Navigating Maryland's Solar Policy Changes: Essential Deadlines and Impacts

Maryland's solar landscape is undergoing a major transformation with new legislation shifting from full retail rate net metering to a value-based system. This episode, featuring environmental and energy attorneys Todd Chason and David Beugelmans, unpacks the critical changes and deadlines that developers and investors must know to safeguard their projects. Learn how these policy shifts will affect revenue streams and discover essential strategies to navigate the July 2027 and July 2030 deadlines for project grandfathering. Stay informed to avoid costly delays and capitalize on new opportunities in Maryland's evolving solar market.

Gordon Feinblatt Legal Bulletin: Community Solar in Maryland

Chason, Todd | Gordon Feinblatt, LLC

Powell, Michael | Gordon Feinblatt, LLC

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Transcript

Intro:

Welcome back to the Gordon Feinblatt podcast. In this episode, Todd Chason and David Beugelmans break down the key solar policy changes in Maryland’s recent omnibus energy bill, focusing on the transition from full retail net metering to a value-based successor program. They explore how these changes impact existing and future solar projects, especially larger scale projects beyond residential rooftops. Let’s get started.

Todd Chason

Hi and welcome to the Gordon Feinblatt podcast. My name is Todd Chason. I am an energy and environment attorney with the firm, and I'm joined here today by David Buglemans, one of my partners. Say hi, David.

David Beugelmans

Hey everybody, this is David Beugelmans Todd's colleague here at Gordon Feinblatt

Todd Chason

So we're here today to do another energy podcast, this time focusing on the omnibus energy bill that passed this last legislative session.

In a separate podcast, Michael Powell and I have talked about many of the non-solar aspects to the omnibus bill. And if you're interested in those, you should listen to that podcast. The point of today's podcast is to focus on the solar aspects, particularly those projects that are larger than residential rooftops. There are pieces in this bill that cover residential rooftop and even a little smaller than that.

But we want to take advantage of David's expertise on these greater than residential rooftop projects. And so this bill, which was over 200 pages in length by the time it actually wound its way through, does contain things that if you're doing business in Maryland, you're using energy in Maryland, you really should know about. 

So David, from the solar aspect, can you give us a high-level summary of what's included in the bill?

David Beugelmans

Yeah, so this legislation contains one of the most consequential changes to Maryland solar policy ever.

What it does it does is it includes a provision that creates a transition structure from a full retail rate net metering program to a successor program that specifically has to provide lower value than the full retail rate.

So there's provisions related to how projects grandfather for the existing net metering treatment. And then there's provisions that talk about the study and how the Public Service Commission needs to stand up the successor program. So it's a big shift for the industry, again, both rooftop projects, including residential, up to commercial size projects and community solar, because it's going to change how much money these projects receive for their generation.

Todd Chason

So let's start there. Tell us the way that this had been calculated before and how it will be calculated going forward and give us a sense for when that change will happen.

David Beugelmans

Yeah, so as I said, Maryland up until now has always been a full retail net metering jurisdiction. That applied to behind the meter systems, so residential, commercial, and community solar subscribers to community solar projects. 

What that means is that the generation from those solar projects participating in net metering would receive the full retail amount for the customer's electric bill. Any charge on a kilowatt hour basis will be included in the compensation. So that would include supply value and then also all distribution values assessed by the utility on a kilowatt hour basis and any taxes or other fees or surcharges that were kilowatt hour based.

So the way that this is described at least for rooftop systems, it's like your electric meter running backwards when you have solar on the roof of a business or a house, when it generates more electricity that's being used on site, the meter runs backwards and provides the full kilowatt hour value. 

Community Solar, because originally it was designed to be a program for people that are unable to do rooftop solar, to sign up to larger remote projects but receive generation that's valued the same. When you subscribe to a Community Solar project, as a subscriber on your utility bill, you would also receive a credit value that was the full retail amount. So it basically be all the kilowatt-hour charges, distribution and supply on your bill. 

Many states across the country, as the amount of solar has increased on the grid, have transitioned away from that. I think one of the first ones, for instance, was California, which has historically been ahead of the curve on these things.

 So, for a variety of reasons, you know, Maryland came to a point from a policy perspective, the legislature wanted to move in that direction. 

What the legislation does is it creates a process at the Public Service Commission where they are going to have to create a work group open to various stakeholders, including utilities, project developers, rate payer advocates, environmental advocates, and then they need to set a new rate. What I think it's going to be is probably something similar to what we've seen in states such as New York that have done this, where they effectively developed what's called a value stack, where they try to determine, okay, so what's like the stack of values associated with that generation to the grid? So there's going to be a supply component, and then there's going to be distribution benefits that result from having solar in specific locations, maybe potentially environmental benefits. There's a lot of things that can go into that, but that's what I anticipate the debate will be about.

The legislation has a pretty quick turnaround for that. The Public Service Commission has to issue a preliminary report to the General Assembly by December of this year. And then they have to actually issue an order or adopt regulations adopting the final structure by February of 2027. And then utilities have to adopt tariffs and have all their billing systems in place to officially roll it out on July 1st, 2027. 

So pretty condensed time frame to move from the current structure to the new structure.

Todd Chason

Give us a sense for what this means for projects in process, right? So how far along would my project need to be to not get caught up in this?

David Beugelmans

Yeah, so the legislation distinguishes between community solar and non-community solar. On the community solar side, the General Assembly included a series of grandfathering requirements where if you meet the requirements, you are on the original net metering structure effectively for the life of the project. The key deadlines are by July 1st, 2027, in order to grandfather, community solar projects will need to have both received a queue position in the utilities community solar program and have paid to the utility a 50% interconnection deposit. So those are the two triggers initially to get in. 

