The Public Service Commission of Wisconsin on Thursday took a small step toward allowing third-party financing of rooftop solar systems in Wisconsin.
The 2-1 ruling allows a Stevens Point family to lease a solar power system for personal use from Amherst-based Northwind Solar. The regulators agreed that the arrangement did not make Northwind a public utility. But the ruling was narrower than solar advocates had hoped for.
Whether such companies should be regulated as public utilities has been a thorny issue in Wisconsin, where previous attempts to clarify the legality of third-party financing arrangements have failed in the Legislature, the courts and before the commission.
Third-party financing is an arrangement in which a solar company installs panels to provide electricity for a home, business or other building. The company is paid by the property owner through either a lease of the equipment or an agreement where the property owner buys the power produced by the installation, usually at a lower rate than that charged by the electric utility.
Utilities oppose such arrangements. They argue that the solar companies would not be subject to the same oversight and consumer protections rules that they must follow.
Third-party financing is allowed in at least 28 states, but the issue had been unresolved in Wisconsin, prompting two petitions to the PSC asking for a ruling on its legality: One by the solar advocacy group Vote Solar on behalf of the Stevens Point family and a second request from Midwest Renewable Energy Association seeking a ruling that third-party solar financing is allowed in Wisconsin.
“Utilities should be working to expand solar access – not seeking out flimsy legal loopholes to prevent it. We’re thrilled to see the commission make the right choice for this family, and hope the state will continue to build on this momentum by affirming that third-party financing is an option for all Wisconsinites," Will Kenworthy, Midwest Regional Director at Vote Solar, said in a statement.
The utilities and their supporters claim a broad shift to third-party financed solar arrays would push up the cost of electricity for customers who continue to be served by the utilities because they would have to take on a larger share of the fixed costs of electric power distribution.
In a statement, WEC Energy Group said rooftop solar developers petitioned the PSC in an attempt to circumvent the law and the state Legislature, which it believes is the appropriate forum for consideration of third-party solar financing.
"The types of 'financing' arrangements the commission voted to approve today are not lawful and also would harm our customers by shifting additional costs from solar owners onto those who cannot afford or choose not to host solar systems," the utility said. "This cost shift is not theoretical; it is happening. In California the cost shift to non-solar customers is as much as $3.5 billion per year and studies found that lower-income customers are hit the hardest."
WEC Energy Group is the parent company of Wisconsin Public Service Corp., which provides electric service for the Stevens Point family.
Proponents argue that third-party financing of rooftop solar arrays could open the door for more property owners to participate in the benefit of lower-cost, carbon-free solar energy, including families and individuals who cannot qualify for a bank loan or comfortably make interest payments on a loan.
Support for third-party financing in filings with the PSC extends beyond homeowners to include nonprofits, municipalities, schools and other entities that want to be able to move to solar power but do not qualify for federal green-energy tax credits because they are tax exempt.
That's what led Advocate Aurora to weigh in on the issue. In a filing, the health care organization stated that the lack of clarity on third-party financing limited its options as it works toward a goal of powering all of its operations with renewable energy by 2030. Third-party financing, Advocate Aurora argued, would allow it to more aggressively pursue that goal without overly taxing its available funds for capital improvements and also allow it to reap the benefits of tax credits. Under a third-party contract, the solar company would receive the credits and pass on savings to the organization.
Third-party solar advocates argued that the utilities' objections stem not from an interest in protecting customers, but rather from a desire to protect their monopolies and prevent the erosion of their customer base as more people install solar panels and reduce their dependence on the utilities to provide their electricity.
The cases hinge on a 1911 court ruling, Cawker v. Meyer, that established a definition of a public utility that has for more than 100 years been an underlying guide to decision making on utility regulation.
Vote Solar argued that contracts to lease a rooftop solar array or buy the power from one did not fall under the ruling's definition of a public utility because the contract was exclusive to the company and the property owner and would not provide power for the general public.
Commissioners Tyler Huebner and Rebecca Cameron Valcq agreed with that position in giving approval in the Stevens Point case.
Kenworthy said he was thrilled by those findings even though the commissioners did not act on Vote Solar's request for a broader ruling that would have clarified that third-party arrangements are allowed by the state.
He said the language in the written ruling, when released, may provide some clarity for others considering a third-party arrangement, but the ruling established two key points: It made clear that a project for a family or single customer does not serve the "public," and Northwind in entering a third-party financing agreement is not a utility.
How broadly the ruling can be applied to other projects remains to be seen, Kenworthy said.
"Installers will have to look at it and see what kind of comfort they get out from this," he said.
The utilities and their supporters argued that a collection of contracts to install and profit from the production of electricity, even if each contract's primary purpose was to provide power to an individual site, made the solar provider a utility that should be regulated.
PSC Commissioner Ellen Nowak said that remains an open question, one that's not answered by the PSC's narrow ruling on the Vote Solar petition, and one that will need to be addressed if third-party solar financing becomes more common in Wisconsin.
"Is it 10? Is it 100?" she asked. "At what point does it become a public utility? Because that is clearly their business model and are by giving them a narrow ruling."
The Midwest Renewable Energy Association's request for broader authorization for third-party solar financing is expected to be settled by the end of the year. No date has been set for that decision.
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This article originally appeared on Milwaukee Journal Sentinel: Solar power advocates win small battle affecting residential customers