Discussion
of Issues
Issue 1:
Should the Commission grant Sunrun’s Petition for
Declaratory Statement?
Recommendation:
I.
Yes. Based on the facts presented by
Sunrun, the Commission should grant Sunrun’s Petition and declare: (1) Sunrun’s
residential solar equipment lease does not constitute a sale of electricity;
(2) offering its solar equipment lease to customers in Florida will not cause
Sunrun to be deemed a public utility under Florida law; and (3) the residential
solar equipment lease described in its Petition will not subject Sunrun or
Sunrun’s customer-lessees to regulation by the Commission. The Commission should
also state that its declaration is limited to the facts described in Sunrun’s
Petition and would not apply to different, alternative facts. (Harper, Crawford)
Staff
Analysis: Staff recommends the Commission grant Sunrun’s
Petition for Declaratory Statement based on the facts presented by Sunrun. Below
is a more detailed explanation of staff’s recommendation.
Law Governing Petitions
for Declaratory Statements
Declaratory statements are
governed by Section 120.565, F.S., and
the Uniform Rules of Procedure in Chapter 28-105, F.A.C. Section
120.565, F.S., states, in pertinent part:
(1)
Any substantially affected person may seek a
declaratory statement regarding an agency's opinion as to the applicability of
a statutory provision, or of any rule or order of the agency, as it applies to
the petitioner's particular set of circumstances.
(2)
The petition seeking a declaratory statement shall
state with particularity the petitioner's set of circumstances and shall
specify the statutory provision, rule or order that the petitioner believes may
apply to the set of circumstances.
Rule
28-105.001, F.A.C., Purpose and Use of Declaratory Statement, provides:
A
declaratory statement is a means for resolving a controversy or answering
questions or doubts concerning the applicability of statutory provisions,
rules, or orders over which the agency has authority. A petition for declaratory statement may be
used to resolve questions or doubts as to how the statutes, rules, or orders
may apply to the petitioner’s particular circumstances. A declaratory statement is not the
appropriate means for determining the conduct of another person.
Rule
28-105.002(5), F.A.C., requires a petition for declaratory statement to include
a description of how the statutory provisions or orders on which a declaratory
statement is sought may substantially affect the petitioner in the petitioner’s
particular set of circumstances. A party seeking a declaratory statement must
not only show that it is in doubt as to the existence or nonexistence of some
right or status, but also that there is a bona fide, actual, present, and
practical need for the declaration. State
Department of Environmental Protection v. Garcia, 99 So. 2d 539, 544-45
(Fla. 3d DCA 2011). A declaratory
statement procedure is intended to enable members of the public to definitively
resolve ambiguities of law arising in the planning of their future affairs and
to enable the public to secure definitive binding advice as to the
applicability of agency-enforced law to a particular set of facts. Department of Business and Professional
Regulation, Div. of Pari-Mutuel Wagering v. Investment Corp. of Palm Beach,
747 So. 2d 374, 382 (Fla. 1999).
Sunrun’s Petition for
Declaratory Statement
Sunrun’s particular circumstances and
facts
The
Petition states that Sunrun has offices in Tampa, Florida, and is the nation’s
largest dedicated residential solar storage and energy services company with
over 160,000 customers currently in 22 states and the District of Columbia. In
Florida, Sunrun offers only its “cash solar product,” which customers must
purchase and pay for in full, upfront.
Sunrun
plans to offer leasing as an option in Florida for potential customer-lessees
who prefer not to or cannot purchase and pay upfront for residential solar
systems. Sunrun states that the Florida residential solar equipment lease will
consist of a 20-year lease of solar panels with an option to include batteries.
According to Sunrun, the residential solar equipment lease will include the
following:
·
Lease payments will be fixed for a 20-year lease
term. The payment amounts will be based on a negotiated rate of return and will
be independent of electric generation, production rates, or any other operational
variable of the leased equipment.
·
Sunrun will hold legal title to the leased
equipment and receive the tax credits and depreciation benefits associated with
the investment.
·
Sunrun will have no control over the use of the equipment
other than as the beneficiary of covenants requiring the customer-lessee to
maintain the equipment in good repair.
