Opinion ID: 1657238
Heading Depth: 1
Heading Rank: 2

Heading: Net Metering Requirement.

Text: A. Arguments of parties. On appeal, Midland argues the trial court erred because (1) net metering is not required under PURPA or state law, and (2) the Iowa courts have no authority to impose requirements on Midland that are not required by federal or state law. In response, the plaintiffs claim the district court had the discretion and authority to impose net metering. They point out that net metering will provide incentives for alternate energy production sources, thereby advancing one of the goals of PURPA. See Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 404-05, 103 S.Ct. 1921, 1924, 76 L.Ed.2d 22, 27 (1983) (stating PURPA was designed to encourage the development of cogeneration and small power production facilities). The plaintiffs also rely on FERC's position that net metering does not violate PURPA to support the trial court's ruling. [1] B. Applicable law. We start with a brief examination of the statutory and regulatory framework. PURPA requires FERC to adopt such rules as it determines necessary to encourage cogeneration and small power production, including rules that require electric utilities to purchase electric energy from qualifying cogeneration facilities. 16 U.S.C. § 824a-3(a)(2). Rates for such purchases have two statutory restrictions: they must be just and reasonable to electric consumers of the utility and to the public, and they must not discriminate against [AEPs]. 16 U.S.C. § 824a-3(b). Congress considered, but did not adopt, a requirement that utilities purchase energy from AEPs on a net metering basis. See, e.g., 145 Cong. Rec. S5291 (1999); 144 Cong. Rec. S7952 (1998). The rules adopted by FERC require electric utilities to purchase energy from qualifying AEPs. 18 C.F.R. § 292.303. FERC's rules also parrot the two requirements for purchase rates set forth in PURPA and, in addition, state that utilities shall not be required to pay more than avoided costs for any excess energy produced by an AEP. 18 C.F.R. § 292.304(a)(1)-(2).  Avoided costs means the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source. 18 C.F.R. § 292.101(b)(6). State regulatory authorities and nonregulated electric utilities were given the responsibility to implement the rules adopted by FERC. 16 U.S.C. § 824a-3(f). In Iowa the legislature enacted a law requiring all utilities to purchase energy from qualifying AEPs and to file tariffs with the utilities board explaining their program for doing so. See Iowa Code § 476.47(1)-(2). Although the legislature provided that rate-regulated utilities' tariffs were subject to the requirements of rules adopted by the utilities board, the statute states that nonrate-regulated utilities' tariffs are to be filed for informational purposes only. Id. § 476.47(2). One rule adopted by the utilities board requires net billing between rate-regulated utilities and AEPs. See Iowa Admin. Code r. 199  15(11)(5). Midland, as a nonrate-regulated utility, is not subject to this rule. [2] Id. With these laws and regulations in mind, we turn to the net metering issue. C. Discussion. To place our consideration of this issue in context, we note that the underlying claim giving rise to this issue was the plaintiffs' request in their petitions that Midland be ordered to comply with PURPA. Interestingly, the district court did not rule that Midland's tariffs violated PURPA by not providing for net metering. Rather, the court held that net metering did not violate the PURPA provision that a utility could not pay more than its avoided costs for energy purchased from AEPs. The court then concluded that if net metering were not allowed, PURPA's purposeful passage to render alternative energy production reasonably attractive [would be] shelved. The implicit conclusion of the district court that net metering is not expressly required by law appears to be correct. The plaintiffs cite no statute, rule, or controlling decision that requires a nonregulated utility to use net metering. The FERC order upon which the plaintiffs rely is not to the contrary. In MidAmerican Energy Co., FERC simply held that state laws requiring rate-regulated utilities to use net metering are not inconsistent with PURPA. 