NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4163-16T1
IN THE MATTER OF ADOPTION OF AMENDMENTS TO N.J.A.C. 14:8-1.2, 2.1 THROUGH 2.6, 2.9, 2.10 and 2.11. _______________________________
Argued September 18, 2018 – Decided July 30, 2019
Before Judges Hoffman, Suter and Geiger.
On appeal from the New Jersey Board of Public Utilities, Docket No. QO16020130.
William Harla argued the cause for appellant Community Energy Solar, LLC (DeCotiis, FitzPatrick, Cole & Giblin, LLP, attorneys; William Harla, of counsel; Christopher J. Turano, on the brief).
Yao Xiao, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (Gurbir S. Grewal, Attorney General, attorney; Jason W. Rockwell, Assistant Attorney General, of counsel; Yao Xiao, on the brief).
PER CURIAM Community Energy Solar, LLC (CES) appeals the amendment of two
regulations by the New Jersey Board of Public Utilities (the BPU). We reject
CES's arguments that the regulations are invalid as ultra vires of the statute or
arbitrary, capricious or unreasonable. We also deny its motion under Rule 2:5-
5 to supplement the record in light of our decision regarding the regulations.
The appeal involves two BPU regulations: N.J.A.C. 14:8-2.5(b)(2) and
N.J.A.C. 14:8-2.9(e)(2). They were part of a rule proposal on March 7, 2016,
to amend "N.J.A.C. 14:8-1, to conform portions of the current rules to the
provisions of P.L. 2012, c. 24 (Solar Act), and to P.L. 2015, c. 51." 48 N.J.R.
383(a) (Mar. 7, 2016). According to the BPU's proposal, these were to "bring
the [BPU's] rules into compliance with the law." Ibid. Both of the challenged
amendments involve solar energy.
In 1999 the Electric Discount and Energy Competition Act (EDECA),
N.J.S.A. 48:3-49 to -98.5, changed the electric power industry in New Jersey.
See In re Ownership of Renewable Energy Certificates, 389 N.J. Super. 481,
487-88 (App. Div. 2007). "New Jersey's electric energy system [was
restructured] so 'customers would have the right to choose their electricity
suppliers' and so that energy suppliers could obtain their energy from wholesale
energy markets . . . . To this end, New Jersey divorced the entities that generate
A-4163-16T1 2 electricity from those that supply it." PPL EnergyPlus, LLC v. Solomon, 766
F.3d 241, 248 (3d Cir. 2014). The change "produced a delicate circuitry of
interdependence between private entities and public utilities, and between New
Jersey and federally-regulated wholesale energy markets." Ibid.
Under the EDECA, utilities were required to "annually increase their
reliance on renewable energy." In re Ownership, 389 N.J. Super. at 488; see
N.J.S.A. 48:3-87(d). The BPU was "to create a 'renewable energy trading
program' to help the industry satisfy the requirement for increased use of
renewable electric power." Ibid. (citing N.J.S.A. 48:3-87(d)(2)).
In its regulations, the BPU adopted "renewable Energy Portfolio
Standards." See N.J.A.C. 14:8-2.1(a). Under these standards, electricity
suppliers could generate a predetermined percentage of electricity from
renewable sources such as solar power. N.J.A.C.14:8-2.1(a); N.J.A.C. 14:8-2.3.
An electricity supplier can generate renewable energy directly in order to satisfy
its renewable energy requirements. It also can purchase certificates from other
energy suppliers.
A-4163-16T1 3 There are Renewable Energy Certificates (RECs) and Solar Renewable
Energy Certificates (SRECs). See N.J.S.A. 48:3-51. A SREC,1 which is issued
either by the BPU or its designee, represents "one megawatt hour . . . of solar
energy that is generated by a facility connected to the distribution system in this
State and has value based upon, and driven by, the energy market." Ibid. A
REC2 represents "one megawatt-hour of generation from a generating facility
1 As described,
The concept is relatively simple; for every 1000 kilowatts . . . of electricity generated by solar, the generator receives one SREC. These SRECs can, in turn, be sold to utilities on the open market, and their value is correlated to the alternative compliance fee the utility would incur for not meeting their [Renewable Portfolio Standard (RPS)] to source some of their energy from the sun. SRECs thus provide owners of solar facilities a source of revenue to help offset the cost of installation. SRECs provide New Jersey's utilities with a means to financially support the production of solar energy; if the utilities are not producing solar power themselves, they can satisfy their RPS by buying it in the form of SRECs from someone who is producing it.
