[6 ELR 50039]

This article is intended to give readers an overview of a wide range of issues involving solar energy that the Environmental Law Institute Solar Project staff is currently examining. The complexity of the legal issues and the speculative nature of many of the questions associated with this new and largely unrealized technology account for the broad approach taken here. There are too objectives in presenting in broad fashion the legal, institutional, and policy issues surrounding solar energy. First, we hope to stimulate additional inquiry into those questions we raise but which we have little hope of answering in this research. Second, we wish to invite reactions as to the importance and, indeed, the relevance of the public policy issues identified so far.

I. Description of the Project

The Environmental Law Institute, under a grant from the National Science Foundation (NSF), is investigating the impact of energy and land use decision making on the utilization of solar energy. The state of Colorado is serving as the case study for the solar research. The project is one of 13 NSF funded studies assessing the effects of social, economic, and legal factors on the use of solar technologies.¹

Solar energy has several characteristics that make it attractive compared with other energy sources: it is plentiful (although highly dispersed), infinitely renewable and clean. Solar energy is useful in a variety of applications, each dependent on a particular technology. The technology closest to commercial acceptance involves the use of a collector material to absorb heat from the sum. That heat can then be circulated or stored as needed for space heating requirements. Other solar energy technologies produce electricity through one of two systems. One process, called "photovoltaic technology" uses semiconductor materials such as silicon to produce electricity directlyfrom the sun; the other uses a field of mirrors to concentrate heat on a central receiver to produce steam for conventional turbine generators.²

The most immediate obstacles to the widespread use of solar energy are technical and economic. Until recently, the cost of solar technologies relative to other energy sources has made solar non-competitive. However, the relative solar energy costs decline as engineering improves, mass production techniques are applied, and the costs of coal, oil, gas, and nuclear energy increase. For purposes of this article, technical adequacy and economic competitiveness will be assumed unless otherwise noted.³

Although technical and economic issues are important, they are not the only impediments to the use of solar energy systems. Two non-economic issues particularly important to the future of solar energy acceptance are the focus of this study: first, the potential impact of the legal system on the use of solar technologies, and second, the role of the principal institutions responsible for energy supply and regulation — the utilities, the public utilities commissions, and environmental regulators.

A principal legal concern of the Project is the adequacy of means to assure that solar users will have continued unobstructed access to sunlight. Land use controls may pose a number of legal issues, including the possible effect of zoning provisions regulating the spatial distribution and appearance of homes on the feasibility and efficiency of solar hardware systems. Other questions arise from the regulation of public utilities, e.g., the possibility that a solar collector constructed to serve a neighborhood might conflict with the monopoly franchise granted to an existing utility.

The complexity of the institutional relationships and legal issues to be evaluated suggested the appropriateness of a case study approach to the solar energy research. Colorado was selected as the focus of this research for several reasons. First, there is considerable awareness and interest in solar energy in Colorado. On a national scale, the state has the largest number of solar heated homes. Also, numerous solar equipment manufacturers and several university-based solar research programs are located there. Some state legislators are actively interested in encouraging solar energy use, and Colorado has adopted or considered several solar energy laws.⁴ This high level of interest in solar energy was considered evidence that relevant decision makers [6 ELR 50040] would have some familiarity with the issues presented by solar energy developmentand that the results of the research might be usefully applied. Colorado also presents a variety of circumstances favorable to solar energy development: demand for energy has been rising rapidly, natural gas is becoming increasingly scarce, numerous social and environmental concerns may constrain use of fossil and nuclear fuels, and high levels of insolation⁵ exist in much of the state. Finally, Colorado has a wide variety of land use patterns, an important variable in our analysis.

Research for this Project has relied principally on two sources: (1) interviews with relevant decision makers and persons generally knowledgeable about energy and land use matters in Colorado; and (2) legal research focused on Colorado and federal statutes. Approximately two dozen persons have been interviewed, including federal, state, and local government officials, utility representatives, lawyers engaged in land use related practices, and environmentalists. Questions were asked about energy supply and demand and the possible role of solar energy; the structure and scope of institutions responsible for energy considerations in land use planning; and existing mechanisms for consideration of solar energy alternatives in energy decision making.

