GOIT
&E Item 1
May 4, 2017
Worksession
MEMORANDUM
May 2, 2017
TO:
Government Operations and Fiscal Policy Committee
Transportation, Infrastructure, Energy and Environment Committee
FROM:
SUBJECT:
Robert H. Dnunmer, Senior Legislative Attorney
~
Worksession:
Bill 9-17, Fuel-Energy Tax - Exemptions - Amendments
Bill 9-17, Fuel-Energy Tax - Exemptions - Amendments, sponsored by Lead Sponsor
Councilmember Leventhal and Co-sponsors Council President Berliner, Councilmembers Eirich,
Hucker, Katz, Rice, Council Vice President Riemer, and Councilmember Navarro, was introduced
on April 4. A public hearing was held on April 25.
Bill 9-17 would exempt energy generated by a Community Solar Energy Generating
System (CSEGS) by exempting energy that is generated from a renewable source located in the
same electric service territory as the subscriber using the energy and subject to a virtual net energy
metering agreement (as defined in State law) with a public utility.
Background
The County fuel-energy tax is imposed on every person transmitting, distributing,
manufacturing, producing, or supplying electricity in the County. For an electric company, the
tax
is applied to the net consumption used to calculate each consumer bill and is passed through to end
users. Current law already exempts energy produced from a renewable source in the County and
either used on the site where it is generated or subject to a net energy metering agreement (as
defined in State law) with a public utility. However, this exemption only applies to the energy
produced from a renewable source, such as solar panels, located on the customer's property or
contiguous to the customer's property due to the definition in State law for "net energy metering"
generated by an "eligible customer-generator."
A CSEGS credits its generated electricity, or the value of its generated electricity, to the
bills of the subscribers to that system through a "virtual net energy metering" agreement, as defined
in State law. This type of facility can be located anywhere in the same electric service area, and
therefore, does not meet the eligibility requirements for the current fuel-energy tax exemption for
renewable energy. The County Attorney's Office has opined that the County fuel-energy tax
would apply to energy generated by a CSEGS and sold to a County customer under a virtual net
energy metering agreement. See the County Attorney letter to the Public Service Commission at
©4-7. Bill 9-17 would expand the current exemption to include renewable energy produced by a
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community solar facility and sold to a County customer under a virtual net energy metering
agreement. The Bill would permit a County resident who is unable to install solar panels on the
customer's property, such as a renter or an owner of a cooperative or condominium, to purchase
solar energy from a community solar facility without paying the County fuel-energy tax.
The Maryland Public Service Commission (PSC) established a CSEGS Pilot Program for
utilities by adopting regulations under the Code of Maryland Regulations (COMAR). On February
15, 2017, the PSC issued an order concerning the tariffs to be used under the CSEGS Pilot
Program. See ©8. Under COMAR, an electric company may choose to apply the appropriate
kilowatt-hour credit to a subscriber's bill as either a reduction in metered kilowatt-hour use or a
dollar credit to the subscriber's billed amount. However, the community solar bill credit must be
of the same value to the subscriber using either method.
An
electric company that applies the
community solar bill credit as a dollar credit would remit the County fuel-energy tax applied to
the net consumption, but must pass through to the end user a dollar credit that would make the
value of the community solar bill credit the same as if the utility had reduced the net consumption
(and the fuel-energy tax owed) by applying the credit in kilowatt-hours. In the order, the PSC
noted that Baltimore Gas and Electric Company stated it would recover any Montgomery County
tax from all its distribution customers, but the PSC stated that it believes the County fuel-energy
tax should only be recovered from Montgomery County distribution customers. Bill 9-17 would
expand the County fuel-energy tax exemption to all CSEGS subscribers without regard to the type
of billing by the utility.
Public Hearing
Lisa Feldt, Director of the Department of Environmental Protection, speaking on behalf of
the Executive, supported the Bill as a vehicle to promote the use of solar energy and to match the
fuel-energy tax exemption available to a resident with solar panels on a residence. See ©26-27.
Gary Skulnik, CEO of Neighborhood Sun Benefit Corp, supported the Bill. See ©28-29.
Neighborhood Sun Benefit Corp is a Montgomery County based business that plans to market
community solar energy generating facilities to County residents. Jerry Pasternak, representing
PEPCO, submitted written testimony supporting the general goals of the Bill. See ©30.
Issues
1.
What is the fiscal and economic impact of Bill 9-17?
Bill 9-17 would create a new exemption from the County fuel-energy
tax
for electricity
produced by a community solar generating facility. Due to the need to establish and market the
expected community solar generating systems, OMB estimated the revenue loss in FY18 at
$381,000. The estimated revenue loss in FY19 is $763,000 and would be $953,000 each year
beginning in FY20.
2. What is the benefit to the County of creating this exemption?
The County already has an exemption for solar energy produced by solar panels installed
on a customer's property. Bill 9-17 would permit those County residents who are unable to install
2
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solar panels on their property, such as renters and owners of a condominium in a high rise building
to receive the same exemption for purchasing energy from a community solar generating facility.
The new exemption would also promote the purchase of solar energy and reduce our carbon
footprint.
3. Is this exemption included in the Executive's Recommended FY18 Budget?
No. If the Council enacts Bill 9-17, the estimated revenue for FY18 will be reduced by
$381,000. The Council would have to make a corresponding reduction in the FY18 Operating
Budget to account for this lost revenue.
4. Should Bill 9-17 be enacted?
Bill 9-17 would undoubtedly provide a public benefit. The Council must weigh this lost
revenue against all other budget decisions as the Council creates the FY18 Operating Budget. If
the Council enacts this Bill, this lost revenue would reduce the amount of money available for the
reconciliation list.
Council staff recommendation:
approve the Bill as introduced.
This packet contains:
Bill 9-17
Legislative Request Report
County Attorney Letter to PSC ­ 10-26-2016
PSC Letter Order dated February 15,2017
Fiscal and Economic Impact Statement
Testimony
Lisa Feldt
Gary
Skulnik
Jerry Pasternak
F:\LA w\BILLS\1709 Fuel Energy Tax - Exemptions - Solar Energy\GO-T&E Memo.Docx
Circle
#
1
3
4
8
20
26
28
30
3
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Bill No.
9-17
Concerning: Fuel-Enemv
Tax
Exemptions - Amendments
Revised:
4f712017
Draft No. _7_
Introduced:
April 4, 2017
Expires:
October 4, 2018
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
--!..!.No::::!n.!!:e~
_ _ _ _ __
Ch. _ _ Laws of Mont. Co. _ __
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Leventhal
Co-sponsors: Council President Berliner, Councilmembers Elrich, Hucker, Katz, Rice, Council Vice
President Riemer, and Councilmember Navarro
AN
ACT to:
(1)
(2)
exempt the energy generated by a renewable source
in
the County by a community
solar energy generating system through a virtual net energy metering agreement from
the County fuel-energy
tax;
and
generally amend the exemptions from the County fuel-energy
tax.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-14
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL No. 9-17
1
Sec.
1.
Section 52-14 is amended as follows:
52-14. Fuel-energy tax.
( a)
(1 )
A tax
IS
2
3
4
levied and imposed on every person transmitting,
distributing, manufacturing, producing, or supplying electricity,
gas, steam, coal, fuel oil, or liquefied petroleum gas in the County.