[Richard M. Hluchan, Here Comes The Sun, N.J. Lawyer Magazine, June 2011 at 31.] 2 "Once issued, a [REC] may be bought and sold in a public market or may be used by an electric utility to help satisfy its regulatory obligation to purchase
A-4163-16T1 4 that produces Class I or Class II renewable energy . . . ." Ibid. It does not
include a SREC or "an offshore wind renewable energy certificate." Ibid.
"Class I renewable energy" is broadly defined as including "electric energy
produced from solar technologies, photovoltaic technologies . . . ." Ibid.
In 2012, the EDECA was amended by the Solar Act of 2012, L. 2012, c.
24, "to further several goals of the State's 2011 Energy Master Plan." In re
Implementation of L. 2012, c. 24, N.J.S.A. 48:3-87(t), 443 N.J. Super. 73, 75
(App. Div. 2015). This included "promoting the installation of solar projects on
contaminated industrial and commercial sites that would otherwise remain
unproductive, while 'discouraging large-scale solar projects on farmland and
open space.'" Ibid. (quoting Press Release, Office of the Governor, Governor
Christie Builds on Record of Growing Renewable Energy Sources with Action
to Strengthen Solar Market (July 23, 2012)). It was amended again in 2015 to
clarify Class II renewable energy regarding hydropower facilities. L. 2015, c.
51. 3
increasing amounts of renewable energy each year." In re Ownership, 389 N.J. Super. at 484. 3 More recently, the EDECA was amended by the Clean Energy Act, L. 2018, c. 17. In addition to closing the SREC program in June 2021,
A-4163-16T1 5 In proposing the amendments to the regulations, the BPU stated the
proposed amendments were to "conform portions of the current rules to the
provisions of . . . [the Solar Act] and to P.L. 2015, c 51." 48 N.J.R. 383(a) (Mar.
7, 2016).
Before the amendments,4 N.J.A.C. 14:8-2.5(a) and (b) provided:
(a) This section sets forth the types of energy that qualify as class I renewable energy for the purposes of issuance of a class I REC usable for compliance with this subchapter. The Board has determined that energy listed at (b) below qualifies as class I renewable energy, with no prior approval required. Energy listed at (d) and (e) below shall qualify as class I renewable energy if the conditions specified in those subsections are met.
[t]he bill also requires the board [to] complete a study to evaluate how to modify or replace the SREC program in order to encourage the continued efficient and orderly development of solar renewable generating sources. The study would evaluate how to develop a program that would reduce the costs of achieving the State's solar energy goals, provide an orderly transition from the current SREC program to a new program, develop targets for grid-connected and distribution systems, establish and update market-based maximum incentive payment caps, and encourage and facilitate market-based cost recovery through long-term contracts and energy market sales.
[Assembly Committee Statement to A. 3723 2 (L. 2018, c. 17).] 4 There were prior amendments for each regulation. We have only cited to the amendment at issue and the immediately preceding version. A-4163-16T1 6 (b) The following qualify as class I renewable energy for the purposes of this subchapter, with no prior approval required:
1. Solar electric generation in the form of solar RECs;
2. Electricity derived from wind energy;
....
[N.J.A.C. 14:8-2.5 (R. 2012 d. 107, effective June 4, 2012).]
The BPU proposed to change the regulation as follows:
Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
14:8-2.5 Energy that qualifies for a class I REC
(b) The following qualify as a [class] Class I renewable energy for the purposes of this subchapter, with no prior approval required:
2. Solar electric generation from a certified facility after the facility's qualification life has ended;
[48 N.J.R. 383(a).]
The BPU also proposed to amend N.J.A.C. 14:8-2.9(e)(2). Before its
amendment, the regulation provided:
A-4163-16T1 7 (e) Electric generation qualifies for issuance of RECs or SRECs only if:
1. It is solar electric generation produced by a generating facility that is interconnected with an electric distribution system, as defined at N.J.A.C. 14:4-1.2, that supplies electricity to one or more end users located in New Jersey; or
2. It is class I renewable energy, other than solar electric generation, and one or more of the following requirements is met:
i. The generating facility reports its generation electronically to PJM-EIS no less frequently than monthly, and complies with any additional requirements established by PJM;5
ii. All of the following requirements are met:
(1) The generating facility reports its generation electronically no less frequently than
5 This reference is to PJM Interconnection, LLC. It is
the privately-held, limited liability corporation that is a [Federal Energy Regulatory Commission]-approved Regional Transmission Organization, or its successor, that manages the regional, high-voltage electricity grid serving all or parts of [thirteen] states including New Jersey and the District of Columbia, [and] operates the regional competitive wholesale electric market, manages the regional transmission planning process, and establishes systems and rules to ensure that the regional and in-State energy markets operate fairly and efficiently.
