In re Adoption of Amendments to N.J.A.C. 14:8-1.2

• Decision Date: 30 July 2019
• Docket Number: DOCKET NO. A-4163-16T1
• Parties: IN THE MATTER OF ADOPTION OF AMENDMENTS TO N.J.A.C. 14:8-1.2, 2.1 THROUGH 2.6, 2.9, 2.10 and 2.11.
• Court: New Jersey Superior Court — Appellate Division

IN THE MATTER OF ADOPTION OF AMENDMENTS TO N.J.A.C. 14:8-1.2, 2.1 THROUGH 2.6, 2.9, 2.10 and 2.11.

DOCKET NO. A-4163-16T1

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Argued September 18, 2018

July 30, 2019

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Before Judges Hoffman, Suter and Geiger.

On appeal from the New Jersey Board of Public Utilities, Docket No. QO16020130.

William Harla argued the cause for appellant Community Energy Solar, LLC (DeCotiis, FitzPatrick, Cole & Giblin, LLP, attorneys; William Harla, of counsel; Christopher J. Turano, on the brief).

Yao Xiao, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (Gurbir S. Grewal, Attorney General, attorney; Jason W. Rockwell, Assistant Attorney General, of counsel; Yao Xiao, on the brief).

PER CURIAM

Community Energy Solar, LLC (CES) appeals the amendment of two regulations by the New Jersey Board of Public Utilities (the BPU). We reject CES's arguments that the regulations are invalid as ultra vires of the statute or arbitrary, capricious or unreasonable. We also deny its motion under Rule 2:5-5 to supplement the record in light of our decision regarding the regulations.

The appeal involves two BPU regulations: N.J.A.C. 14:8-2.5(b)(2) and N.J.A.C. 14:8-2.9(e)(2). They were part of a rule proposal on March 7, 2016, to amend "N.J.A.C. 14:8-1, to conform portions of the current rules to the provisions of P.L. 2012, c. 24 (Solar Act), and to P.L. 2015, c. 51." 48 N.J.R. 383(a) (Mar. 7, 2016). According to the BPU's proposal, these were to "bring the [BPU's] rules into compliance with the law." Ibid. Both of the challenged amendments involve solar energy.

In 1999 the Electric Discount and Energy Competition Act (EDECA), N.J.S.A. 48:3-49 to -98.5, changed the electric power industry in New Jersey. See In re Ownership of Renewable Energy Certificates, 389 N.J. Super. 481, 487-88 (App. Div. 2007). "New Jersey's electric energy system [was restructured] so 'customers would have the right to choose their electricity suppliers' and so that energy suppliers could obtain their energy from wholesale energy markets . . . . To this end, New Jersey divorced the entities that generateelectricity from those that supply it." PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241, 248 (3d Cir. 2014). The change "produced a delicate circuitry of interdependence between private entities and public utilities, and between New Jersey and federally-regulated wholesale energy markets." Ibid.

Under the EDECA, utilities were required to "annually increase their reliance on renewable energy." In re Ownership, 389 N.J. Super. at 488; see N.J.S.A. 48:3-87(d). The BPU was "to create a 'renewable energy trading program' to help the industry satisfy the requirement for increased use of renewable electric power." Ibid. (citing N.J.S.A. 48:3-87(d)(2)).

In its regulations, the BPU adopted "renewable Energy Portfolio Standards." See N.J.A.C. 14:8-2.1(a). Under these standards, electricity suppliers could generate a predetermined percentage of electricity from renewable sources such as solar power. N.J.A.C.14:8-2.1(a); N.J.A.C. 14:8-2.3. An electricity supplier can generate renewable energy directly in order to satisfy its renewable energy requirements. It also can purchase certificates from other energy suppliers.

There are Renewable Energy Certificates (RECs) and Solar Renewable Energy Certificates (SRECs). See N.J.S.A. 48:3-51. A SREC,¹ which is issued either by the BPU or its designee, represents "one megawatt hour . . . of solar energy that is generated by a facility connected to the distribution system in this State and has value based upon, and driven by, the energy market." Ibid. A REC² represents "one megawatt-hour of generation from a generating facilitythat produces Class I or Class II renewable energy . . . ." Ibid. It does not include a SREC or "an offshore wind renewable energy certificate." Ibid. "Class I renewable energy" is broadly defined as including "electric energy produced from solar technologies, photovoltaic technologies . . . ." Ibid.