5
6
7
8
9
*
(4)
*
*
IS
The tax does not apply to energy that
renewable source located:
(A)
generated from a
in the County and either used on the site where it is
generated or subject to a net energy metering agreement (as
defined in state law) with a public
utility~
or
10
11
12
13
14
15
16
17
18
(ill
in the same electric service territory as the subscriber using
the energy and subject to
~
virtual net energy metering
agreement
~
defined in state law) with
~
public utility.
Renewable source means a "Tier 1 renewable source" as defmed
in Section 7-701(1) of the Public Utilities Article of the Maryland
Code or any successor provision.
*
Approved:
*
*
19
20
Roger Berliner, President, County Council
Date
21
Approved:
22
Isiah Leggett, County Executive
Date
~w\billS\
1709
fuel energy tax - exemptions - solar energy\bill 7.docx
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LEGISLATIVE REQUEST REPORT
Bill 9-17
Fuel-Energy Tax
-
Exemptions
-
Amendments
DESCRIPTION:
Bill 5-17 would exempt the energy generated by a renewable source
in the County by a community solar energy generating system located
in the same electric service territory as the subscriber using the energy
and subject to a virtual net energy metering agreement (as defined in
state law) with a public utility.
The current exemption for energy generated by a renewable source
from the County fuel energy tax only applies ifthe energy is produced
on the customer's property or contiguous property. The Public
Service Commission has approved a pilot program for community
solar facilities that would sell electric energy to customers in the
County from a renewable source not located on the customer's
property. Under current law, the energy produced by a community
solar facility would not be exempt from the County fuel energy tax.
The goal is to exempt energy produced by a community solar facility
from the County fuel energy tax in order to encourage customers to
purchase this type of renewable energy.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
County Attorney, Department of Environmental Protection
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
To be researched.
N/A
To be researched.
SOURCE OF
INFORMATION:
Robert H. Drummer, Senior Legislative Attorney
APPLICATION
WITHIN
MUNICIPALITIES:
Applicable.
PENALTIES:
None
F:\LAW\BILLS\1709 Fuel Energy Tax - Exemptions - Solar Energy\LRR.Docx
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Isiah Leggett
Marc P. Hansen
County Executive
OFFICE OF THE COUNTY ATTORNEY
October 26,2016.
County Attorney
David
r.
Collins
Executive Secretary
Public Service Commission of Maryland
William Donald Schaefer Tower
6 St. Paul Street, 16
th
Floor
Baltimore, Maryland 21202
Re: RM 56 - Community Solar
Mail Log Nos. 198358,198381, and 198406
Dear Mr. Collins:
This letter is
in
response to the filings by Potomac Edison ("PE"), Baltimore Gas and
Electric Company ("BGE") and Potomac Electric Power Company ("Pepco") regarding their
Compliance Plans and Relevant Tariffs for Implementing the Community Solar Energy
Generating Systems ("CSEGS") Pilot Programs (collectively "Compliance Plans"). PE's
Compliance Plan
(Mail
Log No. 198358), BGE's Compliance Plan (Mail Log No. 198381),1 and
Pepco's Compliance Plan (Mail Log No. 198406), were
all
filed on September 1, 2016 pursuant
to the Code of Maryland Regulations ("COMAR'') Section 20.62.01.01(A). Montgomery
County, Maryland (''Montgomery County") files these comments to address how
it
interprets,
and intends
to
enforce, the application of Montgomery County's Fuel-Energy Tax ("FEr') on
the CSEGS subscription credits applied to subscribers' bills. This was previously discussed with
the Commissioners during the Rulemaking 56 ("RM 56") hearing on February 12, 2016 (see
enclosed transcript).
In sum, as discussed
in
the Rule Making on February 12, 2016, the subscription dollar
credit would be applied to the bill after
the
FET
tax
is applied
to
the net consumption.
Subscription Credits
Under COMAR 20.62.02.04(C)(1), "an electric company may choose to apply the
appropriate kilowatt-hour credit. .. as either a reduction
in
metered kilowatt-hour use or a dollar
credit to the subscriber's billed amount." .
It
appears that all three utilities are planning on
applying a dollar credit to the bills.
1
BGE
filed Errata
to
Compliance Plan ofBaltimore Gas and Electric Company on September 16,2016 (ML
#
199336).
101 Monroe
Street.
3
n1
Floor, Rockville, Maryland 20850-2580.lisabrennan@montgomerycountymd.gov
(240) 777-6700. (240) 777-6745 • TID (240) 777-2545 • FAX (240) 777-6705
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:'1
.......
····1
I:····:·; ..... : ...
.
.~.
:.:;.
)
!":"';"
David
J.
CoUins
October 26, 2016
Page 2
a.
Potomac Edison - The CSEGS Tariff
filed
with PE's Compliance Plan states:
A Subscriber will receive a bill credit for their subscribed percentage of
the monthly kilowatt-hour output of the CSEGS .... The monthly dollar
credit on the Subscriber's bill
will
be the equivalent of their sUbscription
percentage of the CSEGS monthly kilowatt-hour generation amount
applied to all kilowatt-hour charges on the Subscriber's bill. The
Subscriber's bill credit
Will
be
used
to offset the Subscriber's total bill. PE
CSEGS Tariff, p. 33-3.
b. BGE - BGE's Compliance Plan states "BGE will provide the credit as a
dollar amount instead of a
kWh
[kilowatt hour] credit." BGE Compliance
rlan, p. 2. BGE will apply a credit ''that will be the equivalent of their
subscription percentage of the CSEGS's monthly generation amount
applied to all energy charges on the Subscriber's bill." BGE Compliance
Plan, p. 2.
There will
be
a cap on the credit amount of the lesser of either
the Subscriber's actual usage or subscription amount. BGE Compliance
Plan, p. 4.
c. Pepco - Pepco explains
in
its Compliance Plan that it
''will
provide the
credit
as
a dollar amount. The subscriber will receive a monthly dollar
credit on their bill that will
be
the equivalent of their subscription
percentage of the CSEGS's monthly generation amount applied
to
all
volumetric charges on the subscriber's bill." Pepco Compliance Plan p. 2.
The credit will offset the Subscriber's total bill. Pepco Tariff Schedule
"CNM'''
p. 57.1.
Montgomery County Fuel-Energy Tax
Montgomery County imposes a Fuel-Energy
tax
"on every person transmitting,
distributing, manufacturing, producing, or supplying electricity ...
in
the County." Montgomery
County Code, Section 52-14(a) (1). The
tax
is
applied
to
the net consumption used to calculate
the bill. Montgomery County Code, Section 52-14(a) (3). PE, BGE and Pepco have all stated
that they will be applying the subscription credits as a dollar amount. Therefore, as discussed
in
the Rule Making on February 12,2016, the subscription dollar credit would be applied to the bill
after the FET tax is applied to the net consumption. Volume IV, Tr. p. 773:23 - p. 776: 13.
There is an exemption to the County's FET for energy generated from a renewable
source, however, as currently
written,
that
exemption would not apply
to
CSEGS's. The
exemption states:
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· .... !
j";:'''':'
;.
i
David
J.
Collins
October
26, 2016
Page 3
The tax does not apply to energy that is generated from a renewable source
in
the
County and either used on the site where it is generated or subject to a net energy
metering agreement (as defined in state law) with a public utility. Montgomery
County Code, Section 52-14(a)(4).