[N.J.S.A. 48:3-51.] A-4163-16T1 8 monthly to an electric distribution company, as defined at N.J.A.C. 14:4-1.2, that is a member of PJM;
(2) The electric distribution company then provides the generator's report electronically no less frequently than monthly to PJM-EIS; and
(3) The generating facility complies with any additional requirements established by PJM- EIS; or
iii. The generating facility has the sale of the class I or class II renewable energy settled in the PJM wholesale market.
[N.J.A.C. 14:8-2.9(e) (R. 2013 d. 066, effective April 15, 2013).]
It proposed to change the regulation as follows:
Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
14:8-2.9 Issuance of RECs and SRECs
(e) Electric generation qualifies for issuance of RECs or SRECs only if:
2. It is [class] Class I renewable energy, [other than] including solar electric generation after the end of the solar electric generation facility's qualification life, and one or more of the following requirements is met:
A-4163-16T1 9 ....
[N.J.A.C. 14:8-2.9(e)(2).]
Both regulations were adopted as proposed.
CES argues that the amendments are ultra vires because to qualify for a
Class I REC under the regulations, it must first qualify as a SREC and then its
15-year SREC qualification life6 must have ended. It argues this is contrary to
the "statute and legislative intent which makes it clear that all solar energy
selling into PJM qualifies as a Class I REC." It contends the rules "delete[d]
solar facilities from Class I renewable energy, remove[d] eligibility for Class I
RECs and den[ied these] facilities the economic benefits of qualifying for that
status . . . ."
The BPU contends the regulations only address Class I RECs in the
situation where the solar electric generation facility has reached the end of its
qualification life because there was uncertainty whether these facilities could
continue to qualify for Class I RECs. The BPU argues the regulations did not
add new requirements for solar generators to qualify for Class I RECs or take
away anything. It argues that other requirements—such as being connected to
6 See N.J.A.C. 14:2-2.
A-4163-16T1 10 New Jersey's distribution system—pre-dated the regulatory amendments and
find their source in the State's Energy Master Plan, the Solar Act and
amendments of the EDECA in 2015.
CES responds that the statute does not require it to be connected to the
State distribution system in order to receive Class I RECs prior to the expiration
of its SREC life. It wants to construct a solar facility in the PJM grid region
outside of New Jersey which delivers electric power into the PJM wholesale
grid, and argues that just like a wind or geothermal technologies facility, it
should qualify for a Class I REC. By only allowing solar generators to qualify
for Class I RECs in one situation—after expiration of SREC life—CES argues
the regulations "impermissibly excludes a project category eligible for REC
status."
"Our review of administrative agency action is limited." Russo v. Bd of
Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011) (quoting In re
Herrmann, 192 N.J. 19, 27 (2007)). "Appellate 'review of agency regulations
begins with a presumption that the regulations are both "valid and reasonable."'"
Caporusso v. N.J. Dep't of Health & Senior Servs., 434 N.J. Super. 88, 111 (App.
Div. 2014) (quoting N.J. Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535, 548
(2012)); see M.F. v. Dep't of Human Servs., Div. of Family Dev., 395 N.J. Super.
A-4163-16T1 11 18, 29 (App. Div. 2007). "That judicial deference to administrative agencies
stems from the recognition that agencies have the specialized expertise
necessary to enact regulations dealing with technical matters and are
'particularly well equipped to read and understand the massive documents and
to evaluate the factual and technical issues that . . . rulemaking would invite.'"
M.F., 395 N.J. Super. at 29 (quoting N.J. State League of Municipalities v. Dep't
of Cmty. Affairs, 158 N.J. 211, 222 (1999)). "Because '[t]he grant of authority
to an administrative agency is to be liberally construed to enable the agency to
accomplish the Legislature's goals,'" we generally defer to the agency's statutory
interpretation. In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, Stranded
Costs and Restructuring Filings, 167 N.J. 377, 384 (2001).
"[O]ur Supreme Court has advised the judiciary that 'an ultra vires finding
is disfavored' . . . [a]nd any party challenging a regulation must prove its
invalidity." Caporusso, 434 N.J. Super. at 111-12 (quoting IMO Freshwater
Wetlands Prot. Act Rules, 238 N.J. Super. 516, 525 (App. Div. 1989); League
of Municipalities, 158 N.J. at 222). An agency may not "extend a statute to give
it a greater effect than its language permits." GE Solid State, Inc. v. Dir., Div.
of Taxation, 132 N.J. 298, 306 (1993) (citing Kingsley v. Hawthorne Fabrics
Inc., 41 N.J. 521, 528 (1964)).