II. Legal Issues

The development of solar energy rests to a great extent on the resolution of legal issues. For example, while beyond the scope of this article,⁶ the exercise of state/local land use controls are particularly significant. Restrictions on the location of energy related facilities are another obvious example. Such controls could affect the development of solar energy by directing growth in ways compatible with solar energy or, less directly, by requiring new development to assess the feasibility of using alternative energy sources. Use of solar energy, in turn, may influence the rate and distribution of growth. In addition, the nature and scope of utility regulation will play an important part in solar power development. More directly, the need to assure continued access to sunlight for solar energy systems to function raises difficult questions.

A. Legal Rights to Sunshine

Every solar energy system depends on access to sunlight in order to operate. If the owner of land adjoining a solar collector constructs a building or plants a tall tree that shades the collector, no energy is captured. Even if no such obstruction currently exists, the possibility that it might arise in the future may also deter investment in solar energy devices. This problem may be significant in urban areas where large numbers of home owners occupy a relatively small land area, although the economics of retrofitting existing homes for solar energy are not considered to be very favorable.⁷ For purposes of legal analysis, the question is whether the owner of a solar energy system has any right to have the source of shading removed, and if not, whether he should be granted such a right.

Numerous studies have already reviewed the current statue of "rights to sunlight,"⁸ and only a brief summary will be presented here. Early American law accepted the "doctrine of ancient lights" that had evolved as part of the English common law. The doctrine provided that if a person enjoyed the uninterrupted use of light through a window for 20 years, an adjoining landowner could not obstruct the light.⁹ In 1838, the highest court in New York rejected the rule on the grounds that "It may do well in England … but it cannot be applied to the growing cities and villages of this country without working the most mischievous consequences."¹⁰ This opinion was accepted in most jurisdictions with the exception of a few states that upheld an implied easement for light and air if the landowner could show necessity, that is, the absence of a reasonable alternative source of light.¹¹ The leading modern case on the subject involved the Fountainbleu and Eden Roc Hotels in Miami Beach, Florida.¹² The Fountainbleu built an addition which shaded the Eden Roc swimming pool after about 2 p.m. in the winter. The court rejected arguments by the Eden Roc based on the doctrine of ancient lights and suggested that any remedy would have to come as the result of a comprehensive planning and zoning ordinance.

A solar collector owner suffering a loss of energy caused by shading might also try to bring a nuisance action. However, to succeed at nuisance a plaintiff must show irreparable damage and a greater hardship than would be caused by enjoining the defendant's activity, a standard a solar energy user probably could not satisfy.¹³

The owner of a solar energy system seeking judicial relief from shading of his collector caused by construction [6 ELR 50041] or plants on adjoining land would therefore not appear to have much change of success. Nor should the old doctrine be revived; changing conditions have made that system inappropriate. The purpose behind the old rule — the need to provide natural lighting inside buildings — is also not completely compatible with the needs of solar energy.

Easements to light and air are available in most states and are a partial answer to the problem. The holder of an easement for unobstructed light owns the right to the light coming across an adjacent piece of land. Such easements can be created for any length of time by grant, covenant, or reservation. Thus, the owner of a solar collector could guarantee his access to sunlight by obtaining an easement for light and air from his neighbor.¹⁴

Numerous commentators, often without giving very explicit reasons, have argued that the availability of such easements provides insufficient protection and incentive for solar energy users.¹⁵ Their concern is based primarily on the possibly prohibitive costs of acquiring the rights and secondarily on the effect of transaction costs, i.e., the disincentive(s) caused by requiring prospective solar energy users to negotiate with their neighbors.

A variety of ameliorative measures have been proposed. Most of them are based on some form of zoning system.¹⁶ Typically, these proposals provide for allocation of rights to unobstructed airspace for users of solar energy accompanied by an administrative procedure for alleviating undue hardships. The schemes are usually limited to areas populated by low density, single family dwellings to avoid the obviously undesirable (and probably illegal) result of restricting construction of new high-rise buildings for the benefit of heating existing buildings. Some proposals automatically distribute rights to existing property owners, while others attempt to create an incentive for use of solar energy through a "first in time, first in right" system. Under either variant, "solar rights" would be enforceable by local jurisdictions in the same manner as other zoning powers.

