Court Opinion

ID: 9946793
Source: CourtListenerOpinion
Date Created: 2024-03-01 15:21:46.474657+00
Date Added: 2024-06-11T14:23:43.449075
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

David N. Hommrich,                          :
                Petitioner                  :
           v.                               :      No. 463 M.D. 2022
                                            :      Submitted: October 10, 2023
Commonwealth of Pennsylvania,               :
Pennsylvania Public Utility                 :
Commission,                                 :
                  Respondent                :

BEFORE:         HONORABLE ANNE E. COVEY, Judge
                HONORABLE LORI A. DUMAS, Judge
                HONORABLE MARY HANNAH LEAVITT, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY SENIOR JUDGE LEAVITT                                   FILED: March 1, 2024

                David N. Hommrich, pro se, has filed an amended petition for review
in this Court’s original jurisdiction seeking declaratory relief. Hommrich challenges
the Pennsylvania Public Utility Commission’s (PUC) regulations on alternative
energy projects as inconsistent with the Alternative Energy Portfolio Standards Act
(AEPS Act).1 In response, the PUC has filed a demurrer to Hommrich’s amended
petition asserting that he lacks standing and failed to exhaust his administrative
remedies. Additionally, the PUC objects to the amended petition on grounds that it
does not plead with specificity that Hommrich suffered harm and failed to join as
necessary parties all electric distribution companies (EDCs) and PUC-approved
alternative suppliers. For the reasons that follow, we overrule the PUC’s preliminary
objections.

1
    Act of November 30, 2004, P.L. 1672, as amended, 73 P.S. §§1648.1-1648.8.
                                    Background
             Hommrich is the sole owner of a renewable energy project, which he
purchased from his employer, Pennsylvania Microgrids, LLC (Penn Micro).
Amended Petition ¶3.
             As Hommrich, himself, states: “[a]t the heart of this [p]etition is the
statutory construction of the [AEPS] Act as it applies to the interconnection of
renewable energy systems.”      Amended Petition ¶6.       He further explains that
“[i]nterconnection is the mechanism through which a source of generation connects
and delivers power to an electrical distribution system. Without interconnection,
most[,] if not all[,] renewable energy projects under the AEPS Act [could not]
function.” Id. ¶7. Hommrich states that the gravamen of his petition is “the statutory
interpretation of the AEPS Act and the ongoing regulatory overreach by the PUC in
matters dealing with the [AEPS] Act.” Id. ¶9. He asks the Court to “provide
declaratory relief regarding certain issues that the PUC has failed to address
regarding the timely and cost-effective interconnection of renewable energy systems
under the AEPS Act.” Id.
             Specifically, Hommrich challenges the validity of three PUC
regulations: 52 Pa. Code §75.67 (relating to alternative energy cost-recovery); 52
Pa. Code §75.38 (relating to Level 2 interconnection review); and 52 Pa. Code
§75.39 (relating to Level 3 interconnection review). He also challenges “[a]ny PUC
regulation that allows an EDC to charge a customer-generator for distribution system
improvement costs associated with the interconnection of a customer-generator’s
renewable energy system[.]” Amended Petition at 27, Request for Relief ¶D. The
amended petition asserts that these regulations violate the AEPS Act because an
EDC is required to extend its existing network to connect with an alternative energy

                                          2
project and then compensate the project (or customer-generator) for the energy
received therefrom. Amended Petition ¶¶24-53 and Requests for Relief ¶¶A-D.
            The amended petition asserts that the PUC’s regulations contravene the
AEPS Act because they permit an EDC to recover its connection costs only from the
customer-generator, not the ratepayers of the default electric service utility. The
regulations have altered the AEPS Act by changing “shall” to “may” and by adding
language (e.g., “reasonable and prudently”) that does not appear in the statute.
Amended Petition ¶34. Hommrich seeks a declaratory judgment that establishes:
            A.    Excess energy that an EDC purchases from a customer-
            generator under the AEPS Act represents the purchase of a
            resource as defined in the AEPS Act.
            B.    The cost for distribution system improvements to allow a
            customer-generator to interconnect to an EDC’s distribution
            system is a direct or indirect resource, as that term is used in the
            AEPS Act, and must be recovered from ratepayers, not from the
            customer-generator.
            C.    The PUC does not have the authority to promulgate
            regulations that alter the clear language of the AEPS Act, which
            has rendered regulations at 52 Pa. Code §75.67 unlawful and
            unenforceable.
            D.    Any PUC regulation that allows an EDC to charge a
            customer-generator for costs associated with the interconnection
            of a customer-generator’s renewable energy system is invalid
            under the AEPS Act.
            E.    The language in an EDC’s net metering application that
            requires that the renewable energy project offset a customer-
            generator’s need for electricity is unlawful and unenforceable.
            F.     Any language in an EDC’s net metering application that
            states that an EDC may disqualify a customer-generator’s
            renewable energy system because of excess energy generation is
            unlawful and unenforceable.
            G.    The PUC must compel all EDCs to remove language from
            agreements with customer-generators that violate the AEPS Act.
                                         3
             H.    Customer-generators may use third-party contractors,
             under confidentiality commitments with an EDC, to facilitate a
             timely and cost-effective interconnection, so long as the cost or
             timeline of the third-party option results in a lower cost or a
             shorter timeline for the customer-generator.
             I.    The AEPS Act does not allow an EDC to charge a
             customer-generator a contribution in aid of construction (CIAC).
             This requirement by an EDC is invalid and unenforceable.

