Virginia Lawyers Weekly//July 30, 2021
Virginia Lawyers Weekly//July 30, 2021//
The State Corporation Commission correctly declared “that a pumped storage hydroelectric facility (or ‘pumped storage’) generates ‘renewable energy’ under the former definition in Code § 56-576, and that the amended definition (now excluding pumped storage from that definition) would not apply to contracts executed before the amendment’s effective date[.]”
Renewable energy contracts
Constellation NewEnergy participates in a statutory retail choice program that permits customers to purchase electric energy from 100 percent renewable sources. In December 2019, when Constellation began entering into retail choice contracts, Code § 56-576 defined “renewable energy” as, among other things, “energy derived from … wind [and] falling water[.]’ …
“That same month, Constellation notified VEPCO [Virginia Electric and Power Company] of its Subsection (A)(5) customer enrollment, and VEPCO requested documentation confirming that Constellation would provide customers with electricity sourced ‘100 percent from renewable energy.’
“Constellation responded that it intended to supply its customers with energy sourced from wind and pumped storage hydroelectric facilities, contending that pumped storage ‘generates electricity from falling water,’ consistent with the statutory definition.
“Attached to its response, Constellation provided copies of its wholesale contracts, including the contract with the pumped storage hydroelectric facility that took effect on February 8, 2020.
“On April 1, 2020, VEPCO replied that it disagreed with Constellation’s position regarding pumped storage, asserting that pumped storage did not meet the statutory definition of renewable energy ‘except in the case of any run-of-river production that can be quantified and verified.’”
Meanwhile, the General Assembly amended Code § 56-576, effective July 1, 2020, to exclude energy derived from pumped storage from the definition of renewable energy.
Constellation sought a declaration from the SCC on April 17, 2020, that electricity derived from pumped storage qualified as renewable energy under the then-existing version of Code § 56-576, so that it could rely on that electricity to fulfil its retail choice contracts.
Constellation also sought a ruling that the July 1, 2020, amendment would apply prospectively so that Constellation could rely on pumped storage for the length of the retail choice contracts. VEPCO participated in the proceedings and opposed the declaration that Constellation sought.
The SCC ruled in Constellation’s favor and VEPCO appealed.
“We disagree with VEPCO’s contention that the former definition excluded pumped storage. Like the Commission, we find that the plain language of the former definition is clear and unambiguous; thus, we will give the terms their ordinary meanings. ‘Derived from’ generally refers to a thing that comes from something else. …
“As used in the definition, renewable energy would be energy formed or developed out of the enumerated sources.
“One of those sources is ‘falling water.’ Because there is no language in the statutory definition for this term prescribing that ‘falling water’ must come from a naturally occurring source or that it cannot be a part of a closed system, it is reasonable to apply the plain meaning of water that falls from one height to another.
“Therefore, where water falls from a higher reservoir to a lower reservoir as part of a process that generates electricity, such as happens in a pumped storage hydroelectric facility, the electric energy was derived from falling water. Under this interpretation, the resulting energy satisfied the former definition of renewable energy in Code § 56-576 (2019).
“VEPCO maintains that the interpretation of the definition adopted by the Commission and applied here by this Court creates an inconsistency where falling water is set apart from the other identified sources. This, it argues, is because the other named sources point to the original natural source of energy, whereas applying ‘derived from … falling water’ to pumped storage ignores the original source of energy in favor of the method of production.
“However, VEPCO’s position would add language to the definition that simply was not included in the statute. … There are numerous substitutions or qualifying words the General Assembly could have utilized to achieve VEPCO’s narrower interpretation, but it did not do so. Because such limiting words were not used, we conclude that the legislature did not intend to impose such a narrow meaning on ‘derived from … falling water’ as those terms were used in the former statute. …
“Therefore, we find no error in the Commission’s interpretation of the statute or its finding that pumped storage satisfied the former definition of renewable energy.”
“VEPCO argues that the amended definition of renewable energy should apply ‘prospectively’ to Constellation’s 2019 contracts as of the July 1, 2020 effective date and that the Commission erred in refusing this application. VEPCO misconstrues the concepts of retroactive and prospective application of statutes.
“In general terms, applying legislation prospectively concerns the rights and claims that arise subsequent to the legislation, whereas a retroactive application reaches back to affect rights and duties accrued prior to the legislation. VEPCO claims that it is arguing for a prospective application when it is actually arguing for an application that reaches back to impact Constellation’s contracts executed prior to the statutory amendment and changes a term of the contract affecting Constellation’s performance.
“Thus, the question is not one of prospective application, but it is one of retroactivity and whether the statutory amendment to a definition that does not grant substantive rights changes the previously existing contractual obligations of the parties. In the present circumstances, and in consideration of the statutory scheme, we conclude it does not. …
“In the statute at issue, there is no express manifestation of an intent to apply the statute retroactively or to interfere with the rights and obligations of contracts executed prior to the amendment. There is also no declaration that the future performance of those preexisting obligations must comply with the amended definition.
“Quite simply, there is nothing in the statute to indicate that the General Assembly intended a departure from the norm of a presumed prospective application, i.e., to contracts executed after the effective date of the statute.”
Virginia Electric and Power Co. v. State Corporation Comm’n, Record No. 201172 (Chafin) (Kelsey, joined by Lemons and McCullough, concurring in part and dissenting in part) ( July 15, 2021, From the State Corporation Comm’n. Brooks M. Smith (Andrew J. Flavin; Paul E. Pfeffer; David J. DePippo; Troutman Pepper Hamilton Sanders; Virginia Electric and Power Company, on briefs), for appellant. Alisson P. Klaiber (John F. Dudley; State Corporation Commission, on brief), for appellee State Corporation Commission. Brian R. Greene (Laura K. Musick; Creighton-Elizabeth R. Boggs; GreeneHurlocker, on brief), for appellee Constellation NewEnergy, Inc. VLW 021-6-054, 22 pp.