass.
The Commonwealth Court’s ruling in David N. Hommrich v. Comm., Pa., Pub. Util. Comm’n (674 M.D. 2016), leaves some questions unanswered. In Hommrich, the plaintiff, seeking to install solar photovoltaics, challenged PUC regulations pertaining to net metering that he alleged were unauthorized under the AEPS Act. “Net metering” is a system by which renewable energy generators (most often customers using solar photovoltaics) connect to a public utility power grid, and surplus power is transferred back to the grid, allowing customers to offset the cost of the power they draw from the utility. Hommrich alleged that a project that could be approved for net metering under the AEPS Act could also not be approved under the PUC’s regulations, due to the PUC’s definitions of key terms.
One of the primary questions before the Commonwealth Court was whether the PUC regulatory definitions of “customer-generator” and “utility” exceeded the PUC’s rulemaking authority. The Commonwealth Court determined that the PUC’s regulations were enacted pursuant to its narrow rulemaking authority under the AEPS Act rather than its broader rulemaking authority under the Pennsylvania Public Utility Code. The AEPS Act confers narrow authority on the PUC to establish technical and net metering interconnection rules. In its analysis of the definitions, the Commonwealth Court held that the PUC’s regulations added criteria that restrict eligibility for net metering and inhibit the development of alternative energy, in conflict with the AEPS Act. Because of this dissonance, the Commonwealth Court held that those definitions are invalid and unenforceable.
In addition to invalidating the key “customer-generator” and “utility” definitions, the Commonwealth Court considered two further questions: whether the PUC exceeded its authority in adopting a regulation defining “virtual meter aggregation” and whether the requirement for customer-generators to have an independent load at the generation site in order to net meter was appropriate. The Commonwealth Court again held that the PUC’s regulations were unenforceable because they created eligibility requirements that were not in the AEPS Act.
While the holding in Hommrich may lay the foundation for an increase the number of individuals and entities entitled to be “customer-generators” in the Commonwealth, the Commonwealth Court also upheld some of the PUC regulations challenged in Hommrich, namely the regulations that establish an application process for customer-generators and those that establish rules of operation for large customer-generators. The Commonwealth Court held that these regulations were within the PUC’s narrow authority under the AEPS Act.
Still, the Hommrich holding creates uncertainty for the PUC, which may face significant challenges if it tries to use its defined terms to regulate smaller generators under the AEPS Act. As of now, the door to solar photovoltaic development in Pennsylvania appears more open than ever. The PUC may scramble to close it by requesting a re-argument before the Commonwealth Court or appealing to the Pennsylvania Supreme Court, but in the intervening time the path forward for PUC regulation (particularly of small-scale solar) is unclear.