In re Investigation to Review the Avoided Costs That Serve as Prices for the Standard-Offer Program in 2019

• Decision Date: 20 November 2020
• Docket Number: No. 19-393,19-393
• Citation: 251 A.3d 525
• Court: Vermont Supreme Court
• Parties: IN RE INVESTIGATION TO REVIEW THE AVOIDED COSTS THAT SERVE AS PRICES FOR THE STANDARD-OFFER PROGRAM IN 2019 (Allco Renewable Energy Limited & PLH, LLC, Appellants)

251 A.3d 525

IN RE INVESTIGATION TO REVIEW THE AVOIDED COSTS THAT SERVE AS PRICES FOR THE STANDARD-OFFER PROGRAM IN 2019 (Allco Renewable Energy Limited & PLH, LLC, Appellants)

No. 19-393

Supreme Court of Vermont.

May Term, 2020

November 20, 2020

Thomas Melone, Allco Renewable Energy Limited, New York, New York, 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.

COHEN, J.

¶ 1. Allco Renewable Energy Limited and PLH, LLC (collectively, Allco) challenge several decisions of the Public Utility Commission (PUC) in administering Vermont's standard-offer program and the request-for-proposals (RFP) mechanism the PUC has adopted to implement the program. Allco argues that, contrary to public policy, the PUC disregarded the mandatory requirements of the 2019 RFP and awarded contracts to bidders that failed to satisfy those requirements; that the PUC misinterpreted the program's statutory scheme in several respects; and that certain components of the program are unconstitutional. We affirm.

I. The Standard-Offer Program and the RFP Mechanism

¶ 2. To promote the development of renewable energy in Vermont, the Legislature enacted the standard-offer program in 30 V.S.A. § 8005a, which authorizes the PUC to issue standard offers to developers for the construction of renewable energy plants across the state. The plants must meet certain eligibility requirements, such as having a Vermont location and a capacity of 2.2 megawatts (MW) or less. Id. § 8005a(b). Under the cumulative-capacity component of the program, the statute establishes a schedule that increases program capacity annually until a total of 127.5 MW is reached and directs the PUC to allocate the total capacity among different renewable-energy technologies like solar, wind, and hydroelectric power. Id. § 8005a(c)(1)(A), (c)(2). A portion of this annual increase is reserved for new plants proposed by Vermont retail electricity providers (the provider block) and the remainder is left for new plants proposed by others (the developer block). Id. § 8005a(c)(1)(B).

¶ 3. The Legislature entrusted the PUC to select new plant proposals with its choice of "a market-based mechanism, such as a reverse auction or other procurement tool," as long as it finds that the mechanism is consistent with "applicable federal law" and "the goal of timely development at the lowest feasible cost." Id. § 8005a(f)(1)(A)-(B). With the assistance of a standard-offer facilitator, see id. § 8005a(a), the PUC is directed to "administer the process of applying for and obtaining a standard offer contract in a manner that ensures that the resources and capacity of the Standard Offer Program are used for plants that are reasonably likely to achieve commissioning," id. § 8005a(h).

¶ 4. Pursuant to this statutory power, in 2013 the PUC adopted an RFP mechanism to choose new plants to fill the annual program capacity. Programmatic Changes to the Standard-Offer Program & Investigation into the Establishment of Standard-Offer Prices under the Sustainably Priced Energy Enter. Dev. (SPEED) Program, Nos. 7873, 7874, 2013 WL 840116, at *14-15 (Vt. Pub. Serv. Bd. Mar. 1, 2013) [hereinafter 2013 Order].¹ Under this mechanism, the standard-offer facilitator promulgates an annual RFP, developers submit responsive proposals (bids) to the facilitator, the facilitator selects proposals based on the lowest prices until the annual program cap is reached, the facilitator places some proposals in a reserve group in case selected projects are withdrawn, the results are submitted to the PUC for approval, and the PUC authorizes the facilitator to execute contracts for approved proposals. Id. at *17-20. To "encourage legitimate and realistic bidding and timely development of projects," the PUC requires that bidders demonstrate legal control over the project site and provide a forfeitable security deposit. Id. at *19.

