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In the Matter of Customer On-Site Renewable Energy (Core) Program

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 31, 2011

IN THE MATTER OF CUSTOMER ON-SITE RENEWABLE ENERGY (CORE) PROGRAM REBATE APPEAL: ACFD DEVELOPMENT, L.L.C., PETITIONER-APPELLANT, AND ENGLISH CREEK SELF STORAGE, PETITIONER.

On appeal from a Final Decision of the New Jersey Board of Public Utilities, Docket Nos. EO09070550 and EO09070551.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted March 1, 2011

Before Judges Yannotti and Espinosa.

ACFD Development, L.L.C. (ACFD) appeals from a final decision of the Board of Public Utilities (Board) dated December 1, 2009, which denied ACFD's application to increase the amount of rebates awarded to it for two of its solar energy projects, and denied ACFD's application for an evidentiary hearing in the matter. We affirm.

In 1999, the Electric Discount and Energy Competition Act, N.J.S.A. 48:3-49 to -98 (EDECA), was enacted. EDECA authorized gas and electric utility companies to impose a societal benefits charge upon their ratepayers, which would be used for, among other things, energy efficiency (EE) and renewable energy programs (RE), as determined by the Board. N.J.S.A. 48:3-60(a)(3).

The Board has, from time to time, issued orders setting the funding levels and budgets for the EE and RE programs. The Customer On-Site Renewable Energy (CORE) program is among the RE programs that the Board has established. The CORE program provides financial incentives or rebates to public utility customers who invest in, among other things, solar photovoltaic (PV) energy systems.

It appears that the CORE program experienced what the Board considered "exponential growth and overwhelmingly high participation rates," and applications exceeded available funding. The Board issued an order dated February 13, 2006, which directed its staff to hold all private sector rebate applications "in queue" until budgeted funds became available as a result of cancellation or expiration of previously issued rebate commitments, or as additional funds were transferred to the CORE program budget.

At its meeting of March 13, 2006, the Board approved policies and procedures for the CORE program queue, which were memorialized in an order dated March 22, 2006. The Board's order stated that once a rebate application was received, reviewed and deemed complete, the applicant would receive a letter from the Office of Clean Energy (OCE) indicating that the project had been placed in queue. The March 22, 2006, order also stated that placement of a project in a queue was intended to establish the project's "place in line," should CORE funding become available.

On March 1 and March 13, 2006, ACFD submitted applications for rebates for solar PV energy projects for its buildings in English Creek and Pleasantville, New Jersey. ACFD sought a rebate of $489,042.40 for the English Creek project, which has a 144.768 kilowatt (kW) capacity; and a $2,031,093.20 rebate for the Pleasantville project, which has a 650.624 kW capacity. The OCE informed ACFD that the applications had been placed in queue.

In late 2007, more than $126 million in rebate applications remained in queue, while the estimated budget for these projects was only $57 million. In August, September and October 2007, the Board's Renewable Energy Committee, the OCE and others reviewed various preliminary CORE budget allocations for 2008. The proposed allocations were distributed for comments by "stakeholders" on the allocation of CORE monies.

The Board issued an order dated December 6, 2007, which limited new rebate approvals for private sector solar energy projects with a capacity of 100 kW or more to $245,000. According to the Board, this limitation would prevent oversubsidization of large projects, should they receive both the CORE rebate and funding through the use of solar renewable energy certificates (SRECs). In June 2008, the Board's "Market Manager" issued commitment letters to ACFD indicating that it would receive rebates of an estimated $245,000 for each of the English Creek and Pleasantville projects.

By letter dated April 15, 2009, ACFD's counsel informed the Clean Energy Program (CEP) Coordinator that it could not come to a "fruitful" resolution of the dispute concerning the "appropriate rebate level[s]" for the two projects. Counsel stated that the CORE rebates had been substantially and retroactively reduced without prior notice and an opportunity to be heard, and that the rebates had been reduced after ACFD had made contracts and incurred substantial financial obligations. The CEP Program Coordinator responded in a letter dated April 22, 2009, and explained the Board's reasons for limiting the rebates. The Coordinator advised ACFD's counsel that if ACFD wished to pursue the matter further, it could file a formal petition with the Board.

