BEFORE THE PUBLIC SERVICE COMMISSION DEPARTMENT OF PUBLIC SERVICE REGULATION OF THE STATE OF MONTANA | In the matter of NorthWestern Energy's Petition for a Declaratory Ruling Regarding Community Renewable Energy Projects—Storage-Only | ) ) ) ) ) | REGULATORY DIVISION DOCKET NO. 2020.09.097 | DECLARATORY RULING PROCEDURAL HISTORY On September 16, 2020, NorthWestern Corporation d/b/a NorthWestern Energy (NorthWestern) filed a Petition for a Declaratory Ruling Regarding Community Renewable Energy Projects—Storage-Only (Petition) with the Montana Public Service Commission (Commission). On October 7, 2020, the Commission provided interested parties the opportunity to comment on the Petition. The Commission received comments from the Uda Law Firm (Uda Law) on October 27, 2020, a Conjoined Motion for Default Order and Brief in Support from NorthWestern on November 5, 2020, a response to NorthWestern's Motion from Uda Law on November 24, 2020, and a reply to Uda Law's comments from NorthWestern on December 8, 2020. During a regularly scheduled work session on December 18, 2020, the Commission approved NorthWestern's Petition, as discussed below.
DISCUSSION I. Standard of Decision NorthWestern can request a Commission declaratory ruling to determine how a statute, Commission regulation, or Commission order affects NorthWestern's legal rights. Mont. Code Ann. § 2-4-501 (2019); Mont. Admin. R. 1.3.226; Mont. Admin. R. 38.2.101. The purpose of declaratory relief is "to liquidate uncertainties and controversies which might result in future litigation and to adjudicate rights of parties who have not otherwise been given an opportunity to have those rights determined." In re Dewar, 169 Mont. 437, 444, 548 P.2d 149 (1976). Declaratory judgments should not substitute for otherwise available remedies. Id.; In re Gildersleeve, 283 Mont. 479, 484, 942 P.2d 705 (1997). The Commission can either deny or approve the petition. If denied, the Commission must explain why it was denied. Mont. Admin. R. 1.3.228. If approved, the declaratory ruling is binding between the Commission and NorthWestern regarding the facts presented. Mont. Admin. R. 1.3.229(1). Any Commission decision, whether approval or denial, is a final agency decision subject to judicial review under Mont. Code Ann. § 2-4-701 through -711. Mont. Admin. R. 1.3.229(2). The Commission interprets statutes by their plain meaning. Lucas Ranch, Inc. v. Mont. Dep't of Revenue, 2015 MT 115, ¶ 15, 379 Mont. 28, 347 P.3d 1249. The Commission must "ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted. Where there are several provisions or particulars [in a statute], such a construction is, if possible, to be adopted as will give effect to all." Mont. Code Ann. § 1-2-101. If the plain language of the statute is ambiguous, the Commission looks to extrinsic aids such as legislative history to inform interpretation of the statute. See, e.g., Nelson v. City of Billings, 2018 MT 36, ¶ 16, 390 Mont. 290, 412 P.3d 1058; State v. Gregori, 2014 MT 169, ¶ 13, 375 Mont. 367, 328 P.3d 1128. However, the Commission ignores legislative history when the statute is unambiguous. McGree Corp. v. Mont. PSC, 2019 MT 75, ¶ 16, 395 Mont. 229, 438 P.3d 326. Statutory construction should also "not lead to absurd results if a reasonable interpretation can avoid it." Mont. Sports Shooting Ass'n, Inc. v. Mont. FWP, 2008 MT 190, ¶ 11, 344 Mont. 1, 185 P.3d 1003.