Amended Petition at 27-28, ¶¶A-I.
                              Preliminary Objections
             On December 14, 2022, the PUC filed preliminary objections in the
nature of a demurrer to Hommrich’s amended petition. First, the PUC argues that
Hommrich failed to plead with specificity that he has experienced any harm.
Second, the PUC objects on the basis that Hommrich lacked standing to seek any of
the relief he sought.     Third, the PUC argues that Hommrich failed to join
indispensable parties. Fourth, the PUC argues that it has exclusive jurisdiction over
matters raised in Hommrich’s amended petition, and administrative remedies have
not been exhausted.
             On January 13, 2023, Hommrich filed an answer to the PUC’s
preliminary objections, and both parties filed briefs.
                                Standard of Review
             Pennsylvania Rule of Appellate Procedure 1516(b) authorizes the filing
of preliminary objections to an original jurisdiction petition for review.       See
PA.R.A.P. 1516(b). In ruling on preliminary objections, we accept as true all well-
pleaded material allegations in the amended petition for review and any reasonable
inferences therefrom. Thomas v. Corbett, 90 A.3d 789, 794 (Pa. Cmwlth. 2014).
“The Court, however, is not bound by legal conclusions, unwarranted inferences
from facts, argumentative allegations, or expressions of opinion encompassed in the

                                          4
petition for review.” Id. We may sustain preliminary objections where the law
makes clear that the petitioner cannot succeed on his claim, and we must resolve any
doubt in favor of the petitioner. Id.
                                  I. Contents of Pleading
              Initially, the PUC objects to Hommrich’s amended petition as not
complying with the pleading requirements of the Pennsylvania Rules of Civil
Procedure because it does not adequately explain whether, when, or how he was
allegedly impacted by the regulations he is challenging.2 Rule 1019(a) requires that
“[t]he material facts on which a cause of action or defense is based shall be stated in
a concise and summary form.” PA.R.CIV.P. 1019(a). The PUC notes that “the
pleadings must adequately explain the nature of the claim . . . so as to permit the
preparation of a defense, and [] they must be sufficient to convince the court that the
averments are not merely subterfuge.” PUC Brief at 12 (quoting Martin v. Lancaster
Battery Company, Inc., 606 A.2d 444, 448 (Pa. 1992)).
              The PUC explains that Section 75.67 of its regulations, 52 Pa. Code
§75.67, “on its face” applies only to a “default service provider”3 and lists the costs
such a provider may recover from its customers. PUC Brief at 12. The PUC