Variance procedures are a critical element of these proposals because of the inherent trade-offs involved in choosing among competing uses of airspace. Granting one property owner the right to unobstructed airspace may mean depriving his neighbor of the right to grow a tall tree or construct a building addition. As a legal matter, the servient property owner might challenge this loss of freedom as a taking of property without compensation in violation of the Fifth Amendment. The outcome of such a court test depends on many factors and is difficult to predict.¹⁷ The importance of the public purpose shown by the government and the extent of the property owner's loss would be important, but the decision could easily vary with the vagarics of different state court attitudes.¹⁸

The authors of one solar zoning proposal suggest a rather interesting defense to a Fifth Amendment challenge.¹⁹ They argue that a zoning system that grants every property owner solar rights "gives to and takes from each person the same thing. Each gives up part of his airspace estate in return for solar right." Later, however, the authors propose variance procedures which implicitly recognize that the value of the rights gained and lost may not necessarily be equal. Differences in lot orientation, topography, local weather conditions, landscaping, and heating needs will inevitably result in much greater gains and losses to some than others.²⁰ In order to adjust for these windfalls and wipeouts, the authors suggest a rather arbitrary allowance of shading equal to a 10 percent energy loss, or 23.6 percent of the total azimuth angle traversed by the sun on January 4th.²¹ If a neighbor wished to grow a tree blocking more than the allowable 10 percent and if no equally alternative acceptable site were available for the collector, the neighbor would have to compensate the solar energy user for the fraction of energy being impermissibly shaded. Removal of trees planted before the creation of solar rights, however, would be at the expense of the collector owner. Calculations for these and similar situations would be handled by a solar administrator or master. The authors rather optimistically state that the system could be operated with "mathematical precision" by the use of a computer program.

[6 ELR 50042]

Recitation of this rather complicated example suggests the dilemma inherent in solar zoning schemes. In order to avoid unfairness and possible challenge under the takings clause of the Fifth Amendment, variances must be allowed. But such a system is likely to be complex and expensive to administer unless detailed rules are issued to guide balancing of conflicting interests. Rules are difficult to formulate because a rational calculation of collector size (not to mention placement) depends on an evaluation of several variables in every case, including insolation, intensity of solar radiation, intended uses, and collector efficiency.

Adoption of such a system might also have undesirable consequences. Construction of high density, energy conserving buildings might be impeded. Sun rights might be used to prevent development on adjacent property without regard for energy considerations. Other long term effects on land use planning might also result. Communities would therefore be well advised to determine whether shading of collectors is actually a significant problem. This precaution was taken in Colorado Springs. Using aerial photographs the city discovered that "the vast majority of roof tops (in residential zones) are free from shade between 0900 and 1500 hours."²² However, some serious shading problems were found to exist outside single family residential areas. Unless the topography of Colorado Springs is unusual, other areas may also conclude that the need to assure continued access to sunlight does not yet justify comprehensive new legislation.

More modest schemes for assuring solar access are available. For example, Colorado adopted a law early in 1975, S.95, which officially sanctions easements for solar energy purposes. The Colorado Springs Report²³ recommended adoption of a local ordinance requiring builders to certify that no solar easement existed before a building permit could be issued.

Whatever system is used in existing neighborhoods, it should be supported with strong legislation to provide for solar energy in new developments. Advance planning for solar energy can avoid shading problems and minimize the costs of equipping homes for solar energy use at a later date.

B. Condemnation Procedures

If "solar zoning" is not considered a permissible exercise of the police power, it might be asked whether the local government could condemn the necessary airspace and either sell it or lease it to solar energy users. Theoretically, this approach might allow a local government to encourage solar energy development by condemning property for the benefit of solar electric systems or individual heating and cooling units. However, use of eminent domain powers could be expensive and might not contribute to rational land use planning if used arbitrarily.

The basic legal question raised by any use of the eminent domain power is whether authority is being exercised for public benefit. If solar energy were being collected for the use of individual property owners (rather than for a utility), it might be argued that the eminent domain power is in fact being used for private benefit. However, the use of eminent domain for urban renewal was approved by the United States Supreme Court even though the program primarily benefited individual land owners.²⁴ Assuming similar general benefits to the public at large can be shown to accrue from the use of solar energy, a solar energy related condemnation program should also be upheld.

