Wednesday, May 21, 2014

SPEED, huh? Not so fast…

In re: Programmatic Changes to the Standard-Offer Program and Investigation into the Establishment of Standard-Offer Prices under the Sustainably Priced Energy Enterprise Development (SPEED) Program2014 VT 29

By Jeffrey M. Messina

This case is an appeal from the Public Service Board's (the “Board”) decision that a proposed solar power project does not qualify for a standard-offer power purchase contract under Vermont's Sustainably Priced Energy Enterprise Development (SPEED) program because it exceeds the statutory limit on generation capacity.

This SPEED program was established to promote development of renewable energy in Vermont in two ways: the firstby requiring electric utilities to purchase a certain amount of power from renewable energy sources; the secondby creating a standard-offer program. The Board, under the standard-offer program, authorizes particular long-term-power-purchase contracts with electrical providers in Vermont for renewable energy projects with “nameplate” capacity of 2.2 megawatts (“MW”) or less (and which meet other specific criteria).

“Nameplate” is the term used to refer to the intended technical full-load sustained output of a power-generating facility. (I can’t say for certain what THAT means, though.)

When a plant owner executes a standard offer contract, the Board sets pricing guarantees for the duration of the contract. The standard offer program is administered by Vermont Electric Power Producers, Inc. (VEPP), the SPEED facilitator, operating under contract with the Board.

The Board issued an order prescribing procedures and requirements for the standard-offer program. During the comment period, VEPP wanted clarification about how the Board would define a plant because it had received questions from developers which indicated that some developers intended construction of “multiple plants at a single location that, collectively, exceed[ed] the 2.2 MW cap.” There arose two distinct interpretations.

One interested party remarked that separate projects needed to enter into separate interconnection agreements with the utility as well as separate contracts and obtain separate Certificates of Public Good (“CPG”), while another opined the statute was clear that "separate plants that share common infrastructure and interconnection should be considered one plant."

The Board, in response, decided that any generation components sharing common infrastructure were to be considered as a single plant. As such, it ordered VEPP to tell the Board of applications for projects on the same - or contiguous - parcels of land which would collectively exceed the 2.2 MW cap. The Board further decided it would make a case-by-case determination which projects constituted a single plant. The Board did not, however, provide any criteria it would use to determine whether multiple projects constituted a single plant. (That would have been nice to know.) Okayenough background.

VEPP requested proposals for projects eligible for a power-purchase agreement, indicating the standard-offer contracts would be offered in order of price, starting with the lowest priced, until the capacity was met. Applicant proposed three 2.0 MW solar projectsthe Nina, the Pinta, and the Santa Maria. No, waitthe Bennington Solar project, the Apple Hill Solar project, and the Sudbury Solar project. VEPP received 34 proposals and all three of Applicant’s were the lowest-priced projects.

In its report to the Board, VEPP noted the Bennington project and the Apple Hill project were to be located on the same parcel of property and the project components were "physically contiguous." VEPP asked the Board to determine whether the two projects constituted a single plant because if so, the combined 4.0 MW capacity exceeded the 2.2 MW limit. Great Scott!

The Board ruled that the Bennington and Apple Hill projects were indeed a single 4.0 MW plant since both proposals were located on the same parcel of land with similar interconnection points. Accordingly, the Board disqualified the Apple Hill project and authorized VEPP to enter into standard-offer contracts for the Bennington and Sudbury projects. Applicant petitioned the Board to reconsider.

In its petition, Applicant argued the Bennington and Apple Hill projects were "independent technical facilities" because they would connect with the electric grid through separate three-phase lines, would be separated by a fence, have separate access roads, use separate inverters, transformers and other equipment, and be financed by different parties. To the Board, these arguments were less than electric.

In reaffirming its initial conclusion, the Board overlooked that the projects were to be operationally independent and focused on the fact that the same developer was involved and the plants were located on the same parcel of land and enjoining each other. The Board went on to say that applicant's interpretation of independence allowed construction of any size facility as long as it could be partitioned into “technically independent” 2.2 MW projects by using redundant equipment and separating each piece "by a mere fence." Finally, the Board reasoned cluster development of the kind frustrated the legislative goal of dispensing small-to-moderate facilities across Vermont's electric grid. Applicant appealed.

The SCOV reviews Board decisions with deference to the Board’s “expertise and informed judgment” applying a “presumption of validity” to those decisions. Though SCOV will not “disturb an agency’s interpretation of statutes” within the agency’s specific purview, SCOV maintains it is, ultimately, The Decider. In this case, as The Decider, the SCOV’s focus is on legislative intent.

The SCOV looks to the plain language of the statute and finds a “compelling indication of error” in the Board’s decision.

SCOV notes the statute does not mention physical proximity or common ownership as pertinent indices to determine if facilities are separate plants, and adds the Legislature could have included those factors if it chose to do so. The Court then hammers the point by providing examples of where the Legislature had included like factors in similar statutes.

The SCOV disagrees with the Board’s conclusion that the statute’s plain meaning will “permit any size facility.” In its analysis, the Court cites the fact that a facility must be cost-effective to build, and though separate plants could create separate roads, equipment, etc., to obtain separate permits and contracts, circumstances would not always be economically feasible to do so. Further, each project must obtain is own CPG, which “operates as a check against abuse of the [ ] program.”

The SCOV states its interpretation of the statute is consistent with the Legislature’s “stated goals” of encouraging renewable energy in the state, and provides examples of “many much larger projects” developed under the SPEED program.

Finally, the SCOV essentially admonishes the Board by pointing out that although the Board indicated it would consider projects on a case-by-case basis, it did not provide any criteriaby way of rule or guideline – about how it would make its determinations. Neither, points out the SCOV, did the requests for proposals specify that projects by the same developer, or projects on the same parcel of land, would be deemed a single plant.

No deference today. Clearly erroneous.

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