2
  Pursuant to Rule 1517 of the Pennsylvania Rules of Appellate Procedure, “[u]nless otherwise
prescribed by these rules, the practice and procedure under this chapter relating to pleadings in
original jurisdiction petition for review practice shall be in accordance with the appropriate
Pennsylvania Rules of Civil Procedure, so far as they may be applied.” PA.R.A.P. 1517.
3
 A “default service provider” is:
       An electric distribution company within its certified service territory or an
       alternative supplier approved by the commission that provides generation service
       to retail electric customers who:
                (1) contract for electric power, including energy and capacity, and the
                chosen electric generation supplier does not supply the service; or
                (2) do not choose an alternative electric generation supplier.
66 Pa. C.S. §2803.
                                               5
contends that Hommrich cannot challenge this regulation because this regulation
“has no bearing on [] Hommrich or his putative business plans.” PUC Brief at 14.
Thus, the pleading lacks the requisite specificity.
             Hommrich acknowledges that he is not a default service provider, an
EDC, or an alternative energy supplier. He contends that he does not need to be any
of these things to pursue his declaratory judgment action. In his capacity as an owner
of an alternative energy project, Hommrich requests this Court to determine whether
the AEPS Act “intended for unchecked costs and indeterminate timelines to be
imposed on those who wish to own and operate alternative energy systems[.]”
Hommrich Brief at 30.         Hommrich asserts that pre-enforcement review of
regulations is allowed, and he does not need to be a default service provider in order
to challenge a regulation that adversely impacts his business. “A party interested in
becoming a customer-generator is exposed to financial risk well before [it is]
actually deemed one by the PUC.” Hommrich Brief at 24 (citing Hommrich v.
Pennsylvania Public Utilities Commission, 231 A.3d 1027 (Pa. Cmwlth. 2020)
(Hommrich II), wherein the Court allowed pre-enforcement review because of the
potential for financial harm).
             This Court’s determination in Hommrich v. Pennsylvania Public
Utilities Commission (Pa. Cmwlth., No. 674 M.D. 2016, filed July 28, 2017)
(Hommrich I), is relevant to the present matter. In Hommrich I, Hommrich also
challenged the nature of certain PUC regulations pertaining to net metering,
contending that they were inconsistent with, and not authorized under, the AEPS
Act. There, Hommrich, who was president of Sunrise Energy, LLC (Sunrise
Energy), sought to develop alternative renewable energy assets, specifically solar
power facilities. The projects were separate from any assets owned by Sunrise

                                          6
Energy, which would not be involved in the projects. The projects in Hommrich I
were planned prior to the enactment of the challenged PUC regulations and had not
been approved by the PUC for net metering prior to Hommrich’s acquisition of them.
By contrast, here, the alternative energy project Hommrich purchased from Penn
Micro was approved for net metering while it was owned by Penn Micro, and
nothing in the AEPS Act or the PUC’s regulations requires that an alternative energy
system project must be re-submitted for approval when a change in ownership
occurs.
             In Hommrich I, Hommrich asserted that his proposed projects qualified
for net metering under the AEPS Act but not under the PUC’s regulations. There,
we determined that the pleading had sufficient specificity and stated a viable claim
for relief. In the present matter, as in Hommrich I, the amended petition alleges that
the challenged regulations cause Hommrich direct harm because they interfere with
his ability to secure financing for his project.      Stated otherwise, the PUC’s
regulations pose the same financial harm they did in Hommrich I. Accordingly, we
overrule the PUC’s preliminary objection that Hommrich has failed to adequately
explain the nature of his claims regarding whether, when, or how he is impacted by
the regulations he is challenging.
                                     II. Standing
             In its second preliminary objection, the PUC argues that Hommrich
lacks the capacity to sue because his amended petition does not aver that he is a
default service provider, an EDC, or alternative supplier approved by the PUC.
Hommrich’s amended petition asserts that it is unlawful to require a customer-
generator to pay for the design and construction of interconnections, but this affects

                                          7
Penn Micro, not Hommrich. Penn Micro is not a party to the present action, and
Hommrich is not authorized to represent Penn Micro.
             The PUC contends that EDCs and alternative suppliers have a vested
interest in the regulations that authorize recovery of AEPS Act-related costs. Were
the challenged regulation to be declared invalid, these entities will be affected. At a
minimum, they will experience regulatory uncertainty, and at worst, a loss of
revenue. The PUC asserts that Penn Micro is “the only [PUC]-approved customer-
generator appearing on the face of [Hommrich’s] [a]mended [p]etition. Nor does it
appear that [] Hommrich intends to become a customer-generator pursuant to the
[PUC’s] rules.” PUC Brief at 21.
             Hommrich responds that he plans to build alternative energy projects.
Pre-enforcement review is allowed where there is a risk of imminent harm from a
regulation. Under the PUC’s regulation, Hommrich could incur costs in excess of
$1 million for distribution system improvements, which, Hommrich contends,
should be paid by the ratepayers of default service customers. Otherwise, he cannot
proceed with his plans. Hommrich argues that he need not first suffer a financial
loss or become a customer-generator in order to seek relief from the regulation.
Further, “the only possible path forward for Hommrich under the AEPS Act is to
become a customer-generator, and the PUC knows this.” Hommrich Brief at 43.
Hommrich’s present project was approved by the PUC for net metering while it was
owned by Penn Micro. Because Hommrich currently owns the project outright, he
is representing his own interests, not those of Penn Micro.
             This Court’s prior determination in Hommrich I established that
Hommrich has standing to bring his statutory construction claims. As in Hommrich
I, the amended petition alleges that the challenged regulations cause him direct harm

