Agenda Item 5D
April 4, 2017
Introduction
MEMORANDUM
March 31, 2017
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
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Introduction:
Bill 9-17, Fuel-Energy Tax - Exemptions - Amendments
Bill 9-17, Fuel-Energy Tax - Exemptions - Amendments, sponsored by Lead Sponsor
Councilmember Leventhal, is scheduled to be introduced on April 4. A public hearing is
tentatively scheduled for April 25 at 1:30 p.m.
Bill 9-17 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.
Background
The County fuel energy 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 bill. 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 for a "net energy metering agreement."
A community solar facility generates energy from a renewable source and sells it to
customers 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 County Attorney's Office has opined that the County fuel energy tax would apply to
energy generated by a community solar facility 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. Bi119-17 would expand the current exemption to include renewable energy produced by a
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
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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.
This packet contains:
Bill 9-17
Legislative Request Report
County Attorney Letter to PSC - 10-26-2016
F:\LA w\BlLLS\1709 Fuel Energy Tax - Exemptions - Solar Energy\lntro Memo.Docx
Circle #
1
3
4
2
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Bill No.
9-17
Concerning: Fuel-Enemv
Tax
Exemptions - Amendments
Revised: March 21, 2017 Draft No.
~
Introduced: _ _ _ _ _ _ _ _ __
Expires: _ _ _ _ _ _ _ _ _ __
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ---'..!.No""n.!!:e'----_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Leventhal
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
*
(4)
*
*
IS
The tax does not apply to energy that
renewable source located:
(A)
generated from a
9
10
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
11
12
.ill)
in the same electric service territory as the subscriber using
the energy and subject to
~
13
14
15
virtual net energy metering
agreement (as dermed 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.
16
17
18
*
Approved:
*
*
19
20
Roger Berliner, President, County Council
21
Approved:
Date
22
Isiah Leggett, County Executive
Date
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1709 fuel energy tax - exemptions - solar energy\bill 6.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 Environrnental Protection
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IlVIPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
To be researched.
N/A
To be researched.
SOURCE OF
INFORMATION:
Robert H. Drummer, Senior Legislative Attorney
APPLICATION
WITIDN
MUNICIPALITIES:
Applicable.
PENALTIES:
None
F:\LAW\BILLS\1709 Fuel Energy Tax - Exemptions - Solar Energy\LRRDocx
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Isiah
Leggett
County Executive
OFFICE OF THE COUNTY ATTORNEY
October 26,2016
Marc P. Hansen
County Attorney
David J. 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 Ru1e Making on February 12, 2016, the subscription dollar
credit wou1d be applied
to
the bill after the FET
tax
is applied to the net consumption.
Subscription Credits
Under COMAR 20.62.02.04(C)(I), "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 of Baltimore Gas and Electric Company on September 16,2016 (ML
#
199336).
101 Monroe Street, 3
n1
Floor. Rockville,
Maryland 20850"2580.
Jisabrennan@montgomerycountymd.gov
(240) 777-6700 • (240) 777-6745 • TID (240) 777-2545 • FAX (240) 777"6705
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- - --'-I
David
J.
Collins
October
26,2016
Page
2
a
Potomac Edison- The CSEGS Tariff filed withPE'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
Plan, 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
aU
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 S2-14(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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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; (li) is interconnected and operated in
parallel with an electric company's transmission and distribution facilities; and
(iii) is intended primarily to offset aU 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 same 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 ofthe 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,
~'Z~#~
Lisa Brennan
I
Associate Comty Attorney
Enclosure
cc:
Amy M. Klodowski, Potomac EdiSon
Kimberly
A.
Curry, BOE
Matthew K. Segers, Pepco
Phillip VanderHeyden, PSC Staff
Leslie Romme, PSC Staff
Paula Carmody, OPC