Where Does the Florida PSC Stand on Expanding Rooftop Solar?

Where does the Florida Public Service Commission (PSC) stand on expanding the benefits of rooftop solar to more Floridians? The 5-member commission, appointed by Governor Scott, failed to approve a proposed solar equipment lease structure for Sunrun at its March 1st Agenda Conference; but the issue could be back before the PSC in the next month.

The solar equipment lease

There are residential customers that want to enjoy the economic and environmental benefits of “going solar,” but may not want to invest the upfront cash to purchase a rooftop solar system or simply don’t want the ownership responsibilities.  Third party financing is a tool that can serve those customers and lower the up-front cost and maintenance of a solar system. Third party financing includes the sale of solar power to a retail customer by a non-utility solar provider,  and a solar system equipment lease to a retail customer. It’s a service that continues to meet the growing demand for solar nationwide.

But, if you’re a solar provider or solar advocate in Florida, you know that third party retail sales aren’t available in Florida. The state doesn’t allow any entity, other than a utility, to provide power to a retail customer. The prohibition is found in state statute that defines a utility as supplying electricity to and for the public. The Florida Supreme Court held in 1988 that the “public” includes supplying electricity to even one retail customer.

Yet, the lease of a solar system is permitted in Florida, but it hasn’t been generally used as a tool for rooftop solar development in the Sunshine State. But, the approval of Amendment 4 by voters, and the passage of SB 80 by the Legislature last year, reduced tangible personal property taxes on solar systems (including leased residential solar equipment). With the tax burden lifted, the solar lease is a now an economically viable solar product in the Sunshine State.

Seeking clarity from the PSC 

Sunrun, in late 2017, filed a declaratory statement petition asking the PSC to approve the structure of a proposed solar lease to be offered in Florida – specifically to find that it does not constitute a retail sale of power. A declaratory statement is a way to resolve a controversy or answer questions about laws or rules over which an agency has authority. After all, it makes sense to get regulatory clarity before investing resources into a state-wide solar leasing program.The Florida PSC staff recommended approval of Sunrun’s proposed lease structure – finding that based on the facts in the petition, which is the standard by which declaratory petitions are judged, the lease was not a retail sale of power.

A solar equipment system lease between a customer and a solar provider is allowed in Florida, as long as the contract is not structured as a retail purchase of power according the state’s  net metering rule and Commission precedent. Therefore, provisions in a lease that base the rent on the output of the solar system, or provide certain performance guarantees, can be interpreted as a retail sale of power.

Utilities engage                                                              

Gulf Power and FPUC filed a brief cautioning the PSC against moving too fast to approve proposed lease structure as the provision could be deemed a retail sale of power – this in spite of the facts in the Sunrun petition that indicated otherwise. During the Agenda Conference, the commissioners were ready to go after Sunrun representatives from the get-go. During discussion of the agenda item, the tone of the commissioners’ questions ranged from skeptical to downright hostile on whether the lease structure would represent the sale of power. After extended grilling of Sunrun’s representatives and debate on the dais, the Commission refused to approve the proposed structure of the lease, and the docket was held open pending Sunrun providing the actual lease to the Commission.

Round 2 

Sunrun has since complied with the PSC demand and filed its Florida solar equipment lease in the docket on March 20th. The lease appears to be consistent with Sunrun’s earlier representations to the PSC. In a bit of a paradox, state consumer protection disclosure laws require solar providers, including Sunrun, to provide estimates of the systems output.  Therefore, it will estimate the generation capability of the leased solar equipment – as required by law – and in order to correctly size the customer’s system to meet their self-generation needs. But, Sunrun points out that disclosures required by law do not convert the lease into a sale of electricity.

 Stay tuned

The Florida PSC will get another chance to approve Sunrun’s declaratory statement petition soon – this time with the draft solar equipment lease attached – as requested. If the lease is consistent with the facts in Sunrun’s petition, then the only question that remains is: will the PSC allow a legitimate solar lease to move forward and help bring the economic benefits of going solar to more Florida families, or will it block it? We’ll keep you posted!

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For you solar policy wonks, the framework of the solar equipment lease is below.

  • Lease payments will be fixed throughout the term of the lease. These payments, based on a negotiated rate of return on Sunrun’s investment, will be independent of electric generation, production rates, or any other operational variable of the leased equipment. These lease payments will include maintenance and warranty service to cover repair or replacement of malfunctioning equipment.
  • Sunrun will hold legal title to the leased equipment and receive Investment Tax Credits and depreciation benefits associated with the investment.
  • Sunrun will have no control over the use of the equipment other than as the beneficiary of the covenants requiring the customer-lessee to maintain the equipment in good repair.
At the lease expiration, the customer-lessee may purchase the solar equipment at fair market value, renew the lease on an annual basis, or request removal of the equipment.
  • At the lease expiration, the customer-lessee may purchase the solar equipment at fair market value, renew the lease on an annual basis, or request removal of the equipment.

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