Court Opinion

ID: 4427918
Source: CourtListenerOpinion
Date Created: 2019-08-20 18:57:58.845574+00
Date Added: 2024-06-11T14:50:57.409825
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                           APPROVAL OF THE APPELLATE DIVISION
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                                                     SUPERIOR COURT OF NEW JERSEY
                                                     APPELLATE DIVISION
                                                     DOCKET NO. A-4163-16T1

IN THE MATTER OF
ADOPTION OF AMENDMENTS
TO N.J.A.C. 14:8-1.2, 2.1
THROUGH 2.6, 2.9, 2.10 and
2.11.
_______________________________

                Argued September 18, 2018 – Decided July 30, 2019

                Before Judges Hoffman, Suter and Geiger.

                On appeal from the New Jersey Board of Public
                Utilities, Docket No. QO16020130.

                William Harla argued the cause for appellant
                Community Energy Solar, LLC (DeCotiis, FitzPatrick,
                Cole & Giblin, LLP, attorneys; William Harla, of
                counsel; Christopher J. Turano, on the brief).

                Yao Xiao, Deputy Attorney General, argued the cause
                for respondent New Jersey Board of Public Utilities
                (Gurbir S. Grewal, Attorney General, attorney; Jason
                W. Rockwell, Assistant Attorney General, of counsel;
                Yao Xiao, on the brief).

PER CURIAM
      Community Energy Solar, LLC (CES) appeals the amendment of two

regulations by the New Jersey Board of Public Utilities (the BPU). We reject

CES's arguments that the regulations are invalid as ultra vires of the statute or

arbitrary, capricious or unreasonable. We also deny its motion under Rule 2:5-

5 to supplement the record in light of our decision regarding the regulations.

      The appeal involves two BPU regulations: N.J.A.C. 14:8-2.5(b)(2) and

N.J.A.C. 14:8-2.9(e)(2). They were part of a rule proposal on March 7, 2016,

to amend "N.J.A.C. 14:8-1, to conform portions of the current rules to the

provisions of P.L. 2012, c. 24 (Solar Act), and to P.L. 2015, c. 51." 48 N.J.R.

383(a) (Mar. 7, 2016). According to the BPU's proposal, these were to "bring

the [BPU's] rules into compliance with the law." Ibid. Both of the challenged

amendments involve solar energy.

      In 1999 the Electric Discount and Energy Competition Act (EDECA),

N.J.S.A. 48:3-49 to -98.5, changed the electric power industry in New Jersey.

See In re Ownership of Renewable Energy Certificates, 389 N.J. Super. 481,

487-88 (App. Div. 2007).         "New Jersey's electric energy system [was

restructured] so 'customers would have the right to choose their electricity

suppliers' and so that energy suppliers could obtain their energy from wholesale

energy markets . . . . To this end, New Jersey divorced the entities that generate

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                                        2
electricity from those that supply it." PPL EnergyPlus, LLC v. Solomon, 766
F.3d 241, 248 (3d Cir. 2014). The change "produced a delicate circuitry of

interdependence between private entities and public utilities, and between New

Jersey and federally-regulated wholesale energy markets." Ibid.

      Under the EDECA, utilities were required to "annually increase their

reliance on renewable energy." In re Ownership, 389 N.J. Super. at 488; see

N.J.S.A. 48:3-87(d). The BPU was "to create a 'renewable energy trading

program' to help the industry satisfy the requirement for increased use of

renewable electric power." Ibid. (citing N.J.S.A. 48:3-87(d)(2)).

      In its regulations, the BPU adopted "renewable Energy Portfolio

Standards."   See N.J.A.C. 14:8-2.1(a).      Under these standards, electricity

suppliers could generate a predetermined percentage of electricity from

renewable sources such as solar power. N.J.A.C.14:8-2.1(a); N.J.A.C. 14:8-2.3.

An electricity supplier can generate renewable energy directly in order to satisfy

its renewable energy requirements. It also can purchase certificates from other

energy suppliers.