Maryland defines
net energy metering
as "measurement of the difference between the
electricity that is supplied by an electric company and the electricity that is generated by an
eligible customer-generator and fed back to the electric grid over the eligible customer­
generator's billing period." Public Utilities Article of the Annotated Code of Maryland ("PUA")
Section 7-306 (a)(7).
An
eligible customer-generator
is defined as:
...a customer that owns and operates, leases and operates, or contracts with a third
party
that
owns and operates a ... generating facility that: (i) is located on the
customer's premises or contiguous property; (ii) is interconnected and operated in
parallel with an electric company's transmission and distribution facilities; and
(iii) is intended primarily to offset
all
or
part
of the customer's own electricity
requirements. PUA Section 7-306 (a)(4).
A CSEGS does not have to be on the customer's premises.
In
fact, it can merely
be
"in
the satll:e electric service territory." PUA Section 7-306.2 (a)(3)(ii). A CSEGS system "credits
its generated electricity, or the value of its generated electricity, to the bills of the subscribers to
that system through
virtual
net energy metering." PUA Section 7-306.2 (a)(3)(iv) (emphasis
added).
Virtual net energy metering,
which is entirely different from net energy metering, is
defined as:
...measurement of the difference between the kilowatt-hours or value of electricity
that
is supplied by an electric company and the kilowatt-hours or value of
electricity attributable to a subscription to a community solar energy generating
system and fed back to the electric grid over the subscriber's billing period, as
calculated under the tariffs established under subsection (e)(2) of this section.
(pUA Section 7-306.2 (a)(9).
Thus, the exemption to the County's FET for energy generated from a renewable source, would
not apply to CSEGS's.
Montgomery County firmly supports community solar and has participated
in
the
RM56
proceedings. We appreciate the opportunity to further discuss how the County interprets, and
intends to enforce, the application of Montgomery County's Fuel-Energy Tax ("FET") on the
CSEGS subscription credits applied to subscribers' bills.
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David
J.
Collins
October 26, 2016
Page 4
Please feel
free
to contact me
if
you have any questions regarding this matter.
Respectfully submitted,
.
~~~
Lisa Brennan
I
Associate County Attorney
Enclosure
cc:
Amy
M.
Klodowski, Potomac Edison
Kimberly
A.
Curry,
BGE
~atthewK.Segers,Pepco
Phillip VanderHeyden, PSC Staff
Leslie Romine,
PSC
Staff
Paula
Carmody, oPC
7
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COMMISSIONERS
STATE OF MARYLAND
W. KEVIN HUGHES
CHAIRMAN
HAROLD D. WILLIAMS
JF:AIXNETTE M. MILLS
MICHAEL T. RICHARD
ANTHONY O'DONNELL
PUBLIC SERVICE COMMISSION
#4, 1111/17
AM; ML# 198358, RR-2932
#5, 1111/17
AM; ML# 198406, RR-2934
#6, 1111/17
AM; ML# 198381, RR-2933
February 15,2017
Amy M. Klodowski, Esq.
Attorney
The Potomac Edison Company
800 Cabin Hill Drive
Greensburg, PA 15601
Matthew K. Segers, Esq.
Assistant General Counsel
Pepco Holdings·
EP9628
701 Ninth Street, NW
Washington DC 20068-0001
Kimberly A. Curry, Esq.
Assistant General Counsel
Baltimore Gas and Electric Company
2 Center Plaza, 12th Floor
110 West Fayette Street
Baltimore, MD 21201
Dear Mss. Klodowski and Curry and Mr. Segers:
The Maryland Public Service Commission ("Commission") has reviewed the revised tariff
pages and Compliance Plans implementing the Community Solar Energy Generating Systems
("CSEGS") Pilot Program filed on September 1,2016 by The Potomac Edison Company ("PE"),
Potomac Electric Power Company ("Pepco"), Delmarva Power
&
Light Company ("Delmarva"),
and Baltimore Gas and Electric Company ("BGE") (collectively the "Companies") in compliance
with COMAR 20.62.01.03.
WILLIAM DONALD SCHAEFER TOWER • 6 ST. PAUL STREET • BALTIMORE, MARYLAND 21202-6806
410-767-8000
Toll Free: 1-800-492-0474
FAX: 410-333-6495
MDRS: 1-800-735-2258 (TTYNoice)
Website: www.psc.state.md.us
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
After hearing from the Companies, the Commission's Technical Staff, Office of People's
Counsel and other stakeholders) at the January 11, 2017 Administrative Meeting regarding the
proposed tariffs implementing the Community Solar Energy Generating Systems Pilot Program,
the Commission took this matter under advisement. Staffs comments identified two outstanding
policy issues: Project Selection Oversight; and Annual Project Selection Process.
2
Staff and OPC
also identified a number of other technical issues with the application process, not all of which are
raised by the proposed tariff filings. In this Order, the Commission addresses and resolves many
of these issues to enable the process of implementing the pilot programs to proceed. As explained
below, BGE, Pepco, Delmarva and Potomac Edison are instructed to file revised copies of their
community solar tariffs, consistent with the direction in this Order, Within 15 days from the date
of this Letter Order, for Commission review and approval.
Amount of Annual Capacity Available for Selection in Year 1
Commission Staff proposed that each of the three pilot program years should have a new
and separate selection process. Staff believes that this selection method will ensure a more
equitable allocation of pilot program capacity and a more diverse group of subscriber
organizations.
3
On the other hand, solar developers asked that capacity for all three pilot program
years be available for reservation at the beginning of the pilot program.
4
Under their proposal,
applicants that are not approved in Year 1 are placed on a waiting list, and the queue for Year 2
(and then Year
3)
is derived directly from the waiting list.
5
In
practice, if a particular program
category received applications early in Year 1 with sufficient capacity to fill all three pilot program
years, then no further applications would be accepted for the remainder of the pilot program. Solar
developers stress that certainty as to a project's queue position - i.e. whether the project can enter
The following parties spoke at the Administrative Meeting: Phil VanderHeyden (Commission Staff); Kimberly Curry
&
John Murach (BGE); Matthew Segers (Pepco/Delmarva.); Amy Klondowski (PE); Ray Valdes (PE); Jacob
Ouslander
&
William Fields (OPC); Lisa Brennan (Montgomery County); Dana Sleeper (MDV -SEIA); Harry Warren
(Coalition for Community Solar Access); John Forgash (OneEnergy Renewables); SalarNaini (TumingPointEnergy);
Peter Coleman (Clean Choice Energy); Myriam Toumeux (Fuel Fund of Maryland); Corey Ramsden (Maryland
SUN); Michael Miller (OGOS Energy);
2
Staff Comments at 3.
3
Staff Comments at 3,8-9.
4
TumingPoint Comments at 3; CCSA Comments at 4; OneEnergy Comments at 4.
5
The Companies' proposed tariffs reflected this selection method.
I
llJ
~
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
the program either in Year 1 or following years - is critical to financing and project development,
as well as to its attempts to receive local pennits.