In 2012, the EDECA was amended by the Solar Act of 2012, L. 2012, c. 24, "to further several goals of the State's 2011 Energy Master Plan." In re Implementation of L. 2012, c. 24, N.J.S.A. 48:3-87(t), 443 N.J. Super. 73, 75 (App. Div. 2015). This included "promoting the installation of solar projects on contaminated industrial and commercial sites that would otherwise remain unproductive, while 'discouraging large-scale solar projects on farmland and open space.'" Ibid. (quoting Press Release, Office of the Governor, Governor Christie Builds on Record of Growing Renewable Energy Sources with Action to Strengthen Solar Market (July 23, 2012)). It was amended again in 2015 to clarify Class II renewable energy regarding hydropower facilities. L. 2015, c. 51.³

In proposing the amendments to the regulations, the BPU stated the proposed amendments were to "conform portions of the current rules to the provisions of . . . [the Solar Act] and to P.L. 2015, c 51." 48 N.J.R. 383(a) (Mar. 7, 2016).

Before the amendments,⁴ N.J.A.C. 14:8-2.5(a) and (b) provided:

(a) This section sets forth the types of energy that qualify as class I renewable energy for the purposes of issuance of a class I REC usable for compliance with this subchapter. The Board has determined that energy listed at (b) below qualifies as class I renewable energy, with no prior approval required. Energy listed at (d) and (e) below shall qualify as class I renewable energy if the conditions specified in those subsections are met.(b) The following qualify as class I renewable energy for the purposes of this subchapter, with no prior approval required:

1. Solar electric generation in the form of solar RECs;

2. Electricity derived from wind energy;

. . . .

[N.J.A.C. 14:8-2.5 (R. 2012 d. 107, effective June 4, 2012).]

The BPU proposed to change the regulation as follows:

Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

14:8-2.5 Energy that qualifies for a class I REC

. . . .

(b) The following qualify as a [class] Class I renewable energy for the purposes of this subchapter, with no prior approval required:

. . . .

2. Solar electric generation from a certified facility after the facility's qualification life has ended;

[48 N.J.R. 383(a).]

The BPU also proposed to amend N.J.A.C. 14:8-2.9(e)(2). Before its amendment, the regulation provided:

(e) Electric generation qualifies for issuance of RECs or SRECs only if:

1. It is solar electric generation produced by a generating facility that is interconnected with an electric distribution system, as defined at N.J.A.C. 14:4-1.2, that supplies electricity to one or more end users located in New Jersey; or

2. It is class I renewable energy, other than solar electric generation, and one or more of the following requirements is met:

i. The generating facility reports its generation electronically to PJM-EIS no less frequently than monthly, and complies with any additional requirements established by PJM;⁵

ii. All of the following requirements are met:

(1) The generating facility reports its generation electronically no less frequently thanmonthly to an electric distribution company, as defined at N.J.A.C. 14:4-1.2, that is a member of PJM;

(2) The electric distribution company then provides the generator's report electronically no less frequently than monthly to PJM-EIS; and

(3) The generating facility complies with any additional requirements established by PJM-EIS; or

iii. The generating facility has the sale of the class I or class II renewable energy settled in the PJM wholesale market.

[N.J.A.C. 14:8-2.9(e) (R. 2013 d. 066, effective April 15, 2013).]

It proposed to change the regulation as follows:

Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

14:8-2.9 Issuance of RECs and SRECs

. . . .

(e) Electric generation qualifies for issuance of RECs or SRECs only if:

. . . .

2. It is [class] Class I renewable energy, [other than] including solar electric generation after the end of the solar electric generation facility's qualification life, and one or more of the following requirements is met:

. . . .

[N.J.A.C. 14:8-2.9(e)(2).]

Both regulations were adopted as proposed.

CES argues that the amendments are ultra vires because to qualify for a Class I REC under the regulations, it must first qualify as a SREC and then its 15-year SREC qualification life⁶ must have ended. It argues this is contrary to the "statute and legislative intent which makes it clear that all solar energy selling into PJM qualifies as a Class I REC." It contends the rules "delete[d] solar facilities from Class I renewable energy, remove[d] eligibility for Class I RECs and den[ied these] facilities the economic benefits of qualifying for that status . . . ."

The BPU contends the regulations only address Class I RECs in the situation where the solar electric generation facility has reached the end of its qualification life because there was uncertainty whether these facilities could continue to qualify for Class I RECs. The BPU argues the regulations did not add new requirements for solar generators to qualify for Class I RECs or take away anything. It argues that other requirements—such as being connected toNew Jersey's distribution system—pre-dated the regulatory amendments and find their source in the State's Energy Master Plan, the Solar Act and amendments of the EDECA in 2015.

CES responds that the statute does not require it to be connected to the State distribution system in order to receive Class I RECs prior to the expiration of its SREC life. It wants to construct a solar facility in the PJM grid region...