September/October 2022 Issue

Also in this issue: Remembering Mike May     |     Public Records Retention: When to Say Goodbye     |     Municipal Regulation of Solar Energy Systems

PSCW Takes Up Third Party Ownership Question

Richard Heinemann | 10.17.22

For the past several years, stakeholders have sought clarity on whether or not solar developers can own all or substantial portions of solar generation facilities installed on customer owned property in utility territory without being regulated as public utilities. Earlier this year, the Public Service Commission of Wisconsin (PSCW), considered the question in a widely followed proceeding involving the City of Milwaukee and Eagle Point Solar, but failed to reach a decision in the absence of a definitive majority. Now, however, the question has been set for hearing in a pair of proceedings initiated by solar developers.

The two proceedings have attracted the attention of numerous intervenors, including the Wisconsin Utilities Association, the Municipal Electric Utilities of Wisconsin and the Wisconsin Electric Cooperative Association, all of whom oppose the petitions on the grounds that permitting solar developers to own solar generation facilities and sell energy or lease solar energy generating equipment to utility customers such as school districts or municipalities without PSCW oversight would potentially undermine system reliability, create untenable customer subsidies and weaken consumer protections. For MREA, Vote Solar, and those who support their petitions, such as the League of Wisconsin Municipalities, third party ownership without regulatory oversight is critical to ensuring that tax credits and direct payments can be deployed to lower the cost of financing for tax-exempt organizations or low income residential customers interested in installing on-site solar generation to meet carbon reduction goals or lower utility costs.

Although third party ownership has been the subject of previous PSCW proceedings, such proceedings have focused on the facts and circumstances of specific instances where generation has been developed by entities other than the incumbent utilities to serve utility customers. This is the first time the Commission has expressly decided to take up the question as the subject of possible declaratory relief, rather than look to the state legislature, where recent efforts to pass enabling legislation have failed to generate momentum.

Neighboring states provide little guidance, as third party ownership of solar generation in utility territory is legal in some states (e.g. Iowa and Illinois), but not in others (Minnesota).

In the current proceedings, the petitioners have designated a set of distinguishing features that allegedly define which third-party owned facilities should be deemed not to be subject to public utility regulation under Chapter 196 of the Wisconsin Statutes. The petitioners claim that the absence of clarity on this question has impeded the development of other solar projects. The utilities who oppose the petitions have presented testimony purporting to explain how Wisconsin’s regulatory framework has protected utility customers without prohibiting the development of solar generation resources to meet customer needs.

Evidentiary hearings are scheduled to take place at the end of October, with a final decision from the Commission expected on December 1.