C. Zoning Regulations

A wide range of land use restrictions are generally discussed under the broad label of "zoning," and many of them could impinge on the placement, size, structure, and appearance of solar collectors. In one form or another, zoning has affected almost every facet of land development — from the location and size of buildings to the type and timing of activities permitted on property.²⁵ The following examples illustrate some of the ways zoning may deter solar development:

1. Height regulations may prevent locating a solar collector on the roof;

2. Sideyard and setback provisions, as well as maximum lot coverage and volume limitations, may restrict the location of collectors or prevent their use (this type of regulation is often defined separately for "accessory uses," a distinction that may be ambiguous in the context of solar collectors);

3. Use classifications (e.g., "residential, single family") may prohibit power generating equipment and/or particular types of energy storage systems; communal ownership of collectors or other equipment may also be a violation of some use classification;

4. Aesthetic controls in the form of direct controls on building appearance or through indirect controls by architectural review boards may also impede solar development.

These restrictions may rarely affect solar users and then only in isolated cases, since their application often depends on highly subjective interpretations by local officials. In the early stages, while solar energy systems retain their popular appeal, one might not expect decisions hostile to their owners. However, the mere possibility of these problems could have a disincentive effect; most homeowners will want to be legally sure that these problems won't arise before they invest large sums of money in a solar energy system.

If these or other zoning provisions do infringe upon solar uses, they can be challenged in several ways. First, the applicability of certain ordinances to solar equipment might be questioned. Depending on the way solar devices are used, for example, it may be arguable whether they are an "accessory use" or part of the primary structure. Second, ordinances that affect solar technology but not furnaces or other traditional heating systems might be attacked as lacking any rational basis. [6 ELR 50043] Third, variances can always be sought on a case-by-case basis. These and other means of legal redress are likely to be important for at least the near future. However, a general exemption from zoning restrictions would provide greater certainty.

In addition to potential problems for solar equipment usage under the present zoning laws, the use of certain rooftop solar devices may be restricted by the Uniform Building Code, which is in effect in Colorado cities and counties. Although the scope of this research project does not include an analysis of the building code as it might affect use of solar devices, the load factor of solar equipment on roofs may violate the building code and is therefore a concern of planners. Pitkin County has recently amended the Uniform Building Code by adding requirements concerning glazing with insulating glass, caulking and sealing, and other design standards to prevent loss of heat in buildings. The energy conservation and thermal insulation standards imposed by Pitkin County demonstrate that governmental entities can amend the building code in a manner which mitigates heat loss and encourages energy conservation.

III. State Public Utility Regulation

The structure of utility rates, licensing of energy production, and other utility regulatory issues could have a significant impact on the development of solar energy. Since many of the complex questions raised by utility regulation are beyond the scope of this study,²⁶ our objective is to describe the structure of relevant regulatory decision making with some discussion of the impact on solar energy utilization.

A. Structure of Regulatory Authority

The Colorado Constitution gives the Public Utility Commission (PUC) authority for regulating public utilities. Responsibility for defining what activities and institutions require regulation remains vested in the legislature. As a constitutional body, unlike the statutory commissions of most other states, the PUC is not wholly dependent on the legislature for statutory enumeration of its authority. The public utilities statutes serve more to limit than extend the PUC's power. PUC jurisdiction covers the majority of energy facilities including investor-owned utilities, rural electric cooperatives, and municipally-owned utilities insofar as the latter provide service outside municipal boundaries. Municipal utilities operating exclusively within municipal boundaries are independent authorities.

The PUC has considerable supervisory responsibility for utility operations: it approves rate structures, rate of return on investment, and expenditures to be included in the rate base. Utilities also must obtain "certificates of convenience and necessity" from the Commission prior to extending their service or expanding their generating capacity except for extensions of service within an area already served by the utility. The PUC has broad discretion in deciding whether or not to issue a certificate; the law specifies only that "the present or future public convenience and necessity require such construction."²⁷

Once a certificate is granted, the Commission may not approve a competitive service in the same area unless the existing franchise holder is unwilling or unable to satisfy all the demand. Fierce competition formerly existed for the right to service open areas, but since the early 1960's the entire state has been divided into certificated areas and only minor boundary adjustments are now made. Thus a company wishing to market electricity produced by solar energy would have to prove the inadequacy of existing service and the inability of existing utilities to provide the needed service. However, a legal question exists whether process heat or other forms of solar energy might constitute a new "service" outside the certificates previously granted utilities. If so competition might develop for the right to enter this market.