¶ 5. Further to this scheme, the facilitator promulgated an RFP in 2019. The RFP listed several "mandatory requirements," which proposals had to satisfy "to be considered further in the evaluation process," and warned that "[p]roposals that fail to satisfy these mandatory requirements shall be rejected." One of the requirements compelled proponents to demonstrate site control in favor of the proponent company name in one of several ways, including, among others, providing evidence of fee-simple title to the property or an option to lease the land. Another mandatory requirement was to submit a project map with dimensions of twenty-four by thirty-six inches, which had to include specified information and "indicate the scale at a sufficient ratio ... such that the location of all project facilities is easily discerned." The RFP also provided that proponents awarded standard-offer contracts would be required to submit a security deposit of fifteen dollars per kilowatt of installed capacity, to be refunded upon project commissioning or forfeited if the project withdrew prior to commissioning. Finally, with notice to the PUC, the facilitator could "disregard minor deficiencies in a proposal if such proposal complie[d] in all material respects with the requirements of [the] RFP."

¶ 6. The facilitator received thirty-eight proposals in response to the 2019 RFP. Allco submitted eight proposals, NextEra Energy Resources Development, LLC, (NextEra) submitted three—Vermont Solar DG, St. Albans Solar DG, and Vergennes Solar DG—and Pacific Northwest Solar, LLC, (PNW) submitted three, among them Silk Road Solar. To satisfy the site-control requirement, NextEra submitted written options to lease the properties for its proposals. Given the projects’ costs, and the facilitator's determination that the proposals satisfied the RFP requirements, NextEra's three projects were selected for contract. The facilitator disqualified PNW's Silk Road Solar proposal because the project map was submitted on eight-by-eleven-inch paper and with an inadequate scale to easily discern project facilities. Allco's projects were not selected nor placed in the reserve group because they were among the projects with the highest prices.

¶ 7. The facilitator filed its recommendations with the PUC, and Allco submitted comments challenging several of the facilitator's conclusions. First, Allco argued that the St. Albans Solar proposal failed to meet the site-control requirement because, under an access agreement between the state and the landowner, use of the access road to the property was limited to agricultural purposes and could not be leased nor assigned to NextEra. Second, Allco maintained that the Vermont Solar proposal failed the site-control requirement because access to the property was controlled by an easement deed limiting access to transportation of farm equipment and products. Third, Allco contended that all three of NextEra's projects failed to demonstrate site control in favor of the proponent's legal company name because the site-control documents were in favor of Boulevard Associates, LLC, an affiliated company, instead of NextEra itself. Fourth, Allco argued that the PUC miscalculated the capacity of the developer block. Finally, Allco challenged the constitutionality of the provider-block and technology-allocation provisions of the standard-offer program.

¶ 8. In an order addressing Allco's arguments, the PUC first observed that it adopted the site-control requirement "to reduce speculative bidding and ensure that projects have a realistic chance of being commissioned." Investigation to Review the Avoided Costs that Serve as Prices for the Standard-Offer Program in 2019, No. 18-2820-INV, 2019 WL 3841570, at *14 (Vt. Pub. Util. Comm'n Aug. 9, 2019) [hereinafter 2019 Order]. The PUC then concluded that the St. Albans Solar and Vermont Solar proposals complied with the site-control requirement because, for each, NextEra provided one of the types of documents required by the RFP—a written option to lease the property. Id. The PUC determined that if there were legal restrictions on NextEra's access to the properties precluding project commissioning, NextEra risked forfeiting the security deposit if granted a standard-offer contract. Id. Additionally, the PUC concluded that it was not the appropriate forum to litigate property rights under the access easements because the landowners of the burdened and benefited parcels were not parties to those proceedings. Id.

¶ 9. Regarding the company name, the PUC concluded that listing Boulevard Associates in the site-control documents was a minor deficiency because Boulevard Associates was a wholly owned subsidiary of the project proponent. Id. at *13. The PUC also determined that the Silk Road Solar proposal's wrong-sized map was a waivable, minor defect because the map showed the information specified in the RFP with sufficient clarity and detail to permit review. Id. at *11. Rejecting Allco's constitutional and developer-block-capacity arguments, id. at *3-4, *6, *8, the PUC ordered the facilitator to execute standard-offer contracts for NextEra's three proposals and to place the Silk Road Solar project in the reserve group, leaving Allco without a contract in the 2019 RFP process, id. at *11, *14.

¶ 10. Allco filed a motion for reconsideration, renewing, among others, its argument concerning the use of the different company name in site-control documents. In response, the PUC recognized that it initially misapprehended NextEra's corporate structure—which we clarify below—but concluded that the site-control requirement was nevertheless satisfied because one of the ways of satisfying the requirement was to provide a written option to lease the property "unconditionally exercisable by the proponent or its assignee," and the project proponent supplied an option unconditionally exercisable by its assignee. Investigation to Review the Avoided Costs that Serve as Prices for the...