Environment

Before state Supreme Court, Duke Energy lawyer calls NC WARN’s solar agreement with church “almost exploitative”

NC WARN installed a 5.25-kilowatt solar system on the roof of Faith Community Church in Greensboro. Duke Energy filed an opinion against the project at the NCUC, alleging NC WARN is acting as a public utility. The case is now before the state Supreme Court. (Photo: NC WARN)

The sun has risen and set nearly 1,100 times since NC WARN installed a small solar power system on the roof of Faith Community Church in Greensboro. And since that time in May 2015, the Durham-based environmental nonprofit has been fined $60,000 by the NC Utilities Commission — the penalty was later rescinded — and has taken its case to the Court of Appeals, which ruled 2–1 against NC WARN. The group appealed and today argued before the state’s highest court that it should be allowed to provide solar energy to the church.

Typical of high-level legal battles, the oral arguments dove deep into the semantical weeds: What defines “public”?

Is NC WARN “selling” the electricity — verboten under North Carolina law? Is it  legally “leasing” the system, or operating in regulatory limbo under a “unique” finance agreement?

Three years ago, NC WARN installed the 5.25-kilowatt system as part of a power purchase agreement in which the church pays 5 cents a kilowatt hour for solar-generated electricity. NC WARN has discontinued the agreement and has provided no power until the court case is settled.

All along, NC WARN has contended that this is a finance agreement, a private contract that should not be meddled with by the utilities commission. “This case is about overregulation,” said Matthew Quinn, attorney for NC WARN. “Is the function of  [this agreement] to sell power or to help Faith Community Church put a solar system on its roof?”

NC WARN contends it’s the latter. Judge Robin Hudson seemed unconvinced. Reading from the Power Purchase Agreement, she noted that the church “will purchase electricity” from NC WARN. “Are we supposed to read this as not selling electricity?” she asked Quinn.

“Yes,” Quinn replied, adding that a previous court ruling considered the “function” of an overall agreement.

For their part, Duke Energy, Dominion Energy and the public staff of the NC Utilities Commission have countered that NC WARN is essentially acting as a utility and must be regulated as such. If private entities go rogue and sell electricity, they argue, it would upend the state’s entire regulatory scheme: In exchange for a near-monopoly, Duke Energy agrees to have its rates set by the utilities commission.

“This is not altruistic,” said Dwight Allen, attorney for Duke Energy. “NC WARN is trying to be a utility.” The agreement with the church, he added, “is almost exploitative.”

Judge Sam Ervin IV served on the utilities commission from 1999 – 2008, and as such, is well-versed in relevant law. He asked Quinn about NC WARN’s view that this is a “test case,” which could push the boundaries of the state’s energy law. “You want this case to be a model for other nonprofits,” Ervin told Quinn. “That it would cover not only this contract but that you will enter into other contracts.”

“It’s our position that it would be unfair to hold NC WARN to contracts that may or not happen,” Quinn replied.

To be a utility, electricity has to be sold to the public, Quinn told the court. And NC WARN’s only customer is the church, not multiple customers. In fact, in his dissent, Appellate Court Judge Chris Dillon wrote that NC WARN wasn’t acting as a public utility because one church doesn’t meet the definition of “public.

Allen told the justices that a prior NC Supreme Court ruling determined that one person, and presumably, an entity like a church, can qualify as “the public.”

To complicate matters, since the original court filing, state lawmakers passed House Bill 589, complex in the way only a utility lawyer could love. With extensive input from many interested parties, including Duke Energy, the bill legalized third-party leasing of solar power, with certain restrictions. And it and provided higher monetary rebates for nonprofits that want to install rooftop systems — including churches, like Faith Community.

Environment

NC WARN taking its solar case vs Duke Energy to state Supreme Court

NC WARN installed a 5.25-kilowatt solar system on the roof of Faith Community Church and sells it the electricity. Duke Energy has successfully argued that the sales qualify NC WARN as a utility. (Photo: NC WARN)

The question of whether the nonprofit environmental group NC WARN behaved like a public utility in selling a small amount of solar power to a Greensboro church will now be decided by the state Supreme Court.

NC WARN filed its intent to appeal today. Three judges from the state appeals court ruled against the nonprofit — and for Duke Energy — in September. But since the decision was split 2–1, the case automatically goes to the supreme court.

The dispute began in 2015, when NC WARN, at the request of Faith Community Church,  installed a 5.25-kilowatt system on the roof. The system covers only part of the building’s energy needs; the church buys the rest of its power from Duke.

Legislation passed this year made is legal in North Carolina, under certain circumstances to lease solar power as a third-party. But NC WARN is selling the energy as part of its financing agreement for the solar system with the church.

