Pennsylvania Adopts Final Rule to Expand Net Metering to Customer Generators Owned/Operated by Third Parties

The Pennsylvania PUC has adopted a final order setting forth an interpretation of the Alternative Energy Portfolio Standards (AEPS) Act that permits the net metering of facilities even where not owned by the host customer (such as for financing reasons).

Specifically, the PUC adopted as Commission policy that the term "operator," as found in the definition of "customer-generator" in the AEPS Act, shall be interpreted as including customer-generators with distributed alternative energy systems that contract with a third-party to perform the operational functions of the alternative energy system, thereby making such third-party owned or operated systems eligible for net metering.

The PUC confirmed that it will impose a size limitation of 110% for net metered alternative energy systems owned and operated by third-parties that are interconnected and placed on property owned or leased and operated by an electric utility customer. That is to say, net metering of alternative energy systems where the customer-generator contracts with a third-party to operate the system will only be permitted where the system is designed to generate no more than 110% of the customer-generator's prior year electric consumption.

In the final order, the PUC clarified that the 110% limitation is to be part of the criteria used in designing a system that is installed as part of the third-party business model. "This limitation does not apply to those systems directly owned or operated by a customer-generator who is not using the third-party owner or operator model," the PUC said.

The Commission said that the 110% design limit will be based on historical or estimated annual system output and customer usage, both of which are affected by weather, which is beyond the control of the customer-generator. As such, the PUC declined to include a kWh output restriction on systems utilizing the third-party operator business model, as a "hard cap" would, "unfairly penalize customer-generators for variations in weather that are beyond their control."

Furthermore, the PUC confirmed that the 110% limitation on third-party owned and operated alternative energy systems shall apply to the cumulative consumption of all meters that are eligible for virtual meter aggregation in accordance with the AEPS Act and the Commission's regulations.

The PUC held, however, that this policy, "does not in any way expand the virtual meter aggregation provisions of the AEPS Act and Commission regulations to include community aggregation. This policy simply permits customer-generators who chose to contract with a third-party to own and operate an alternative energy system located on property owned or leased and operated by that customer-generator to virtual net meter in the same manner as if that customer-generator owned or operated the alternative energy system."

The PUC also said that the policy, "should not be interpreted as creating a contractual relationship between the EDC and a third-party owner or operator of an alternative energy system placed on property owned or leased and operated by a customer-generator. Any contractual relations in such a scenario remain between the EDC and the retail electric customer, who is responsible for complying with all applicable EDC tariff provisions and Commission regulations."

The PUC declined to exempt distributed generation systems under 200 kW from the 110% limit, and declined to raise the limit to 200%, as requested by distributed energy developers.

The case is M-2011-2249441.