II. Party Positions NorthWestern attributes its Petition to several proposals for "battery-only resources without any physical connection to any renewable resource" that NorthWestern received in response to its Request for Proposals of May 1, 2020, for Community Renewable Energy Projects (CREPs). Pet. ¶¶ 5-6. NorthWestern seeks confirmation from the Commission that (1) storage-only resources cannot qualify as CREPs; and (2) storage resources must be coupled with one or more of the other resources in Mont. Code Ann. § 69-3-2003(10)(a)-(h) in order for their respective renewable energy fractions to be considered eligible renewable resources. Pet. at 4. NorthWestern represents that an eligible renewable resource must produce electricity from one or more of the following resources: (1) wind; (2) solar; (3) geothermal; (4) certain water power; (5) landfill or farm-based methane gas; (6) gas produced during the treatment of wastewater; (7) low-emission, nontoxic biomass based on dedicated energy crops, animal wastes, or solid organic fuels from wood, forest, or field residues; (8) hydrogen derived from any of the sources listed in § 69-3-2003(10) for use in fuel cells; and (9) the renewable energy fraction from storage-type resources, including batteries. Id. ¶ 17, citing Mont. Code Ann. § 69-3-2003 (10). Similarly, NorthWestern points to statute that defines "renewable energy fraction" as "the proportion of electricity output directly attributable to electricity and associated renewable energy credits produced by one of the sources listed in subsection (10)." Id. ¶ 18, citing Mont. Code Ann. § 69-3-2003(15). NorthWestern states that while energy storage devices may be listed in § 69-3-2003(10)(i), they are only listed with respect to the renewable energy fraction associated with power directly attributable to the other renewable resources identified in subsection (10). Id. ¶ 19. Accordingly, if storage-only resources qualified as CREPs, NorthWestern states there would be no need to analyze the renewable energy fraction from the other resources and the corresponding statutory provisions would be superfluous. Id. ¶ 20. To give effect to all provisions in Mont. Code Ann. § 69-3-2003 and to avoid omitting the reference to renewable energy fraction, NorthWestern notes the Commission "should find that storage-only resources do not constitute eligible renewable resources and, likewise, cannot qualify as CREPs." Pet. at 4. Uda Law states that the Commission must deny NorthWestern's Petition because it is contrary to the CREP statute's language and disregards the intent of the Legislature, which was to add batteries, along with other types of energy storage facilities, to the definition of "eligible renewable resource" in order to allow storage-only projects to qualify as CREP resources. Comment at 2. Uda Law contests NorthWestern's argument that storage-only facilities "are only listed with respect to the renewable energy fraction associated with power directly attributable to the other renewable resources in subsection (10)" because the argument impermissibly inserts words into the statute, inasmuch as the word "other" does not appear in the statutory definition of "renewable energy fraction." Id. at 2-3. Uda Law argues that the statutory definition of "renewable energy fraction" simply states, "produced by one of the sources listed in subsection (10)," and that storage facilities are listed as a source in subsection (10) and they provide "electricity output." Id. at 3, citing ¶¶ 69-3-2003(10)(i) and (15). Uda Law states that "a plain language reading of the statute supports storage-only facilities qualifying as eligible CREP resources, and the Commission should deny NorthWestern's petition on these grounds alone." Id. Uda Law argues that the definition of "eligible renewable resource" in subsection (10) is ambiguous, thus it is necessary to review legislative history to determine the Legislature's intent. Id. at 2-3. Uda Law cites both House and Senate committee hearings for Senate Bill 106 (SB 106), as well as statements made in second reading of the bill on the House floor, for the proposition that the Montana Legislature specifically amended the CREP statutes to include several other storage-only facilities in the definition of eligible renewable resources, making it clear the Legislature intended to allow storage-only resources to qualify as eligible CREP resources. Id. at 3-5. Uda Law states that the Commission supported SB 106 in both Senate and House hearings, with one Commissioner stating there was "a unanimous vote by the Commission that [SB 106] is a needed identifying of the storage as a renewable resource." Id. at 5. Uda Law states that the Commission, in supporting SB 106, "publicly supported the passage of this bill to allow for additionally [sic] storage-only facilities to qualify as eligible CREP resources." Id. at 6. NorthWestern argues that Uda Law's arguments obscure the rules of statutory construction by failing to interpret the statute as a whole and by omitting clear statutory language, including