Big Wins for Renewable Energy and Transparency in Utility Rate Making

Nelson Mullins Energy Team members Weston Adams and Court Walsh represented a large-scale solar developer before the S.C. Public Service Commission (PSC) in two recently decided high profile matters likely to have positive impacts for the renewable energy industry and ratepayers in South Carolina. On December 10, 2020, in orders issued in two separate PSC dockets, the PSC: (1) Rejected Dominion Energy South Carolina’s (Dominion Energy) required integrated resource plan (IRP) for providing power, saying the utility, among other shortcomings, did not sufficiently analyze the use of renewable energy in its plans; and (2) Adopted a proposed regulation affirming the independence of third-party consultants engaged by the PSC to assist it in avoided cost matters, thus rejecting the language proposed by utilities.

PSC Rejects Dominion Energy’s Resource Plan, Instructs Utility to Redo Its Work

In Docket 2019-226-E, the PSC rejected the IRP of Dominion Energy submitted under the 2019 South Carolina Energy Freedom Act (the “Act”). Per the Act, utilities must submit an IRP every three years for PSC review to determine whether the utility’s proposed plan represents “the most reasonable and prudent means of meeting the electrical utility’s energy and capacity needs.” To obtain PSC approval, the utility’s IRP must include, among other elements:

• Long-term forecasting of the utility’s sales and peak demand under reasonable scenarios
• Projections of the utility’s renewable energy purchases or production
• Evaluation of proposed resource portfolios under various renewable energy and demand-side management scenarios
• Plans and forecasts for current facility retirement

After receiving days of testimony from Dominion Energy and other parties, the PSC found that the Dominion Energy’s IRP fell short of the Act’s requirements. As a result, the PSC rejected the proposed IRP and directed the utility to essentially redo its work.

Among other directives, the PSC instructed Dominion Energy to: 1) re-run its IRP modeling using assumptions as proposed by solar industry and environmental groups; 2) update the utility’s planning assumptions as to demand, commodity fuel prices, renewable energy forecasts, and existing unit retirements; and 3) show in the IRP the range of cost impacts to consumers. The PSC directed Dominion Energy to complete the updates and submit its revised IRP to the PSC within 60 days. The PSC further made clear that these and numerous related requirements were not temporary, but instead would be the standard for IRPs and annual updates going forward.

Adopted Regulation Implements and Protects Independence of PSC’s Third-Party Consultants

In a recently completed rulemaking proceeding, the PSC adopted regulatory language implementing South Carolina law which allows the PSC to obtain its own dedicated consultant to assist in analyzing and setting avoided cost rates impacting qualifying renewable energy providers.

In the 2019 South Carolina Energy Freedom Act, the legislature authorized the PSC to employ, through contract or otherwise, third-party consultants and experts to assist it in evaluating avoided cost rates, methodologies, and calculations. Under the Act, the consultant’s duties are exclusively to the PSC, and not to other parties in a proceeding.

In Docket 2019-326-A, the PSC initiated a rulemaking to implement this authority. In comments, Dominion Energy, Duke Energy Carolinas, and Duke Energy Progress each argued that the PSC adopt language which would have undermined the independence of the PSC’s consultant. The utilities’ proposals sought to limit what data the consultant could analyze, prevent the consultant from freely communicating with the PSC, and subject the independent consultant to full discovery and cross-examination. The effect of such proposals would have been to diminish the independence of the PSC’s work and effectively sever the statutory relationship between the consultant and the PSC.

Following a hearing, the PSC properly rejected the utilities’ proposals and instead adopted almost word-for-word the regulation as proposed and argued for by Weston Adams on behalf of solar interests. As reflected in the language adopted last week by the PSC, the regulation will now assure that a consulting expert may conduct his or her own analysis based on independent modeling, rather than merely relying on utility company inputs. Moreover, the adopted regulation reaffirms that the independent consultant’s duties are to the PSC, further clarifies the consultant’s authority to obtain information on the PSC’s behalf from utilities, and rejects the utilities’ attempt to gain discovery and cross-examination of the Commission’s consultant.

The PSC’s actions in the recent dockets are clear wins for consumers, renewable energy, and the solar industry in South Carolina. Because of these decisions, South Carolina utilities will now have to present IRPs that fully consider and incorporate clean, renewable energy in providing power. Moreover, the PSC, rather than relying on utilities modelling, may now obtain independent analysis when considering how to set avoided cost rates for qualifying energy producers. These two PSC decisions collectively advance recent legislative efforts to modernize the South Carolina power industry, and are progress for the future of independent power in this state.