94 F.E.R.C. at 62,263-64. We have found no federal case or regulatory decision holding that net metering is required by PURPA. Having determined there is no express requirement for net metering, we consider whether there is an implied requirement in PURPA that net metering be used. We think the answer to this question is clearly no. FERC has repeatedly stated that it would leave the implementation of PURPA to state regulatory authorities and nonregulated utilities, including the determination as to whether to institute net energy billing for AEPs. See, e.g., Swecker v. Midland Power Coop., 87 F.E.R.C. ¶ 61,187, at 61,721-22 (1999); Order No. 69, Small Power Production and Cogeneration Facilities, Regulations Implementing Section of the Public Utility Regulatory Policies Act of 1978, FERC Statutes and Regulations 1977-1982 ¶ 30,128, at 30,892 (1980), 45 Fed.Reg. 12,231 (1980) [hereinafter Order No. 69]; see also MidAmerican Energy Co., 94 F.E.R.C. at 62,263 (In implementing PURPA, the Commission ... recognized that net billing arrangements ... would be appropriate in some situations, and left the decision of when to do so to state regulatory authorities. (Emphasis added.)). FERC has also stated that nonregulated electric utilities are to be afforded `great latitude' in determining `the manner of implementation' of FERC's regulations concerning AEPs. Co-generation Coalition of America, Inc., 61 F.E.R.C. ¶ 61, 252, at 61,925 (1992) (order denying petition for a nationwide investigation). Given the broad discretion granted to regulatory authorities and nonrate-regulated utilities to determine whether and when to use net metering, we conclude it would be wrong to interpret PURPA to require Midland to offer net metering to all AEPs in its tariffs. Despite the absence of any authority that requires net metering, the plaintiffs argue the trial court had discretion to order Midland to use net metering. See generally Order No. 69, 45 Fed.Reg. 12,231 (1980) (noting review of a nonregulated utility's implementation of PURPA may be pursued in a state court forum pursuant to section 210(g) of PURPA); see also Policy Statement Regarding the Commission's Enforcement Role Under Section 210 of the Public Utility Regulatory Policies Act of 1978, 23 F.E.R.C. ¶ 61,304, at 61,644. To exercise discretionary authority over a nonregulated utility's implementation of PURPA would place the Iowa courts in the position of acting as a regulatory board for such utilities. We think this role is neither advisable nor necessary. FERC itself has authority to undertake an enforcement action to require a State regulatory authority or nonregulated electric utility to implement [FERC's] regulations. Tenn. Power Co., 77 F.E.R.C. ¶ 61,125, at 61,483 (1996) (order denying petition for enforcement under section 210 of PURPA) (citing 16 U.S.C. § 824a-3(h)(2)) (emphasis added). In the Tennessee Power decision, FERC stated that it would most likely use its enforcement power where claim is made that the nonregulated utility has not implemented FERC's regulations or has implemented them in a manner contrary to PURPA. 77 F.E.R.C. ¶ 61,125, at 61,485. FERC would leave to the states and state judiciaries challenges to the utility's application of implementing regulations, i.e., fact-specific questions. Id.; Cogeneration Coalition of America, Inc., 61 F.E.R.C. ¶ 61,252, at 61,926. The dispute here clearly falls in the category of an implementation, not an application, issue. The plaintiffs challenge Midland's tariff, not Midland's application of the tariff to particular customers. The arguments they advance in support of their position are not fact-specific to these plaintiffs or to this utility but instead rest on general principles of fairness and the desire to encourage alternate energy production. In essence, a decision by our court upholding the district court's decision would mean that all nonrate-regulated utilities in Iowa would be required to use net metering for all AEPs. Yet neither Congress, FERC, our state legislature, nor the utilities board saw fit to impose a universal requirement on nonregulated utilities to implement net metering. [3] In conclusion, we decline the opportunity to make a policy decision on whether net metering would be preferable in the situation before us. There are several reasons that support our decision: (1) the specialized and technical nature of the net-metering issue, (2) the absence of any meaningful guidance for case-by-case determinations of when net metering is appropriate and when it is not, (3) the broad precedential effect of requiring net metering in this case, which would be contrary to FERC's position that net metering is appropriate in some situations, (4) the authority of the Iowa legislature and the utilities board to require net metering for nonregulated utilities and their failure to do so, and (5) the authority of FERC to regulate the implementation of PURPA by nonrate-regulated utilities, including ordering net metering. Federal law gives nonregulated utilities broad discretion to implement PURPA, and we cannot say that Midland's position on net metering is contrary to that law. Therefore, the district court erred when it ordered Midland to use net metering in selling energy to and buying energy from the plaintiffs.