an express definition provided by the Legislature. Conjoined Mot. at 5, citing Mont. Code Ann. § 1-2-101; S.L.H. v. State Compensation Mut. Ins. Fund, 2000 MT 362, ¶¶ 16-17, 303 Mont. 264, 15 P.3d 948; Boettcher v. Montana Guar. Fund, 2007 MT 69, ¶ 19, 336 Mont. 393, 154 P.3d 629; State ex. Rel. Long v. Justice Court, Lake County, 2007 MT 3, ¶ 8, 335 Mont. 219, 156 P.3d 5; Mont. Code Ann. § 1-2-107; Stratemeyer v. Lincoln County, 276 Mont. 67, 78-79, 915 P.2d 175, 181-182 (1996). NorthWestern asserts that Uda Law's interpretation would further lead to an absurd result by allowing any storage device identified in § 69-3-2003(i) to qualify as an eligible renewable resource, even if the electricity output is attributed to non-renewable resources. Id. at 5. NorthWestern states that the plain statutory language resolves the issue, inasmuch the Legislature adopted the "Montana Renewable Power Production and Rural Economic Development Act" to promote the development of "renewable energy production." Id. at 5-6, citing Mont. Code Ann. §§ 69-3-2001, -2002 (emphasis added by NorthWestern). NorthWestern argues that Uda Law's interpretation of the statutes would allow storage resources with electricity output attributable to non-renewable resources to qualify as eligible renewable resources. Id. at 7. NorthWestern asserts that, contrary to the Uda Law's assertion, the inclusion of the word "other" in NorthWestern's characterization is simply a function of reading the statute as a whole and interpreting § 69-3-2003(10)(i) in coordination with the other provisions in the statute. Id. NorthWestern also argues that Uda Law's interpretation would omit both the Legislature's express preface to § 69-3-2003(10)(i), which allows only the "renewable energy fraction" from storage facilities to qualify as eligible renewable resources, and the statute's express definition of "renewable energy fraction." Id. at 6-7. NorthWestern further reasons that if storage-only facilities qualified as eligible renewable resources on their own, there would be no need to analyze the renewable energy fraction and apportion the electricity output from the storage devices because they would automatically qualify as being listed in § 69-3-2003(10). Id. at 7. Uda Law replies that, with regard to NorthWestern's argument that the qualification of a storage-only device as an eligible renewable resource would obviate the need to analyze the renewable energy fraction of that device, "the opposite is true." Uda Law asserts that "if storage-only resources were indeed ineligible as renewable resources on their own, there would be no need to analyze the renewable energy fraction and apportion the electricity output from the storage resources because 100% of the stored energy would be provided by the renewable generation resource." Resp. at 5. Further, if "it were the case that storage resources were only intended to be charged directly from renewable generation resources, then 100% of their stored energy would be from renewable energy and there would be no ‘renewable energy fraction' to calculate." Id. Uda Law concludes that "under the plain language of the Act, a storage facility does not have to be directly tied to a renewable generation source, it just has to be able to trace the energy that it is relying on to charge its facility." Id. at 6. Uda Law argues that the Legislature explicitly used the term "proportion of electricity output" in the definition of "renewable energy fraction" to ensure that storage-only facilities were being credited only for the "proportion of electricity output" that is "directly attributable to . . . one of the [generation] resources listed in subsection (10)." Id. at 7 (emphasis added by Uda Law). Uda Law interprets this to mean that the Legislature intended for storage-only facilities to qualify for CREP benefits provided that the electricity output from the batteries could be analyzed and apportioned to renewable generation sources. Id. Uda Law asserts that the CREP statute's reference to the "proportion of electricity output" acknowledges that standalone battery systems may not always be charged by renewable resources and may be charged by traditional sources during times of low load and high supply. Id. at 6, citing § 69-3-2003(10). NorthWestern replies that Uda Law's Response now appears to support NorthWestern's position. Repl. at 2 (citing Uda Law's Resp. at 6, where Uda Law states that in order to qualify as an eligible renewable resource, the resource must "be able to trace the energy that it is relying on to charge its facility."). NorthWestern also modified its Petition to request the Commission find that: (1) storage-only resources cannot qualify as CREPs under Montana law; and (2) storage resources listed under Montana Code Ann. § 69-3-2003(10)(i) must be coupled with or prove that their electricity output derives from one or more of the other resources identified in § 69-3-2003 (10)(a)-(h) in order for their respective renewable energy fractions to be considered as eligible renewable resources. Id. at 6.
