Alerts and Updates

Energy, Environment and Resources Update

Issue 10 | March 2016

ENERGY

U.S. Solar Market Continues Strong Growth in 2015

According to a report by the trade group Solar Energy Industries Association, a record 7,286 MW of solar PV was installed in the United States in 2015. While California, North Carolina and Nevada maintained their one-two-three rankings for new installation, more than 13 states installed over 100 MW each, demonstrating growing geographic diversification for solar generation. For the first time, new solar capacity exceeded new natural gas capacity and represented nearly 30 percent of all new U.S. generating capacity.

For 2015, utility-scale solar grew 6 percent year-over-year and represented more than half of all new installed solar PV. Growth in the residential solar market soared by 66 percent year-over-year, with over 2 gigawatts of new installed solar. Residential solar has grown to comprise 29 percent of all U.S. solar capacity. The growth of solar, and particularly distributed generation, has drawn notice beyond the renewable and energy communities. Warren Buffett, whose Berkshire Hathaway has ownership interests in several utilities, wrote in his annual shareholder letter that solar and other renewables are pushing traditional utilities to improve their efficiency. Under the old monopoly model, Buffett writes, “a ‘sloppy’ operation could do just fine financially.” With solar and other renewables increasing their generating capacity and ability to compete on price, a poorly run utility is now likely to find itself in trouble.

New York PSC Limits ESCO Marketing to Residential and Small Commercial Customers

By Phyllis J. Kessler

On February 23, 2016, the New York Public Service Commission (“Commission”) issued an order limiting how electric and gas marketers (known in New York as “energy service companies” or “ESCOs”) can market competitive energy supply to residential and small commercial customers (“mass market customers”). Case No. 15-M-0127, In the Matter of Eligibility Criteria for Energy Service Companies, Order Resetting Retail Energy Markets and Establishing Further Process.

The order provides that starting March 4, 2016, new and renewed ESCO contracts for mass market customers must guarantee either that the price paid by the customer is no greater than it would have paid as a full-service utility customer, or that the energy supplied comprises at least 30-percent renewable electricity. The order also provides that, within 60 days of its issuance, the Commission will consider new requirements applicable to entities providing energy to mass market customers.

The Commission based its order on its determination that ESCOs are unable to compete with prices offered for commodity services by utilities, which have the benefit of economies of scale, and that the Commission receives a large number of complaints from customers of ESCOs. It cited its broad legal authority under Articles 1 and 2 of the New York State Public Service Law as providing it with jurisdiction for its actions.

The Commission’s order appears to be creating upheaval in the New York ESCO market, and it is raising concerns that its requirements may drive some ESCOs out of business. A group of ESCOs promptly sought, and succeeded in obtaining, a temporary restraining order against the new rules pending a hearing on the merits scheduled for April 14, 2016. National Energy Marketers, et al. v. New York Public Service Commission, Index No. 868-16 (S.Ct., Albany Cty., March 4, 2016). There is more to come in this New York story, and its outcome could influence the regulation of ESCOs in other jurisdictions around the country.

ENVIRONMENTAL

CERCLA Natural Resource Damages—NPL Listing Resets the Statute of Limitations

By Seth v.d.H. Cooley

Court decisions concerning the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) statute of limitations applicable to natural resource damages (NRD) claims are relatively few in number. On February 9, 2016, the U.S. District Court for the Eastern District of New York added one more to the short list. In State of New York v. Next Millennium Realty, LLC, 2016 U.S. Dist. LEXIS 15775, the defendants asserted, in a motion for partial summary judgment, that the NRD trustees’ claims were time-barred because (a) CERCLA’s NRD statute of limitations requires an NRD claim to be filed within three years of the later of (i) “the date of the discovery of the loss and its connection with the release in question” or (ii) the date on which the Department of the Interior’s NRD regulations were promulgated, and (b) New York state’s complaint had been filed decades after both of those events had transpired. The court rejected this argument and ruled that, per the plain language of CERCLA § 113(g)(1), the listing of a site on the CERCLA National Priorities List (NPL)—even if it occurs well past the later of three years’ post-discovery of loss and three years’ post-promulgation of the NRD regulations—resets the statute of limitations. The court found that the new statute of limitations, post-listing of the site on the NPL, is three years after the completion of the remedial action (excluding operation and maintenance activities).

To the extent that the regulated community was hoping that this case—which involved the filing of an NRD complaint in 2006, some 20 years after both the discovery of the loss (1986) and the promulgation of the NRD regulations (1987), and the filing of a complaint (2006) well prior to the listing of the site on the NPL (2011)—might present sufficiently compelling facts to convince the District Court to rule against the NRD trustees, the court did not oblige. An appeal to the U.S. Court of Appeals for the Second Circuit may follow in due course, but, notably, the Second Circuit vacated and remanded a prior District Court decision in this case that had found New York’s CERCLA cost-recovery claims to be time-barred.

Chesapeake Bay Total Maximum Daily Load Implementation

By Seth v.d.H. Cooley

In a recent edition of our Energy, Environment and Resources Update, we discussed the then-pending petition for writ of certiorari from a decision of the U.S. Court of Appeals for the Third Circuit upholding the Chesapeake Bay TMDL (Total Maximum Daily Load). On February 29, 2016, the U.S. Supreme Court denied the petition. The Chesapeake Bay TMDL will now move into implementation mode, free from legal attack on EPA’s authority to issue it.

The TMDL requires substantial reductions in the amounts of nitrogen (25 percent), phosphorus (24 percent) and sediment (20 percent) that are annually released to the Chesapeake Bay watershed. A major tool to be employed in meeting these targets is the establishment and expansion of riparian buffers—areas of forest or grassland bordering streams and rivers in agricultural settings. Details are established through Watershed Implementation Plans for each of the six Bay states (i.e., Delaware, Maryland, New York, Pennsylvania, Virginia and West Virginia), as well as the District of Columbia. The Chesapeake Bay TMDL will likely be used as a model in other watersheds with impaired water quality related largely to agricultural activity.

Notably, the court’s decision to deny certiorari and thereby effectively endorse EPA’s authority to regulate wide-scale water pollution by working with multiple states in customizing plans to reduce pollution associated with an entire business sector (here, agriculture) occurred after the passing of Justice Antonin Scalia, but prior to the court’s consideration of EPA’s Clean Power Plan. The Clean Power Plan, like the Chesapeake Bay TMDL, represents a regulatory effort founded on “cooperative federalism” at a multi-state level and with major economic ramifications. Inasmuch as the court did not explain its thinking behind its denial of certiorari in the Chesapeake Bay TMDL litigation, it appears difficult to gauge the extent to which that thinking may carry over to the Clean Power Plan litigation. Of course, the makeup of the court may also be different by the time the Clean Power Plan (presently stayed per U.S. Supreme Court order) makes it to the court after adjudication by the U.S. Court of Appeals for the District of Columbia.

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