The Commission believes that allocating all pilot program capacity at the outset is not in
the best interests of the pilot program. The Commission wants to encourage Marylanders and
companies to participate in the program, and it is concerned that allocating all pilot program
capacity through the Year 1 application process may prohibit possible pilot program entrants from
participating. In addition, the Commission wants to see the outcome ofthe Year 1 process to assess
if the pilot program includes sufficient project diversity. Ultimately, the Commission has a
statutory obligation to conduct a meaningful pilot program study,6 and it believes that the study
will be better if the pilot program contains a variety of project types. Therefore, the Commission
finds that projects that do not receive a position in Year 1 must reapply for a position in a future
year and do not maintain their queue or waiting list position for subsequent years.
Nonetheless, the Commission is sympathetic to the concerns of the solar developers about
their desire for certainty about the project pipeline and their view that Maryland will have more
successful projects if the queue is solidified further in advance. Therefore, in Year 2, the
Commission will allow projects that apply - but do not receive - a position in the Year 2 queue to
join a publicly-posted waiting list for Year 3 capacity. The Companies will fill the Year 3 queue
starting with the waiting list developed in Year 2, which should provide those Year 2 wait-listed
projects more certainty about their status for receiving a position in the remainder of the pilot
program.
Project Selection Oversight
Commission Staff proposed a "Project Selection Oversight" plan that would give the
Commission a chance to review the project selection queue before it took effect.
7
Staff listed
several factors that the Commission could consider to distinguish proj ects and decide which
6
Maryland General Assembly, Chapter 347 (2015), Section 2.
7
Staff Comments at 3,5-8, 17.
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Amy M. Klodowski, Esq.
Kimberly
A.
Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
projects received a slot in the pilot program. s Staff acknowledged that its plan would slow the
selection of projects, but believed that it would better ensure that the pilot included a variety of
projects that would support a meaningful study. OPC supported Staffs proposal.
9
Solar developers disagreed with Staffs plan and believed that first-come first-served
project queues are most appropriate.
10
They believed that the pilot program categories (i.e. Open,
Low
&
Moderate Income, and Small/Brownfield/Other) will ensure a sufficient amount of project
diversity. These parties also note that projects will exit the interconnection queue and meet other
approval prerequisites)) - and thus be eligible to enter the pilot program queues - at different times,
so requiring all applications to wait for an overarching Commission review would result in
significant delays in project selection and project implementation, harming Maryland's potential
community solar customers.12
In selecting projects for Year I ofthe pilot program, the Commission agrees with the solar
developers that the pilot program queue should be filled on a first-come first-served basis. The
Commission is concerned that Staffs proposal would significantly delay project selection and
development, particularly because projects may enter the queue at different times depending on
the results of interconnection studies and other permitting. The Commission agrees with Staff that
it is important to ensure project diversity in this pilot program and appreciates Staffs attempt to
outline selection factors. The Commission agrees with many of them, and while it does not make
these selection factors binding, the Commission believes that they may offer useful guidance it
reviews Year 1 results.13 With the benefit of seeing what types of projects are accepted in Year 1,
the Commission may revisit the selection process for Year 2 of the pilot program.
14
Factors listed by Staff include: geographic concentration; feeder capacity; proximity to customer loads;
technological, aesthetic or policy goals; subscriber organization percentage of category/program capacity; evaluation
of distribution system benefits; category eligibility; customer service/performance; and subscriber organization
authorization status. Staff Comments at 7, 17.
9
OPC Comments at 8.
10
CCSA Comments at 2; TumingPoint Comments at 7-8; OneEnergy at 5-6.
II
See COMAR 20.62.03.04B(3).
12
The Companies' draft tariffs as filed reflect the solar developers' preference to eliminate this oversight process.
13
Stafflisted several factors, but did not include others, such as the diversity of subscriber organization owners.
14
The Commission notes that it maintains the authority to require each utility tariff to include a process to prioritize
applications if a utility receives multiple applications that exceed "the available program capacity or category in a
short period of time." COMAR 20.62.03.04B(2). Although the Commission declines to require each tariff to include
8
®
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew
K.
Segers, Esq.
February 15,2017
Pilot Program Capacity Limits
COMAR 20.62.02.02A(1) states that the pilot program's statewide capacity is limited to
1.5% of Maryland peak demand,I5 and that each utility is not required to accept applications
totaling more than 1.5% of its Maryland peak demand. To measure 2015 peak demand,
Commission Staff recommended using estimates of 2015 peak demand from the Commission's
2014 1O-year plan, which would result in a statewide program capacity ofapproximately 225 MW.
Staff argues that this approach is most consistent with the Commission's intention when it
promulgated the regulations. I6 Solar developers support this approachP The Companies
recommend that the Commission use 2015 actual peak demand figures, arguing that using actual
2015 data is more consistent with the text of the regulations.
18
The Commission's plain reading of COMAR 20.62.02.02 leads it to agree with the
Companies' interpretation. The Commission instructs the Companies to use actual 2015 peak
demand figures, as calculated by PJM,I9 in calculating pilot program capacity.2o The regulation
references the electric company's "2015 Maryland peak demand", which leads the Commission to
dismiss Potomac Edison's contention that it should use 2015
summer
peak demand instead of2015
actual
peak demand. 2
1
The Commission agrees with Staff's position that each Company should be required to
publish its capacity chart in its tariff as it will increase transparency and clarity of the program
capacity.
It
concurs with BGE and PHI's suggestion to include an additional caption above the
chart. 22
Subscriber Organization Bond Amount & Timing
such a prioritization process at this time, it reserves the right to require each utility to institute such a process for the
future program years.
15
A utility must accept slightly more capacity if its LMI category is full. COMAR 20.62.02.02A(l)(b).
16
Staff Comments at 4.
17
CCSA Comments at 6.
18
BGEIPHI Comments at 5; PE Comments at 2.
19
Per PJM's Network Service Peak Load (NSPL) calculation.
20
Per BGEIPHI's filings, the following capacity limits would occur: BGE- 100.7 MW; Pepco-49.6 MW; Delmarva
- 16.4 MW. PE did not provide its 2015 annual peak demand in its filing.
21
PE Comments at 2.
22
BGE and PHI proposed the following caption: The following table sets forth the annual capacity limits under the
Pilot Program for the Company. Updates to the status ofthe Company's Pilot Program's queue and capacity limits
can be found at WWW.xxx.com.
~
~
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
Staff proposed a bond of $250,000 per subscriber organization due at the time of
application. Solar advocates countered that a $250,000 bond per subscriber organization is much
too high, not in line with the risk to consumers, and puts small businesses and non-profits at an
extreme disadvantage. 23
The Commission agrees with solar advocates that a bond of $250,000 per subscriber
organization is too large for many subscriber organizations, particularly for small businesses and
non-profits. In addition, the Commission notes that subscriber organizations that collect prepaid
subscription funds in advance of commercial operation are required to maintain those funds in an
escrow account, which limits customers' financial risk. 24
It
finds that the bonding requirement for
an electric or gas broker license, which is $10,000, is the appropriate starting point for the
subscriber organization bonding requirement. Therefore, the Commission sets the bonding
amounts as follows:
Non-profit or "Type B,,25 subscriber organization (less than 1 MW) - no bond required;
All other subscriber organizations - $10,000 initial bond for up to 1 MW of proposed
community solar capacity, plus any additional amount per the "Additional bonding requirement"
below;
Additional bonding requirement - $25,000 per additional MW of proposed community
solar capacity.26
Solar developers asked that the bonding obligation not apply until the project is accepted
into the program. 27 They argue that a subscriber organization should not be forced to acquire a
bond if its application is ultimately denied a queue position. However, the Commission finds that
the administrative difficulty of managing a post-application bonding requirement outweighs the
MD SUN Comments at 2.