III. Commission Decision NorthWestern's first request asks the Commission to declare that storage-only resources cannot qualify as CREPs under Montana law. NorthWestern bases the request on its receipt of "several proposals for battery-only resources without any physical connection to any renewable resource." Pet. at 4. The Commission notes that the terms "storage-only," "battery-only," and "standalone battery" are not defined in statute, though both NorthWestern and Uda Law utilize these terms interchangeably, yet without apparent agreement on their definitions. The Commission will analyze this issue with the understanding that a "storage-only" or "battery-only" resource is "a storage facility that has no proof of the source of its electricity output." The Commission agrees with NorthWestern and declares that battery-only resources, without any proof of a renewable fraction attributable to a renewable source, cannot be certified as an "eligible renewable resource" under Mont. Code Ann. § 69-3-2003(4). Mont. Code Ann. § 69-3-2003(4) requires a CREP to be an eligible renewable resource. Relevant to this Petition, an "eligible renewable resource" must produce electricity from a "renewable energy fraction." Mont. Code Ann. § 69-3-2003(10), (10)(i). A "renewable energy fraction" can be derived from "batteries." Mont. Code Ann. § 69-3-2003(10)(i)(iv). A "renewable energy fraction" requires the ability to directly attribute the electricity and renewable energy credits produced by a source in -2003(10). Mont. Code Ann. § 69-3-2003(15). The Commission finds that the definition of "renewable energy fraction" is ambiguous, insofar as the requirement in § 69-3-2003(15) that such a fraction be "produced by one of the sources identified in subsection (10)" creates a circular logic in that a renewable energy fraction is itself listed as one of the sources. Nonetheless, the Commission finds that the statute clearly defines a renewable energy fraction as "the proportion of electricity output directly attributable to electricity and associated renewable credits . . ." The Commission finds in this element of the definition an unmistakable and necessary linkage between a renewable energy fraction and a source of energy that demonstrably produces renewable energy credits. Uda Law's legislative history appears to support the Commission's findings. Uda Law argues that the Legislature explicitly used the term "proportion of electricity output" in the definition of "renewable energy fraction" to ensure that storage-only facilities were being credited only for the proportion of electricity output that is "directly attributable to . . . one of the sources listed in subsection (10)." Uda Law interprets this to mean that the Legislature intended for storage-only resources to qualify for CREP benefits, provided that the electricity output from the batteries could be analyzed and apportioned to renewable generation resources. Resp. at 7. In the Senate, the bill initially was introduced with flywheel storage, hydroelectric pumped storage, and batteries each listed as a separate source from which an eligible renewable resource could produce electricity. SB 106_1, Mont. 63rd Leg. Sess. The introduced version of SB 106 also listed as a source the "renewable energy fraction from the sources identified in subsections (10)(a) through (10)(m) of electricity production from a multiple-fuel process with fossil fuels." The Senate Energy and Telecommunications Committee questioned the bill's sponsor regarding how RECs would be counted for storage sources. Sen. Energy and Tel. Hearing, 16:14:50–16:22:02 (Jan. 29, 2013). The sponsor admitted that it was a difficult issue, as he was trying to carve out capacity credits in a section of statute that is focused on energy output rather than capacity. Id. at 16:21:07. Committee members expressed concern about minimizing the potential double-counting of renewable energy credits and voted to amend the bill to make the "source" the "renewable energy fraction" from flywheel storage, hydroelectric pumped storage, batteries, and compressed air. The Senate Energy Committee amendment also defined "renewable energy fraction" as "the proportion of electricity output directly attributable to electricity and associated renewable energy credits produced by one of the sources identified in subsection (10)." SB 106_2, Mont. 63rd Leg. Sess. It is clear from the legislative history that the Legislature passed SB 106 to promote the development of storage resources. The Legislature also placed language in the statute so that the "eligible renewable resource" is the renewable energy fraction from the storage facility. The Commission concludes that a storage facility does not qualify as an eligible renewable resource merely because its output comes from a storage facility. The statute should not be read in a circular fashion to allow the renewable energy fraction—which is defined as the proportion of output from a source identified in Mont. Code Ann. § 69-3-2003(10)—from storage facilities to always be 100% of the storage facility’s output, since the renewable energy fraction is itself a source listed in Mont. Code Ann. § 69-3-2003(10). Such automatic eligibility undermines the purpose of the statute. Accordingly, the Commission finds that storage-only facilities that cannot prove that a renewable energy fraction is attributable to a renewable source cannot qualify as CREP under Montana law. NorthWestern also asks the Commission to declare that storage resources must be coupled with one or more of the other sources in Mont. Code Ann. § 69-3-2003(10)(a)-(h) in order for their respective renewable energy fractions to be considered eligible renewable resources. Pet. at 4; Repl. at 6. The Commission declares that the renewable energy fraction stored in a battery device can be certified as an eligible renewable resource, so long as it comprises electricity directly attributable to electricity and associated renewable energy credits produced by one of the sources identified in subsection (10)(a)-(h). Mont. Code Ann. § 69-3-2003(15). This declaration logically follows from the Commission's first; however, subsequent Commission CREP proceedings would be necessary to determine whether any given battery proposal could satisfy this fact-specific inquiry.
DONE AND DATED this 18th day of December, 2020, by a vote of 5 to 0. BY ORDER OF THE MONTANA PUBLIC SERVICE COMMISSION /s/ BOB LAKE Bob Lake Chairman /s/ BRAD JOHNSON Brad Johnson Vice Chair /s/ROGER KOOPMAN ROGER KOOPMAN Commissioner /s/ TONY O'DONNELL Tony O'Donnell Commissioner /s/ RANDY PINOCCI Randy Pinocci Commissioner ATTEST: Amber Koop Commission Assistant (SEAL)
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