As part of a power purchase agreement, the church leases the system from NC WARN by paying 5 cents a kilowatt hour for solar-generated electricity. Duke Energy has successfully argued that the very act of selling power transforms NC WARN into a utility and infringes on Duke’s legal monopoly.

Appeals Court Judge Chris Dillon, though, disagreed. He wrote that NC WARN wasn’t acting as a public utility because one church doesn’t meet the definition of “public.” Nor does the nonprofit’s financial arrangement of leasing the system — basing it on a kilowatt hour basis rather than a flat monthly rate, Dillon wrote.

The Rev. Nelson Johnson, pastor of Faith Community Church, issued a statement about the case today:

“We are eager to take this pivotal case to the NC Supreme Court with our partners at NC WARN.  With the ominous recent advances of global heat and destructive weather that are hurting so many people nearby and around the world, there has never been a more important time to challenge Duke Energy’s attempts to control the benefits we are all provided by the sun.”  

NC WARN has stopped selling power to the church until the court case is resolved. The group has escrowed the money the church had already paid.

Commentary

Editorial: NC WARN is right in its solar power lawsuit against Duke Energy

NC WARN’s 5.25-kilowatt solar system on the roof of Faith Community Church (Photo: NC WARN)

Last week, a split state Court of Appeals panel ruled in favor of Duke Energy and against the consumer watchdog group NC WARN in a dispute over whether it could generate solar power from panels it had installed on a Greensboro church roof.

This morning’s lead editorial in the Greensboro News & Record does a good job of explaining why NC WARN shouldn’t give up in its quest to promote widely distributed third party electric generation and sales. This from the editorial:

“Durham nonprofit NC WARN, which promotes clean energy, installed solar panels on the roof of Faith Community Church and sold the electricity generated to the church for the bargain price of 5 cents per kilowatt/hour. Duke Energy contended the arrangement encroaches on its monopoly as a regulated utility.

The N.C. Utilities Commission agreed, and in a 2-1 decision Tuesday, so did the N.C. Court of Appeals. But the dissenting opinion, written by Judge Chris Dillon, justifies a further appeal to the N.C. Supreme Court. A different outcome there is certainly possible.

This case presents new circumstances in North Carolina and can address the legal questions arising from small, off-the-grid renewable energy developments.

State law was written for the era of big energy plants. Does it allow for small-scale projects like the one on the roof of Faith Community Church? If not, shouldn’t it be updated?….

Competition is the hallmark of the free-enterprise system, but state law protects utilities such as Duke Energy, which is granted a monopoly in the Greensboro area and much of North Carolina. In return, it is required to serve all customers and to submit to regulation by the N.C. Utilities Commission, which sets the rates it can charge.

While NC WARN took just a tiny slice from Duke’s sales, one solar installation can lead to many more….

There would have been no case at all if the church had installed its own solar panels to create electricity for its own use. The violation, according to the Utilities Commission, came from the sale by NC WARN of electricity it generated. No one found any fault on the church’s part.

Duke Energy welcomed the majority opinion, while NC WARN embraced Dillon’s view. The split decision grants an automatic right of appeal to the Supreme Court, and NC WARN should pursue its claim there for a definitive ruling.

In the meantime, the legislature should consider whether it means to bar arrangements such as this. When a public utility invests billions of dollars in big power plants to meet the energy demands of millions of customers, granting regional monopolies makes sense. But when small solar arrays can supply homes or businesses with electricity, perhaps the law should make room for such providers.

Duke Energy is a public utility. If NC WARN meets the same definition under the law as Duke by supplying electricity for a single church, the law may have made a mistake.”

Click here to read the entire editorial.

Environment

NC appeals court rules against NC WARN in Greensboro solar power case

NC WARN installed a 5.25-kilowatt solar system on the roof of Faith Community Church and sold it the electricity as part of a leasing agreement. The state appeals court ruled NC WARN can’t sell the power because it in doing so it is acting as a public utility. (Photo: NC WARN)

The nonprofit environmental group NC WARN was acting as a public utility when it provided solar power to a Greensboro church, the NC Appellate Court ruled 2-1 today.

The decision favored Duke Energy, Dominion Energy and the NC Public Utilities Commission public staff, which had argued that NC WARN’s financial arrangement was infringing on the utility companies’ regulated monopoly.

Judges Hunter Murphy and Donna Stroud concurred on the ruling; Judge Chris Dillon dissented.

As Policy Watch reported in March during the original court hearing, NC WARN had entered into a “power purchase agreement” with Faith Community Church in Greensboro. The church leases a solar power system from the nonprofit by paying 5 cents a kilowatt hour for solar-generated electricity.

NC WARN stopped selling power to the church while the court weighed its decision.

“In this case, NC WARN was clearly and unlawfully acting as a public utility without following the rules of being a public utility,” said Duke Energy spokesman Randy Wheeless.