24
COMAR 20.62.05.11.
25
Staff Comments, Draft Subscriber Organization Application Fonn at 2 (defining a "Type B" subscriber organization
as one composed of a "Proposed Collective Group of Subscribers of a (single) Community Solar Energy Generating
System).
26
As an example, a for-profit subscriber organization requesting 2 projects with a combined capacity of 1.1 MW
would be required to submit a $35,000 bond: a $10,000 initial bond, plus an additional $25,000 because the total
proposed project capacity is over 1 MW.
27
See Oral Comments of Michael Miller of OGOS Energy at January 11, 2017 Administrative Meeting.
23
l!!J
((;l
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
concern noted by the developers. Therefore, the Commission approves Staffs proposal to require
the appropriate bond at the time a subscriber organization applies for the program.
Method of Providing Subscription Credits
Potomac Edison proposed tariff language that would allow it to pay community solar bill
credits as either dollar credits or per-kWh credits.
28
PE states that although COMAR 20.62.02.04C
requires the same type of bill credit for all subscribers of a particular project, it does not require
the same bill credit method to be implemented across all projects within a utility's service territory.
PE stated that it wanted to maintain flexibility to choose between the types of bill credits in the
future. Staff objected to PE's language, requesting that PE indicate in its tariff whether it will use
a kWh or dollar credit method.
29
The Commission agrees with PE that the law and regulation clearly allow a utility to choose
either type of credit - either a kilowatt-hour or dollar credit - for each project and disagrees with
BGE's assertion that it can only select the dollar credit option. In fact, the Commission is
encouraged that PE is leaving open its options and encourages the other utilities to do so as well.
One objective of the pilot program is to compare different types of implementations of the pilot
program and provide recommendations to the General Assembly. Leaving open the possibility of
providing bill credits by different methods is one way that the Commission can gather more
comparative information about the pilot program. Thus, it approves PE's position to maintain its
proposed tariff language on this point.
Additional Companies' Concerns
Staff recommended that community solar interconnection applications expire after 12
months,30 which could prevent a possible backlog in the interconnection queue both for community
solar projects and other distribution generation. However, developers argued that this requirement
PE Comments at 2-3.
29
Staff Comments at 9.
30
Staff Comments, Redline Versions of Tariffs.
28
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15, 2017
is overly burdensome.
31
BGE
&
PHI explain that there is no 12-month expiration limit
in
COMAR,
but that it could incorporate such a limitation if the Commission thought it was reasonable.
32
The Commission agrees with Staffs approach.
It
is cognizant of the possibility that a flood
of community solar interconnection applications could, if they are approved, limit the capacity of
distribution feeders available to future community solar applicants and other types of distributed
generation, including rooftop solar. In particular, a community solar project that receives
interconnection approval but does not receive a position in the Year 1 program queue would remain
as an approved interconnection application for several years, thereby tying up feeder capacity and
potentially blocking future interconnection applications even though the project has no
straightforward path to operation. Therefore, the Commission directs that the Companies shall
include tariff language that interconnection applications made for projects seeking Year 1 pilot
program capacity expire at the end of the Year 1 if not implemented.
33
The Commission holds
open the possibility of amending this provision for future program years and instruct Staff, in
consultation with the workgroup, to file a report within 180 days with recommendations, if
appropriate, for tariff language amendments on this issue.
The Companies raised other concerns about specific proposed tariff language. BGE noted
that Staff suggested tariff language that an interconnection agreement be "partially" executed as a
condition of entering the program and stated that the insertion was reasonable.
34
BGE requested
that similar language be included in the Pepco and Delmarva tariffs. The Commission agrees with
Staff's reasonable insertion and instructs all Companies to include such language in tariffs.
Meanwhile, Potomac Edison asked that the Commission reject Staffs insertion of tariff language
that: (a) provides exceptions to the co-location prohibition
35 ;
and (b) states that a subscriber
organization must replace LMI subscribers with a sufficient number of LMI subscribers such that
30% of kWh output is provided to LMI customers.
36
The Commission agrees with Staffs position
OneEnergy Comments at 6.
32
BGEIPHI Comments at 3-4.
33
The Commission notes that the Companies should not take this directive to imply that it should discard project
information about an interconnection application at the end of Year 1, but simply that the project is no longer approved
to connect at that time - and thus no longer ahead in the line and "blocking" other projects from obtaining capacity
on that portion of the distribution system.
34
BGE/PHI Comments at 4.
35
PE Comments at 3.
36
PE Comments at 4.
31
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Amy M. Klodowski, Esq.
Kimberly
A.
Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
that both insertions simply state program requirements and are appropriate for the tariff, and thus
rejects PE's contention that such provisions are unnecessary or inappropriate.
Additional OPC Concerns
OPC raised several general concerns about the pilot program. OPC is concerned that:
(1)
customers who receive support from the Electric Universal Service Program (EUSP) might not
receive the full benefit of community solar bill credits; (2) the Commission has not yet approved
a Contract Disclosure Form; (3) the process for a subscriber organization to certify LMI
participation is not clear; and (4) the statutorily-required study has not received sufficient focus in
workgroup meetings.
37
The Commission agrees with OPC on all four points, and is particularly concerned to learn
that the statutorily-required study may not be receiving the necessary attention and planning. The
pilot program study is not only required by law, but it is at the heart ofthe pilot program's purpose.
The pilot program is intended to test various possibilities for community solar in Maryland, and
the study must provide the General Assembly with the necessary information by which it can
evaluate whether a permanent community solar program should be implemented or if the state
should meet its goals through other means.
38
If the Commission and other stakeholders fail to
sufficiently focus on the study from the outset of the pilot program, it will have a more difficult
time meeting its statutory obligation. Indeed, the obligation for a meaningful study falls not only
Staff but on all stakeholders. Therefore, the Commission directs Staff, in consultation with the
workgroup, to develop a study plan with specifics on the metrics for the Projects and Subscriber
Organizations, as well as the data and cooperation it needs from all stakeholders. Staff shall file
its detailed study plan within ninety (90) days.
Given the pilot program's statutory focus on including LMI customers as participants, the
Commission shares OPC's concern that EUSP customers might not receive the same financial
benefits as other customers. All customers, including those receiving EUSP benefits, should
receive the same opportunity to benefit from this pilot program. The Commission directs Staff, in
See OPC Comments at 3-8. Energy Advocates supported items (1) and (3)
in
its comments.
38
For example, the General Assembly could decide that implementing greater retail choice options for developing
and consuming renewable resources (Le. "green" electricity supply options) is more advisable than a pennanent
community solar program.
37
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
consultation with the workgroup, to file within ninety (90) days a report outlining one or more
possible solutions for EUSP customers. Regarding items (2) and
(3),
the Commission directs Staff,
in consultation with the workgroup, to file within ninety (90) days a Contract Disclosure form and
a document clarifying for stakeholders the method by which a subscriber organization can certify
LMI participation.
Additional Solar Developer Concerns
Solar developers raised additional concerns with a few of Staffs other recommendations.
