Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

New York Public Service Commission’s ESCO Order Set for Preliminary Injunction Hearing

Posted in Litigation, Rulemakings

On May 20, 2016, a state Supreme Court judge in New York is tentatively set to hear arguments regarding a request for preliminary injunctive relief with regard to the “Order Resetting Retail Energy Markets And Establishing Further Process,” issued on February 23, 2016 (the “ESCO Order”) by the New York Public Service Commission (“NYPSC”).   While the fate of the operative provisions of the Order is in the hands of the court, the ESCO Order and additional developments in related proceedings have created turmoil in the energy service companies (“ESCO”) market and have not benefitted ESCOs or customers.   Furthermore, the NYPSC has taken completely inconsistent positions – in one proceeding it seeks to eviscerate part of the ESCO market and then in another proceeding (Reforming the Energy Vision or “REV”) it contemplates that ESCOs will play a pivotal role in providing innovative services to end-use customers in a more dynamic, diverse and smart distribution system.

Several ESCOs have committed violations of the rules governing ESCO conduct (the “Uniform Business Practices” or “UBP”) in their marketing and contract practices.  However, the ESCO Order’s attempt to address those violations of the UBP is excessive. The NYPSC could have addressed these problems with several, well-publicized enforcement proceedings against the worst ESCO offenders and the enhanced investigation of others.

We will report back on the outcome of the preliminary injunction hearing and on continuing developments at the NYPSC in the ESCO proceeding (Case 15-M-0127).

The ESCO Order

In the ESCO Order, the NYPSC confirmed its authority to regulate ESCO participation in the retail market, noted that consumers had submitted numerous complaints regarding ESCO marketing and contracting practices, and concluded that it was necessary to restructure the ESCO market for residential and small commercial retail customers (i.e., mass market customers) to protect customers from high-pressure sales situations, deceptive marketing, slamming, and lack of expected savings.

Accordingly, the NYPSC directed that ESCOs “shall only enroll new mass market customers or renew existing mass market customers in gas or electric service if at least one of the following two conditions is met: (a) enrollment where the contract guarantees that the customer will pay no more than were the customer a full-service customer of the utility; and (b) enrollment based on a contract for an electricity product derived from at least 30% renewable sources.” Additionally, the NYPSC required ESCOs to receive affirmative consent from a mass market customer prior to renewing that customer from a fixed rate or guaranteed savings contract into a contract that provides renewable energy but does not guarantee savings. Finally, ESCOs that currently serve mass market customers, through month-to-month variable rate agreements, must enroll those customers in a compliant product at the end of the current billing cycle or return the customers to utility supply services.

Incredibly, the NYPSC ordered that ESCOs implement the ESCO Order within ten (10) calendar days from the issuance date of the ESCO Order.

The ESCO Industry Challenge of the ESCO Order

The ESCO industry challenged the Order on a number of bases, including that the Order was issued in an arbitrary manner and resulted in an unconstitutional taking in violation of due process. The ESCO industry successfully obtained a Temporary Restraining Order (“TRO”) on March 4, 2016 and a stay of the operative provisions of the Order  (as discussed above) pending the hearing on the request for a preliminary injunction.

However, the prospect that the operative provisions of the Order may be re-instated has caused ESCOs and utilities to scramble to be ready for compliance.  For example, ESCO and utility risk management groups are confronting a material change in risk profiling and hedging with the prospect that thousands of customers may be moved rapidly from the ESCO portfolio to the utility portfolio.

NYPSC Expectations for ESCO Implementation of the ESCO Order

With respect to the guaranteed savings requirement, the ESCO must guarantee that the customer will pay no more, on an annual basis, than the customer would have paid as a full service customer of the utility. The ESCO must ensure that this requirement is met by refunding at the end of each year any customers charged more than they would have paid as a full service customer of the utility for that year.