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       There are Renewable Energy Certificates (RECs) and Solar Renewable

Energy Certificates (SRECs). See N.J.S.A. 48:3-51. A SREC,1 which is issued

either by the BPU or its designee, represents "one megawatt hour . . . of solar

energy that is generated by a facility connected to the distribution system in this

State and has value based upon, and driven by, the energy market." Ibid.          A

REC2 represents "one megawatt-hour of generation from a generating facility

1
    As described,

             The concept is relatively simple; for every 1000
             kilowatts . . . of electricity generated by solar, the
             generator receives one SREC. These SRECs can, in
             turn, be sold to utilities on the open market, and their
             value is correlated to the alternative compliance fee the
             utility would incur for not meeting their [Renewable
             Portfolio Standard (RPS)] to source some of their
             energy from the sun. SRECs thus provide owners of
             solar facilities a source of revenue to help offset the
             cost of installation. SRECs provide New Jersey's
             utilities with a means to financially support the
             production of solar energy; if the utilities are not
             producing solar power themselves, they can satisfy
             their RPS by buying it in the form of SRECs from
             someone who is producing it.

             [Richard M. Hluchan, Here Comes The Sun, N.J.
             Lawyer Magazine, June 2011 at 31.]
2
  "Once issued, a [REC] may be bought and sold in a public market or may be
used by an electric utility to help satisfy its regulatory obligation to purchase

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that produces Class I or Class II renewable energy . . . ." Ibid. It does not

include a SREC or "an offshore wind renewable energy certificate." Ibid.

"Class I renewable energy" is broadly defined as including "electric energy

produced from solar technologies, photovoltaic technologies . . . ." Ibid.

        In 2012, the EDECA was amended by the Solar Act of 2012, L. 2012, c.

24, "to further several goals of the State's 2011 Energy Master Plan." In re

Implementation of L. 2012, c. 24, N.J.S.A. 48:3-87(t), 443 N.J. Super. 73, 75

(App. Div. 2015). This included "promoting the installation of solar projects on

contaminated industrial and commercial sites that would otherwise remain

unproductive, while 'discouraging large-scale solar projects on farmland and

open space.'" Ibid. (quoting Press Release, Office of the Governor, Governor

Christie Builds on Record of Growing Renewable Energy Sources with Action

to Strengthen Solar Market (July 23, 2012)). It was amended again in 2015 to

clarify Class II renewable energy regarding hydropower facilities. L. 2015, c.

51. 3

increasing amounts of renewable energy each year." In re Ownership, 389 N.J.
Super. at 484.
3
   More recently, the EDECA was amended by the Clean Energy Act, L. 2018,
c. 17. In addition to closing the SREC program in June 2021,

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      In proposing the amendments to the regulations, the BPU stated the

proposed amendments were to "conform portions of the current rules to the

provisions of . . . [the Solar Act] and to P.L. 2015, c 51." 48 N.J.R. 383(a) (Mar.

7, 2016).

      Before the amendments,4 N.J.A.C. 14:8-2.5(a) and (b) provided:

            (a) This section sets forth the types of energy that
            qualify as class I renewable energy for the purposes of
            issuance of a class I REC usable for compliance with
            this subchapter. The Board has determined that energy
            listed at (b) below qualifies as class I renewable energy,
            with no prior approval required. Energy listed at (d)
            and (e) below shall qualify as class I renewable energy
            if the conditions specified in those subsections are met.

            [t]he bill also requires the board [to] complete a study
            to evaluate how to modify or replace the SREC program
            in order to encourage the continued efficient and
            orderly development of solar renewable generating
            sources. The study would evaluate how to develop a
            program that would reduce the costs of achieving the
            State's solar energy goals, provide an orderly transition
            from the current SREC program to a new program,
            develop targets for grid-connected and distribution
            systems, establish and update market-based maximum
            incentive payment caps, and encourage and facilitate
            market-based cost recovery through long-term
            contracts and energy market sales.

