FERC Declines to Assert Jurisdiction Over State-Run Net-Metering Programs

July 17, 2020

On July 16, 2020, the Federal Energy Regulatory Commission (FERC) dismissed a petition for declaratory order filed by the New England Ratepayers’ Association (NERA) asking FERC to assert jurisdiction over net metering — wholesale energy sales from generation sources located on the customer side of the retail meter — and to find that the rates for such sales must be priced in accordance with either the Federal Power Act or the Public Utility Regulatory Policies Act of 1978 (PURPA). FERC relied on its discretion to act on declaratory orders and found that the issues raised in the petition “do not warrant a generic statement from the Commission at this time.” Specifically, FERC found that NERA did not point to a specific controversy or harm that FERC could resolve with a declaratory order, and that NERA did not have standing to bring a petition to enforce PURPA.

NERA’s petition, which McGuireWoods previously reported, argued that, under current net-metering programs run at the state level, when a customer-generator produces more energy than it consumes, the customer is delivering energy to the interconnecting utility and the meter runs backward. NERA argued in its petition that the typical state-run net-metering process results in a retail customer being compensated for all the energy it produced, including the energy sold to the utility for resale at the bundled electric rate, which typically includes distribution and other charges, in addition to electricity charges. NERA also asserted that, because nearly all net-metering customers are Qualifying Facilities, their sales must be priced in accordance with PURPA. The petition drew significant attention, with hundreds of individuals and entities submitting interventions and comments.

FERC’s order dismissing the petition was very sparsely worded. Indeed, the pages containing the names of commenters took up more pages than FERC’s two-page discussion section. Specifically, FERC found that the petition did not “identify a specific controversy or harm that [FERC] should address” to “terminate a controversy or remove uncertainty.” Additionally, as to NERA’s PURPA claims, FERC found that NERA did not have standing to bring a claim enforcing PURPA, noting that only electric utilities, qualifying small power production facilities and qualifying cogeneration facilities may petition for enforcement of PURPA, and that NERA did not satisfy any of those categories.

Commissioners Bernard McNamee and James Danly issued concurring statements. McNamee stated that he agreed with dismissing the petition on procedural grounds, but wrote separately to emphasize that the order “does not address any of the important, substantive issues underlying the Petition.” McNamee further noted that he believes it “best to decide important legal and jurisdictional questions, like the ones rated in the Petition, when applying the law to a specific set of facts, such as a Section 206 complaint, or through a rulemaking proceeding.” Similarly, Danly expressed concern about the consequences of dismissing the petition and instead leaving the determination up to “a patchwork quilt of conflicting decisions” in federal district courts across the country in which “[c]onfusion, delay and inconsistent rules … will be the inevitable result.”

Ultimately, FERC’s decision leaves the door open for a more fine-tuned challenge to specific state-administered net-metering programs, whether at the FERC level or in the courts.