B. Utility Rate-Making

Utility rates have traditionally been established for different types of services and users in an effort to reflect different costs of providing service. For example, large industrial customers willing to accept "interruptible service" have paid less than residential customers who receive guaranteed service. Of course, rates are also set independently for gas and electricity. The structure of utility rates may be a major factor in the cost of solar energy systems. Solar process heat, for example, may be compatible with an appropriately designed system of interruptible service. The economic relationship of utility rate structures to solar energy usage is being explored in other studies.²⁸ Our discussion of this topic will focus on a selected example to illustrate the way in which state regulators are actually likely to make the relevant pricing decision.

Solar heating and cooling systems for buildings (unless equipped with large storage facilities) are generally most cost-effective when designed to meet a "base load" rather than the highest possible demand. Because of the high initial investment required for collectors and related equipment and the compensating lower cost of operation, the more the system is in use, the lower the cost per use. Capacity that is rarely used raises the per use cost of the system and should be replaced by a backup source of energy, unless there is no less costly substitute. For this reason, solar heating systems may be most competitive in northeastern states where winters are long and the system is in use over a large part of the year. If electricity rates are scheduled to decline with increasing use or otherwise penalize the consumer of relatively small amounts, solar users may find that their electricity bills are reduced much less than expected.

The following example illustrates the problem. Suppose heating a home with solar energy reduces its use of electricity by 75 percent. If the first 25 percent costs twice as much per unit of electricity as the remaining 75 percent, the owner's electric bill will be reduced by only 60 percent rather than the expected 75 percent, in [6 ELR 50044] effect, significantly adding to the cost of the solar system.

This concern is far from hypothetical. A recent decision of the Colorado PUC authorized a "demand energy" rate structure for all new residential and general commercial customers who use electricity for space heating and those existing all electric customers who wish to change.²⁹ Under the demand energy concept, a customer's bill is made up of two components — total energy usage (measured in kilowatt hours) and the maximum demand (measured in kilowatts) imposed on the utility at any one time. The latter charge is usually measured over a short period of time, such as 15 minutes. A solar (or any other) customer can limit his demand charge by using energy storage systems or other hardware to "flatten" his maximum demand, but the net effect of the pricing system is likely to be an increase in the total cost to the solar energy user.

The merits of this pricing approach are currently being debated by public utility economists.³⁰ Proponents of the demand charge argue that it is consonant with "cost-tracking" principles, i.e., the customer should bear the full cost of his service. The occasional use of the system by a solar homeowner, they claim, requires that an additional increment of capacity equal to the user's maximum demand be available at all times. If solar energy users became a significant fraction of the utilities' total demand (say 20 percent), a large amount of capacity might be required for only intermittent use. The demand charge is designed to compensate for the fixed costs generated by capital investments required to serve the occasional user.

The demand charge concept has its critics. Their major argument is that it provides an incentive to flatten peak use of energy but not to go "off-peak." In other words, an energy consumer who uses 24 kilowatts per day is best advised to use 1 kilowatt per hour, even though total demand on the utility might be reduced most by shifting all 24 kilowatts to the early morning hours when demand on the system is lowest.³¹ As another way of making the same argument, the solar user might claim that because he has a heat pump and a good storage system which allows him to use energy off-peak, he actually does not cause any increase in total demand on the system.³² The demand charge simply assumes the solar user requires energy at peak times.

