Regulator Lifts Stay On Order That Prohibits Retail Suppliers From Using Term "Renewable Energy" In Marketing REC Products; Term Limited To Using Supply From Owned Generation Or PPA

Supreme Court Affirms Geographic Limit For Source Of RECs For Voluntary Renewable Offerings

November 3, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Connecticut PURA has lifted a stay of its 2020 decision which, among other things, limits voluntary renewable electricity supply offers (VRO) from retail electric suppliers to using only RECs sourced from certain RTOs and which meet certain definitions, and which prohibits the use of the term "renewable energy" to market a REC product

See specific details of PURA's prior decision, which had been first reported by EnergyChoiceMatters.com, here

Note: VROs are generation supply offers from load-serving retail electric suppliers that contain some type of qualifying renewable components as discussed below. REC-only products, as used in this story, refer to offers under a PURA-authorized program under which RECs (and not generation supply) may be purchased by a customer with costs included in the utility consolidated bill (UCB), under a successor to the current Clean Energy Options REC add-on program (CEOP).

Specifically, the order 2020 established certain universal standards for REC-only and suppliers' VRO offers as follows:

(1) Certificates that support VROs or REC-only offers may originate only from the ISO-NE, New York, or PJM control areas

(2) Certificates that support VROs or REC-only offers must reflect resources defined as Class I in Conn. Gen. Stat. § 16-1.

Absent the prior stay, all new and renewing VRO offers must comply with the rules and standards established in the 2020 order for all customer enrollments (treatment of existing contracts discussed in our prior story)

The 2020 order prohibited suppliers from using the term "renewable energy" for REC-based VRO products. Under the order, a supplier may not market the product as "renewable energy" unless the offer is supported by an ownership interest in or PPA for a renewable resource used to serve the contract.

In light of the lifting of the stay, PURA directed that its Office of Education, Outreach, and Enforcement submit by Friday, November 17, 2023 proposed modifications to the implementation dates from the 2020 decision, as appropriate.

The lifting of the stay follows a recent decision from Connecticut's Supreme Court which affirmed PURA's 2020 order, which had been appealed by retail suppliers

In brief, on appeal, suppliers (the plaintiffs) had contended that (1) the geographic and marketing restrictions contained in PURA’s final decision violate the dormant commerce clause, (2) PURA’s final decision violates energy suppliers’ right to free speech under the state and federal constitutions, (3) PURA’s final decision violates their right under the federal constitution to freely contract, and (4) PURA failed to abide by the procedural requirements of the Uniform Administrative Procedure Act (UAPA).

The state's Supreme Court denied arguments concerning the dormant commerce clause and UAPA, while finding that the other claims had not been properly raised by retail suppliers earlier, and thus were not considered by the court

With regard to the dormant commerce clause arguments, the state's Supreme Court said, "to determine what level of scrutiny to apply to the plaintiffs’ claim, we begin our analysis in the present case by asking whether the allegedly competing enti- ties -- renewable energy generating facilities located outside of the permitted control area, on the one hand, and renewable energy generating facilities located within the permitted control area, on the other -- pro- vide different products. We conclude that they do."

The Court said, "PURA has decided to cre- ate restrictions on the class of RECs used to satisfy a VRO product that are distinct from RECs produced outside of the permitted control area. From the state’s perspective, RECs created in the permitted control area differ from RECs created outside of this area because they displace fossil fuel generation with a more direct impact on this state’s environment. Although there are undoubtedly similarities between the two different classes of RECs, the two classes can be treated differently for dormant commerce clause purposes."

The Court found the geographic limits were not unconstitutional because, "Connecticut’s VRO program has resulted in a REC product that is capable of being produced only by gener-ators located in the permitted control area because only RECs produced in this area help advance this state’s environmental policy goals. This distinguishes such generators from generators located outside of the per- mitted control area to the point that the entities should not be considered similarly situated for purposes of a claim of facial discrimination under the commerce clause."

Furthermore, the Court said, "Requir- ing that a VRO product be supported by an ownership interest in or a power purchase agreement for a renew- able resource to qualify as ‘‘renewable energy’’ does not substantially conflict with 16 C.F.R. § 260.15 (a) because nothing in that section forbids a state from enacting more rigorous marketing requirements. In other words, to the extent necessary, the plaintiffs can comply with both the Federal Trade Commission’s guideline and the marketing restriction. Thus, there is no ‘‘actual conflict’’ with this guideline."

"We also decline to consider the plaintiffs’ free speech and contract clause claims be- cause they were not raised before PURA during the administrative proceedings. Finally, we conclude that the plaintiffs failed to satisfy their burden of showing that PURA violated their procedural rights under the UAPA or that any violation caused prejudice to their substantial rights," the Court said

PURA Dockets 16-12-29RE01

CT Supreme Court: SC 20643

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