On February 22, 2023 the Public Service Commission of Wisconsin (PSC) issued a written decision (the Order) in Docket 9300-DR-106, in which Vote Solar sought a declaratory ruling related to financing arrangements for distributed energy resources (DER). The PSC had previously approved the ruling verbally at its December 1, 2022 Open Meeting, by a 2-1 vote. The Final Order officially grants the petition (in part) while stating the PSC’s reasoning.

In this docket, Vote Solar had asserted that one of its members wished to utilize financing for a DER system in Stevens Point (The Family Project by signing a lease with North Wind Renewable Energy Cooperative (North Wind). The family involved with the project currently takes service from Wisconsin Public Service Corporation (WPSC) and sought to interconnect to the utility’s system. However, the family first wanted assurance, via a declaratory ruling from the PSC, as to the project’s status as a public utility. A declaratory ruling is an administrative action under Ch. 227 of the Wisconsin Statutes, and “shall bind the agency and all parties to the proceedings on the statement of facts alleged, unless it is altered or set aside by a court.” Wis. Stat. § 227.41(1).

In the Final Order, the PSC made the following Conclusions of Law:

• The Family Project host customer to be served by a DER owned by North Wind under the arrangement and the specific facts and circumstances described in this docket is not, by itself, “the public” within the meaning of Wis. Stat. § 196.01(5)(a).
• The Family Project does not produce, transmit, deliver, or furnish power either directly or indirectly “to or for the public,” as that phrase is defined by statute and interpreted by the courts.
• As such, North Wind, as owner of the Family Project, a project utilizing third-party financing for the installation of a DER system to provide energy to the customer, is not, by virtue of that arrangement alone, subject to regulation as a public utility pursuant to Wis. Stat. § 196.01(5)(a).

The Order appears to provide a narrow ruling, repeatedly emphasizing that the decision relies on the particular facts and circumstances of the docket at hand, namely:

• the individualized contract,
• the equipment’s location “behind” the customer’s point of interconnection,
• the Project is designed to provide electric service only to the customer, and that the Project cannot and will not provide electric service to any other customers,
• the energy is not intended for, nor open directly or indirectly to, the public, and
• any excess generation produced from the Project will be delivered to WPSC, a fact which does not make the service “to or for the public.”

The Order states that it does not depart from prior PSC decisions because the Commission is consistently applying previous interpretation of state statute to a specific set of facts. The Order also states that prior third-party financing dockets addressed single or central pieces of equipment, rather than DERs, and therefore do not help define when multiple pieces of equipment or plant may be considered a public utility. In the alternative, the Order states that even if the Commission was departing from prior rulings, it is not bound by those prior decisions and that a decision on a particular set of facts does not bind the Commission on different facts.

The Order then states that the Legislature has endowed the PSC with “extraordinary power” as “experts in the field of utility regulation” and that action or inaction by the Legislature does not prevent the PSC from “using its expertise and experience to interpret and apply statutes to a specific dispute.” The Order also dismissed arguments regarding consumer protection and impact on energy markets as speculative.

Next, the Order asserts that the decision is not a rulemaking, as it falls under specific exemptions within Wis. Stat. §§ 227.10(1) and 227.01(13). These exemptions include a decision made within a contested case, as well as a disposition of a particular matter as applied to a specific set of facts and a specifically named party.

Finally, the Order reiterates that this decision “is limited to the particular Family Project facts and circumstances presented” and does not exempt a large group of entities with different activities or arrangements. The Order also declined to make any determination on the status of future North Wind arrangements, which must be decided on the particular facts and circumstances. However, the Order then asserts that “pursuing a path like Vote Solar’s request for a declaratory ruling on the Family Project may provide a permissible framework for petitioning the Commission for case-by-case determinations in the future.”

Huebner Concurrence

In a separate concurrence, Commissioner Huebner argues that the Family Project is not providing power “to” the public because the “energy goes one of two places: (1) to the customer’s usage or (2) to the public utility.” He asserts that North Wind does not aim to replace the utility and is not obligated to provide power to “whoever may require the same.” He also asserts that the public does not require solar energy.

Lastly, Commissioner Huebner argues that the petition cannot be denied “based on who does the work, union or not,” nor because the decision would have an impact on utility stock performance, nor due to any concerns related to rates. 

Nowak Dissent

In what will likely be one of her last opinion as a Commissioner, Commissioner Nowak wrote a separate dissent arguing that the majority went out of its way to craft a narrow ruling, and that the dispute is not ripe. Commissioner Nowak argues that the PSC should have waited until the utility denied an interconnection request and an appeal was filed, or made some indication that the PSC intended to regulate the facility.

She pointed out that previous Commissions have said this is a question more appropriate for the Legislature. Commissioner Nowak argued that the Legislature has sent a message by not acting to address the issue of third-party financing.

Commissioner Nowak argues that the sale of electricity is the sole purpose of the facility in this case, not incidental, and that the intentions and actions of the enterprise should be the focus, not just the equipment. Commissioner Nowak asserts that the focus of Vote Solar is to provide service to “those who can afford it” and states “[t]he majority and the applicant would have us believe that by discriminating, they can avoid regulation that would preclude them from engaging in discrimination.” A conclusion Commissioner Nowak calls “a mockery of the law.”

Finally, Commissioner Nowak noted her disagreement with what she sees as the PSC disclaiming jurisdiction over consumer protections.

Effect of Decision

It remains to be seen what, if any, broader effect, this decision may have on the wider availability of third-party financed solar or other DERs in the future. However, there will likely be further legal, or potentially legislative, action in the coming months and years. The Commission's ruling may be appealed for review in circuit court, and persons "aggrieved" by the decision may also petition the agency for a rehearing.

Godfrey and Kahn will continue to monitor the issues of third-party financing and the definition of public utility closely and keep our clients up to date on any further developments. Please reach out to a member of our Energy Practice Group if you have questions.