                                          8
because he cannot secure financing for his project. To the extent his project was not
an approved customer-generator in Hommrich I, Hommrich has rectified that
deficiency by purchasing a project from Penn Micro that was previously approved
by the PUC for net metering. Thus, Hommrich’s amended petition in the present
matter does not suffer from the same deficiency as in Hommrich I, and the PUC does
not refer to any authority requiring Hommrich to obtain new approval for his project
due to the change in ownership. Accordingly, we overrule the PUC’s second
preliminary objection that Hommrich lacks the capacity to sue.
                                        III. Nonjoinder
                 Next, we address the PUC’s third preliminary objection regarding
Hommrich’s failure to join a necessary party pursuant to Pennsylvania Rule of Civil
Procedure 1028(a)(5), PA.R.CIV.P. 1028(a)(5).4                  At issue are the costs to
interconnect to an EDC’s distribution system and the recovery of those costs under
Section 3 of the AEPS Act, in which EDCs and alternative suppliers have a vested
interest. The PUC argues that in the event the challenged regulations should be
declared invalid, these entities will be affected by regulatory uncertainty and/or lost
revenue. In addition, the PUC argues that because Hommrich’s amended petition
contains allegations about the conduct of Pennsylvania Power Company (Penn
Power), Penn Power is also a necessary party.5 Finally, Penn Micro is also a

4
    It states:
       Preliminary objections may be filed by any party to any pleading and are limited to
       the following grounds:
       ....
               (5) lack of capacity to sue, nonjoinder of a necessary party or misjoinder of
               a cause of action[.]
PA.R.CIV.P. 1028(a)(5).
5
  Whether a party is indispensable is governed by “at least” the following:

                                                 9
necessary party, given the allegations about Penn Micro’s requested interconnection
with Penn Power.
               Hommrich rejoins that the relief he seeks will not affect any EDC,
which will recover the interconnection costs, either from customer-generators, under
the current regulations, or from default service customers, as mandated in the AEPS
Act. There is no outcome where an EDC’s costs will increase. In any case, EDCs
are obliged to follow the AEPS Act, as construed by this Court. Penn Micro is not
a party, and the amended petition asserts no claims against Penn Power.
               In his capacity as president of Penn Micro, Hommrich has received
numerous emails from Penn Power, which have been referenced in his amended
petition to illustrate the PUC’s current regulatory regime.                         Kriebel Minerals,
Incorporated (Kriebel)6 in its petition to intervene in this matter, included its
communications with a different utility, i.e., West Penn Power, for illustrative
purposes.       Both Kriebel and Hommrich believe that the problems with
interconnections have their root cause in the PUC’s regulations. Communications
used in a pleading for illustrative purposes do not require that all entities referenced
in these communications be joined as parties. Both Hommrich and Kriebel are

       (1)     Do absent parties have a right or interest related to the claim? (2) If so, what
       is the nature of the right or interest? (3) Is that right or interest essential to the merits
       of the issue? (4) Can justice be afforded without violating the due process rights of
       absent parties?”
CRY, Inc. v. Mill Service, Inc., 640 A.2d 372, 375 (Pa. 1994) (quoting Mechanicsburg Area School
District v. Kline, 431 A.2d 953, 956 (Pa. 1981)).
6
  Kriebel Minerals, Inc., a natural gas company operating in the Commonwealth of Pennsylvania,
was permitted to intervene in the present action. It avers that its intervention concerns the same
“improper actions, and inactions, by the PUC raised by [] Hommrich.” Application for
Intervention at 2. It opposes all of the PUC’s preliminary objections in the present matter and
joins in Hommrich’s Brief.
                                                   10
challenging the PUC’s regulatory actions and inactions, but neither has alleged a
dispute with any specific EDC.
              The PUC raised Hommrich’s failure to join indispensable parties in
Hommrich I. There, we explained that “EDCs do not have a right or interest
regarding the validity of the regulations or who qualifies as a customer-generator.
The EDCs merely apply the law in effect when ruling on the applications. Thus, we
conclude the EDC is not an indispensable party[.]” Hommrich I, slip op. at 18. The
amended petition avers that Hommrich has not, never filed, and does not plan to file
a complaint against Penn Power. The issues in the amended petition arise from the
PUC’s regulations. See CRY, Inc., 640 A.2d at 375 (internal citation omitted) (a
party is considered indispensable when its rights are “so directly connected with and
affected by litigation” that no decree can be made without impairing those rights).
              For the same reasons articulated in Hommrich I, we overrule the PUC’s
third preliminary objection that Hommrich has failed to join an indispensable party,
or parties, in the present matter.
                            IV. Exhaustion of Remedies
              In its fourth preliminary objection, the PUC argues that it has exclusive
jurisdiction to adjudicate Hommrich’s claims about Penn Power’s interconnection
practices and tariff and that Hommrich failed to exhaust his administrative remedies
with the PUC. Hommrich rejoins that the amended petition does not assert a legal
action against Penn Power in the prayer for relief. Rather, it challenges the PUC’s
impermissible regulatory regime. Hommrich’s requested ruling from the Court
would construe the AEPS Act and, indirectly, affect all EDCs, not Penn Power
singularly.