            [Assembly Committee Statement to A. 3723 2 (L. 2018,
            c. 17).]
4
  There were prior amendments for each regulation. We have only cited to the
amendment at issue and the immediately preceding version.
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           (b) The following qualify as class I renewable energy
           for the purposes of this subchapter, with no prior
           approval required:

           1. Solar electric generation in the form of solar RECs;

           2. Electricity derived from wind energy;

                 ....

           [N.J.A.C. 14:8-2.5 (R. 2012 d. 107, effective June 4,
           2012).]

     The BPU proposed to change the regulation as follows:

           Full text of the proposal follows (additions indicated in
           boldface thus; deletions indicated in brackets [thus]):

           14:8-2.5 Energy that qualifies for a class I REC

                 ....

           (b) The following qualify as a [class] Class I renewable
           energy for the purposes of this subchapter, with no prior
           approval required:

                 ....

           2. Solar electric generation from a certified facility
           after the facility's qualification life has ended;

           [48 N.J.R. 383(a).]

     The BPU also proposed to amend N.J.A.C. 14:8-2.9(e)(2). Before its

amendment, the regulation provided:

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              (e) Electric generation qualifies for issuance of RECs
              or SRECs only if:

              1. It is solar electric generation produced by a
              generating facility that is interconnected with an
              electric distribution system, as defined at N.J.A.C.
              14:4-1.2, that supplies electricity to one or more end
              users located in New Jersey; or

              2. It is class I renewable energy, other than solar
              electric generation, and one or more of the following
              requirements is met:

                    i. The generating facility reports its generation
              electronically to PJM-EIS no less frequently than
              monthly, and complies with any additional
              requirements established by PJM;5

                    ii. All of the following requirements are met:

                          (1) The generating facility reports its
                    generation electronically no less frequently than

5
    This reference is to PJM Interconnection, LLC. It is

              the privately-held, limited liability corporation that is a
              [Federal Energy Regulatory Commission]-approved
              Regional Transmission Organization, or its successor,
              that manages the regional, high-voltage electricity grid
              serving all or parts of [thirteen] states including New
              Jersey and the District of Columbia, [and] operates the
              regional competitive wholesale electric market,
              manages the regional transmission planning process,
              and establishes systems and rules to ensure that the
              regional and in-State energy markets operate fairly and
              efficiently.

              [N.J.S.A. 48:3-51.]
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                                          8
                  monthly to an electric distribution company, as
                  defined at N.J.A.C. 14:4-1.2, that is a member of
                  PJM;

                         (2) The electric distribution company then
                  provides the generator's report electronically no
                  less frequently than monthly to PJM-EIS; and

                        (3) The generating facility complies with
                  any additional requirements established by PJM-
                  EIS; or

                  iii. The generating facility has the sale of the
                  class I or class II renewable energy settled in the
                  PJM wholesale market.

            [N.J.A.C. 14:8-2.9(e) (R. 2013 d. 066, effective April
            15, 2013).]

It proposed to change the regulation as follows:

            Full text of the proposal follows (additions indicated in
            boldface thus; deletions indicated in brackets [thus]):

            14:8-2.9 Issuance of RECs and SRECs

                  ....

            (e) Electric generation qualifies for issuance of RECs
            or SRECs only if:

                  ....

            2. It is [class] Class I renewable energy, [other than]
            including solar electric generation after the end of the
            solar electric generation facility's qualification life,
            and one or more of the following requirements is met:

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                                       9
                        ....

                  [N.J.A.C. 14:8-2.9(e)(2).]

Both regulations were adopted as proposed.

       CES argues that the amendments are ultra vires because to qualify for a

Class I REC under the regulations, it must first qualify as a SREC and then its

15-year SREC qualification life6 must have ended. It argues this is contrary to

the "statute and legislative intent which makes it clear that all solar energy

selling into PJM qualifies as a Class I REC." It contends the rules "delete[d]

solar facilities from Class I renewable energy, remove[d] eligibility for Class I

RECs and den[ied these] facilities the economic benefits of qualifying for that

status . . . ."

