Solar Fight – Hommrich v. PUC

This saga begins in 2004 when the Pennsylvania Legislature enacted the Alternative Energy Portfolio Standards Act, 73 P.S.§§ 1648.1-1648.8. [the “AEPS”].  To provide incentive for nonutility owners called “customer-generators” to build alternative energy generating systems, the AEPS mandated that an electric distribution company [‘EDC”] buy back excess electricity generated by an alternative energy generating system called “net metering.”  The AEPS authorized the Pennsylvania Public Utility Commission [“PUC”] to enact regulations to impose “technical and net metering interconnection rules.”  The PUC promulgated regulations in 2006 and amendments in 2016 that dealt specifically with net metering.  That is when the trouble began.

David M. Hommrich was the president of a solar power development company located in Pittsburgh.  Hommrich wanted to develop alternative energy generating systems for his own and his family’s use.  The systems would have a nameplate capacity of 3,000 kilowatts.  The projects were separate and apart from his solar energy company.

In 2017, Hommrich filed a petition against the PUC challenging its 2016 regulations on the grounds that the regulations exceeded the authority given to the PUC under the AEPS. Hommrich v. PUC, 2017 WL 3203437 (2017)[“Hommrich I”].  Hommrich raised three issues: (1) the challenged  PUC regulations are unenforceable under the AEPS; (2)  the regulations cannot be applied retroactively to projects that had received approval prior to promulgation of the regulations; and (3) his proposed solar projects qualify for customer-generated status and are eligible for net metering.  The PUC filed numerous objections to the petition.  While the Commonwealth Court found that Hommrich could challenge the PUC regulations as unenforceable under the AEPS, Hommrich did not exhaust all of his administrative remedies by first filing an interconnection application with an EDC. [Sometime after Hommrich I was decided, Hommrich purchased a renewable energy project that had already received PUC approval for net metering.]

Hommrich and the PUC then filed motions for summary relief on the enforceability of PUC’s regulations, and the Commonwealth issued a decision in 2020. Hommrich v. PUC, 231 A.3d 1027 (Pa. Cmwlth. 5/12/2020), affirmed at 664 Pa. 567 (2/17/2021). [“Hommrich II”].

In Hommrich II, the Commonwealth Court dealt with these issues:

• Definition of “customer-generator.”  Under the AEPS definition, a “customer-generator” may utilize net metering so long as “any portion” of the electricity generated by the customer-generator is used to offset part of the customer-generator’s electrical requirement.  The PUC changed the definition to add that a customer-generator must be a “retail electric customer,” i.e. a customer-generator must be an entity that has a need for electricity from an EDC independent from its need for electricity needed to power its generation facilities. Hommrich argued that this change in the definition disqualified him from being a customer-generator and using net metering. The Commonwealth Court agreed holding that the PUC change was overreach and contradictory to the AEPS.

• The PUC regulation regarding “virtual meter aggregation” was unenforceable because it required a customer-generator to have a “measurable electric load independent” of the customer-generated system, and must have a purpose other than to support the customer-generator’s alternative energy system. The Commonwealth Court held that the independent load requirement is not found in the AEPS.

• The Commonwealth Court upheld the PUC’s regulations concerning the regulatory application process to obtain customer-generator status.  Hommrich argued that the AEPS gave exclusive authority to DEP to determine compliance with the AEPS.  The Commonwealth Court found that the AEPS only gave DEP authority over environmental standards.  The rules promulgated by the PUC to obtain customer-generated status were within the power granted to it under the AEPS and were reasonable.

• The Commonwealth Court upheld the PUC’s regulations concerning what “large “customer-generators” such as Hommrich (i.e. capacity between three to five megawatts) must do to operate in parallel with the grid during grid emergencies.  Hommrich argued that the AEPS only requires that the customer-generator’s system be “available.”  The Commonwealth Court held that the AEPS requires more than just availability – the system must be physically capable of operating in parallel during a grid emergency.  The PUC regulations reasonably provide technical guidance for what is required to be able to operate in parallel during a grid emergency.

The saga continues with Hommrich v. PUC, 463 M.D. 2022 (Pa. Cmwlth. 3/1/2024) [“Hommrich III”].  Hommrich filed an amended petition to challenge more regulations promulgated by the PUC concerning: (1) alternative energy cost-recovery; (2) Level 2 interconnection review; and (3) Level 3 interconnection review.  Hommrich also challenged any PUC regulation that allows an EDC to charge a customer-generator for distribution system improvement costs associated with the interconnection of a customer-generator’s renewable energy system. The PUC regulations permit an EDC to recover its connection costs only from the customer-generator, and not the ratepayers of the default electric service utility.

The Commonwealth Court referred back to Hommrich I to hold that Hommrich does adequately alleged direct harm since he does not qualify for net metering under the PUC regulations, which interferes with his ability to obtain financing. Second, the Commonwealth Court found that Hommrich has standing to pursue his claims since under the PUC regulations, Hommrich would incur costs in excess of one million dollars for distribution system improvements. Third, EDC’s do not have to be made parties to the action, since EDCs do not have a right or interest regarding the validity of regulations or who qualifies as a customer-generator.  An EDC only applies the law in effect when ruling on an application for interconnection. Finally, the Commonwealth Court held that the exhaustion of an administrative remedy objection no longer applied since Hommrich had purchased a renewable energy project that already received PUC approval.  The PUC did not point to any authority that requires Hommrich to seek another round of approval for a project simply because of a change in ownership. The Commonwealth Court noted that an administrative agency, like the PUC, cannot rule on the legality of its own regulations or the power to issue them.

Stay tuned for Hommrich IV.