They urged the Commission to:
(1)
allow a project to choose its program category at the time it is
accepted into the pilot program, rather than declare it upfront; (2) declare that a project that already
has an interconnection agreement retain its position in the interconnection queue, rather than
reapply and go to the back of the line with other CSEGS-specific interconnection applications;39
and (3) require that each utility post its interconnection queue online, similar to what occurs in
some other states. 40
The Commission rejects the first two requests and seeks more information on the third
request. First, the Commission denies the request to allow a project to choose its category at its
time of acceptance rather than in its application. The Commission created different program
categories to ensure that it received project applications committed to those types of projects,
particularly for the LMI category. It does not want to encourage projects which failed to receive
capacity in one category to elect another category to the detriment of projects that were committed
to that specific category from the outset. Second, the Commission denies the request to allow a
project to maintain its position in the interconnection queue. Although the Commission recognizes
that the interconnection process will work at different speeds for different projects (and will likely
move faster for projects that were previously approved), it does not want to automatically give
previously-approved projects the unfair advantages of essentially reserving access to particular
feeders and satisfying the interconnection approval prerequisite immediately.41 Third, the
CCSA Comments at 8 (arguing that this requirement could affect a project's fmancial assumptions if a project is
required to reapply and not "retain [its] position in the interconnection queue on constrained feeders or circuits
consistent with [its] original application date.").
40
CCSA Comments at 8 (citing California and Minnesota as other states with published interconnection queues).
41
See ESA Comments at I
&
SynerGen Solar Comments at 2 (favoring the requirement for a new application as
maintaining "a level playing field").
39
@)
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew K. Segers, Esq.
February 15,2017
Commission is intrigued by the suggestion that each utility post its interconnection queue online.
It
requests that Staff and the Companies file comments within ninety (90) days outlining the
feasibility, benefits, costs, and barriers of this suggestion.
Additional Items in Staff Filings
Staff filed a proposed Subscriber Organization Application and a general process timeline.
The Commission agrees with Staffs general direction on these documents and instructs Staff to
file clean copies with any minor adjustments that Staff deems appropriate. The Commission notes
in particular that Staff will have to adjust the dates it proposed in its timeline, and it encourages
Staff to select dates that will start the pilot program as soon as is feasible. Staff shall process
Subscriber Organization Applications in a timely manner. Staff also noted that tariff language
regarding cost recovery, particularly through BGE's Rider 10, should not constitute a
guarantee
that base rates or other charges would recover program costS.42 The Commission agrees with Staff
that it reserves the right review program costs at a later date.
Additional Concerns
Several other issues were raised by parties in comments. Staff and solar developers believe
that the list of "Proof of Application of Applicable Permits" should remain in the tariff;43 while
Potomac Edison disagrees. 44 The Commission agrees with Staff and solar developers that this list
should be included in the tariff to provide clarity to all stakeholders about permitting requirements.
BGE and PHI asked that they be permitted to use the Standard Offer Service rate in determining
the bill credit amount when a customer's retail rate is unavailable. 45 Solar developers support this
position,46 and although Staff expresses some concern with it, Staff ultimately recommends
approval of this proposal. 47 The Commission agrees with the consensus recommendation and
accepts BGE and PHI's position on this issue. Solar advocates asked that the requirement for
Staff Comments at 9.
43
Staff Comments, Redlined Tariffs; CCSA Comments at 6.
44
PE Comments at 3.
45
BGEIPHI Comments at 4-5.
46
CCSA Comments at 8.
47
Staff Comments at 9.
42
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Amy M. Klodowski, Esq.
Kimberly A. Curry, Esq.
Matthew
K.
Segers, Esq.
February 15,2017
monthly subscriber list updates to the Companies be waived when no changes occur, and that the
Commission post basic subscriber organization infonnation on its website.
48
The Commission
agrees with both recommendations.
It
instructs the Companies to include the waiver provision for
list updates in their tariffs and instructs Staff to work with the Commission's Communications
Director and IT Department to select the appropriate place on the Commission's website to post
basic subscriber organization infonnation.
During the hearing, the Commission heard testimony about the applicability of bill credits
in relation to Montgomery County's Fuel-Energy Tax and other bill charges. The Commission
reiterates that each utility's tariff must comply with COMAR 20.62.02.04D, which states that if a
utility chooses to apply the community solar bill credit as a dollar credit, the applied credit must
be "no less than the value
to the subscriber
[emphasis added] of the credit had it been applied to
the subscriber's bill as a reduction in metered kilowatt hours." The law intends Community Solar
virtual net-metering to be given the same treatment as behind the meter net-metering, and the
Commission does not believe Montgomery County's plans to impose the Fuel-Energy Tax on
Community Solar participants meets the intent of the law.
49
The Commission also took note of
BGE's presentation stating that it would recover any Montgomery County tax from all its
distribution customers; under such a circumstance, the Commission believes that the Montgomery
County tax should only be recovered from Montgomery County distribution customers.
By Direction of the Commission,
/s/ ([)avid
J.
Collins
David
J.
Collins
Executive Secretary
MD SUN Comments at 2.
49
The Commission also notes that the community solar statute excludes a community solar project from the
definitions of an electric supplier or generating station and mandates that the pilot program's capacity counts toward
the state's net metering cap. Public Utilities Article,
§
7.306.1(C), (G).
48
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ROCKVILLE,MARYLAND
MEMORANDUM
April 21, 2017
TO:
Roger Berliner, President, County Council
Jennifer
A.
Hughes, Director, OffIce of Management and
Alexandre
A.
Espinosa, Director, Department ofFinan
FElS for Council
sm
9-17, Fuel-Energy
Tax·-
Exemptions - Amendments
FROM:
SUBJECT:
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:fz
co:
Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefi.eld, Director, Public Information Office
Alexandre A. Espinosa, Director, Department of Finance
Lisa Feldt, Director) Department of Environmental Protection
Stan Ed\",<ards, Department ofEnvironmental Protection
Dennis Hetman, Department of Finance
David Platt, Department of Finance
Robert Hagedoom. Department of Finance
Felicia Zhang, Office ofManagement and Budget
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Fiscal Impact Statement
Bill
9~17
- Fuel-Energy Tax - Exemptions - Amendments
1.
Legislative Summary.
This legislation would amend Chapter 52. Section 52-14 ofthe County Code to:
a)
exempt
the
t,-nergy generated by a renewable source
in
the County by a
community
solar
energy generating system through a
virtual
net energy metering agreement from
the
county fuel-energy
tax; and
b) generally amend the exemptions from the County
fuel~energy
tax,
2. An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
Bill
9~
17
would exempt electricity generated by a community solar project
(as
defined
in
COMAR
20.62) from the County's fuel energy tax. While there are currently no State programs that provide
exemptions for solar energy generation in the manner outlined in
Bill
9-17
and therefore related
data
is
limited., the Department of Environmental Protection estimates that revenues to
the
County
as
a result of
Bill 9-17
could
be
reduced by $381,000 in the frrst
year
and the estimated full
implementation impact could be approximately $953,000 annually after three years.
These estimates assume full implementation of
the
community solar pilot
as
outlined
in COMAR
20.62. The total capacity ofcommunity solar projects in the service territories ofthe three utilities
(Pepco.
BGE.
Potomac Edison) serving Montgomery
County is defined
in
COMAR
20.62.02.02.