Officials at Public Service Company (PSC), the largest utility in Colorado, have reservations about the value of off-peak pricing based on time-of-day or peak-off-peak usage. They argue that PSC's average load factor (69 percent) is so high that very little savings are likely to be obtained from off-peak pricing. The time of some demands, for example, the use of appliances at meal times, is difficult to shift. On the other hand, the Company does have significantly higher demand during the day than at night, and, therefore, a time-of-day meter might produce some benefits. Unfortunately, having agreed to the installation of demand meters, the PUC may be discouraged from ordering these supplanted by time-of-day meters.³³

Fortunately, the benefits of time-of-day pricing are likely to be evaluated by the PUC. In its opinion giving partial acceptance to the use of demand charges, the Commission took note of the possible value of a complete revision of the rate structure but decided the issue required consideration in a separate proceeding.³⁴

This debate over electrical back-up systems and their costs suggests the value of oil and natural gas as a supplemental source of energy. These fuels are less affected by peaking considerations.³⁵

C. Regulation to Encourage Solar Energy Use

The preceding discussion of rate-making suggested how regulation might discourage use of solar energy systems. There are a variety of ways, however, in which regulation could be used to encourage or at least facilitate use of solar energy systems. The following approaches are suggestive rather than exhaustive:

1. Stiffened minimum insulation requirements are frequently cited as a prerequisite for efficient operation of solar energy heating and cooling systems. Regulations might require that minimum insulation standards be met as a condition for service. The PUC disclaimed the authority to take such action in a 1974 opinion,³⁶ but a more recent Colorado Supreme Court opinion undermined the Commission's reasoning.³⁷ A less dramatic step was authorized by the PUC. Under a Public Service Company program, customers can have the cost of insulation additions added to their utility bills to be paid back at a relatively low rate of interest. A similar program has been approved by the public utility commission in Michigan.

2. Utility participation in solar energy projects can be encouraged (or perhaps mandated) by regulatory agencies. Although the PUC generally reacts to utility proposals rather than initiating them, the potential for assertive [6 ELR 50045] regulation should not be ignored. The PUC has made a positive contribution to utility participation in solar energy development by approving, at Public Service Company's request, inclusion of a $1 million contribution to the Electric Power Research Institute (EPRI) in the Company's rate base. The PUC may even have the authority to order a utility to participate actively in solar energy research and demonstration projects.³⁸

For example, the PUC might ask utilities to offer solar equipment to their customers as a supplement to their regular services. This idea obviously raises controversial issues and would require serious evaluation. Advantages of the proposal include the utilities superior capital raising ability, better access to information for evalution of available solar equipment, and ability to service equipment they install. On the other hand, many solar experts would not like to see utility companies dominate the development of solar energy.

The commission could also encourage solar energy projects by adopting reliability standards that recognize the difference between solar energy systems and fossil fuel power plants. Since central station solar systems by themselves, without ample storage capability, cannot guarantee operation on any given day, traditional licensing requirements for power plant reliability might discourage utility interest in their development.

3. Liberal interpretation of entry requirements could encourage the emergence of new companies to provide solar services. A conservative reading of monopoly franchise privileges might restrict provision of solar services to existing utilities. Such utilities might want to enter the solar market any way, but their lack of interest should not result in the absence of alternative sources of supply. Of course, resolution of this issue might depend on judicial interpretation of constitutional or statutory language.

D. Legal Issues in Public Utility Regulation

1. Discriminatory rate regulation

One issue of concern to solar energy users is whether they might in some way be singled out by utilities for higher electricity rates. A possible rationale for higher charges to solar customers has already been discussed; if electricity service to solar energy users requires peak capacity for infrequent use after an extended period of cloudy days, the average costs of this service might be much higher than that for other customers. Whether or not this is in fact true, it might be used to justify a rate structure that discriminates against solar energy users.

State utility commissions are traditionally accorded considerable latitude in the exercise of their rate-making authority, and the constitutional charter of the Colorado Public Utility Commission provides additional reasons for judicial deference. However, the Colorado Supreme Court has overturned a PUC determination on the grounds that it was "destitute of evidential integrity,"³⁹ and state court decisions in the public utility area yield numerous similar opinions.⁴⁰

A policy adopted for the direct benefit or harm of any user group may be struck down as arbitary and unfair. Recently, for example, a New York court invalidated a decision of that state's utilities commission to subsidize homeowners using electric heat.⁴¹ The subsidy was to lower the base rate per kilowatt hour paid by electricheat customers. The court said the program "constituted undue preference and advantage," adding that "the cost of home heating oil has reached new heights for the same reason that has caused fuel oil levels to reach new levels."