Jim Warn, executive director of NC WARN, said third-party financing arrangements such as this one are ‘in the public interest and are in accord with state policy promoting clean, affordable energy.”

The question before the court was whether NC WARN produced electricity for “the public” in doing so for the church. State statute doesn’t allow third parties to sell electricity to the public because it infringes on the regulated monopoly that is in place. However, House Bill 589, recently passed by the legislature, does allow for limited third-party leasing, which had previously been illegal.

Judge Murphy, wrote the majority opinion, stated that if NC WARN were allowed to generate and sell electricity to “cherry-picked nonprofit organizations” in North Carolina, “that activity stands to upset the balance of the marketplace.”

“Specifically,” Murphy went on, “such a stamp of approval by this court would open the door for other organizations like NC WARN to offer similar arrangements” to other nonprofits or commercial enterprises. That “would jeopardize regulation of the industry itself.”

Judge Dillon, though, disagreed. He wrote that NC WARN wasn’t acting as a public utility because one church doesn’t meet the definition of “public.” Nor does the nonprofit’s financial arrangement of leasing the system — basing it on a kilowatt hour basis rather than a flat monthly rate, Dillon wrote.

He compared the NC WARN arrangement with a hardware store that rented a portable generator based on the power it used rather than only a daily rate.

The NC WARN viewed its appeal as a test case, Warn said, “a challenge to Duke Energy’s blockade against competition from companies that install solar systems on rooftops with little or no up-front cost to the customer. Such financing arrangements have been a key to the growth of rooftop solar in many other states.”

Warn said the organization is “strongly considering” appealing the case to the North Carolina Supreme Court.  

NC WARN Appeals Court by Lisa Sorg on Scribd

Commentary

Op-eds provide hope for renewable energy on another globally warm August morning

A news article in The Guardian puts it pretty bluntly in a Q&A article about the horrific wildfires plaguing California right now. After drawing direct connections between the heat and drought that have been battering the Golden State and the fires, the article puts it this way:

“What can be done?

Bluntly, stop using fossil fuels. ‘People are doing everything they can, but nature is very powerful and we’re not on the side of nature,’ California Governor Jerry Brown said last week. ‘We’re fighting nature with the amount of material we’re putting in the environment, and that material traps heat.’”

Which, thankfully, brings us to a couple of encouraging op-eds from North Carolina news outlets in recent days about the encouraging rise of sustainable energy and the can’t-happen-soon-enough demise of fossil fuels,

As Elizabeth Ouzts of Southeast Energy News explained in “Renewable energy losing its edge as a political wedge in N.C.” on WRAL.com, even many conservative Republicans are seeing the light:

“In this year’s Conservatives for Clean Energy survey, Republican voters said increasing competition in the energy marketplace and investing in clean energy should both be bigger policy priorities than supporting fossil fuels.

Asked how policy makers should solve the problem of toxic coal ash, a plurality of Republicans chose ‘investing state resources into solar, wind and other renewable energy sources’ over the options of doing nothing and paying utilities to clean up the waste.

A majority of voters – including a plurality of ‘very conservative’ ones – said they would be less likely to vote for a politician who supported the temporary ban on new wind projects.”

Some of the conclusions in Ouzts’ article are also reflected in another op-ed — this one by Jim Warren of NC WARN — in Raleigh’s News & Observer entitled “Why solar power is beating coal and natural gas.” Here’s Warren:

There’s good news — outside of North Carolina — in the increasingly desperate fight to slow the climate crisis before its own momentum makes acceleration unstoppable. Economical storage, the long-sought Holy Grail of renewable energy, is surging in the marketplace while climate-wrecking fracked “natural” gas has begun to decline.

“North Carolina is held back by Duke Energy executives’ obsession with gas and their obstructionist strategy toward solar and storage as they cling to the increasingly risky plan to build the Atlantic Coast Pipeline and some 20 gas-fired power plants.

The difference? Market competition versus monopoly capture of customers, public and civic leaders, and public debate.

Solar-with-storage projects are surging in many states by beating gas plants on economics and reliability. By 2026, the U.S. is expected to add storage capacity equal to 35 nuclear plants, generating $4 billion in annual savings.”

After detailing how Duke continues to stonewall efforts to expedite the conversion to renewables, Warren ends on this somewhat more encouraging note:

“Fortunately, utilities commissioner Dan Clodfelter, the Public Staff’s Chris Ayers and Attorney General Josh Stein are changing the long-standing rubber-stamp of Duke Energy’s ‘build plants, raise rates, control debate’ business model. Local leaders are emerging too. Working with Clean Path volunteers, Chatham County commissioners recently made a move toward solarizing county-owned facilities.

North Carolinians must insist that Duke Energy get on the right side of the accelerating climate crisis by belatedly joining the clean energy revolution.”

Amen.