- The North Carolina Court of Appeals has upheld the state Utilities Commission's decision to change the way utility companies credit customers who generate energy through rooftop solar panels.
- Tuesday's unanimous decision rejected arguments from the Environmental Working Group, NC WARN, and other environmental groups. They argued that the Utilities Commission failed to conduct an investigation required by law before making the change.
- Judge Hunter Murphy's unanimous decision explained that the Utilities Commission conducted a "de facto" investigation before changing rules for "net metering."
The North Carolina Court of Appeals has upheld the state Utilities Commission’s decision to change the way utility companies credit customers who generate energy with rooftop solar panels.
Tuesday’s unanimous decision rejected arguments from environmental groups who had challenged the change to “net metering.” Critics pointed to a state law requiring the commission to investigate costs and benefits of customers’ site-based generation of electricity.
“The Commission erred in concluding that it was not required to perform an investigation of the costs and benefits of customer-sited generation; however, the record reveals that the Commission de facto performed such an investigation when it opened an investigation docket in response to the Companies’ proposed revised NEM rates; permitted all interested parties to intervene; and accepted, compiled, and reviewed over 1,000 pages of evidence,” wrote Judge Hunter Murphy.
“The Commission is delegated exclusive authority to establish NEM rates, and we do not disturb an order by the Commission approving NEM rates unless we determine it to be unconstitutional, in excess of the Commission’s statutory authority or jurisdiction, procedurally unlawful, legally erroneous, unsupported by the evidence, or arbitrary or capricious and prejudicial to an appellant’s substantial rights,” Murphy added. “The Commission made findings of fact as to the costs and benefits of customer-sited generation supported by competent, material, and substantial evidence; reached conclusions of law supported by these findings of fact; and acted pursuant to its explicit statutory authority.”
While upholding the Utilities Commission’s decision, appellate judges modified the ruling by pointing out that state law “requires the Commission to perform an investigation of the costs and benefits of customer-sited generation before it may establish NEM rates,” Murphy wrote.
Judges John Arrowood and Toby Hampson joined Murphy’s opinion.
The three-judge panel heard an hour of oral arguments on the topic on Feb. 7.
The Environmental Working Group, NC WARN, and other environmental groups argued that the Utilities Commission should not have dropped “flat-rate net metering.” Under that system, Duke Energy credited rooftop solar uses the same rate for all energy their homes sent to the electrical grid.
Lawyers representing the Utilities Commission Public Staff and Duke Energy countered that a 2017 state law — House Bill 589 — mandated the change.
“We are here this morning because a terrible injury has been inflicted on the rooftop solar industry in our state,” argued lawyer Matthew Quinn on behalf of the commission’s critics. “What this court must decide is whether that injury can be undone.”
Quinn cited an expert who estimated that average savings for rooftop solar customers could drop as much as 31% under the new system. Installers estimated that the value of rooftop solar systems would drop 20-35%. Even the commission’s Public Staff found that a rooftop solar customer’s electric bill “will be increased between 16.5% and 118%,” Quinn argued.
The legal complaint targeted the way the Utilities Commission made its decision. Commissioners relied on information provided by Duke Energy rather than conducting their own investigation, as required by House Bill 589, Quinn said. Critics put forward alternative ways of calculating costs and benefits of rooftop solar energy.
“Can Duke investigate itself?” Quinn asked. “The commission’s legal conclusion was: ‘Duke, you are permitted to investigate yourself.’ Now, our position is that can’t possibly be what the statute means.”
“You can’t investigate yourself,” he added. “It’s got to somebody else — neutral third party. … Otherwise, the investigation is the fox guarding the henhouse.”
Robert Josey of the Utilities Commission’s Public Staff responded that the commission conducted its investigation when it adopted the new system. The new system complied with the dictates of HB 589, he said.
“Net metering customers have received a cross-subsidy from non-net metering customers until now,” Josey told the Appeals Court. The 2017 law “required the commission to establish net metering rates that avoid cross-subsidization and that hold nonparticipating customers harmless,” he added.
The critics “simply disagree with that state policy that requires net metering customers to pay their full fixed costs to serve,” Josey said.
Adopting the critics’ proposal would amount to “drastic action,” argued Ashley Cooper on behalf of Duke Energy. “They’re asking for the commission to abandon its years of precedents and adopt a new methodology that’s only been adopted and utilized in a nadful of states.”
“The appellants really just want one thing. They want a flat rate, and they want that put back in service,” Cooper said. “Appellants seek to rewrite the language [of HB 589], which we know they can’t.”
Quinn urged the appellate panel to consider energy-related executive orders from Gov. Roy Cooper along with the law.
“What authority does the Utilities Commission have to consider any executive order from the governor?” Murphy asked.
“I don’t know if it’s binding upon the Utilities Commission, but it’s certainly important,” Quinn responded.
“Why? Why is it any more important than my 12-year-old daughter’s opinion?” Murphy shot back.
Hampson questioned the Utilities Commission’s reliance on Duke Energy’s work.
“Surely the utility can submit information, an analysis, an investigation that says here’s why we think we meet the costs/benefits analysis. But isn’t it the obligation of the commission, then, to actually undertake a review?” Hampson asked.
Cooper labeled the case “unique.” Duke Energy worked on the analysis with 20 groups “that ranged from the North Carolina Sustainable Energy Association to Southern Alliance for Clean Energy to Vote Solar to Sunrun,” he said. “These are some of the leaders — environmental champions in rooftop solar and renewable energy. They all had a chance to be a part of this cost-benefit analysis.”