On July 20, 2009, ACFD filed a petition with the Board. It asserted that the $245,000 CORE rebate cap for solar (PV) energy projects of 100 kW or more was arbitrary. It said that the English Creek and Pleasantville projects had been in queue for an "unconscionable" amount of time, during which time it continued to develop the facilities at "substantial cost." ACFD also said that the Board had imposed the rebate cap "without regard" to the extent by which the solar energy installation exceeds 100 kW, or the need to obtain a full rebate in order for the installation to be "commercially viable."

In addition, ACFD said that imposition of the rebate cap was contrary to fundamental principles of due process, contract law and equity. It further claimed that the Board's decision to cap the rebates violated the implied covenant of good faith and fair dealing. ACFD asserted that it had reasonably relied to its detriment on the rebate policies that were in effect when it designed the projects.

ACFD additionally asserted that it had been denied benefits that it reasonably anticipated as a result of its "de facto contractual bargain with the Board" that the "full" amount of the rebates would be paid if it waited for funds to become available. ACFD requested that the matter be transmitted to the Office of Administrative Law (OAL) for mediation or an evidentiary hearing before an administrative law judge as a "contested case."

By letter dated October 2, 2009, the Board's Secretary informed ACFD's counsel that the request for an evidentiary hearing was denied. The Secretary stated that ACFD's petition raised a challenge to a policy decision by the Board, and principles of fair play and administrative due process did not require an evidentiary hearing in the matter. The Secretary wrote that the Board would afford ACFD an additional opportunity to submit written comments in support of its petition.

On October 23, 2009, ACFD's counsel submitted additional written comments to the Board. Counsel stated that ACFD was not challenging the validity of the Board's policy of limiting rebates for solar (PV) energy projects exceeding 100 kW in capacity. Counsel also asserted that the rebate cap should not be applied to ACFD's two projects. Counsel reiterated many of the claims in the earlier-filed petition, and also sought "special treatment" for ACFD's projects because ACFD allegedly had transformed a former polluted landfill into "a clean, modern 'brown to green' sustainable business development" whose economic viability was threatened by the "dramatic loss of rebate funds."

Counsel additionally noted that the Board had previously awarded a rebate at pre-2008 funding levels to its solar PV project at Northfield, New Jersey. Counsel stated that the Northfield rebate application had been submitted at the same time as the applications for the English Creek and Pleasantville projects. Counsel asserted that ACFD had reasonably believed that all three applications would be treated the same, and the Board acted arbitrarily in applying the rebate cap to the English Creek and Pleasantville projects.

The Board considered the matter on December 1, 2009, and thereafter issued an order denying the petition. The Board found that: the rebate cap was warranted because full rebate funding by ratepayers, along with SREC funding, would provide a windfall to larger solar energy projects; ACFD knew or should have known that the projects would have to wait in queue for available funding and, during that time, CORE rebates could be reduced; ACFD had the opportunity to submit comments before the Board issued its 2008 Budget Order limiting the rebates; and any actions ACFD took in anticipation of receiving a full CORE rebate were not reasonable or otherwise induced by the Board's policies.

The Board additionally found that: there was no "de facto" contractual relationship between the Board and ACFD to provide rebates at pre-2008 levels because ACFD had been placed on notice that the CORE program procedures and rebate levels could be changed or cancelled without notice; placement of the projects in queue was not a contractual agreement by the Board for full rebate funding at pre-2008 levels; and the implied covenant of good faith and fair dealing did not apply because there was no contract between the Board and ACFD for rebate funding at pre-2008 levels.

