FERC Disclaims Jurisdiction over Solar Generators Selling Energy to Net Metered Customers

The Federal Energy Regulatory Commission (FERC or the Commission) has determined that it does not have jurisdiction over the owners and operators of solar generation facilities that sell energy directly to a customer, if that customer does not then engage in a "net sale" by delivering more energy than it uses to the transmission system during the customer's local utility billing period. The Commission's order provides important clarity to owners and operators of solar generation facilities and to utility customers.

In Sun Edison, LLC, the Commission addressed a petition for declaratory order filed by Sun Edison, a developer, owner, and operator of solar generation facilities throughout the United States. As part of its business, Sun Edison constructs and installs solar generation facilities on the property of local electric utility customers, and then sells the generated energy directly to those customers. Some of the customers to whom Sun Edison sells energy are participants in utility net metering programs (Net Metering Participants), in which energy generated by the Sun Edison solar facility that exceeds a Net Metering Participant's immediate energy needs is delivered by the Net Metering Participant to the local electric grid. The Net Metering Participant typically receives a credit on its bill from its local utility for the delivered excess energy. In its petition, Sun Edison sought a Commission determination that Sun Edison's operation of its solar generation facilities and the resulting sales of energy to a Net Metering Participant are not subject to the Commission's jurisdiction, so long as the Net Metering Participant does not make a "net sale" of energy during the applicable utility billing period.

The Commission has previously determined that when a Net Metering Participant produces more electricity than it can use on a particular day and delivers that energy to the local electric grid, it is not subject to the Commission's jurisdiction so long as the Net Metering Participant does not make a net sale of energy during the local utility billing period.[1] A net sale occurs when a Net Metering Participant produces more energy over the course of the billing period than it uses during that same billing period. If, however, a Net Metering Participant delivers excess energy to its local electric grid at times during a billing period but ultimately uses more energy than it delivered over the billing period, the Net Metering Participant has not made a net sale of energy.

Although the Commission has determined that when there is no net sale, Net Metering Participants are not subject to the Commission's jurisdiction, the Commission had not addressed whether the generation owner that sells the generation to the Net Metering Participant is subject to the Commission's jurisdiction when excess energy is delivered to the local electric grid. Addressing this issue for the first time, the Commission granted Sun Edison's request that the Commission disclaim jurisdiction. In its order, the Commission explained that the owner or operator of an energy generation facility that sells generation directly to a Net Metering Participant is not subject to the Commission's jurisdiction so long as the Net Metering Participant does not make a net sale. If no net sale occurs, the owner of a generation facility that sells the generation directly to the Net Metering Participant does not engage in wholesale sales or sales for resale, and the Commission's jurisdiction is not implicated.

Separately, Sun Edison requested the Commission to waive its requirement that a generation facility seeking exemption from regulations implementing the Public Utility Holding Company Act of 2005, by virtue of its status as a qualifying facility (QF), must be certified as a QF in order to reduce the administrative burden of filing QF certifications for a large number of solar generation facilities. The Commission denied this request, but noted that it is willing to discuss possible methods of self-certification for rooftop solar generation facilities that will not require filing QF certifications for each facility. Sun Edison has sought rehearing of the Commission's decision denying Sun Edison's request.

In addition, the Commission stated that it is presently seeking comments on a proposal to exempt generation facilities that are 1 megawatt (MW) or smaller, and seeking QF status from the requirement that they receive a QF certification.[2] The Commission stated that if the proposal is adopted, it expects that many generation facilities that sell energy directly to retail customers and that also seek QF status would be exempted from the requirement to obtain QF certification, due to the fact that such generation facilities are often 1 MW or less.

Comments to the Commission's proposal regarding changes in its QF certification requirements are due on or before December 21, 2009.

If you have any questions or would like more information on any of the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:

Philadelphia
Kenneth M. Kulak

Washington, D.C.
Michael C. Griffen

[1] See MidAmerican Energy Co., 94 FERC ¶ 61,340 (2001).

[2] See "Revisions to Form, Procedures, and Criteria for Certification of Qualifying Facility Status for a Small Power Production or Cogeneration Facility," 74 Fed. Reg. 54,503 at 16, 20 (Oct. 22, 2009).