                                          11
             The doctrine of exhaustion of administrative remedies is a judicially
created rule intended to prevent premature judicial intervention into the
administrative process.      Empire Sanitary Landfill, Inc. v. Department of
Environmental Resources, 684 A.2d 1047, 1053 (Pa. 1996). Our Supreme Court has
explained the operation of, and exceptions to, the exhaustion doctrine as follows:
             The doctrine of exhaustion of administrative remedies is founded
             on judicial recognition of the mandate of the legislature that
             statutorily prescribed remedies are to be strictly pursued.[] It also
             is an acknowledgement that an unjustified failure to follow the
             administrative scheme undercuts the rationale upon which the
             administrative process is founded; that the technical nature of the
             subject and the ability of an administrative body to examine it
             suffice as a matter of public policy to displace preliminary court
             action . . . . Clearly our case law reinforces the rule that a party
             seeking relief must exhaust available administrative remedies
             before he may obtain judicial review . . . . However, “[w]here
             the administrative process has nothing to contribute to the
             decision of the issue and there are no special reasons for
             postponing its immediate decision, exhaustion should not be
             required.” Borough of Green Tree v. Board of Property
             Assessments, []328 A.2d 819, 824 ([Pa.] 1974), quoting L. Jaffe,
             Judicial Control of Administrative Action 440 (1965).
             Furthermore, exhaustion will not be required when the
             administrative process is not capable of providing the relief
             sought.

Ohio Casualty Group of Insurance Companies v. Argonaut Insurance Company, 525
A.2d 1195, 1197-98 (Pa. 1987) (citations and footnote omitted).
             In Hommrich I, we determined that Hommrich had failed to exhaust
administrative remedies because he had not submitted a project for PUC approval as
a customer-generator. Unlike Hommrich I, Hommrich has now purchased an
alternative energy project from Penn Micro, which was previously approved by the
PUC for net metering. And, as we noted earlier, the PUC does not point to any

                                          12
authority that would require Hommrich to seek another round of approval for a
project simply because of a change in ownership. As noted in Hommrich I, an
administrative agency, such as the PUC, cannot rule on the legality of its own
regulations or the power to issue them. Accordingly, the PUC’s preliminary
objection regarding Hommrich’s alleged failure to exhaust his administrative
remedies is overruled.
                                    Conclusion
             For the foregoing reasons, we overrule the PUC’s preliminary
objections in their entirety and direct the PUC to answer Hommrich’s amended
petition for review.

                           _________________________________________________________
                           MARY HANNAH LEAVITT, President Judge Emerita

Judge Fizzano Cannon did not participate in the decision in this case.

                                         13
          IN THE COMMONWEALTH COURT OF PENNSYLVANIA

David N. Hommrich,                     :
                Petitioner             :
           v.                          :     No. 463 M.D. 2022
                                       :
Commonwealth of Pennsylvania,          :
Pennsylvania Public Utility            :
Commission,                            :
                  Respondent           :

                                    ORDER

             AND NOW, this 1st day of March, 2024, the preliminary objections of
the Pennsylvania Public Utility Commission to David N. Hommrich’s amended
petition for review are OVERRULED. The Public Utility Commission is directed
to file an answer to the amended petition for review within 30 days of this order.

                           _________________________________________________________
                           MARY HANNAH LEAVITT, President Judge Emerita