In addition, the Board found that: ACFD had been treated fairly and equitably because it had been informed that its projects would have to wait in queue and, during that time, the CORE rebates could be reduced; the ACFD projects do not warrant special treatment; the rebate cap was not applied retroactively because the cap was imposed in the 2008 Budget Order and the Board did not provide ACFD with commitment letters for its projects until after that order was issued; and ACFD's Northfield project was not similarly situated to the English Creek and Pleasantville projects because the latter projects occupied lower places in the queue and the Northfield project received a commitment letter before the Board issued the order imposing the rebate cap.

The Board therefore concluded that the ACFD English Creek and Pleasantville projects had been "properly provided commitments for rebates of $245,000 after the cap was instituted." The Board denied ACFD's request for funding of the CORE rebates at the pre-2008 levels. The Board directed the Market Manager to process the rebates in accordance with the commitment letters previously issued.

On appeal, ACFD raises the following arguments for our consideration:

Point 1:

The BPU contravened the Administrative Procedure Act by not holding a hearing on the ACFD petition and by declining to transmit the ACFD petition to the Office of Administrative Law ("OAL"), prior to rendering its decision to deny the petition

1. The BPU's Secretary lacked authority to deny ACFD's petition for a hearing

2. The Secretary's letter misconstrued the petitioner's request

3. The petition provided ample factual and legal basis for the Board to grant the hearing request

4. Not all OAL proceedings are plenary

5. The petition should have been treated by BPU as a contested case Point 2: The BPU should be "estopped" from imposing the rebate "cap" on the two Pleasantville and English Creek projects We are satisfied from our review of the record that these arguments are entirely without merit. We affirm the Board's final determination substantially for the reasons stated by the Board in its thorough and comprehensive order of December 1, 2009. We add the following brief comments.

The scope of our review in an appeal from a final agency decision is limited. Circus Liquors, Inc. v. Middletown Tp., 199 N.J. 1, 9 (2009). In reviewing an agency's decision, we consider whether: 1) "the agency's action violates express or implied legislative policies"; 2) the record contains substantial evidence in support of the findings upon which the agency based its action; 3) "in applying the legislative policies to the facts, the agency clearly erred in reaching" a decision that could not have been reasonably made on a showing of the relevant factors. Id. at 10 (quoting Mazza v. Bd. of Trs., 143 N.J. 22, 25 (1995)). Where appropriate, we must defer to an agency's "'expertise and superior knowledge of a particular field.'" Ibid. (quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)).

ACFD argues that the Board erred by failing to refer its petition to the OAL for a hearing before an administrative law judge as a "contested case." The Administrative Procedure Act defines a "contested case" as a proceeding . . . in which the legal rights, duties, obligations, privileges, benefits or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing[.]

[N.J.S.A. 52:14B-2(b).]

If a matter does not present a dispute as to material issues of fact that can only be decided after the opportunity for an agency hearing, it is not a "contested case" subject to transfer to the OAL. N.J.S.A. 52:14B-2(b).

Here, the Board correctly determined that ACFD's petition need not be referred to the OAL for an evidentiary hearing. ACFD asserted that it was not contesting the Board's policy decision to impose a cap on the CORE rebates for solar (PV) energy projects with a capacity of 100 kW or more. Rather, ACFD maintained, for various reasons, that the rebate cap should not be applied to its English Creek and Pleasantville projects. However, ACFD's petition did not raise any genuine issue of material fact which required an evidentiary hearing. Indeed, the facts upon which the Board based its decision were essentially undisputed. We are therefore satisfied that the Board did not err by refusing to refer the matter to the OAL for an evidentiary hearing.

We are also satisfied that the record fully supports the Board's decision to deny payment of rebates to ACFD for its English Creek and Pleasantville projects at pre-2008 funding levels. As the Board explained in its order of December 1, 2009, the rebate cap was imposed on solar (PV) energy projects with a capacity of 100 kW or more because there were insufficient funds for all of the CORE programs. Moreover, as the Board thoroughly explained in its order, ACFD's due process, contract and equitable claims are without merit.

Affirmed.

20110331

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