Renewable Energy Law Alert: Oregon Public Utility Commission Gives a Green Light to Third-Party Ownership of On-Site Solar and Wind Facilities
8/4/2008

On July 31, 2008, the Oregon Public Utility Commission ("the OPUC") issued an Order that paves the way for developers to build and operate solar and wind facilities on property that belongs to utility customers. The Order comes less than two months after Honeywell International, Inc., Honeywell Global Finance, LLC, and PacifiCorp filed a joint petition with the OPUC seeking a declaratory ruling to resolve questions about how Oregon law and OPUC regulations would apply to solar facilities that are installed on a utility customer's property but are owned by a third-party developer. See In re Honeywell et al., Docket No. DR 40, Order No. 08-388 (OPUC July 31, 2008). Chief Administrative Law Judge Michael Grant reduced the questions down to two key issues: (1) whether a customer is eligible for net metering under such an arrangement, and (2) whether the developer is subject to regulation by the OPUC.

1. Solar and Wind Facilities Owned or Leased by a Third Party Qualify for Net Metering

According to the Order, Oregon's net-metering rules do not require that the utility customer own an otherwise eligible net-metering facility installed on a utility customer's property. Any load not served by the on-site generation must be provided by the utility. The utility must also provide and pay for the standard meter required to interconnect the facility to the grid. In addition, the Order acknowledged that net-metering rules still apply even if the developer is receiving additional state and federal incentives, such as tax credits. The Order also stated that any renewable energy credits generated by the facility would belong to the owner of the facility, not the utility.

2. Solar and Wind Facilities Owned or Leased by a Third Party Will Not Be Regulated by OPUC

The other key aspect of the Order was the question of whether third-party owners of such facilities would be subject regulation by the OPUC either as a "public utility" or as an electricity service supplier ("ESS") under Oregon law. The OPUC concluded that a solar or wind net-metered facility owned by a third party is not a "public utility" because Oregon law specifically exempts solar and wind facilities from the definition. Notably, the Order stated that although a net-metering facility may generate electricity using a wide range of fuels (e.g., solar, wind, fuel cells, hydroelectric power, landfill gas, digester gas, waste, dedicated energy crops available on a renewable basis, and low-emission, nontoxic biomass based on solid organic fuels from wood, forest, or field residues), only electricity sales from net-metered wind and solar facilities are exempt from regulation by the OPUC.

The OPUC concluded that a developer that installs, owns, and operates a solar facility on a utility customer's property is not an ESS because a developer's facilities would be connected on the customer's side of the meter, the developer would not use the utility's distribution system, and the developer would not supply or require the use of ancillary services.

The OPUC declined to address the question of whether there is federal jurisdiction over third-party sales to utility customers, but noted that such jurisdiction was unlikely because the Federal Energy Regulatory Commission has already concluded that net metering is not a "sale" under the Federal Power Act. Thus a third party's sale of electricity to a utility customer would not be a "sale for resale" that could trigger federal jurisdiction.

If you have further questions, please contact:

Patrick G. Boylston at pgboylston@stoel.com or (503) 294-9116
Stephen C. Hall at schall@stoel.com or (503) 294-9625