Any discriminatory effect of rate regulation on solar energy will probably be more subtle. Even solar energy advocates would probably admit that the "demand charge" concept has a basis in economic theory. In the context of currently available information, courts are unlikely to tamper with such decisions. The case for solar energy must therefore be directed at state regulatory commissions.

2. Regulation of Energy Use

The authority of utility commissions to regulate the end-use of energy is another issue of potential significance to the acceptance of solar energy. Because natural gas is a valuable back-up source of energy for solar systems, conservation of natural gas may benefit solar owners. The Colorado PUC claimed authority to regulate end-use in 1975 and recently ordered an end to the burning of natural gas in the use of gas-fueled luminaires and advertising flares.⁴² Such uses were estimated to consume enough gas to heat about 300 homes.

In an earlier opinion the PUC had refused to impose stiffened minimum insulation requirements. The issue was raised in Colorado in 1974 by a utility seeking the authority to condition electric service upon proof of compliance with specified insulation standards.⁴³ Rejecting a recommendation by the staff in favor of the proposal, the Commission decided that

It is not our function nor do we have authority to regulate consumers. The Commission sets utility rates throughout the State of Colorado and each individual can then make individual economic decisions based upon these rate schedules. It is therefore clear that [6 ELR 50046] neither the Commission nor regulated utilities have the power to establish mandatory insulation standards or mandatory performance standards as a precondition to obtaining utility service.

The Commissioner who wrote the opinion was apparently disturbed by the implication that the agency could theoretically be asked to limit the use of energy for frost-free refrigerators, tall buildings, and other energy intensive devices.

The Commissioner's reasoning was apparently reversed by the more recent PUC opinion prohibiting the use of natural gas for some decorative purposes. This broader reading of the Commission's authority is supported by a Colorado supreme court opinion that concluded that, as a constitutional body, the PUC may exercise all powers reasonably related to the provision of utility services unless the legislature decides otherwise.⁴⁴ The PUC might therefore consider moving toward an allocation approach that limits natural gas to its "highest" uses, e.g., as a supplemental source of energy for solar systems.

3. Monopoly franchise restrictions⁴⁵

Under the doctrine of regulated monopoly, public utilities in Colorado have the exclusive right to serve the needs of an area. Solar energy development is therefore left largely to the discretion of existing utilities. However, the PUC could take many steps to promote utility interest in solar energy projects. State law recognizes the Commission's authority, on its own motion, to order the construction of new facilities.⁴⁶ If an existing utility fails to provide the desired service, the Commission may, after satisfying the notice and hearing requirements of due process, authorize a new utility to provide it.⁴⁷ The PUC therefore could effectively initiate a solar energy service; if the relevant utility declines to enter the market, a new company or organization can be certified despite the monopoly franchise doctrine.

A more difficult question is presented by the possibility that a neighborhood association formed to purchase and operate a communal collector might find itself subject to regulation as a public utility. The organization would then have to justify its existence under the monopoly franchise doctrine, a difficult burden. Even if this obstacle could be overcome, the paperwork required to satisfy site location approval and tariff setting procedures would be a significant disincentive to operation. On the other hand, utility status may be necessary to acquire needed rights-of-way across public property and other property interests.

Colorado law defines "public utility" broadly, encompassing "every person or municipality operative for the purpose of supplying the public for domestic, mechanical, or public uses," and "every cooperative electric association … and every other supplier of electrical energy."⁴⁸ This definition has been interpreted to establish electrical cooperatives as public utilities and give them a regulated monopoly status.⁴⁹ However, a solar association supplying heat (rather than electricity) to its members would presumably not come within this definition and would therefore not be subject to PUC regulatory requirements.

Colorado law also offers one method for operating an electric utility free of regulation. The state constitution specifically exempts municipally owned utilities from the jurisdiction of the PUC.⁵⁰ This provision has been interpreted to cover only home rule cities providing utility service within their boundaries.⁵¹ Thus, a municipality could provide solar energy services to its residents without coming under PUC regulation.