The second thing is once you've done that, you have to by July 1st, 2030, place the project in service. For all of those deadlines, the legislation allows the Public Service Commission to extend for an individual project based off of a good cause. So, for instance, potentially if there's an issue with utility taking longer than required by the commission's interconnection regulations, you could conceivably get an extension to the deadlines from the commission in cases like that.

But otherwise, it's basically kind of a fixed deadline. You have to meet them. And if you don't, you can't get an extension. You're going to be in the successor program. So again, your project can happen. It's just not going to receive the full retail, net metering that projects have historically received. I'll also add that for two utilities, Delmarva Power and Light and Potomac Edison, the legislation includes a capacity sub cap for those utility service territories. It's a little too complicated to explain on this podcast, but that's going to be basically an additional limit of projects that can sort of enter the queue after April 1st of this year. So that's another limit to be aware of for those two utilities that NEM 1.0, the existing program may turn off sooner than July 1st, 27, than for the other two utilities.

Todd Chason

Do you have any sense for when the commission will begin evaluating the various steps that need to be taken to get us up to that July 2027 deadline?

David Beugelmans

Well, yeah, there's sort of two things. So, if you're talking about the grandfathering requirements, the Public Service Commission has a standing net metering work group. And that work group has been working on regulations to basically update the existing regulations for community solar to reflect what the bill says. And then as you might expect with any complicated bill like this, there's sort of some interpretation, things that have to go into that. So, we're working that out. That's due to the Public Service Commission by June of this year. And then there's going to be a process to update that. So that's in process. 

The other work stream to be aware of is like the actual implementation process for Net Metering 2.0. And with respect to that, just this past week, the Public Service Commission released an RFP to hire a consultant to run that process, we can tell from the RFP that they are indeed going to look to kind of a value of solar type mechanism that I was talking about earlier. So basically a New York type model for this successor, which for developers, I think is a positive thing. 

So, the RFP is out there, they're gonna have to hire somebody. And then I would expect, relatively soon, I would think the commission's gonna probably issue an order creating a work group and a process to develop the work product and then get it ready for the end of the year.

Todd Chason

What else is in the bill that people should be focused on?

David Beugelmans

Those are the main provisions. If you're developing a community solar project, making sure that able to qualify to grandfather. Again, you have those requirements that you have to meet by July 1st, 2027 in any utility service territory. But you also have to worry about if you're in DPL or Potomac Edison, the utility sub-caps. So, making sure you are staying on the utility to get the studies done so you can make the 50% deposit. That's very important.

To get a community solar queue position, especially if you're developing a CPCN size project, to get a queue position, you have to actually have submitted your CPCN application and that has to be deemed complete. So that's another important item. So just staying on track of that and making sure you're making progress towards that will be very important because you don't want to wait until July 1st of next year and then be out of luck because you can't grandfather. 

So that's a really important cliff date for projects under development today.

Todd Chason

I don't think there's a precise answer to this question, but can you give me a sense for at what point you'd really need to begin the development process to be able to make that deadline? In other words, is it already too late or is there some marker later this year or early next where someone could still move forward with a project and meet these grandfathering deadlines?

David Beugelmans

I don't think it's too late. I think if you're starting from square one today, I think you can make it work. I would say as we approach the end of this year, I think it's going to become more and more difficult. There's so many factors, it's hard to say for sure. Like for instance, if you're doing a non-CPCN project, to get a queue position, you just have to show that you applied for a local permit, which can be much easier than applying for a CPCN and having your application being complete.

So, on the edges as we get closer, depending on what you're doing, it could make a difference. 

If you don’t have a line of sight on these things by the fall, think it's gonna be tough.

Todd Chason

Remind us what the threshold is between a CPCN and a non-CPCN.

David Beugelmans

Any project over 2 megawatts needs a CPCN.

Todd Chason

And that process has gotten rather filled up over the past couple of years, has it not?

David Beugelmans

It has. So you're looking at, know, if you were to file today, you probably wouldn't be able to get a CPCN until like 18 months from now. But the completeness determination is actually much earlier than that and it's in regulation. So to get a completeness determination, again, because you need that for get a queue position to grandfather, that's maybe 60 to 90 days from filing. You know, giving some variability to a couple of factors. So that's, that's much faster than actually getting the final decision.

Todd Chason

Well, David, I think that that gives us a pretty good summary of this bill and how it affects these projects. I really appreciate you spending the time this afternoon bringing us up to speed on the solar aspects of this bill.

David Beugelmans

No problem, thanks Todd.

Todd Chason

We know this was a lot of information compacted into a fairly short period of time, so please know that we're here to help if you have any questions. Please feel free to reach out, email, or give us a call. Our contact information for both myself, Todd Chason, and David Bugleman's, along with the firm information, will be available to listeners in the show notes. We look forward to hearing from you. Thanks for listening.

Outro:

That’s it for today’s episode. Thanks for joining us on the Gordon Feinblatt Podcast. If you enjoyed this discussion, be sure to subscribe, share it with your network and stay tuned for future episodes from our team. For more information about our firm, or to connect with one of our attorneys, please feel free to visit us on our website gfrlaw.com or email us at gordonfeinblatt@gfrlaw.com. As a disclaimer, please note this podcast is intended for informational purposes only and is not legal advice to any person, entity, or firm. The information discussed in this podcast is obtained from a variety of sources. Portions of the content may contain attorney advertising under the rules of some states. Prior results do not guarantee a similar outcome in the future.