As Duke's solar project awaits approval, consumers were cut out of the deal

As Duke's solar project awaits approval, consumers were cut out of the deal

Politico
By Bruce Ritchie

11/13/2020 05:03:49 AM EST

TALLAHASSEE — The future of a $1 billion solar program could hinge on an agreement
between Duke Energy Florida, Walmart, and two solar advocacy groups that shut out the
residential utility customers that state regulators are supposed to protect.

The state Public Service Commission will begin a three-day hearing Nov. 17 that will focus on
whether the settlement, which sets the contours of Duke's plan with no input from the public,
should be approved instead of delving into the project's benefits or costs to consumers.
Consumer advocates have accused the commission of shirking its oversight of monopoly
investor-owned utilities and substituting the policymaking process with a privately-bargained
deal.

Settlement agreements between utilities and their stakeholders aren't new. They can reduce
costly and time-consuming litigation and creatively resolve conflicts, legal experts say. The
Florida Public Service Commission frequently encourages all sides in contentious utility disputes
to negotiate toward settlements.

But the deals have raised concerns that certain customers, such as powerful industries, stand to
gain when consumer advocates are cut out of negotiations. And utilities increasingly are using
settlements to avoid scrutiny of projects and rate hike requests, critics say.

"It's another example of the way the settlement process is being gamed," said Ben Wilcox,
research director of the nonpartisan government watchdog group Integrity Florida.

In Florida, concerns about utility settlements have grown since 2014, when the Florida Supreme
Court ruled that the state Office of Public Counsel was not required by law to be at the table for
a rate settlement involving Florida Power & Light Co.

In 2019, Florida Power & Light, Walmart, and two Vote Solar and the Southern Alliance for
Clean Energy, reached a settlement over the utility's SolarTogether project. The groups asked
the commission to approve the project based on the settlement, which addressed their concerns
about how low-income customers would be treated under the proposal.

The commission instead allowed a hearing on a wide variety of issues. Commission staff then recommended that the FPL proposal be denied, saying it put certain customers at risk of paying higher rates while protecting the utility and other customers. The Office of Public Counsel, too, raised objections to the settlement and the FPL program.

PSC staff said the commission had a responsibility to determine whether the FPL proposal established "fair, just, and reasonable" rates and whether it was in the public interest.

The commission nonetheless voted unanimously to approve the project March 3. Commissioners didn't delve into the staff recommendation or whether the solar project was needed. Instead, they determined that the proposal was in the public interest based on the settlement.

Now, the PSC, in a pre-hearing order on the Duke Energy solar plan, has said the only issue to be decided is whether the Duke settlement with Walmart and the solar groups is in the public interest.

Duke Energy in July asked the commission to approve construction of 10 solar projects through 2023. The utility struck a deal with the same three groups as FPL — Walmart, Vote Solar, and the Southern Alliance for Clean Energy — but unlike FPL, Duke had the agreement in place before it sought PSC approval for the project.

The League of United Latin American Citizens of Florida intervened, saying Walmart stands to save $35 million under the Duke program.

Walmart won't say whether it stands to gain under the Duke proposal and is fighting the League's demand to turn over documents that could show what, if anything, the company stands to benefit.

Nearly two-thirds of solar power produced by Duke will be reserved for commercial and industrial customers such as Walmart. SACE and Vote Solar, non-profit groups who don't fully disclose the source of their funding, endorsed the proposal because 27 percent of the residential power will be reserved for low-income customers.

The utility says the solar power will offset the need for a new gas-powered generating plant.

But there are broader issues the commission must explore, including whether low-income customers could be charged higher rates, said Bradley Marshall of the Earthjustice law firm, which is representing the league.

"The stipulation is an attempt to try to narrow the issues that the commission can be considering in this hearing," Marshall said in an interview. "We are certainly concerned about the precedent that this could be establishing for future hearings."

Utility settlements have been on the rise nationwide since the energy crisis of the 1970s, which prompted rapid growth in the number of rate cases brought before commissions.

Confronted with a rising number of cases, newly empowered consumer groups, and a backlog of litigation, some commissions embraced the use of "nonunanimous settlements", Hofstra University law school professor Stefan Krieger wrote in a 1995 law journal article.

Many approved such settlements without evidentiary hearings, thereby potentially ignoring the interests of groups which were not parties to the settlement agreement, Krieger wrote.

The trend shifted the burden of proof from utilities to consumer groups, public counsels, and other intervening parties during the legal proceedings, he wrote.

After losing its fight against the FPL proposal, the Office of Public Counsel has not engaged Duke Energy on the merits of its solar program, Deputy Public Counsel Charles Rehwinkel said, but it has backed Earthjustice's concerns.

Rehwinkel has warned that his office could challenge approval of the Duke agreement with Walmart and the solar groups.

"I'm concerned about a stipulation with a clear beneficiary and no representation of customers who are footing the bill, especially the poorest customers," he said in an interview.

Former PSC member Nathan Skop said the 2014 Florida Supreme Court decision limits the ability of the Office of Public Counsel to protect ratepayers from settlements. He and other commissioners who challenged utilities were removed from the PSC by the Republican-led Legislature in 2010.

The public interest would have been better served had the court adopted a bright-line rule that any settlement opposed by the Office of Public Counsel, absent strong evidence to the contrary, should weigh against the determination that a project is in the public interest, Skop said.

Approving the Duke solar agreement is like granting a $1 billion rate hike with little discussion of the merits.

"Why do we need a Public Service Commission if they are just going to superficially give things away to the utilities without any scrutiny?" Skop said. "Their job as regulators is to scrutinize and not just have a couple of parties and the utility say this is what they want and give it to them."

PSC spokesperson Bev DeMello said any proposed settlement must be found to be in the public interest by the commission to be approved. She rejected criticisms that consideration of the settlement is an attempted end run around the Office of Public Counsel.

"The Commission will consider all evidence and arguments in its determination of whether the settlement is in the public interest," DeMello said in an email.

In his pre-hearing order, Commissioner Donald Polmann, said the public interest question is the "broadest issue" that allows for a variety of arguments to be made. Adding more issues to the hearing agenda "may inadvertently constrain" the ability of parties to make arguments in the case.

Earthjustice says the proposed settlement should not be a consideration in the case. And the law firm has raised a legal question about whether Walmart can be considered an adversarial party, which means it would be in no position to reach a settlement with Duke.

Walmart, which receives 29 percent of its power from renewable sources and wants to get to 100 percent by 2035, said it has engaged in the Duke solar process to support its renewable energy goals.

In an email, Steve Chriss, director of energy services at Walmart, refused to answer questions about whether the company stands to save money from the Duke solar program, citing ongoing litigation.

In a filing with the PSC, Walmart said the information sought by Earthjustice is proprietary and therefore protected from public disclosure. The company said it is not legally obligated to provide information that could show whether it was an adversary in the case.

Both Walmart and Duke said granting the League's request to produce those documents would have a chilling effect on future settlement discussions.

"The Commission should deny LULAC's Motion to avoid setting a dangerous precedent that would directly contradict the Commission's long-standing practice of encouraging parties to settle contested dockets when possible," Duke Energy said in a filing with the commission.