Defining Site Control Under Pennsylvania’s AEPS

Written by Andrew Miller

The interconnection standards for alternative energy net metering projects (typically solar or wind projects) in 52 Pa. Code § 75.36(7) provide in part that “[w]hen an interconnection customer is not currently a customer of the EDC, upon request from the EDC, the interconnection customer shall provide proof of site control evidenced by a property tax bill, deed, lease agreement or other legally binding contract.” The local utility (an Electric Distribution Company or EDC) must certify to the Pennsylvania Public Utility Commission )(PaPUC) that an applicant has site control as part of the interconnection approval process.  An applicant can clearly produce a deed or lease to establish site control in order to file an application for interconnection.  But what are “other legally binding agreements”? 

We can look to Pennsylvania Municipalities Planning Code (MPC) for some guidance.  The MPC governs zoning and land development in Pennsylvania.  “Site control” is important in the MPC because an applicant for zoning approval or land development must have a legal interest (a “developer” or “landowner”) in the property being developed in order to seek an approval for the development.  The MPC defines a “developer” as  “any landowner, agent of such landowner, or tenant with the permission of such landowner, who makes or causes to be made a subdivision of land or a land development.”  A “landowner” is defined as “the legal or beneficial owner or owners of land including the holder of an option or contract to purchase (whether or not such option or contract is subject to any condition), a lessee if he is authorized under the lease to exercise the rights of the landowner, or other person having a proprietary interest in land.” A party with a purchase contract or an option to purchase on property qualifies as a “landowner.” 

The other common contractual arrangements at the time of interconnection application for net metering are options to lease in the case of many ground-mounted projects and easements or options for easements in the case of roof or other building-mounted systems.  Options to lease will qualify as “other legally binding agreements” if the rights granted in the option are equivalent to the rights under a lease.  The rights under an option to lease can be equivalent to the rights under a lease agreement if the lease satisfies two requirements.  First, the lease option must be unilaterally exercisable meaning the optionee/developer may exercise the option without any right of consent or termination by the optionor/landowner.  In other words, the developer may unilaterally decide to secure long-term site control by exercising the option without any further action by the landowner. Second, the lease must be fully negotiated and incorporated into the text of the option or as an exhibit to the option.  The lease can’t still be negotiable where the lease may never be executed if the parties cannot agree on terms.  A lease option that meets these two conditions is nearly identical to a solar lease with development or due diligence period where the lessee/developer may unilaterally terminate the lease if they decide a project is not feasible.  The only real difference is that in an option the developer does not have to take any action to terminate its contractual rights (they just expire on the expiration date of the lease) while in a lease with a development or due diligence period, the developer must typically take action to terminate the lease.  In either case, though, the developer has full control over the future site lease and therefore has full site control to satisfy the interconnection requirements.

A similar analysis should apply to an easement or easement option for use of rooftop space.  The EDC reviewing the application for interconnection should review the easement to assure the developer has the unilateral right to occupy the easement area or to exercise the option for the right to occupy the easement area with its array and equipment for the term of the project.  If the easement grants those rights, the developer should be deemed to have site control.  Easements and leases are very similar in many ways with one of the biggest differences often being that a lease is almost always an exclusive right to occupy the leasehold area (such as the ground area to be occupied by a solar array) and an easement is not always an exclusive right to occupy the project area (such as a rooftop where the owner must still have access).  Solar leases always contain easements as part of their terms further reinforcing that an easement could meet the requirements for site control.

Ultimately, the determination of site control lies with the EDC.  If the EDC follows the proper legal analysis, then lease options, easement options and easements should all be able to qualify as indicia of site control.  But developers must also be careful they have crafted their solar lease options, easement options and easements to meet the indicia necessary to be an “other legally binding agreement” conferring on them the equivalent of leasehold rights.

MPL Law Firm helps renewable energy developers ensure their site agreements satisfy interconnection and legal requirements. Contact us if you would like to discuss your project.