       The BPU contends the regulations only address Class I RECs in the

situation where the solar electric generation facility has reached the end of its

qualification life because there was uncertainty whether these facilities could

continue to qualify for Class I RECs. The BPU argues the regulations did not

add new requirements for solar generators to qualify for Class I RECs or take

away anything. It argues that other requirements—such as being connected to

6
    See N.J.A.C. 14:2-2.

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                                           10
New Jersey's distribution system—pre-dated the regulatory amendments and

find their source in the State's Energy Master Plan, the Solar Act and

amendments of the EDECA in 2015.

      CES responds that the statute does not require it to be connected to the

State distribution system in order to receive Class I RECs prior to the expiration

of its SREC life. It wants to construct a solar facility in the PJM grid region

outside of New Jersey which delivers electric power into the PJM wholesale

grid, and argues that just like a wind or geothermal technologies facility, it

should qualify for a Class I REC. By only allowing solar generators to qualify

for Class I RECs in one situation—after expiration of SREC life—CES argues

the regulations "impermissibly excludes a project category eligible for REC

status."

      "Our review of administrative agency action is limited." Russo v. Bd of

Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011) (quoting In re

Herrmann, 192 N.J. 19, 27 (2007)). "Appellate 'review of agency regulations

begins with a presumption that the regulations are both "valid and reasonable."'"

Caporusso v. N.J. Dep't of Health & Senior Servs., 434 N.J. Super. 88, 111 (App.

Div. 2014) (quoting N.J. Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535, 548

(2012)); see M.F. v. Dep't of Human Servs., Div. of Family Dev., 395 N.J. Super.

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18, 29 (App. Div. 2007). "That judicial deference to administrative agencies

stems from the recognition that agencies have the specialized expertise

necessary to enact regulations dealing with technical matters and are

'particularly well equipped to read and understand the massive documents and

to evaluate the factual and technical issues that . . . rulemaking would invite.'"

M.F., 395 N.J. Super. at 29 (quoting N.J. State League of Municipalities v. Dep't

of Cmty. Affairs, 158 N.J. 211, 222 (1999)). "Because '[t]he grant of authority

to an administrative agency is to be liberally construed to enable the agency to

accomplish the Legislature's goals,'" we generally defer to the agency's statutory

interpretation. In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, Stranded

Costs and Restructuring Filings, 167 N.J. 377, 384 (2001).

      "[O]ur Supreme Court has advised the judiciary that 'an ultra vires finding

is disfavored' . . . [a]nd any party challenging a regulation must prove its

invalidity." Caporusso, 434 N.J. Super. at 111-12 (quoting IMO Freshwater

Wetlands Prot. Act Rules, 238 N.J. Super. 516, 525 (App. Div. 1989); League

of Municipalities, 158 N.J. at 222). An agency may not "extend a statute to give

it a greater effect than its language permits." GE Solid State, Inc. v. Dir., Div.

of Taxation, 132 N.J. 298, 306 (1993) (citing Kingsley v. Hawthorne Fabrics

Inc., 41 N.J. 521, 528 (1964)).

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      An agency's decision should be upheld "unless there is a clear showing

that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the

record." In re Herrmann, 192 N.J. at 27-28. "When an agency violates the

express policy of its enabling act, the agency action may be deemed arbitrary

and capricious." Caporusso, 434 N.J. Super. at 103 (citing PSE&G v. N.J. Dep't

of Envtl. Prot., 101 N.J. 95, 103 (1985)). Our "[i]ntervention is warranted when

the action is unsupported or unaccompanied by reasonable explanation." Ibid.

(citing PSE&G, 101 N.J. at 103).

      We agree with the BPU that the amendments to the regulations were

narrowly focused to clarify that once a solar facility's qualification life ended in

fifteen years that it could still receive Class I RECs without prior approval from

the BPU. As such, the regulation addressed the "interstices" of the statute,

filling a void that had not heretofore been addressed, and was not a "diversion"

or a sea-change in the distribution of Class I RECs or SRECs, as CES alleges.

