Wheelabrator Lisbon, Inc. v. Department of Public Utility Control
283 Conn. 672, 931 A.2d 159, 2007 Conn. LEXIS 366 (2007)
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Rule of Law:
When a long-term electricity purchase agreement is approved by a state regulatory agency based on a producer's special status as a renewable energy source, the "electricity" sold under the contract is presumed to include its renewable attributes. Consequently, any subsequently created financial instruments representing those attributes, such as renewable energy certificates (RECs), belong to the purchasing utility unless the contract expressly provides otherwise.
Facts:
- Wheelabrator Lisbon, Inc. operates a power plant that generates electricity by burning municipal solid waste, qualifying it as a 'resource recovery project' and a renewable energy source.
- In 1991, Wheelabrator and Connecticut Light and Power Company (the utility) entered into a 25-year electricity purchase agreement.
- Under the 1991 agreement, the utility was required to purchase the 'entire net electric output' from Wheelabrator's facility at a premium 'avoided cost' rate.
- This favorable agreement was approved by the Department of Public Utility Control (department) specifically because of Wheelabrator's status as a renewable energy facility, which exempted it from standard bidding procedures.
- The agreement contained a clause stipulating that disputes over its interpretation would be presented to the department for resolution.
- In 2002, the New England Power Pool (NEPOOL) created a new accounting instrument called a Renewable Energy Certificate (REC) to track and trade the renewable attribute of electricity.
- Following the creation of RECs, NEPOOL began assigning the RECs generated by Wheelabrator's facility to Wheelabrator, which then started selling them on the open market for additional profit.
Procedural Posture:
- In 1991, Wheelabrator petitioned the Department of Public Utility Control (department), the state's administrative agency for utilities, for a declaratory ruling approving its electricity purchase agreement with Connecticut Light and Power Company (utility), which the department granted.
- In 2004, the utility filed a petition with the department to reopen the 1991 proceeding and issue a declaratory ruling that it owned the RECs associated with the purchased electricity.
- The department issued a final decision, ruling that it had jurisdiction and that the utility was entitled to the RECs.
- Wheelabrator (plaintiff) appealed the department's administrative decision to the Superior Court, which is the state's trial court.
- The Superior Court affirmed the department's decision, finding it had jurisdiction and its conclusion was supported by substantial evidence, and dismissed Wheelabrator's appeal.
- Wheelabrator (appellant) appealed the trial court's judgment to the Appellate Court, and the case was transferred to the Supreme Court of Connecticut, the state's highest court.
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Issue:
Does a contract for the purchase of the 'entire net electric output' from a renewable energy facility, priced at a premium 'avoided cost' rate due to the facility's renewable status, include the renewable attributes of the electricity, thereby entitling the purchasing utility to subsequently created Renewable Energy Certificates (RECs)?
Opinions:
Majority - Zarella, J.
Yes, a contract for the purchase of the 'entire net electric output' from a renewable energy facility at a premium rate based on its renewable status implicitly includes the renewable attributes of that electricity, entitling the purchasing utility to any subsequently created RECs. The department had jurisdiction over this dispute because it was not a matter of pure contractual intent but rather a question of legislative intent and public policy rooted in the department's regulatory authority. The term 'electricity' in the 1991 agreement, which was approved only because of the plaintiff's renewable status, necessarily included the renewable attribute. The creation of RECs merely 'unbundled' this pre-existing attribute; it did not create a new commodity. To allow the plaintiff to keep the RECs would grant it an unbargained-for windfall and effectively force the utility's ratepayers to pay twice for the same renewable attribute—once through the premium 'avoided cost' rate and again when the utility purchases RECs to meet state mandates. Finally, the department's decision was not an unconstitutional taking because it was a determination of ownership, establishing that the RECs were never the plaintiff's property to begin with.
Analysis:
This decision sets a key precedent for resolving disputes over the ownership of environmental attributes in long-term energy contracts executed before those attributes were separately commodified. By interpreting 'electricity' from a renewable source to include its inherent renewable qualities, the court protects utilities and ratepayers from having to pay twice for the same attribute. The ruling effectively creates a default rule that RECs belong to the utility in such legacy contracts, shifting the burden to energy producers in future agreements to explicitly negotiate for and reserve ownership of RECs or other environmental credits if they wish to retain them.