For purposes ofestimating the potential
fiscal
impact resulting
from Bill
9-17,
assumptions were
made
about
the total kilowatt hours (kWh) used by Montgomery County residents
and
bu.'linesses
based on the share that County subscribers represent ofthe total subscribers in
a
service tenitory,
and the split between residential and commercial customers.
3. Revenue and expenditure estimates covering at least tbe next 6 fiscal years.
BiH
9~
17
could reduce revenues from
the
County's fuel-energy
tax
as
follows:
FY18: $381.000
FY19: $763,000
FY20:
$953,000
FY21:
$953,000
FY22:
$953,000
FY23:
$953,000
4. An actuarial analysis through the entire amortization period for each regulation that would
affect retiree pension or group insurance costs.
Not applicable.
5. An estimate of expenditures related to County's information technology
(IT)
systems,
including Enterprise Resource Planning (ERP) systems.
Not
app licable.
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6. Later actions that may affect future revenue and expenditures
if
the regulation
authorizes
future
spending.
Not applicable.
7~
An
estimate of the staff time needed to implement the regulation.
The Department of Environmental Protection and 1he Department of Finance did not report impact..;;
to
staff as
a result
of
Bill 9-17.
8.
An
explanation of how the addition of new staff responsibilities would affect other duties.
Not
Applicable.
9.
An
estimate of costs when an additional appropriation is needed.
Not Applicable.
10. A description of any variable that could' affect revenue and cost estimates.
Several variables could affect the revenue estimates provided
in
this analysis are:
..
The
implementation
rate
ofcommunity solar projects;
.. The number ofCounty residents and businesses subscribing to community solar projects; and
.. The future scope of the current community solar program. The current community solar
program is a 1hree-year pilot. At this time,
it
is not possible. to predict whether the program
\\-111 be
extended/expanded,
or what
the
capacity of
an extt."'Ildedlcxpanded
program
may
be.
U.
Ranges of revenue or expenditures
that
are uncertain or difficult to project.
See response
to
#10.
12.
If
a bill
is
likely to have no fiscal impact, why that is the case.
Not
applicable.
13. Other fiscal impacts or comments.
Not
applicable.
14. The fonowing contributed
to
and concurred vrith this analysis:
Lisa Feldt, Department of Enviromnental Protection
Stan Edwards. Department ofEnvironmental Protection
Matt Schaeffer, Office of Management and Budget
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Economic. Impact Statement
Bm
9-17 Fuel-Energy Tax
~:xemption
- Amendments
Background:
This legislation would amend Chapter 52, Section 52-14 of the County Code to:
a) exempt the energy generated by a renewable source in the County by a community solar
energy generating system through a virtual net energy metering agreement from the
County fuel-energy tax; and
b) generally amend the exemptions from the County fuel-energy tax.
Bill 9-1.7 would exempt the energy generated by a renewable source in the County by a
community solar energy generating system located in the smne electric. service tenitory
&5
tbe
subscriber using the energy and
su~jeci
to a virtual net energy metering agreement (as defined in
State law) \vitha public utility. The
current
exemption for energy generated by a renewablc
source from the County fuel energy tax only applies if the energy is produced on tbe customer's
property or contiguous property. The goal is to exempt energy produced by a community solar
filCiIity fTom
the Countyfilcl energy
tax
to encourage customers
to
purchase this type of
renewable energy.
1.
The sources of information, assumptions, and methodologies used
• Department of Environmental Protection; Commtmity Solar Assumptions
• Office ofthe County Attorney; Potomac Edison, Baltimore Gas and Electric Company
and Potomac Electric Power Company Compliance Plans and Relevant Tariffs
• National Renewable Energy Labs for solar production in
~\ifaryland
The County fuel cnergy tax is imposed on every person transmitting, distributing, manufacturing,
producing, or supplying electricity in the County. The
tax
is applied to the net consumption used
to calculate the bi 11. Current law already exempts energy produced from a renewable source in
the County and either used on the site where it is generated or subject to a net energy metering
agreement (as defined in State law) 'With a public utility. However, this exemption only applies
to the energy produced
from
a renewable source, such as solar panels, located on the customer's
property or contiguous to the customer's property because of the definition in State law Jor a "net
energy metering lihrreement.
It
A community solar facility generates encrgyfrom a renewable source and sells
it
to
customt~rs
in
the County through a "virtual net energy metering agreement," as defined in State law. This type
of facility can be located anywhere in the same electric service area, and therefore. does not meet
the eligibility requirements for the current
fuel
energy
tax:
exemption for renewable energy_ The
Bill "",ould pemlit a County resident who is unable to install solar panels on the customer's
property, such as a renter or an O\\Illcr of a cooperative or
condominium~
to purchase solar energy
from a community solar facility without paying the County fUel energy tax:.
As part of the analysis completed for the fiscal impact statement for the bill, the Department of
Environmental Protection (DEP) estimates that the potential impact of exempting cmnmul1ity
solar subscribers from the Fuel Energy Tax (FET) to be approximately $8.7 million in lost
tax
10f3
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Economic Impact Statement
Ui1I9-17 Ji'ucl-:f2nergy Tax Exemption - Amendments
revenue to the County over ten years and $18.3 million over a twenty-year time horizon using
the February 201 6 Commission approved pilot program (COMAR 20.62) as a baseline for
calculations.
Whi
Ie
there are
currently no
State
programs that provide exemptions for solar
energy generation in the manner outlined
in
Bill 9-17 and therefore related data are
limited, the
Department of Environmental Pmtection estimates that revenues to the County because
of
Bill 9­
17
eouId be reduced by
$381
,000
in
tlie
first year and the estimated full implementation impact
could be approximately
$953,000
annually after three years, assuming current tax rates. The
estimated annual impact after capacity is reached at year 3 is approximately $950,000 per year.
2. A description of
any
variable that could affect the
economic
impact estimates.
Variables that could atIect
the
economic impact estimat.es include:
I.) The implementation rate of commwlity solar projects; Using data from National Renewable
Energy Labs about solar production in Maryland, and using factors for efficiency conversions,
DEP estimates assume approximately].3 million
k\\:11
per year per 1MW of installed nameplate
solar.
Actual production
\vi11
depend on weather conditions, installation method, and the actual
panels themselves.
2.) The
ntlllber
of County residents and businesses subscribing to community solar projects;
Business customers have greater energy demand and pay more in
FET
taxes, but also have lower
aggregate energy prices than residential overall.
3.) The
current community solar program is a three-year pilot
It
is
not possible to predict
whether the progrmn will be extendediexpanded. or V'lhat the capacity of
illl
extended/e~'\panded
program may
be.
4.) The
potential jobs created because of increased
solar
energy proliferation that may result
from this
bilL
3. The Sill's
positive
or
negative effect, if any on employment, spending,
savings,
investment, incomes,
and prol)erty
values
in the County.
An estimated economic impact cannot be quantified with. specificity on these variables given
a
lack
of data enumerating
the
number
of
residents and businesses that would
be
affected and that
would receive fuel energy exemptions.
While the
stimulation in investment for solar panels have
an economic impact attributed to the exemption,
the
total impact on the County's economy
through
employment~
spending, investment, incomes, and property values is likely to be modest.
The 10- and 20-year fiscal estimates in section 1 assume that after the 3-year pilot program, no
additional community solar is developed because the pilot concludes \vithotit transition to a full
program.
