State ex rel. Utilities Comm'n v. Stanly Solar, LLC

873 S.E.2d 34

STATE of North Carolina EX REL. UTILITIES COMMISSION; Duke Energy Progress, LLC; Duke Energy Carolinas, LLC; Accion Group, LLC, Appellees,

v.STANLY SOLAR, LLC, Appellant.

No. COA21-188

Court of Appeals of North Carolina.

Filed May 3, 2022

The Allen Law Offices, Raleigh, by Dwight W. Allen, Britton H. Allen, and Brady W. Allen, and Jack Jirak, Deputy General Counsel Duke Energy Corporation, for Appellees Duke Energy Carolinas, LLC and Duke Energy Progress, LLC.

Burns, Day & Presnell, P.A., Raleigh, by James J. Mills and Daniel C. Higgins, for Appellee Accion Group, LLC.

Kilpatrick Townsend Stockton LLP, by Benjamin L. Snowden, for Appellant Stanly Solar, LLC.

GORE, Judge.

¶ 1 Stanly Solar, LLC ("Stanly Solar") appeals from the Order Denying Motion for Return of CPRE Proposal Security ("Order") entered by the North Carolina Utilities Commission ("Commission"). For the following reasons, we affirm the Commission's order.

I. Background

A. Competitive Procurement of Renewable Energy Program

¶ 2 On 27 July 2017, North Carolina Governor Roy Cooper signed into law North Carolina Session Law 2017-192. Session Law 2017-192, in conjunction with the Commission's Rule R8-71 and the Commission's Order Modifying and Approving Joint CPRE Program allowed for the implementation of the Competitive Procurement of Renewable Energy ("CPRE") Program by Duke Energy Carolinas, LLC ("DEC") and Duke Energy Progress, LLC ("DEP" and, together with DEC, the "Companies").

¶ 3 The CPRE Program was to be implemented in multiple tranches. As part of Tranche 1 the Companies issued a Request for Proposals ("RFP") for electric generating facilities, subject to a set criterion, from eligible market participants ("MPs") in 2018. MPs for this RFP included third-party renewable developers, the DEC/DEP Proposal Team, and any affiliate of DEC or DEP that elects to submit a proposal. Proposals were due 11 September 2018.

¶ 4 The RFP was administered by an Independent Administrator, the Accion Group, LLC ("Accion"). Accion was responsible for developing and utilizing the CPRE Program Methodology to evaluate all Proposals in accordance with the evaluation process established under Commission Rule R8-71(f)(3)(iii) and ensuring that all Proposals are treated equitably throughout the RFP.

¶ 5 Accion hosted a website ("IA RFP Website") as a base for all RFP communications. Among other things, the IA RFP Website was available to all MPs to provide comments on the RFP process, submit questions concerning the RFP (questions and responses were available to be viewed by all registered persons on the IA RFP Website), and provided a confidential message board to allow MPs to ask project specific questions to Accion without those questions being disclosed to all MPs.

¶ 6 Proposals to the Tranche 1 RFP were due by 11 September 2018. The evaluation process was to be split into two Steps. The full evaluation process of proposals and notification of winning bids was projected to be completed by 25 February 2019, with the contracting period to be completed by 24 April 2019.

¶ 7 If, at the conclusion of Step 1 of the evaluation process, a third-party MP was notified by Accion that their Proposal was selected to move on to Step two of the evaluation process, that MP would be required to post a Proposal Security in the amount of $20/kW, based on the proposed facility's inverter nameplate capacity. The Proposal Security would only be released (i) if the Proposal is eliminated by Accion due to failure to meet any required RFP criteria or action; (ii) if the MP elects to withdraw the Proposal pursuant to Section VI(A) of the RFP; (iii) if the Proposal is not selected as a winning proposal, upon closure of the RFP; or (iv) if the Proposal is selected as a winning Proposal, upon completion of the contracting phase of the RFP, including execution of the applicable contract and posting of security as required in the applicable agreement. The Companies will be entitled to draw on the full amount of the Proposal Security if the MP (a) withdraws its Proposal during Step 2 of the evaluation process; or (b) if the Proposal is selected as a winning Proposal but the MP fails to complete the contracting phase.

¶ 8 Accion evaluated the Proposals in accordance with Commission Rule R8-71(f)(3). Commission Rule R8-71(f)(3) required Accion to perform an initial ranking of Proposals based on economic and noneconomic criteria in evaluation Step 1. Noneconomic criteria considered included facility permitting, financing experience, technical development and operational experience, and historically underutilized businesses. Step 2 of the evaluation process required the T&D Sub-Team to assess the system impact of the Proposals and assign any System Upgrade costs to each Proposal.

