NH regulation of solar PPAs, leases

Thursday, April 14, 2016

As distributed energy resources like solar panels become more widely adopted, how do typical solar business models like solar power purchase agreements or solar leases match up to state utility laws?  While the answer may vary from state to state, an order issued by the New Hampshire Public Utilities Commission earlier this year found found that offering solar power purchase agreements or solar leases to customers in New Hampshire would not subject a solar company to Commission regulation under any of several theories.  The order finding no regulation required is consistent with other state policy and precedent supporting distributed generation, and could be a model for other states.

Federal law controls some many aspects of the U.S. electricity industry, but states can and do regulate public utilities and competitive electric power suppliers.  Knowing who these state-regulated utilities and suppliers were was straightforward under the dominant utility models of the twentieth century.  But as new technologies like solar photovoltaic panels or other distributed energy resources become more widely adopted, and new business models like solar power purchase agreements and solar leases arise, their regulatory status can be uncertain.  If a solar company installs solar panels on a customer's roofs, and sells that customers the power produced, will it be regulated like a public utility or supplier under state law?  What if the company leases the panels to the customer?

The New Hampshire Public Utilities Commission recently addressed these questions in answering a 2015 petition by Vivint Solar, Inc.  In that petition, Vivint asked the New Hampshire Public Utilities Commission for a declaratory ruling that it would not regulate Vivint as a public utility, competitive electric power supplier, or limited producer of electrical energy under state law, for offering solar power purchase agreements or solar leases to residential customers in New Hampshire.

In a January 15, 2016 order -- Order No. 25,859 -- the Commission granted Vivint's petition.  First, the Commission noted the value of regulatory certainty:
We believe it is important for a party planning to do business in the state to have a vehicle through which it may clarify its regulatory status prior to entering the marketplace, provided that it can describe in sufficient detail its business plans and practices and these plans and practices are not hypothetical or speculative.
Next, the Commission concluded that the operations described by Vivint would not constitute sales to or for the "public" within the meaning of the statutory definition of "public utility."  Key factors recited in the order included the "conditional nature and relative complexity of Vivint’s relationships with its customers."

The Commission then analyzed its rules regarding competitive electric power suppliers, concluding that although Vivint might meet the regulatory definition of a supplier, that definition "should not be read in isolation but in the context of the overall purpose and effect" of the rules in their entirety.  The Commission then noted that those "Puc 2000" rules "seem intended to regulate  a set of relationships and related transactions that is quite different from those undertaken in the context of customer-sited, behind-the-meter, distributed generation development involving sales of electricity directly to the host customers pursuant to the terms and conditions of PPAs."

Finally, the Commission concluded that neither Vivint's PPAs nor solar leases should be subject to Commission regulation under the New Hampshire Limited Electrical Energy Producers Act.  The Commission interpreted that act's retail sales provisions "as applicable to sales of electricity off-site from the generation facilities," not "on-site and behind-the-meter" sales of power as contemplated by Vivint.

The New Hampshire Public Utilities Commission noted that while the petition and briefs in the case focused on the residential solar energy market, its analysis and conclusions "would not be different if the relevant customers were non - residential, assuming that the Systems were installed on the customers’ premises behind the utility retail electric meter, we re sized no larger than necessary to meet the customers’ reasonably anticipated electric consumption, and involved sales of electricity directly to the host customer or leases of the installed Systems to the host customer."

While the ruling technically applies to the company and facts asserted in the petition, it confirms the possibility of an important role for third-party involvement in distributed generation.

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