LEGAL Q&A: Using Revolving Funds for Municipal Group Net Metering

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

We often get questions from municipalities about setting up revolving funds pursuant to RSA 31:95-h for various municipal programs. Unfortunately, that statute limits the reasons for which revolving funds can be created, so our Legal Services team occasionally have the sad duty of shooting down a great program idea. Thankfully, the legislature has allowed revolving funds for two energy efficiency programs. Those exist under RSA 31:95-h, I (f) & (g). 

Q:  What do sections (f) and (g) allow?

A: The first allows a revolving fund to be established to finance energy conservation and efficiency and clean energy improvements by participating property owners in an energy efficiency and clean energy district created pursuant to RSA 53-F. The second allows a revolving fund to be established
to facilitate transactions relative to municipal group net metering.

Q: What is a “Clean Energy District” and how do municipalities establish a Clean Energy District?

A:  A Clean Energy District designation under RSA chapter 53-F allows for “C-PACE” financing, also known as Commercial Property Assessed Clean Energy financing, within the bounds of the district. As with other districts, such as the well-known “TIF District” established under RSA 162-K, a Clean Energy District is adopted by the legislative body. RSA 53-F:2 provides that towns, other than town-charter towns, vote to establish such a district via warrant article, cities and town-charter towns should utilize their normal legislative body procedures, and village districts may be acted upon by any means authorized by RSA 52. One important aspect of adoption to point out is that the petitioned warrant article provisions of RSA 39:3 are specifically not allowed for towns. The governing body must affirmatively act on its own to place the question on the warrant article. A group of dedicated clean energy activists cannot force the question on the warrant via petition.

The designation is designed to allowed energy efficiency or clean energy improvements to residential, commercial, industrial, or and other use buildings within the bounds of the district, excluding residential property containing less than 5 dwelling units via the specified procedures. RSA 53-F:1.In short, it allows the municipality to enter into agreements with private parties to obtain financing for energy efficiency and conservation work for eligible properties, apply for and obtain state and federal grants for the same, and enter into agreements with owners of eligible properties to help those owners pay for and improve those properties. RSA 53-F:3. RSA 53-F:3 also provides that municipalities may collect charges to cover the administrative cost from owners who agree to participate and RSA 53-F:4 provides that municipalities also receive energy usage information from participating owners.

Q:  How does this relate to the revolving fund created under RSA 31:95-h, I(f)?

A: The revolving fund created pursuant to the statute would allow the municipality to utilize funds paid by the owners of the participating properties to expand the offerings to other qualified properties. Potentially, a district could start in the heart of the industrial or commercial zone of a municipality and be expanded outward via amendments to the original warrant article, placed on the warrant by the governing body and voted on by the legislative body.

Q: What is “municipal group net metering”?

A: Under typical net metering rules, the owner of a renewable electricity generating system, e.g. solar panels, has a single meter through which all the electricity flows. In the solar scenario, at sunnier times of the year, e.g. June, the panels would produce more electricity than is consumed by the owner. As a consequence, electricity would flow back through the meter to the grid from the owner. At darker times of the year, e.g. December, the panels would produce less electricity than is consumed by the owner and more electricity would be consumed by the owner than is produced.

Of course, a single owner may have multiple meters. For example, in the municipal context, a single municipality may own a town hall, public works garage, and police department. Municipal group net metering allows the owner of the renewable electricity generating system to share the output with other customers without the requirement that they share a meter as long as the customers are part of the same distribution utility. For example, the public works garage may have a large flat roof that works well for solar panels. That production can be shared with the town hall, which may have been built in the 1800s and has a steeply pitched roof with many gables, making it unsuitable for solar panel placement. The municipal group meter metering accomplishes the same feat as typical net metering, but without the requirement of having a single meter.

Q: How does this relate to the revolving fund created under RSA 31:95-h, I(g)?

A: Municipalities often explore the possibility of a Power Purchase Agreement (PPA) for solar installations. Under this model, a third party owns the solar energy system located on the property of the host customer and sells the electricity produced by the facility to the customer under a contract designed to provide long-term electricity cost savings. In municipalities, this most often occurs on top of former, capped landfills. The municipality retains ownership of the landfill, but the solar company installs a number of solar panels. The advantage to the municipality is that the PPA model delivers long-term energy cost savings without requiring large up-front capital expenditures.

The revolving fund created pursuant to the statute would allow the municipality to utilize funds paid into the fund through third-party contracts, as necessary, to expand and maintain these group net metering projects. For example, a municipality may start by having a few panels installed on the town garage and later, if the NHMA-supported increase to the net metering cap is made law, explore the possibility of expanding the generation capacity to an old, closed and capped landfill utilizing funds from the revolving fund.

Natch Greyes is Municipal Services Counsel with the New Hampshire Municipal Association.  He may be contacted at 603.224.7447 or at legalinquiries@nhmunicipal.org.