In re Investigation to Review Avoided Costs that Serve as Prices for Standard-Offer Program in 2020

Decision Date13 August 2021
Docket Number2020-311
CourtVermont Supreme Court
PartiesIn re Investigation to Review the Avoided Costs that Serve as Prices for the Standard-Offer Program in 2020 (Allco Renewable Energy Limited & PLH LLC, Appellants)

Supreme Court On Appeal from Public Utility Commission Anthony Z. Roisman, Chair

Thomas Melone of Allco Renewable Energy Limited, New Haven Connecticut, for Appellants.

Alexander W. Wing, Special Counsel, Montpelier, for Appellee Vermont Department of Public Service. PRESENT: Reiber, C.J Robinson, Eaton, Carroll and Cohen, JJ.


¶ 1. Allco Renewable Energy Limited & PLH LLC (collectively Allco), appeal the Public Utility Commission's (PUC) September 2020 decision awarding two provider-block contracts to Green Mountain Power (GMP). Allco argues that the PUC erred in determining that the proposals submitted by GMP on behalf of an undisclosed independent developer were proper provider-block projects under 30 V.S.A. § 8005a(c)(1)(B). We defer to the PUC's conclusion that the GMP proposals qualified as provider-block projects because Allco has not demonstrated that the PUC's interpretation of § 8005a(c)(1)(B) is either unreasonable or has compelling indications of error.

¶ 2. We begin with a brief background on the standard-offer program. In 2009, the Legislature established a standard-offer requirement as part of the Sustainably Priced Energy Enterprise Development (SPEED) Program to promote the rapid development of renewable energy in Vermont. 2009, No. 45, § 4. In 2012, the Legislature made significant changes to the standard-offer program, now codified at 30 V.S.A. § 8005a. See 2011, No. 170 (Adj. Sess.), § 4. Under the program, the PUC issues standard-offer contracts for the construction of renewable energy plants that meet certain eligibility requirements, and Vermont retail electricity providers are required to buy the renewable power from selected plants at a designated price for a set period of time. 30 V.S.A. § 8005a. The program contracts will ultimately account for a cumulative capacity of 127.5 megawatts (MW) of electricity, allocated in annual statutorily designated increments. Id. § 8005a(c). A portion of each year's new capacity is reserved for plants proposed by Vermont retail electricity providers-the provider block-and the remainder is left for plants proposed by independent developers-the developer block. Id. § 8005a(c)(1)(B).

¶ 3. The PUC is directed to allocate the cumulative capacity among different categories of renewable-energy technologies, including methane derived from landfills, solar, wind power, hydroelectric power, and biomass. Id. § 8005a(c)(2). The PUC calculates avoided costs to serve as price caps for each technology category. "Avoided cost" is defined as:

[T]he incremental costs to retail electricity providers of electric energy or capacity, or both, which, but for the purchase through the standard offer, such providers would obtain from distributed renewable generation that uses the same generation technology as the category of renewable energy for which the [PUC] is setting the price.

Id. § 8005a(f)(2)(B).

¶ 4. The PUC is authorized to "use a market-based mechanism, such as a reverse auction or other procurement tool," to fill the annual capacity if it finds that such mechanism is consistent with federal law and "the goal of timely development at the lowest feasible cost." Id. § 8005a(f)(1). Since 2013, the PUC has used a market-based mechanism, consisting of an annual request for proposals (RFP) where the lowest-priced bidders are awarded a standard-offer contract at their bid price. See Investigation into Programmatic Adjustments to the Standard-Offer Program for 2018, No. 17-3935-INV, 2018 WL 1452283, at *1 (Vt. Pub. Util. Comm'n Mar. 16, 2018). In March 2020, the PUC decided to retain its market-based mechanism to fill the available 2020 capacity for the standard-offer program and directed the Standard Offer Facilitator, the state's purchasing agent, to issue a RFP. Investigation to Review the Avoided Costs that Serve as Prices for the Standard-Offer Program in 2020, No. 19-4466-INV, 2020 WL 1557388, at *8 (Vt. Pub. Util. Comm'n Mar. 4, 2020). [*]

¶ 5. In June, GMP submitted two provider-block proposals-one for a project based in Bristol, Vermont, and the other for a project in Pittsford, Vermont. In a letter accompanying both proposals, GMP disclosed the following:

In the interest of transparency, GMP also wishes to explain the structure underpinning its Application. GMP executed an agreement with a solar developer under which the developer assigned its interest in a Land Purchase Option for this project site. GMP thus maintains the required site control for the project. If awarded the project under the RFP, GMP intends to execute a Standard Offer PPA with VEPP Inc., also as required. Once executed, GMP then intends to assign the PPA and the Land Purchase Option to the developer who would continue on with permitting, construction, operation and all deliveries under the Standard Offer PPA. GMP would have no further involvement in he project other than to receive its pro rata share of output from the project under the Standard Offer Program.

