A Nevada state court this week set aside part of the Public Utilities Commission’s controversial decision to change rates on existing solar customers because the Commission’s process lacked adequate notice to the public, but due to ongoing discussions between the parties the hotly contested issue may soon be at least partially settled anyway. Regardless of what happens at the Commission, the subject is certain to be revisited when the legislature next convenes.
The immediate result of the court’s ruling is that the part of the Commission’s order which would have reduced bill credits to customers who already have solar panels is set aside and remanded to the Commission, while the remainder of the ruling upholding the Commission’s order relating to new solar customers is affirmed.
But the court’s remand is likely to be superseded because the Commission, at a hearing coincidentally scheduled for tomorrow, will consider a settlement between utilities and customers to grandfather the 32,000 existing residential rooftop customers on the old rate for 20 years. If, as expected, the Commission ratifies the grandfathering agreement, the remanded case will become moot.
Since 1997, Nevadans have participated in a program called net energy metering, under which customers earn a kilowatt-hour bill credit for each kilowatt-hour of clean power they produce that exceeds their own consumption. The high value of the credit was a key factor in many Nevadans’ decision to install solar because the credit offset a meaningful portion of cost. The Commission’s recent decision radically changed the way credits are calculated and valued, and replaced the framework with a new system that values the excess much lower than before.
Recognizing that a critical element in the financial model for solar installations went away overnight, the Commission’s ruling caused nearly every solar installer to immediately abandon the state. The new formula also caused an uproar in the renewable energy community because it significantly reduces income that solar customers had been expecting to receive, causing what had been good investments to go under water (financially). The move to not grandfather customers also set a precedent that alarmed renewable energy advocates concerned that commissions in other states might follow Nevada’s lead.
While states do periodically shift gears on rates on a going-forward basis, it was well-known in Nevada that customers relied on the net metering tariff in making relatively significant long-term investments. While the Commission is legally entitled to change the tariff in a way that reduces payments to customers for excess solar production, for policy reasons such changes are often made only to new customers, not existing customers.
With regard to the process the Commission followed in this case, the court found that the Commission did not sufficiently notify the public of its intention, and therefore the public was deprived of its right to participate in the proceeding. It is well established in American law that public entities such as the Commission must provide notice of the matters before it. As to the question of how specific notice must be, the Nevada Supreme Court in a previous case explained that “[i]nherent in any notice and hearing requirement are the propositions that the notice will accurately reflect the subject matter to be addressed,” and that “notice must be specific enough to alert all interested persons of the substance of the hearing.” When notice is deficient, the court found, the result is a “denial of fairness and due process.” The requirement, which falls under the legal description “subject matter jurisdiction,” cannot be waived, does not require the affected parties to have been absent from the proceeding, and may be raised by any party or the court at any time.
The notice in this case not only did not include a sufficient description of the issue that was ultimately addressed, the notice specifically excluded the highly controversial matter by saying that the proposal “does not . . . [a]ffect the rights of [existing solar] customers in any way.” Based on the fact that courts as high as the Supreme Court of the United States have, for decades, held notice to be an “inexorable safeguard,” the Nevada court rejected a multitude of arguments that the deficient notice should not result in the court throwing out the Commission’s ruling.
However, the court also explained that its ruling in this case is limited to the procedural requirement of notice for existing customers, not to substantive policy issues related to existing solar customers or to anything relating to new solar customers. In fact, the court specifically rebuffed all objections raised by solar supporters relating to the validity of the Commission’s order on new solar customers, finding that the Commission’s order is not contrary to law, is not arbitrary or capricious, and does not violate the Contract Clause of the U.S. Constitution.
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