·
At the lease expiration, the customer-lessee will
be able to purchase the solar equipment at fair market value, renew the lease
on an annual basis, or require removal of the equipment.
·
Sunrun will provide customary workmanship
warrantees to protect the customer-lessees’ home from damage during the
installation process. The customer-lessees will be responsible for the costs
for ongoing system maintenance through their monthly lease payment. Equipment
warranties and maintenance services will be triggered by damage to or
malfunction of the system, or its components, and will not be dependent upon
electrical generation or system production rates.
·
The customer-lessee will be responsible for the
cost of non-warranty maintenance, repair and replacement.
·
Once the system is installed and interconnected,
the operational burden and risk of maintaining the equipment and assuring
adequate solar exposure conditions will be borne by the customer-lessee.
·
The customer-lessee will be responsible for the costs
of applicable property taxes and insurance.
·
Lease terms and conditions will be compliant
with applicable IRS and accounting standards.
Amici Curiae Gulf Power and FPUC raise issues that they
believe the Commission should consider when evaluating Sunrun’s Petition. Their
issues all relate to the single fact that Sunrun did not file a lease agreement
for the Commission’s review. For example, they state that the lease would
provide information as to energy performance guarantees for the solar systems,
whether the lessee is entitled to compensation via separate bill credits or
refunds in the event that performance guarantees are not met, and information
as to the nature of the obligations retained by the lessor as compared to the
lessee. Gulf Power and FPUC assert that without Sunrun’s proposed leasing
agreement, there is ambiguity as to whether the lease program is compliant with
Florida law and suggest that the Commission’s Order on Declaratory Statement
address such compliance issues. Amici Curiae also provide marketing materials
from Sunrun’s activities in other jurisdictions.
In its response to Gulf Power and FPUC’s memorandum of law, Sunrun
states that its Petition clearly outlines how the lease payments will not be linked
to electricity production. Sunrun points to the places in the Petition where it
addresses the lease components as to guarantees, warranties, and obligations of
the lessor and lessees. Sunrun reiterates that its Petition provides that the customer-lessee’s
payments will be fixed in amount throughout the lease term and without regard
to the level of electricity production or output of lease equipment.
Also in response, Sunrun states that the Petition is
consistent with Rule 26-6.065(2), F.A.C., and Order 17009, issued December 22, 1986, in
Docket No. 860725-EU, In re: Petition of
Monsanto Company for a declaratory statement concerning the lease financing of
a cogeneration facility (Monsanto),
as Sunrun’s customer-lessees will be solely responsible for all costs and
expenses associated with the maintenance, repair, replacement and operation of
the leased equipment, and the lease payments will not be dependent on electric
generation.
Sunrun concludes that providing a lease agreement is not
required because it is seeking the affirmative declaration from the Commission in
good faith before investing any further time, effort, and expense with this
proposed project. Moreover, it states that the relevant statutes and rules do
not require it to provide contractual documentation before the agency may issue
a declaratory statement. Sunrun notes its activities in other jurisdictions are
irrelevant to its Petition in Florida.
Statutes,
Rules, and Commission Orders Applicable to Sunrun’s Facts
The
statute to be applied to this Petition is Section 366.02(1), F.S., which
states, in pertinent part, that the Commission’s jurisdiction extends to public
utilities defined as:
Every person, corporation,
partnership, association, or other legal entity and their lessees, trustees, or
receivers supplying electricity or gas…to or for the public within the state.
The rule that applies to this
Petition is Rule 25-6.065, F.A.C., which provides, in pertinent part:
The term “customer-owned
renewable generation” does not preclude the customer of record from contracting
for the purchase, lease, operation, or maintenance of an on-site renewable
generation system with a third-party under terms and conditions that do not
include the retail purchase of electricity from the third party.
The
Commission order applicable to Sunrun’s Petition is Order 17009, issued December 22, 1986, in Docket No. 860725-EU, In re: Petition of Monsanto Company for a
declaratory statement concerning the lease financing of a cogeneration facility. In Monsanto,
the Commission declared that the Monsanto Company’s on-site lease financing of
its cogeneration facility did not result in a retail sale of electricity, did
not cause the lessor to be deemed a public utility, and did not subject either
the company or its lessor to regulation by the Commission.
