Commissioner James Danly Dissent Regarding Hollow Road Solar LLC

Commissioner James Danly Statement
March 18, 2021
Docket No. EL21-35-000 

I dissent from the Commission’s decision to grant Hollow Road Solar LLC’s petition for declaratory order that a Virginia statute granting a solar facility tax credits should not be deemed a subsidy for purposes of the PJM minimum offer price rule.[1] 

The Commission determines that the subsidy is “generally available” because the statute includes other “technologies” such as “certain onsite sewage systems” and “equipment used to grind, chip, or mulch trees.”[2]  Most of the short list of other technologies had been included in the Virginia statute since 2003.[3]  Solar equipment was added by separate bill eleven years later in 2014 in an act entitled, “Real and personal property taxes; exemption for solar energy equipment, facilities, or devices.”[4]  The solar exemption was amended in 2016 in a bill labeled nearly identically:  “Sales and use tax exemption and real and personal property tax exemption; solar and wind energy equipment, facilities, and devices.”[5]  The first sentence of the bill’s description confirms its undisputed purpose:  “Provides a sales and use tax exemption for machinery, tools, and equipment of a public service corporation used to generate energy derived from sunlight or wind.”[6]  This is unambiguous. 

For those of you who, like me, are disinclined to rely upon legislative history, we have the plain text of the enacted statute itself.  It does indeed list other types of equipment, and it appears that a public service corporation with a septic system or a wood chipper might also qualify for tax relief.[7]  But the overwhelming preponderance of statutory text involves solar facilities, including stand-alone sections solely devoted to solar facilities.  These dedicated sections spell out the conditions for solar facilities to receive the tax relief.

I submit that the question whether this Virginia statute is a subsidy for purposes of the minimum offer price rules is not difficult.  And I hasten to point out that both PJM and the Independent Market Monitor for PJM agree it is a subsidy. 

Our order today thus allows a subsidized solar facility to bypass the PJM minimum offer price rule and bid into the PJM Base Residual Auction below its actual costs.  The consequences for PJM’s capacity market prices are obvious.  Every existing capacity resource in the applicable zone will suffer artificially low prices caused by new resources “competing” on an uneven playing field.

Many disagree that PJM should mitigate new renewable resources subsidized by the states, but the proper course is to change the mitigation rules (if in fact they need to be changed) rather than to declare that tax relief overwhelmingly directed at solar facilities is not really a subsidy directed at solar facilities because the tax relief may also be available to a wood chipper.

For these reasons, I respectfully dissent.