A-4163-16T1 12 An agency's decision should be upheld "unless there is a clear showing
that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the
record." In re Herrmann, 192 N.J. at 27-28. "When an agency violates the
express policy of its enabling act, the agency action may be deemed arbitrary
and capricious." Caporusso, 434 N.J. Super. at 103 (citing PSE&G v. N.J. Dep't
of Envtl. Prot., 101 N.J. 95, 103 (1985)). Our "[i]ntervention is warranted when
the action is unsupported or unaccompanied by reasonable explanation." Ibid.
(citing PSE&G, 101 N.J. at 103).
We agree with the BPU that the amendments to the regulations were
narrowly focused to clarify that once a solar facility's qualification life ended in
fifteen years that it could still receive Class I RECs without prior approval from
the BPU. As such, the regulation addressed the "interstices" of the statute,
filling a void that had not heretofore been addressed, and was not a "diversion"
or a sea-change in the distribution of Class I RECs or SRECs, as CES alleges.
The BPU's proposal said as much. In proposing the amendment to
N.J.A.C. 14:8-2.5(b)(2), the BPU stated that it "proposes to add energy from a
solar electric generation facility after the expiration of its qualification life to
the list of energy that qualifies as Class I renewable energy with no prior
approval required." 48 N.J.R. 383(a) (Mar. 7, 2016). In the proposal regarding
A-4163-16T1 13 N.J.A.C. 14:8-2.9(e)(2), it stated "the Board proposes to clarify that Class I
renewable energy includes energy generated at a solar electric generation
facility after the end of its SREC qualification life." Ibid. The BPU only
addressed Class I RECs at the end of the facilities' qualification life; there was
no pronouncement that it was adding new requirements that restricted facilities
that were within their qualification life. CES complains that the BPU's action
was arbitrary and capricious because it was not supported by a reasonable
explanation. We reject that argument because the BPU did explain the narrow
change it made.
The issue CES identified was beyond the amendment of these regulations.
The BPU contends that the State's Master Plan and the Solar Act required a
connection to the State's distribution system to obtain Class I RECs and SRECs.
Under the Master Plan,
[q]ualifying Class 1 electric generators (with the exception of solar and offshore wind) do not need to be located in New Jersey, but must deliver electricity into the PJM wholesale grid, which serves New Jersey. Qualifying solar electric generation must be located in New Jersey and connected to the distribution supply serving New Jersey.
[2011 New Jersey Energy Master Plan, Section 4.9.3, page 46 (Dec. 6, 2011).]
A-4163-16T1 14 The Solar Act (L. 2012, c. 24) addresses proposed solar electric power
generation facility projects and what it means to be "connected to the
distribution system," which is a defined term that was added by that Act.
N.J.S.A. 48:3-51, L. 2012, c. 24 § 1. Thus, there is support for the contention
that connection is required. This also could be consistent with the Legislature's
concern that New Jersey had a shortage of generators of electricity. See N.J.S.A.
48:3-98.2.
The BPU's power to regulate utilities is broad. In re Centex Homes, LLC,
411 N.J. Super. 244, 254 (App. Div. 2009). "Our courts have consistently held
that the Legislature in Title 48 intended to delegate the widest range of
regulatory power over public utilities to the [BPU]." Ibid. (alteration in original)
(quoting Deptford v. Woodbury Terrace Sewerage Corp., 54 N.J. 418, 424
(1969)). The Court has further stated that the BPU's powers extend beyond those
expressly granted by statute "to include incidental powers that the agency needs
to fulfill its statutory mandate." In re Pub. Serv. Elec. & Gas Co., 167 N.J. at
384 (quoting In re Valley Rd. Sewerage Co., 154 N.J. 224, 235 (1998)).
We are mindful as well that the energy delivery system has been described
as a "delicate circuitry of interdependence between private entities and public
utilities, and between New Jersey and federally-regulated wholesale energy
A-4163-16T1 15 markets." PPL EnergyPlus, 766 F.3d at 248. Its complexity is evident from the
description of the credits at issue. CES has not explained the impact on the
energy system for the State or the region of its interpretation.