Future
impacts to
FET
revenues from community
soJar
project<;
will
depend
011
long~
tenn program decisions made by the Public Service Commission after the pilot program.
20f3
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Economic Impact Statement
Bill 9-17 Fuel-I:nergy Tax Exemption - Amendment,
Further, while the community solar pilot program continues for any systems put in place within
the 3-ycar
time frame, the contracts can extend out to 25 years (COlvlAR 20.62.02.10).
4.
If
a Bill
is
likely to have no economic impact,
why
is that the case?
See
mmlber
3.
5.
The
following contributed to or concnrred
with this
analysis:
David Platt, Dennis Hetman, and Robert Hagedoom, Finance.
Alexan~ire
A. Es
nosa~
Director
___tj..l
~ I~.JI
Date
Department of Finance
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TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAH LEGGETT
REGARDING BILL 9-17, FUEL-ENERGY TAX - EXEMPTIONS - AMENDMENTS
April 25, 2017
Good afternoon. My name is Lisa Feldt. I am the Director of the Department of
Environmental Protection. I am testifying on behalf of the County Executive in
support of Bill 9-17, Fuel-Energy Tax - Exemptions - Amendments.
In
1971, the County adopted a fuel-energy tax that applied to "all electricity
delivered for [mal consumption in the County," and the tax was imposed on
"persons who distribute, produce, transmit, manufacture or supply electricity" in
the County. For many years, electricity subject to taxation was almost exclusively
generated by large, fossil fuel-based power plants and distributed to users in the
County by regulated public utilities. The tax was based on electricity use as
measured by a customer's electric meter.
In
2014, the County recognized that with the advent of new technologies and
fmancing mechanisms for solar photovoltaic systems, many homes and businesses
in the County were generating electricity on-site, supplementing the power
delivered by their utilities. Not only was this electricity generated "behind the
meter," making it difficult to track, it also was a clean source ofpower consistent
with the County's commitment to reduce greenhouse gas emissions by 80% (from
2005 levels) by 2050. The fuel-energy tax was amended to exempt this form of
electricity generation from taxation to reflect County policy to encourage solar,
and to address the inherent challenges associated with collecting the tax on
electricity from these systems.
Regulations recently adopted by the Maryland Public Service Commission (PSC)
authorized the creation of a community solar pilot program. Community solar
allows electric customers that are unable to own or lease their own solar systems.­
for example renters or those with a shady roof- to "subscribe" to a remote solar
system and have it reflected on their bill as if the panels were on their own roof.
Under current County law, this electricity would be subject to the energy tax. Bill
9-17 would exempt this form of electricity generation from the energy tax, thereby
treating "rooftop" and community solar systems equally with regard to the energy
tax. Electricity generated by a community solar system would be delivered via the
electric grid, and measured by a customer's meter. However, because the
electricity generated by these systems would be subject to a "virtual net metering"
agreement between a supplier and a customer, it would be possible to extract out
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the portion of the electricity that would not be subject to the fuel-energy tax. This
adjustment would be done by the electric utilities serving the County and would
not create any administrative burden on the County.
In
addition to providing parity between on-site and community solar systems,
exempting community solar systems from the tax would encourage continued
expansion of solar as a renewable energy source in the County. Such systems
benefit the environment by reducing greenhouse gas emissions and air pollutants,
create jobs for local companies, and potentially provide more predictable energy
costs for residents and businesses.
On behalf ofthe Cqunty Executive, I urge you to support Bill 9-17 and would be
happy to address any questions the Council may have.
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Bill 9-17
Position:
Favorable
Testimony Submitted by:
April 25, 2017
Gary Skulnik
CEO
Neighborhood Sun Benefit Corp
11609 Gilsan Street
Silver Spring, MD 20902
gary@neighborhoodsun.solar
202-413-8534
l\Ieighborhood Sun is a clean energy B-Corp based in Montgomery County, part ofthe Bethesda Green
incubator. Our company focus is in marketing, signing-up, and managing customers in the brand new
community solar space. We are funded by local investors, including many who live in Montgomery
County. Our hope is to grow into a thriving business, bringing clean energy employment and economic
activity to the county. I thank Council Member Leventhal for his leadership in putting this bill forward. I
strongly support it and urge its quick passage.
Bill 9-17, in essence, exempts Montgomery Cou'nty subscribers to community solar projects from paying
the county energy tax. By Maryland law, a community solar project must exist in the same utility
territory as the subscribers who purchase from it. So, by definition, it's local power. The way it works is
that a subscriber would agree to purchase a certain amount of power from a community solar project,
to match their usage. Each month, the utility will credit the subscriber with their portion ofthe power
produced by that community solar project. The exact term for this is "virtual net metering." It's
supposed to have the same impact for a consumer as if the solar system were on their roof. This new
program in Maryland will dramatically expand access to solar power. Apartment dwellers, small
businesses, faith organizations, and the many homeowners who currently cannot or will not get solar on '
site will be able to support solar and get the same benefits as on site solar customers.
The primary reason to pass this bill is the issue of fairness. The county is already on record supporting
roof-top solar by exempting it from the county energy tax. But as mentioned earlier, most of the market
does not have access to roof-top or on-site solar. Passing this bill will enable community solar
subscribers to get the same benefit as on-site solar customers by also being exempt from the county
energy tax.
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The bill also will encourage more county residents and businesses to support solar energy, which is in
line with the county's goals on reducing greenhouse gas emissions and promoting local clean energy.
Finally, the bill will send a signal that Montgomery County continues to strive for leadership on
environmental protection and supporting green businesses.
There will be a lot of competition in the community solar market in Maryland. This will serve our county
residents well and ensure they get the best products available. I urge you to pass
Bill
9-17 to give
everyone in Montgomery County, not just the lucky few, access to affordable, and local solar power.
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J~;ry
Pasternak
Office 202-872-2524
Vee President
paj)Co..com
jpasternak@pepco.com
701 Ninth street NVV
Washington, DC 20068··0001
April 25, 2017
Montgomery County Council
100
Maryland Avenue
Rockville, Maryland
20850
Re:
Bill 9-17
Fuel-Energy Tax - Exemptions - Amendments
Dear Council President Berliner and Councilmembers:
The Potomac Electric 'Power Company ("Pepco') submits these comments. on Bill 9-17,
which would exempt the energy generated by a renewable source in Montgomery County
by
a community solar energy generating system located
in
thesanie electric service territory as
the subscriber using the energy and subject to
a
virtual net energy metering agreement (as
defined in state law) with a public utility"
.
Pepcoadvances technologies that empower customers,promote sustainable solutions, and
drive a 21
st
centuty economy. In
the
la'3t year alone, Pepco hasprovided faster and easier
solar i.nstallations for over 17,000 customers. As part ofthe Exelon-PHI merger, Exelon has
committed to the development of 5 megawatts of solar generation in Montgomery County
and we initiated, and are actively participating in, a "grid-of-thc,-future"proceeding before
the Maryland Public Service Commission that will examine opportunities to tran."fOIm the
electric grid through smart grid
technology~
m:icrogrids, renewable resources and distributed
generation.
Pepco supports fuegO'll ofthis bill- to encourage customers to purchase renewable energy­
and we look forward to working
with
the Government OperatiOns
&,
Fiscal Policy and the
Transportation, Infrastructure. Energy
&
Environment Committees
to
implement the
provisions ofthe legislation.