      The BPU's proposal said as much.            In proposing the amendment to

N.J.A.C. 14:8-2.5(b)(2), the BPU stated that it "proposes to add energy from a

solar electric generation facility after the expiration of its qualification life to

the list of energy that qualifies as Class I renewable energy with no prior

approval required." 48 N.J.R. 383(a) (Mar. 7, 2016). In the proposal regarding

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N.J.A.C. 14:8-2.9(e)(2), it stated "the Board proposes to clarify that Class I

renewable energy includes energy generated at a solar electric generation

facility after the end of its SREC qualification life." Ibid. The BPU only

addressed Class I RECs at the end of the facilities' qualification life; there was

no pronouncement that it was adding new requirements that restricted facilities

that were within their qualification life. CES complains that the BPU's action

was arbitrary and capricious because it was not supported by a reasonable

explanation. We reject that argument because the BPU did explain the narrow

change it made.

      The issue CES identified was beyond the amendment of these regulations.

The BPU contends that the State's Master Plan and the Solar Act required a

connection to the State's distribution system to obtain Class I RECs and SRECs.

Under the Master Plan,

            [q]ualifying Class 1 electric generators (with the
            exception of solar and offshore wind) do not need to be
            located in New Jersey, but must deliver electricity into
            the PJM wholesale grid, which serves New Jersey.
            Qualifying solar electric generation must be located in
            New Jersey and connected to the distribution supply
            serving New Jersey.

            [2011 New Jersey Energy Master Plan, Section 4.9.3,
            page 46 (Dec. 6, 2011).]

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The Solar Act (L. 2012, c. 24) addresses proposed solar electric power

generation facility projects and what it means to be "connected to the

distribution system," which is a defined term that was added by that Act.

N.J.S.A. 48:3-51, L. 2012, c. 24 § 1. Thus, there is support for the contention

that connection is required. This also could be consistent with the Legislature's

concern that New Jersey had a shortage of generators of electricity. See N.J.S.A.

48:3-98.2.

      The BPU's power to regulate utilities is broad. In re Centex Homes, LLC,

411 N.J. Super. 244, 254 (App. Div. 2009). "Our courts have consistently held

that the Legislature in Title 48 intended to delegate the widest range of

regulatory power over public utilities to the [BPU]." Ibid. (alteration in original)

(quoting Deptford v. Woodbury Terrace Sewerage Corp., 54 N.J. 418, 424

(1969)). The Court has further stated that the BPU's powers extend beyond those

expressly granted by statute "to include incidental powers that the agency needs

to fulfill its statutory mandate." In re Pub. Serv. Elec. & Gas Co., 167 N.J. at

384 (quoting In re Valley Rd. Sewerage Co., 154 N.J. 224, 235 (1998)).

      We are mindful as well that the energy delivery system has been described

as a "delicate circuitry of interdependence between private entities and public

utilities, and between New Jersey and federally-regulated wholesale energy

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                                        15
markets." PPL EnergyPlus, 766 F.3d at 248. Its complexity is evident from the

description of the credits at issue. CES has not explained the impact on the

energy system for the State or the region of its interpretation.

      We are satisfied that the regulatory amendments were narrowly focused

on Class I RECs for the period once a solar facility's qualification life ended

after fifteen years. CES is candid that it is not concerned with the period after

the qualification life ends. We express no opinion on CES's concern about the

requirement for connection to New Jersey's distribution system because it

simply was not triggered by the amendment of these regulations. The BPU has

"the specialized expertise necessary to enact regulations dealing with technical

matters and . . . to evaluate the factual and technical issues." M.F., 395 N.J.

Super. at 29 (quoting League of Municipalities, 158 N.J. at 222). We defer to

its interpretation of its regulations. If it had intended the massive change that

CES portends, we certainly would have seen evidence of this in the proposal or

the numerous other comments that the BPU received.