We are satisfied that the regulatory amendments were narrowly focused
on Class I RECs for the period once a solar facility's qualification life ended
after fifteen years. CES is candid that it is not concerned with the period after
the qualification life ends. We express no opinion on CES's concern about the
requirement for connection to New Jersey's distribution system because it
simply was not triggered by the amendment of these regulations. The BPU has
"the specialized expertise necessary to enact regulations dealing with technical
matters and . . . to evaluate the factual and technical issues." M.F., 395 N.J.
Super. at 29 (quoting League of Municipalities, 158 N.J. at 222). We defer to
its interpretation of its regulations. If it had intended the massive change that
CES portends, we certainly would have seen evidence of this in the proposal or
the numerous other comments that the BPU received.
Part of the problem has to do with CES's inaction during the notice and
comment period. It did not file anything with the BPU while the comment
period was open from March 7, 2016 to May 6, 2016. Rather, starting on
November 2, 2016, and continuing through February 20, 2017, CES's consultant
A-4163-16T1 16 and counsel contacted the BPU by email and letter. The amendments to the
regulations were adopted by the BPU on February 22, 2017, and the adoption
was effective on April 17, 2017. 49 N.J.R. 809(a). These emails and letters
were not included by the BPU in the adoption.
CES filed its notice of appeal on June 1, 2017. Thereafter on June 30,
2017, it sent an Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13,
request to the BPU asking for fifteen categories of records that included internal
communications such as emails, text messages, notes about the proposed
amendments, any document that reflected a response to the comments about the
regulations, legal memoranda, any draft of the regulations, documents that had
to do with a discussion about the regulations and all documents regarding the
publication of the amendments. CES's counsel supplemented this by seeking
documents that were part of the "deliberative process." The BPU provided an
initial response, but asked for more time and a narrowing of the requests.
In October 2017, CES filed a motion under Rule 2:5-5 to correct, settle
and supplement the record. It asked to include in the record on appeal five
emails and one letter because these were not included in the BPU's Statement of
Items Comprising the Record on Appeal (SICRA). These documents were the
same as were sent to the BPU after the notice and comment period had closed
A-4163-16T1 17 and before the amendments' adoption. The motion also asked that the BPU be
required to include all other documents, whether or not privileged, that it
considered in reaching a decision of the regulations.
On appeal, CES asks that we allow it to explore the complete record of
the documents that the BPU considered in connection with the amendments or
remand this for further proceedings before the BPU. The BPU opposes this
because the documents received from CES, after the notice and comment period,
were properly not considered and did not have to be included in the SICRA. As
for the OPRA requested documents, the BPU contends this was an improper
collateral attack and would require the production of documents protected by
the deliberative process.
We agree that CES did not perfect its request for records under OPRA.
CES did not file an order to show cause or verified complaint, nor a request with
the Government Records Council. See N.J.S.A. 47:1A-6 (providing that a
person who is denied access to a record requested under OPRA may challenge
the denial in Superior Court). See also Asbury Park Press v. Monmouth Cty.,
406 N.J. Super. 1, 7 (App. Div. 2009). Because the regulations address a narrow
issue that CES effectively is not challenging, there is no basis to order the
production of the requested records. In addition, a valid OPRA request "must
A-4163-16T1 18 identify with reasonable clarity those documents that are desired, and a party
cannot satisfy this requirement by simply requesting all of an agency's
documents." Bent v. Twp. of Stafford Police Dep't, 381 N.J. Super. 30, 37 (App.
Div. 2005).
We also deny the Rule 2:5-5 motion to supplement the record on appeal.
There is no need to supplement the record where, "even if included, [the
information would be] . . . unlikely to affect the result reached." Pressler &
Verniero, Current N.J. Court Rules, cmt. 2 on R. 2:5-5 (2019) (citing In re
Marvin Gastman, 147 N.J. Super. 101, 114 (App. Div. 1977)). The regulations
addressed a narrow issue; the motion referenced documents that do not address
that issue. Thus, we deny the motion to require supplementation of the record
in these circumstances.
In re NJPDES Permit, 216 N.J. Super. 1 (App. Div. 1987), cited by CES,
does not lead us to a different result. That case did not require the agency to
review and comment on materials received after the notice and comment period
when it promulgated the regulation or to include them in the SICRA.
Our decision is very narrow. The challenged amendments narrowly
focused on Class I RECs for the period once a solar facility's qualification life
ended in fifteen years. CES does not really challenge that issue. As such, the
A-4163-16T1 19 amendments are neither ultra vires nor arbitrary, capricious or unreasonable.
We express no opinion on whether a generator of solar energy must be connected
to the State distribution system in order to qualify for Class I REC certificates.
Affirmed.
A-4163-16T1 20