• North Carolina Rejects Third-Party Sales of Solar-Generated Electricity
  • April 28, 2016 | Authors: Tracey K. Ledbetter; James A. Orr
  • Law Firm: Eversheds Sutherland (US) LLP - Atlanta Office
  • The North Carolina Utilities Commission recently ruled that third-party sales of solar-generated electricity violate state law. The Commission rejected a test case brought by an advocacy group seeking to legitimize such third-party sales.

    The North Carolina Waste Awareness and Reduction Network (NC WARN) installed a solar photovoltaic system on the roof of a church in Greensboro, North Carolina, in 2015. NC WARN, which owned the rooftop solar installation, then sold energy generated by the rooftop panels to the church. NC WARN argued that this arrangement constituted “providing funding, a service, rather than just selling electricity to a church.” (Order at 2.) This funding mechanism would supposedly allow the church to avoid the up-front cost of installing a solar photovoltaic system while also creating a revenue stream that would allow NC WARN to install similar systems for other customers.

    NC WARN filed a petition seeking a declaratory ruling that it was not a public utility under the relevant state law. The Commission received comments from various utilities and advocacy groups regarding the legality of third-party sales such as those by NC WARN.

    In its April 15, 2016 Order, the Commission denied NC WARN’s petition. It concluded that under state statutory and case law, “the NC WARN program in this case constitutes service to the public and is thus impermissible.” (Order at 19.) The Commission noted that state law does not allow a third party to compete with the incumbent power company in its exclusive franchise territory.

    The Commission recognized that third-party sales of solar-generated power resulted in cost shifting to the power company’s other customers. The incumbent electric company must be able to serve peak demand, but the sales through which it would normally recover its costs would be supplanted by third-party sales of solar-generated energy. This, in turn, “increases the costs borne by the incumbent’s other customers,” who may not have the opportunity to purchase electricity from third parties. (Order at 25-26.)

    The Commission also distinguished between merely financing electric generating facilities and selling electric power. It commented, “Existing law does not prohibit financing of public utility or customer-owned generating facilities, but sales of power to or for the public makes the generator a public utility irrespective of the manner in which the facility is financed.” (Order at 22.) The Commission suggested that a program in which the church repaid the cost of solar panel installation through the savings achieved by solar generation, rather than through the purchase of electricity, might be permissible.

    Because it found that NC WARN willfully undertook to provide public utility service, without waiting for the declaratory ruling it requested from the Commission, the Commission imposed a penalty of $200 per day for each day NC WARN provided electric service to the church, which would amount to about $60,000. However, NC WARN may avoid having to pay the monetary penalty if it takes certain steps, including refunding all charges to the church and donating the solar photovoltaic system to the church.

    NC WARN has indicated it intends to appeal the Commission’s decision.