      Part of the problem has to do with CES's inaction during the notice and

comment period. It did not file anything with the BPU while the comment

period was open from March 7, 2016 to May 6, 2016. Rather, starting on

November 2, 2016, and continuing through February 20, 2017, CES's consultant

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                                       16
and counsel contacted the BPU by email and letter. The amendments to the

regulations were adopted by the BPU on February 22, 2017, and the adoption

was effective on April 17, 2017. 49 N.J.R. 809(a). These emails and letters

were not included by the BPU in the adoption.

      CES filed its notice of appeal on June 1, 2017. Thereafter on June 30,

2017, it sent an Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13,

request to the BPU asking for fifteen categories of records that included internal

communications such as emails, text messages, notes about the proposed

amendments, any document that reflected a response to the comments about the

regulations, legal memoranda, any draft of the regulations, documents that had

to do with a discussion about the regulations and all documents regarding the

publication of the amendments. CES's counsel supplemented this by seeking

documents that were part of the "deliberative process." The BPU provided an

initial response, but asked for more time and a narrowing of the requests.

      In October 2017, CES filed a motion under Rule 2:5-5 to correct, settle

and supplement the record. It asked to include in the record on appeal five

emails and one letter because these were not included in the BPU's Statement of

Items Comprising the Record on Appeal (SICRA). These documents were the

same as were sent to the BPU after the notice and comment period had closed

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and before the amendments' adoption. The motion also asked that the BPU be

required to include all other documents, whether or not privileged, that it

considered in reaching a decision of the regulations.

      On appeal, CES asks that we allow it to explore the complete record of

the documents that the BPU considered in connection with the amendments or

remand this for further proceedings before the BPU. The BPU opposes this

because the documents received from CES, after the notice and comment period,

were properly not considered and did not have to be included in the SICRA. As

for the OPRA requested documents, the BPU contends this was an improper

collateral attack and would require the production of documents protected by

the deliberative process.

      We agree that CES did not perfect its request for records under OPRA.

CES did not file an order to show cause or verified complaint, nor a request with

the Government Records Council. See N.J.S.A. 47:1A-6 (providing that a

person who is denied access to a record requested under OPRA may challenge

the denial in Superior Court). See also Asbury Park Press v. Monmouth Cty.,

406 N.J. Super. 1, 7 (App. Div. 2009). Because the regulations address a narrow

issue that CES effectively is not challenging, there is no basis to order the

production of the requested records. In addition, a valid OPRA request "must

                                                                         A-4163-16T1
                                      18
identify with reasonable clarity those documents that are desired, and a party

cannot satisfy this requirement by simply requesting all of an agency's

documents." Bent v. Twp. of Stafford Police Dep't, 381 N.J. Super. 30, 37 (App.

Div. 2005).

      We also deny the Rule 2:5-5 motion to supplement the record on appeal.

There is no need to supplement the record where, "even if included, [the

information would be] . . . unlikely to affect the result reached." Pressler &

Verniero, Current N.J. Court Rules, cmt. 2 on R. 2:5-5 (2019) (citing In re

Marvin Gastman, 147 N.J. Super. 101, 114 (App. Div. 1977)). The regulations

addressed a narrow issue; the motion referenced documents that do not address

that issue. Thus, we deny the motion to require supplementation of the record

in these circumstances.

      In re NJPDES Permit, 216 N.J. Super. 1 (App. Div. 1987), cited by CES,

does not lead us to a different result. That case did not require the agency to

review and comment on materials received after the notice and comment period

when it promulgated the regulation or to include them in the SICRA.

      Our decision is very narrow.      The challenged amendments narrowly

focused on Class I RECs for the period once a solar facility's qualification life

ended in fifteen years. CES does not really challenge that issue. As such, the

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amendments are neither ultra vires nor arbitrary, capricious or unreasonable.

We express no opinion on whether a generator of solar energy must be connected

to the State distribution system in order to qualify for Class I REC certificates.

      Affirmed.

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