With regard to new offerings by ESCOs of the renewable product, the ESCO must guarantee that at least 30% of the energy provided to the customer will be generated by renewable resources, eligible under the NYPSC’s Environmental Disclosure Labeling Program (“EDP”) rules, to ensure that these products contribute to greater renewable energy achievement. Pursuant to the EDP, energy labels are based on the environmental attributes of the energy purchased by the load serving entity and are not affected by the separate purchase of Renewable Energy Certificates (“RECs”). Currently, to meet this requirement the ESCO must guarantee that at least 30% of the energy provided to the customer will be generated by deliverable renewable energy resources, including biomass, biogas, hydropower, solar energy, and wind energy, and will include renewable attributes.

Additional NYPSC Proceedings Regarding The ESCO Industry

In addition to the modifications to the ESCO market for mass market customers, the Commission established procedural rules to make it easier for the NYPSC to revoke the eligibility of the ESCO to conduct business.  The NYPSC may now issue an Order to Show Cause requiring the ESCO to explain why the ESCO’s certification should not be revoked and demanding the ESCO present a case to maintain its eligibility without prior Staff notice to the ESCO, even if the ESCO has only a single violation of the UBP governing ESCO conduct in New York.

Similarly, in a related proceeding (Case Nos. 15-M-0127, 12-M-0476 and 98-M-1343), the NYPSC has invited interested parties to submit comments on a variety of issues pertaining to the functioning of the ESCO market, including: (a) whether and under what circumstances ESCOs should be required to post performance bonds or other forms of demonstrated financial capability; and (b) what penalties may apply to ESCO’s that violate the UBP, other NYPSC orders, or provisions of the New York Public Service Law.

 

 

 

Climate change regulation starts to take shape in Washington State

Posted in Climate Change, Northwest

In 2015, the Washington Legislature failed to act on Governor Jay Inslee’s cap-and-trade proposal to limit the greenhouse gas emissions that cause climate change.  Since then, all branches of Washington State government, as well as the people themselves, have engaged in what looks like a massive brainstorming session on how to limit Washington’s greenhouse gas emissions.  However, the recent close of the 2016 legislative session marks a turning point, with some options dropping off the table.  This post summarizes how we got here and outlines where we may be heading for the next couple of years.

Future posts will analyze the remaining options as they develop.  The melee includes the Clean Air Rule under development by the Department of Ecology in direct response to the Governor’s frustration with last year’s legislative inaction.  It also includes Ecology implementation of the EPA’s Clean Power Plan, the potential for action by the 2017 Legislature, and the possibility that the courts will step in at some point. Read More

Oregon PUC outlines ambitious schedule for implementation of Clean Electricity programs

Posted in Electric Power, Northwest, Renewables, Rulemakings

At an April 21 workshop, the Oregon Public Utility Commission presented its timeline for implementing a variety of programs in the wake of the state’s recently passed and far-ranging energy bill, SB 1547 (the “Oregon Clean Electricity and Coal Transition Plan”).  Most widely known for its provisions increasing renewable portfolio standards and phasing out coal-fired resources from large utilities’ electricity supply to Oregon retail consumers, SB 1547 also establishes (or affects) a variety of other state programs and initiatives, ranging from “transportation electrification,” to demand-response, to community sponsored solar projects.

The OPUC’s workshop served as a kick-off to outline the variety of different dockets the OPUC was preparing to open as a result of the legislation, as well as to highlight ongoing dockets on related matters.

The OPUC provided a helpful draft graphical timeline, which is linked here (although staff cautioned this timeline is subject to change).  As OPUC staff noted, many of these timeframes are driven by statutory deadlines within SB 1547.  For example, the first rulemaking, for transportation electrification (requiring non-consumer owned electric utilities to devise programs to stimulate electric vehicle infrastructure and use), is scheduled to start next month in order to meet the legislation’s requirement that such electric companies file compliance program applications by the end of this year.

Two immediate takeaways are reflected in the timeline. The first is simply the breadth of different energy matters that are affected or potentially affected by SB 1547, and how the OPUC sees the new law fitting in with its ongoing dockets.  The second is the ambitious timeline for these proceedings.  The OPUC is expecting to be very busy in the next few years, adopting rules and implementing new programs that could dramatically change the energy industry in Oregon.

We will provide updates as the anticipated dockets continue to unfold.

