10th Circ revives case fighting ‘standby’ fees on solar power

Installing solar panels on a residential roof in San Diego. REUTERS/Mike Blake

(Reuters) – California nonprofit Vote Solar and several owners of solar arrays in Farmington, New Mexico, can challenge the city utility’s “standby fees” on alternative energy systems in federal court, the 10th U.S. Circuit Court of Appeals held Monday.

The 10th Circuit said a federal judge in Albuquerque erred in ruling that he lacked jurisdiction because the challengers and their lawyers at Earthjustice had alleged only that the fees were “inconsistent” with an antidiscrimination rule adopted by the Federal Energy Regulatory Commission – not that the utility “outright failed” or “made no reasonable attempt” to implement the rule.

The unanimous three-judge panel said the judge’s view conflicts with the text of the Public Utilities Regulatory Policies Act, the FERC’s interpretation of PURPA, rulings by every circuit court to consider the jurisdictional question, and the plain meaning of “implement.”

PURPA “gives federal courts jurisdiction over utilities’ failure to implement rules; we cannot read into that text a relaxed standard demanding only a good-faith effort at implementation,” Senior Circuit Judge Carlos Lucero wrote for the court. He was joined by Circuit Judges Carolyn McHugh and Joel Carson.

Farmington Public Affairs Administrator Georgette Allen said the city-run Farmington Electric Utility System (FEUS) and its lawyers were “obviously disappointed” and are “evaluating the ruling and the next steps to be taken.”

“We still remain steadfast in our belief that the rates designed by FEUS conform with PURPA, validated by the continued interest we have seen in solar customer applications,” Allen said in an email.

Vote Solar’s attorneys at Earthjustice, who have successfully challenged what they consider “anti-solar rates and fees” elsewhere, did not immediately respond to requests for comment on Monday. According to their 2019 lawsuit, FEUS implemented standby fees against utility customers who also installed solar panels in 2017.

FEUS says the standby fees, which range from about $3 to $8 per kilowatt of generating capacity, are necessary to ensure that it has sufficient power to meet demand when alternative energy systems fall short, and to defray the cost of attaching alternative systems to the grid.

Vote Solar’s lawsuit alleged that the rates constitute pricing discrimination against “small power generators,” which is prohibited by PURPA and FERC regulation.

For example, as of 2019, FEUS charged all residential customers about $57 for using 500 kilowatts of power per month. However, customers who also had a six-kilowatt roof system would incur a $43 standby fee, increasing their monthly bill to $100 for the same amount of energy use, the complaint alleged.

Senior U.S. District Judge James Parker did not reach the merits of the dispute, ruling that questions of “how well” a utility implements a FERC rule belong in state court. The 10th Circuit disagreed.

“At bottom, the district court reinterpreted the word ‘implement’ to require only a reasonable effort by the utility to incorporate a FERC rule, while Plaintiffs argue that to ‘implement’ a rule requires the utility to act or regulate consistently with the rule,” Lucero wrote. “At the level of plain meaning, it seems to us a non sequitur to claim that a utility can ‘implement’ a rule by issuing a regulation that is inconsistent with that rule.”

The case is Vote Solar et al v. City of Farmington d/b/a Farmington Electric Utility System, 10th U.S. Circuit Court of Appeals, No. 20-2028.

For Vote Solar et al: David Bender, Sara Gersen and Chinyere Osuala of Earthjustice

For Farmington/FEUS: Jennifer Breakell of Farmington City Attorney’s Office; Kristen Connolly McCullough of Duncan, Weinberg, Genzer & Pembroke