¶ 6. In July 2020, the Facilitator filed a report recommending that the PUC award contracts to the two provider-block proposals submitted by GMP. Allco filed comments, arguing that the GMP proposals were not bona fide provider-block projects because the legislative intent behind 30 V.S.A. § 8005a(c)(1)(B) indicated that a provider-block project is a utility-owned project, not a developer project proposed by a utility. Furthermore, under principles of agency law, Allco argued that GMP did not propose the project because it was acting as an agent on behalf of a principal, the undisclosed independent developer.

¶ 7. In September 2020, the PUC issued an order directing the Facilitator to make standard-offer contracts available to the two GMP proposals. In response to Allco's comments, the PUC concluded that nothing in the RFP, PUC precedent, or § 8005a(c)(1)(B) required provider-block projects to be owned and operated by a Vermont utility. The PUC noted that § 8005a(c)(1)(B) neither defines the term "proposed" nor prohibits a Vermont utility from proposing a project and engaging a third-party company to develop and operate the project. In fact, the PUC observed that in 2019, it awarded contracts to projects proposed by a utility, the Vermont Public Power Supply Authority (VPPSA), that were developed by third parties. Finally, the PUC explained that there may be reasons why it is more cost effective for a utility to rely on a third party to develop and operate a project.

¶ 8. Allco filed a motion for reconsideration. Citing legislative history-namely, testimony before the Senate Committee on Natural Resources and Energy-Allco again argued that the Legislature intended for utilities to own provider-block projects. In an order denying the motion, the PUC explained that it was declining to look to legislative history to determine the meaning of § 8005a(c)(1)(B) because legislative intent could be ascertained from the text of the statute, which provides that a portion of the annual increase in the standard-offer program "shall be reserved for new standard-offer plants proposed by Vermont retail electricity providers." (Emphasis added.) If the Legislature had intended for utilities to own provider-block projects, the PUC reasoned, the Legislature would have said so.

¶ 9. On appeal, Allco argues that the PUC erred in concluding that utilities do not need to own provider-block projects for three reasons. First, Allco argues that legislative history confirms that the Legislature intended for utilities to own provider-block projects. Second, Allco argues that prior PUC orders demonstrate that the PUC has similarly understood that provider-block projects must be owned by utilities. Finally, Allco argues that because "GMP has admitted that it is merely acting as an agent for an undisclosed developer," agency principles indicate that the undisclosed developer, not GMP, is proposing the project.

¶ 10. The Department of Public Service (DPS) responds that the plain language of § 8005a(c)(1)(B) clearly demonstrates that provider-block projects are those "proposed by"-not owned by-Vermont utilities. Because the plain language of the statute is clear, DPS submits that legislative history is irrelevant. In any event, DPS argues that the clear legislative intent behind the standard-offer program is to "encourage[] renewable energy development 'with a goal of ensuring timely development at the lowest feasible cost, '" and GMP's bids were consistent with that goal because they were among the lowest priced bids submitted. Finally, DPS points out that the typical standard-offer contract permits assignment to a third party.

¶ 11. "Out of respect for the expertise and informed judgment of agencies, and in recognition of this Court's proper role in the separation of powers, we accord agency decisions substantial deference." In re Conservation Law Found., 2018 VT 42, ¶ 15, 207 Vt. 309, 188 A.3d 667. That deference extends to "an agency's interpretation of a statute that [it] is tasked with interpreting." In re Stowe Cady Hill Solar, LLC, 2018 VT 3, ¶ 20, 206 Vt. 430, 182 A.3d 53 (quotation omitted). "[W]e will overturn an agency's interpretation of a statute if there is a compelling indication of an error or if the interpretation is unjust or unreasonable." In re Acorn Energy Solar 2, LLC, 2021 VT 3, ¶ 23, Vt., 251 A.3d 899 (quotation omitted).

¶ 12. According deference to the PUC's decision, we conclude that Allco has not demonstrated that the PUC's interpretation of § 8005a(c)(1)(B) is either unreasonable or has a compelling...

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