Declaratory
Statement Requested
Sunrun
asks the Commission to declare that based on the facts presented by Sunrun:
(1)
Sunrun’s residential solar equipment lease does not
constitute a sale of electricity;
(2)
Offering its solar equipment lease to customers in
Florida will not cause Sunrun to be deemed a public utility under Florida law;
and
(3)
The residential solar equipment lease described in its petition
will not subject Sunrun or Sunrun’s customer-lessees to regulation by the
Commission.
In its
Petition, Sunrun states that the declaratory statement procedure can assist
Sunrun with planning its future conduct and will help avoid costly
administrative litigation by selecting the proper course of action in advance.
Sunrun will only offer and market the residential solar equipment lease program
in Florida if the Commission grants, in the affirmative, its request for a
declaratory statement, which contains specific facts as required by Section
120.565(3) F.S. For this reason, Sunrun is a substantially affected person and
has standing to bring its Petition.
Staff’s
Analysis of Sunrun’s Petition for Declaratory Statement
Sunrun’s Petition asks the
Commission whether Sunrun’s proposed leasing program triggers the Commission’s
jurisdiction under Section 366.02(1), F.S. The Commission has issued previous
orders on petitions for declaratory statement that have addressed the concept
of what constitutes a public utility in terms of leasing cogenerators or the
use of energy created by cogenerators. These orders stand for the general
proposition that where a customer pays a flat fee to an energy generation
equipment supplier for personal use and that fee is not based on electric
production, there is no jurisdictional sale of electricity. The Monsanto declaratory statement is on
point in this instance.
In Monsanto, the company asked the Commission for a declaratory
statement to recognize that the company’s use of lease-financing for equipment
to increase the company’s own on-site generation would not render the company
subject to the Commission’s jurisdiction. In its petition, the company stated
that it would replace older, less efficient natural gas boilers with a
combustion turbine capable of using either oil or natural gas as a fuel, and
would finance this project by leasing the necessary equipment. The company
stated that it would pay a fixed amount for the lease, an amount that was not tied
to energy production. The lease would run for a minimum of five years, after
which the company could elect to renew it, purchase the equipment, or pay for
the removal of the equipment. The company stated that it would pay for the fuel
and would be responsible for any operation and maintenance costs for the
equipment. The Commission answered the declaratory statement in the affirmative
and held that Monsanto’s plan would not trigger the Commission’s jurisdiction
because the company’s lease financing of its cogeneration facility did not
result in a retail sale of electricity, did not cause the company’s lessor to
be deemed a public utility, and did not subject either the company or its
lessor to regulation by the Commission.
Like Monsanto, Sunrun’s fixed lease payments
are independent of electric generation and production. Sunrun’s residential
solar equipment lease program will allow individual customers to generate their
electricity for personal use. According to Sunrun’s facts, the customer will be
the end-user and will not engage in the retail sale of electricity.
Additionally, Sunrun’s lease does
not run afoul of Order No. 18302, issued in October 16, 1987, in Docket No.
8700446-EU, In re: Petition by PW
Ventures Inc., for a Declaratory Statement in Palm Beach County (PW Ventures). The Commission’s holding
in PW Ventures established that private
companies cannot use cogenerators to engage in unregulated retail sales to
avoid Commission jurisdiction.
In the PW Ventures order, the Commission denied PW Ventures Inc.’s
Petition for Declaratory Statement for Commission approval to construct, own,
and operate a cogeneration project, because the facts presented in the petition
constituted a retail sale of electricity to another independent private company.
In its order, the Commission explicitly held that this decision was consistent with
its prior order in Monsanto. In PW Ventures, Inc. v. Nichols, 533 So. 2d.
281, 284 (1988), the Florida Supreme Court affirmed the Commission’s order and
opined that while limiting the sale of electric service was in the public
interest, there was no prohibition on self-generation.
The facts in Sunrun’s Petition are consistent with Order No.
