The Eagle Point-Dubuque PPA is typical of third-party PPAs that have proliferated in the solar industry in recent years. Under this type of arrangement, a host allows a solar developer to set up and maintain a solar installation on its premises and agrees to purchase all of the output from the facility at an agreed-upon rate. At the end of the agreement, the developer typically transfers ownership of the solar facility to the host. Because the solar developer is responsible for installation and maintenance costs, third-party PPAs are an attractive way for customers to “go solar” without a significant up-front investment.1 However, because the solar developer sells electricity to the retail consumer under these arrangements, some states have argued that the solar developer is performing a public utility function and must be subject to the same regulatory oversight as traditional utilities, including regulation of rates.
If Dubuque had financed and installed the on-site solar facility itself, without the third-party PPA, the arrangement would be considered self-generation and would be permitted under Iowa law. If the third-party solar developer had been considered a public utility, however, the developer would have been prohibited from providing service to customers within the territory of the incumbent utility, thus precluding the PPA.2 The issue before the court was whether a third-party PPA for a behind-the-meter solar generation facility is sufficiently “clothed with the public interest” to trigger regulation. The court concluded that it does not, and in doing so, rejected the Iowa Utilities Board’s use of a bright-line test. The court applied a multifactor test used by other states for many years to decide whether the public interest demands utility-type regulation in certain circumstances. The court’s opinion is also notable for its comprehensive review and analysis of case law and legislative developments in other states regarding third-party PPAs and their regulatory status.
1 See generally Julia Elizabeth Sullivan et al., Why End Users are Investing (Big) in Distributed Generation, 27 Elec. J. 23 (2014).
2 Iowa law defines a “public utility” as any “person, partnership, business association, or corporation, domestic or foreign, owning or operating any facilities for: 1. Furnishing gas piped by piped distribution system or electricity to the public for compensation. . . .” Iowa Code § 476.1.