Jan Borchert, Current Hydro and Dana Hall, Esq.

When we talk about legal considerations, proper environmental and engineering permits to install and operate the hydro-project comes to mind first. But there are several other things a potential CDG host needs to consider: CDG registration, CDG oversight and business practices and even learn about Essential CDG Subscription Contract Terms.

Permitting and Interconnection

Permitting a hydroelectric facility is required under Federal, State and municipal law and regulations. The Federal Power Act and other laws give the Federal Energy Regulatory Commission (FERC) jurisdiction to regulate the construction and operation of non-federal hydroelectric projects.[1] The New York State Department of Environmental Conservation (NYSDEC) Division of Water Resources regulates water quality and issues Section 401 Water Quality Certifications[2] and permits for stormwater discharges pursuant to the Clean Water Act.

The CDG host must also sign an interconnection agreement with the utility and in many cases will be responsible for the cost of system upgrades, including new wires where necessary. The process involves technical and procedural requirements necessary to safely and reliably interconnect a generating system to the electric grid. In New York, the requirements involve national technical standards—including the IEEE 1547 and UL 1741 standards—and the adoption of interconnection rules and procedures by the NYPSC.

Have a look at our permitting section for more info on permitting requirements for hydropower projects.

CDG Registration

CDG hosts are required to submit a Distributed Energy Resource Supplier Registration Form which must be supplemented with the following material:

  • Copy and proof of acceptance of your registration with the NYS Department of State and a copy of your certificate of assumed name (if applicable);
  • Sample sales agreements, including customer disclosure statements, and sample bills for each customer class for each material category of the CDG or On-Site Mass Market products or services that will be offered;
  • Copies of information and promotional materials used for mass marketing purposes for each product offering;
  • A list of entities, including contractors and sub-contractors, that market on behalf of your company;
  • The NYS DPS Office of Consumer Services Service Provider Form   

CDG Oversight and Business Practices

All CDG hosts must comply with New York law, consumer protection requirements and NYPSC oversight rules which are defined in Case 15-M-0180.[3] The NYPSC has established oversight and guidance on appropriate marketing and contracting for CDG hosts. It is essential that a CDG host be aware of this guidance and follow it.

Essential CDG Subscription Contract Terms

At this point we’ve talked about how to structure your CDG, but not so much about actual legal terms and conditions involved. The legal terms and conditions that bind a subscriber to join a CDG are the responsibility of the CDG host. As with any business contract, all parties involved should obtain guidance from legal counsel before entering into a CDG subscription agreement. CDG subscription contract terms can be considered in two categories – project specific provisions which are unique to each subscriber, and standard provisions which are consistent for all subscribers joining the CDG. Below are some of the essential terms that should be included.[4]

Project specific provisions: Each subscription contract will have terms specific to the subscriber signing and would generally include:

  • Subscriber contact information and address
  • Subscription rate (price per kWh) for volumetric credits,
  • Annual escalation rate for per kWh price (if used)
  • Production start date
  • Estimated annual electricity output to be credited
  • Utility account number and distribution utility name
  • NYISO zone

Standard provisions:  All subscription contracts will have standard terms and conditions, which may include provisions regarding:

  • Cancellation terms and cancellation fees (if desired)
  • Term (the duration of the agreement)
  • Early Termination (allowing a subscriber to terminate their participation)
  • Payments (providing clear instructions on how subscribers are to pay)
  • Subscriber Rights and Obligations (including what happens if the subscriber moves)
  • Host Rights and Obligations
  • Assignment, Insurance and Force Majeure
  • Default, Remedies and Indemnification
  • Limitation of Liability and Warranty Disclaimer
  • Dispute Resolution

Some terms and conditions may be more protective of the host but less appealing to the subscriber, such as requirements that the subscriber find a replacement if they move out of the utility territory, or the amount of termination or cancellation fees imposed. A CDG host will need to weigh their concerns about risk in the business venture with the flexibility and ease in acquiring subscribers, all while being careful to comply with program rules and regulations. In all subscriber contracts, a CDG host must consult with an experienced attorney who can assist them in customizing a subscriber agreement that best meets their needs. (See Lessons Learned – Community Solar Legal Framework below for more suggestions.) 

Next Steps

There might not be many hydropower CDG projects out there, but there are enough solar CDG projects to learn from. We’ve complied a list of lessons to be learned from other CDG projects in terms of marketing, legal framework and model structures.

Or download our full Microhydro Community DG report.

[1] Federal Power Act, 16 U.S.C. §§ 791 to 823d. The FPA oversees hydropower licensing, administration and safety, as well as electric transmission and wholesale sales rates and services.

[2] 33 U.S.C. § 1251 et seq.

[3] NYPSC October 19, 2017 Order Establishing Oversight Framework and Uniform Business Practices for Distributed Energy Resource Suppliers in Case 15-M-0180 and to the Uniform Business Practices for DER Suppliers.

[4] The non-exhaustive list here applies to a typical CDG where subscribers join and pay for monthly credits. The Subscriber as Investor, CSH and other models discussed above would require different business and legal considerations.


One response

Leave a Reply

Your email address will not be published. Required fields are marked *