23729, issued in November 7, 1990, in Docket No. 900699-EQ, In re: Petition of Seminole Fertilizer
Corporation for a declaratory statement concerning the financing of a
cogeneration facility (Seminole). In Seminole,
the Commission reiterated its holding in Monsanto
and held that there was no retail
sale of electricity triggering the Commission’s jurisdiction when a private
company expanded its cogeneration equipment to lease the energy equipment to
its subsidiary.
Moreover, the facts set forth in Sunrun’s Petition are also
consistent with Rule 25-6.065, F.A.C., which addresses interconnection and net
metering of customer-owned renewable generation. Rule 25-6.065(2)(a), F.A.C.,
specifically states that “[t]he term ‘customer-owned renewable generation’ does
not preclude the customer of record from contracting for the purchase, lease,
operation, or maintenance of an on-site renewable generation system with a
third-party under terms and conditions that do not include the retail purchase
of electricity from the third person.”
Gulf Power and FPUC point to Order
No. PSC-13-0652-DS-EQ, issued Dec. 11, 2013, in Docket No. 130235-EQ, In re: Petition for declaratory statement
regarding co-ownership of electrical co-generation facilities in Hendry County
by Southwest Renewable Fuels, LLC, at p. 6 (Southeast), for the proposition that Sunrun must provide a lease
agreement for the Commission’s review. Staff disagrees.
In Southeast, the Commission denied the declaratory statement petition
because the companies failed to provide the business arrangement contract
documentation. The Commission determined that the business arrangement between
Southeast Renewable Fuels, Inc., and its Confidential Partner would give rise
to the possibility of a retail transaction between unrelated entities, which
could fall within the definition of a public utility and invoke the Commission’s
regulatory jurisdiction. However, Sunrun’s facts are different from the Southeast set of facts. The leasing
agreement described in Sunrun’s Petition outlines the relevant factors to show
self-generation, which is more consistent with Monsanto than with Southeast.
Sunrun’s Petition can be distinguished from Southeast
because there is no issue of two unrelated entities joining together to
generate electricity for joint use and for compensation. Sunrun’s Petition states
that lessees would be leasing solar panels for the purposes of generating electricity
for their own personal use, which is in contrast to the complex business
arrangement outlined in Southeast.
Staff believes that Sunrun’s Petition contains the necessary
facts to support its request for a declaratory statement, and that production
of a lease agreement is unnecessary for the requested relief. The Petition
describes the proposed lease agreement obligations for the lessor and lessee
with respect to both warranty and repairs. While
Gulf Power and FPUC speculate about facts that may be included in the lease
agreement that are contrary to those presented in the Petition, it is well
settled that declaratory statements are inherently limited to the facts upon
which they are based. When
the Commission issues the declaratory statement, it will be controlling only as
to the facts relied upon and not as to other, different or additional facts. If
Sunrun attempted to go outside the clear bounds of its Petition as suggested by
Gulf Power or FPUC by, for example, providing energy performance guarantees and
other obligations in the lease that were not presented in their declaratory
statement set of facts, then the Commission’s declaratory statement would not
apply to these alternate set of facts.
Conclusion
For the reasons set forth above, staff recommends that the
Commission grant Sunrun’s Petition for Declaratory Statement and declare that
based on the facts presented by Sunrun: (1) Sunrun’s residential solar
equipment lease does not constitute a sale of electricity; (2) offering its
solar equipment lease to customers in Florida will not cause Sunrun to be
deemed a public utility under Florida law; and (3) the residential solar equipment
lease described in its petition will not subject Sunrun or Sunrun’s customer-lessees
to regulation by the Commission. The Commission should also state that its
declaration is limited to the facts described in Sunrun’s Petition and would
not apply to different, alternative facts.
Issue 2:
Should this docket be closed?
Recommendation:
Yes, if the Commission votes to either grant or deny
the Petition for Declaratory Statement, the docket should be closed.
Staff Analysis:
Whether the Commission grants or denies Sunrun’s
Petition, a final order will be issued. Upon issuance of the final order, the
docket should be closed.