CPUC Implementation of the Renewables Portfolio Standard Beyond 2020 Begins

Posted in California, Renewables

– a dispatch from  California Energy attorney Vid Prabhakaran –

The California Public Utilities Commission is revving itself up to take on the task of putting together a whole new set of procurement requirements to implement the Renewables Portfolio Standard (RPS)-related provisions of Senate Bill (SB) 350.

As described in an earlier blog entry, SB 350, which the California Legislature passed in 2015, sets ambitious goals for the state, including a 50% Renewables Portfolio Standard and a doubling of energy efficiency by 2030.

In an April 15 ruling, the Administrative Law Judge requested comments on how best to change the existing RPS program to accommodate:

  • New compliance periods for years after 2020;
  • New requirements for RPS-eligible short- and long-term contracts;
  • New requirements for using utility-owned generation or other ownership agreements for compliance periods after 2020;
  • Changes to excess procurement rules for all compliance periods beginning January 1, 2021; and
  • Changes to the rules governing excess procurement related to early compliance with the new requirements for long-term contracts.

Opening comments on these issues and all the others described in the April 15 ruling are due May 5.

When is a reward a bribe? OSHA policy limits workplace safety incentive programs

Posted in California, Federal, Health and Safety, Northwest

Years ago, my employer gave employees a coaster every quarter that the group had no OSHA reportable incidents. Now it would have been in violation to have such a program. Despite criticism from workers compensation carriers who recognize the benefits of incentive programs, OSHA has reiterated its policy and it continues to enforce against companies that have safety programs that reward on the job safety. Although that is counter-intuitive, it is because OSHA believes that such programs may discourage reporting of reportable injuries and illnesses. OSHA has stated: Read More

Children’s Crusade to Combat Climate Change Continues

Posted in Climate Change, Litigation, Northwest

A federal magistrate judge in Oregon has kept alive the dreams of a group of young plaintiffs—aided by environmental advocacy groups—to compel government action against climate change.  Like a similar case brought by the same plaintiffs a few years ago in state court, discussed below, the federal case seeks a declaration that government inaction violates the public trust.  But in the federal case, plaintiffs added claims that their constitutional rights to life, liberty and property also are being violated.  Read More

Sturgeon v. National Park Service: Supreme Court Sidesteps Federal / State Lands Conflict

Posted in Land Use, Litigation, Natural Resources, Rulemakings

A case originating in Alaska may have answered the question for those wondering how the United States Supreme Court will approach weighty questions of law and policy with a vacancy on the Court; it probably won’t.

In Sturgeon v. National Park Service, 577 U.S.  (2016), the Court had the opportunity to address a monumental conflict between state and federal rights, with the potential to tip the scales between federal and state control over millions of acres of land in Alaska.  Instead, the Court sidestepped those issues and reversed the Ninth Circuit’s interpretation of a single sentence in the Alaska National Interest Lands Conservation Act (ANILCA).  The Court remanded the case to allow the Ninth Circuit, or perhaps the district court, to try again.

The Origins of the Sturgeon Case

In 2007, a moose hunter (John Sturgeon) stopped his hovercraft on a gravel bar in the middle of the Nation River, which flows through the Yukon-Charley National Preserve, an area set aside for preservation purposes under ANILCA.  The State of Alaska owns the land underneath the river because it is navigable.  Several National Park Service (NPS) rangers warned Sturgeon that national NPS regulations prohibited hovercrafts in the park and on the Nation River as it flowed through the park.  Though NPS did not prosecute Sturgeon for the 2007 encounter, he brought a lawsuit challenging NPS’ regulations in which the State of Alaska intervened on Sturgeon’s behalf.

Why the Sturgeon Case Matters to Alaskans

The facts of Sturgeon’s case have broad implications for the management of lands in Alaska because thousands, if not millions, of acres of non-federal lands are located within the boundaries of Federal areas in Alaska and potentially subject to NPS regulations.

How the Ninth Circuit Resolved Sturgeon

The Ninth Circuit upheld NPS’ national regulations as applied to the Nation River based on its reading of the exclusion contained in the second sentence of section 103(c) of ANILCA: “No lands which . . . are conveyed to the State, to any Native Corporation, or to any private party shall be subject to the regulations applicable solely to public lands within such [Conservation System Unit]s.”  Conservation System Units (CSU) are areas set aside in Alaska for national parks, preserves, refuges, and other federal purposes. 

