Virginia Commission Issues Decision on Pumped Storage Hydro, Allows Retail Contracts Grandfathering

In a Final Order granting a declaratory judgment petition field by Constellation NewEnergy, the Virginia State Corporation Commission held that: (1) electricity generated by a pumped storage hydroelectricity facility is “renewable energy” under Section 56-576 the Code of Virginia; and (2) the revised definition of “renewable energy” under 56-576, effective July 1, 2020, which excludes pumped storage hydroelectricity as a “renewable energy” resource, does not apply to Constellation’s contracts with its retail customers because, under Virginia law, statutes will not be applied retroactively absent express intent by the General Assembly manifesting otherwise. The Commission’s Final Order is available here. Virginia Electric and Power Company (“Dominion”) has appealed the decision to the Supreme Court of Virginia.

In its petition, Constellation, a competitive service provider (“CSP”), explained that it had entered into contracts in December 2019 to serve customers with “electric energy provided 100 percent from renewable energy” under Section 56-577 A 5 (“Section A 5”) of the Code. To serve under Section A 5, a CSP must balance its retail load on a monthly basis with energy procured on the wholesale market that satisfies the definition of “renewable energy” under Section 56-576. (We’ve written about Section A 5 here and here.) That definition includes “energy derived from . . . falling water.”

Constellation represented in its petition that it entered into retail contracts with customers in 2019, and that Dominion began switching the customers to Constellation’s supply service in February 2020. The retail contracts provide that Constellation anticipated serving its customers with “renewable energy” under 56-576 generated by a pumped storage hydroelectricity facility. Constellation also represented that it had entered into a wholesale generation contract with a facility to purchase sufficient pumped storage energy to balance its retail load on a monthly basis. Constellation filed its petition after receiving notice on April 1, 2020 from Dominion that Dominion “disagrees with Constellation’s view that electric energy produced by the pumped storage hydroelectric facility . . . qualifies as renewable energy in Virginia for the purposes of serving customers under Section A 5 because it does not meet the definition of renewable energy under Section 56-576 . . . .”

This was a two-part decision. First, the Commission held that there is no ambiguity in the phrase “derived from . . . falling water” under Section 56-576, and that “energy generated from a pumped storage hydroelectric facility is ‘renewable energy,’ because it is derived from water that falls from a higher point to a lower point.” The Commission also held that the General Assembly has expressly demonstrated – at least twice – that it knows how to exclude pumped storage from the definition of “renewable energy” when that is the legislative intent. The General Assembly did so in the definition of “renewable energy” for purposes of the utility’s RPS program in Section 56-585.2 A, and it also revised the definition of Section 56-576 in the Virginia Clean Economy Act (“VCEA”), effective July 1, 2020, to specifically exclude pumped storage. Under Virginia law, the Commission must presume that the difference in the General Assembly’s choice of language – excluding pumped storage elsewhere but not in the current definition of Section 56-576 – was intentional.

This initial decision in the Final Order allows Constellation to rely on pumped storage to serve Section A 5 customers until July 1, 2020, when the VCEA becomes effective. As stated, the VCEA revised the definition of “renewable energy” in Section 56-576 to specifically exclude electricity generated from a pumped storage facility. The average duration of Constellation’s retail contracts extend long after July 1, 2020.

In the second part of the Final Order, the Commission held that the VCEA’s revised definition of “renewable energy” in Section 56-576 does not apply to Constellation’s retail contracts executed in 2019 to provide service under Section A 5. The Commission cited decisions by the Supreme Court of Virginia standing for the proposition, in part, that Virginia law does not favor retroactive application of statutes, that statutes are to apply prospectively unless a contrary legislative intent is manifest, and the general rule that new legislation will not be construed to interfere with existing contracts unless the General Assembly expressly says so in the statute. Absent an express manifestation of intent by the General Assembly a court will not infer that a statute was intended to apply retroactively, and the failure to express such an intention evidences a lack of such intention.

Constellation and Dominion had agreed in the pleadings that these were legal issues and that a hearing was not necessary. Constellation had requested expedited treatment of the petition, and the Commission did not disappoint. Constellation filed its petition on April 17, 2020, and the Commission issued the Final Order, after accepting notices of participation and briefs, on May 29, 2020.

The case now moves to the Supreme Court of Virginia on appeal.

For more information on this case and other issues impacting the retail energy and renewable energy industries, please contact Brian Greene or any of GreeneHurlocker’s energy attorneys. GreeneHurlocker represents Constellation in the proceeding.

Brian Greene
bgreene@greenehurlocker.com
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