¶ 9 If during the Step 2 evaluation process the T&D Sub-Team determined that any required Interconnection Facilities or System Upgrades could not be completed by 1 January 2021, but could be completed by 1 July 2021, the IA was to notify the MP of the projected completion date of the Interconnection Facilities and System Upgrades, then the MP would have the option to either elect to allow the Proposal to remain in the RFP or withdraw the Proposal. However, if it was determined that any required Interconnection Facilities or System Upgrades could not be completed by 1 July 2021, the IA would remove the Proposal from further consideration.

B. Stanly Solar's Bid

¶ 10 Stanly Solar is a 50 MW solar project under development in Stanly County, North Carolina. Stanly Solar had received a system impact study in December 2017 and was designated as a "Late-Stage Proposal," meaning that it was not included in the Tranche 1 "grouping study" and would solely bear the costs of its own network upgrades.

¶ 11 Stanly Solar submitted a third-party PPA bid into the CPRE. On 6 December 2018, Stanly Solar was notified that it had been selected in Step 1. At that time, it appeared that the project likely would not be able to achieve interconnection by the 1 January 2021 in-service deadline. However, Stanly Solar opted to proceed to Step 2 and posted a $1 million surety bond as Proposal Security on 4 January 2019. Stanly Solar's initial surety bond was rejected for failure to comply with the proper form. Stanly Solar posted a revised surety bond on 5 February 2019, which was accepted. On 10 April 2019, Stanly Solar was notified that it had been selected as a winning bid and would have to sign a PPA or withdraw from the CPRE and forfeit its Proposal Security.

¶ 12 On 7 June 2019, Stanly Solar received a Facilities Study Report which indicated that it would take approximately two years from the start of construction to achieve interconnection. At a construction planning meeting on 21 June 2019, Duke indicated that April 2021 was a likely in-service date for Stanly Solar's Proposal. At no point did Stanly Solar receive notification from the IA during Step 2 that its interconnection date might be later than 1 January 2021. Neither was Stanly Solar provided the option to withdraw during Step 2 of the selection process.

¶ 13 On 26 June 2019, Stanly Solar informed the IA that the Interconnection Facilities and System Upgrades for its proposal would not be completed by 1 January 2021. Stanly Solar then requested to withdraw its proposal and have its Proposal Security returned, pursuant to Section VI(A) of the RFP. Stanly Solar's request was denied on 5 July 2019. The IA's stated justification for the denial was: (1) "The IA has not informed the MP that interconnection cannot be completed by [1 January 2021];" (2) "Duke Transmission has yet to establish a date for completion of associated system upgrades, and, ergo, there has not been a determination that the system upgrades ‘will not be completed until at least July 2021;’ " and (3) "Should Duke Transmission fail to complete its responsibilities necessary for the MP to interconnect by the established COD, that would be a contract dispute pursuant to the terms of the PPA and not something to be adjudicated before the fact." On 8 July 2019, Stanly Solar clarified that Duke's Transmission Group had told Stanly Solar that the project would not reach interconnection until at least April 2021. The IA did not respond to Stanly Solar's 8 July 2019 request.

¶ 14 On 11 July 2019, Stanly Solar received a final Interconnection Agreement, which confirmed that the projected in-service date was not until 31 May 2021.

C. Procedural History

¶ 15 On 14 January 2020, Stanly Solar filed a Motion for Return of CPRE Proposal Security with the North Carolina Utilities Commission. Stanly Solar argued it is entitled to return of its Proposal Security because (1) Stanly Solar should have been able to withdraw during Step 2 without forfeiting its Proposal Security; (2) failure to return the Proposal Security will result in inequitable treatment as compared to Duke-sponsored proposals; and (3) refunding Stanly Solar's Proposal Security will not cause harm to any party.

¶ 16 Accion responded to Stanly Solar's Motion for Return of CPRE Proposal Security on 20 February 2020. Accion argued, among other things, that Stanly Solar misconstrues Section VI(A) of the RFP and that the RFP does not entitle Stanly Solar to a return of its Proposal Security under the specific events occurring during Stanly Solar's bid process. The Companies filed a joint response to Stanly Solar's Motion on 24 February 2020. The Companies argued that Section VI(A) does not entitle Stanly Solar to a refund of its Proposal Security and treatment of the Duke-sponsored proposals is consistent with the RFP.

¶ 17 Stanly Solar filed a Reply in Support of Motion for Return of CPRE Proposal Security on 13 March 2020. To which Accion responded on 21 April 2020.

¶ 18 On 20 October 2020, the Commission entered an Order Denying Motion for Return of CPRE Proposal Security. The Commission concluded "that the provisions of Sections II(F) and VI(A) of the Tranche 1 RFP providing for the...