The Ninth Circuit read this provision to mean that NPS could apply its national regulations to lands within Alaska’s CSUs regardless of ownership.  The Ninth Circuit concluded that, because the regulations at issue were applicable nation-wide, they were not subject “solely” to CSUs in Alaska, and the ANILCA exclusion did not apply.

Sturgeon at the Supreme Court and Next Steps

The Supreme Court rejected the Ninth Circuit’s interpretation for leading to a “topsy-turvy” result whereby NPS could regulate non-federal lands in Alaska’s CSUs with national regulations, rather than Alaska-specific ones.  The Court read ANILCA as being intended to accommodate Alaska’s unique circumstances and held that the Ninth Circuit’s approach flipped that intent on its head.  Because the Ninth Circuit’s opinion relied entirely on its interpretation of section 103(c), the Court reversed and remanded the case for further proceedings.

So where does the Supreme Court’s opinion leave the parties?  It leaves them pretty much where they were, for now.  The Supreme Court’s decision left unaddressed “vital issues of state sovereignty” and NPS’ authority over non-federal lands in CSUs.  The parties will have to litigate these issues before the Ninth Circuit or possibly the district court.  Like any good cliff-hanger, the Sturgeon case is “to be continued . . . .”

Reforms to Exit Fees for Departing Load Customers May Be On the California Horizon

Posted in California, Electric Power

The California Public Utilities Commission (CPUC) signaled this month that the topic of exit fee reform for departing load customers may be back on the Commission’s agenda.  A significant public outcry arose late last year when Pacific Gas and Electric Company (PG&E) aimed to significantly increase its exit fees to such a level that much of the savings that Community Choice Aggregators (CCAs) had previously projected for their customers relative to continuing to take service from the utilities that these customers had departed from, would be entirely eliminated.  However, there was no clear venue for the CPUC to take up this topic.   Read More

Was Flint the Love Canal of our Water System?

Posted in Natural Resources, Water Law

Both “hard” and “soft” water can contain minerals that can be slightly corrosive and cause low or high pH resulting in lead in drinking water.  Common sources of lead in household drinking water include:

  • Lead Piping and service connections used before 1930 are highly corrodible based on the chemicals found in tap water.
  • Copper fixtures contain low concentrations of lead used in their casting that  can be released as the fixtures are corroded by water.
  • Copper or brass pipes were often joined with lead-based solder prior to 1988.
  • Wells with Brass or bronze pumps, well screens with a “lead packing collar”, or packed with lead shot or lead wool, can leach lead into private systems.

According to the American Water Works Association 2012 “Buried No Longer” report, repairing and expanding the drinking water infrastructure of the US will cost over $ 1 trillion dollars if accomplished over the next 25 years and that doesn’t include the cost of removing lead in lines on private property. In light of Flint, it’s time to consider the plumbing.

Oregon Legislature Passes Sweeping Energy Bill

Posted in Northwest, Renewables

The Oregon Legislature on Wednesday passed a sweeping and contentious bill that signals significant changes for the state’s energy industry.  Senate Bill 1547, the final home for the “Oregon Clean Electricity and Coal Transition Plan,” touches many areas of the industry. The aspects of the legislation that are receiving the most press are the requirements for large electric companies in Oregon generally to phase out coal-fired resources from their electricity supply to Oregon retail consumes by 2030, and the bill’s increases in the renewable portfolio standards (over time, to reach 50% by 2040 for the largest utilities).  But there are a host of other related — and unrelated — aspects of the legislation, including directions for the Public Utility Commission’s role and oversight over the various provisions and programs at issue; revisions to the use of renewable energy certificates (“RECs”); a mandate for larger electrical companies to have 8% of their aggregate electrical capacity by 2025 come from small (under 20 MW) renewable energy projects or biomass combined heat and power facilities; the creation of community solar programs; and programs encouraging energy efficiency and transportation electrification. Read More