On November 10, 2015, five months after Maryland Governor Larry Hogan approved a law creating a three-year pilot program for community solar projects in the state, the Public Service Commission (PSC or Commission) released draft regulations (Draft Regulations) implementing the state’s community solar energy generation system (CSEGS) pilot program. Although the Draft Regulations were produced through extensive discussions with a stakeholder group, the regulations do not reflect a consensus position of those stakeholders.

The Draft Regulations require all electric utilities in the state to establish a community solar program, and the electric companies must accept applications for CSEGSs within the individual utilities’ service territory until the statewide limit of 300 MW is met. Utilities must file a plan and relevant compliance tariffs within 45 days of the effective date of the final regulations. The Draft Regulations also provide that an electric company must accept applications from subscriber organizations that operate solely for low- and moderate-income subscribers, unless the total installed statewide CSEGS capacity has exceeded 400 MW, thereby setting aside at least 100 MW to serve this customer base.

The Draft Regulations outline certain co-location requirements to the mandate that electric companies must accept applications for the proposed CSEGSs. Specifically, with certain exceptions, an electric company cannot accept a project of 500 kW or greater that is proposed to be located within one mile of an existing or proposed solar facility of 500 kW or greater.  Additionally, a subscriber organization cannot construct multiple facilities on a single parcel of property. Beyond these limitations proposed in the Draft Regulations, the legislation itself caps the size of each CSEGS at 2 MW. The Draft Regulations allow solar organizations to convert all or a portion of an existing solar generation system to a CSEGS, and these existing facilities are not subject to the co-location rules. Every utility is required to continue to facilitate the subscriber organization’s operation for 25 years after the pilot program has ended.

The Draft Regulations allow unlimited subscribers in each system, up to the maximum system limit. A subscriber cannot subscribe for an amount of energy that exceeds 200 percent of the value of the subscriber’s annual baseline energy usage, but a subscriber can purchase multiple subscriptions from one or more systems up to that limit. Once an individual subscriber executes a contract with the subscriber organization, subscribers receive a kilowatt-hour credit, calculated by each utility, on their utility bill. Subject to a variety of limitations, electric utilities must compensate subscribers for CSEGSs’ generation that is excess to subscribers’ needs, and must pay subscriber organizations for unsubscribed energy.  Subscriber organizations own and have title to all of the renewable energy credits generated by the CSEGS.

To participate in the pilot program, a subscriber organization must first apply to the Commission.  Once accepted by the Commission, the applicant must apply to the electric utility serving the CSEGS’s location. Electric utilities will process applications in the order received.  As part of the subscriber organization’s CSEGS management responsibilities, it must solicit and maintain subscribers. The Draft Regulations provide specific consumer protection requirements as to how a subscriber organization can solicit subscribers, and standards for contracts with subscribers. A subscriber organization can create, exchange, and trade individual subscriptions up to the full project capacity. Additional subscriber organization responsibilities include providing data to the utility on an ongoing basis to allow the utility to process bill credits.

The PSC will accept comments on the Draft Regulations through December 4, 2015. The PSC will then hold a rulemaking session to consider the Draft Regulations and comments received on December 14 and 15, 2015. If the Commission approves the Draft Regulations for publication following the rulemaking session, they will be published in the Maryland Register for notice and comment.

Ballard Spahr’s Energy and Project Finance Group assists clients in developing strategies to thrive in the fast-changing regulatory, technological, and financing environment of the energy industry. If you have questions about this alert, please contact Practice Group Leader Howard H. Shafferman, Katie Leesman, or the Ballard Spahr attorney with whom you regularly work.

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