IV. Conclusion

The preceding discussion reflects a study in progress. Its intent is primarily to introduce some of the legal and institutional questions likely to affect the future development of solar energy. No final conclusions regarding desirable legislative strategies have yet been reached. More detailed analysis of these and other issues (particularly the relationship between solar energy and land use planning), including recommended policy approaches, will be included in the Project's final report later this year. Readers interested in receiving the final report or who have comments on the ideas expressed in this artible are invited to write the author at the Environmental law Institute.

1. For summary of issues being considered in the 13 National Science Foundation awards, see Laurence Rosenberg, "Three Problem Areas Affecting the Future of Solar Energy" (A paper presented at the annual American Association for the Advancement of Science (AAAS) meeting, Boston Mass., Feb. 21, 1976).

2. Numerous sources provide excellent explanations of the principles of different solar energy technologies. Good basic references are Daniels, Direct Use of the Sun's Energy (1964); Clark, Energy for Survival (1974); Portola Institute, Energy Primer (1974); and American Institute of Architects Research Corp., Solar Energy and Housing: An Introduction (1975). Solar power ststems based on wind, ocean thermal gradients, and the use of plants are not being examined in this project.

3. Different solar energy technologies are in fact at very different states of development. Solar heating and cooling systems may be competitive in some parts of the country now, while solar electric technologies are generally viewed as ten years away from any commercial application.

4. Senate Bill 95 (solar easements) and Senate Bill 75 (property tax assessments) were approved in 1975. The 1976 session of the Colorado legislature considered and defeated a solar shading law and also energy and climate evaluation requirements for new subdivisions.

5. "Insolation" is the technical term for the range of light energy collectable as solar energy.

6. See generally Reilly (ed.) The Use of Land: A Citizens Policy Guide to Urban Growth (1973), Bosselman & Callies, The Quiet Revolution in Land Use Control (1971); Colorado Land Use Comm'n, A Land Use Program for Colorado (1974).

7. Richard Crowther, a solar architect, estimates that only 5 to 10 percent of existing homes are suitable for retrofit with solar energy, although as many as 30 to 40 percent of commercial buildings may be appropriate. High Country News, Mar. 12, 1976, at 6.

8. See generally Harris, Is the Right to Light A California Necessity? (Rand Paper No. P-5558, 1975); Phillips, Assessment of a Single Family Residence Solar Heating System in a Suburban Development Setting, Annual Research Report (NSF-RA-N-75078, July 1975) (hereafter cited as Colorado Springs Report); Eisenstadt & Utton, Solar Rights and their Effect on Solar Heating and Cooling, Natural Resources Journal (forthcoming, 1976) (hereafter cited as Solar Rights); Proceedings of the Workshop on Solar Energy and the Law (W. Thomas ed.), (NAS-RA-575-004, Mar. 1975); Kraemer, Phoenix Project Legal Research Report (July 1975); Dawes, Allocation of Solar Energy — Rights to Light (unpublished manuscript, 1973).

9. The doctrine of ancient lights still exists in modified form in England under the Rights of Light Act of 1959.

10. Parker v. Foote, 19 Wend. 309, 317 (N.Y. 1838).

11. Solar Rights, supra note 8, at 8-9.

12. Fountainbleu Hotel Corp. v. Forty-Five Twenty-Five, Inc., 114 So. 2d 357 (Fla. 1959).

13. See Colorado Springs Report, supra note 8, at 127-29.

14. An easement for "light" would include the portion of the electromagnetic spectrum captured by collectors as solar energy. Solar Rights, supra note 8, at 20-23.

15. "Energy and environmental considerations dictate that some sort of right to the solar energy should be given to the homeowner, on the basis of public policy." Solar Rights, supra note 8, at 5-6.

16. In addition to authorities cited in note 8, several alternative approaches have been proposed in statutory form by a study directed by William Thomas of the American Bar Foundation and expected to be published later this year.

17. The distinction between permissible exercises of government "police powers," which do not require compensation, and a "taking," which does, is one of the more perplexing areas of the law. An extensive literature is devoted to the subject; among the best works are Bosselman, Callies & Banta, The Takings Issue (1973); Soper, The Constitutional Framework of Environmental Law, in Federal Environmental Law (E. Dolgin & T. Guilbert eds., 1974); and Costonis, Fair Compensation and the Accomodation Power: Antidotes for the Taking Impasse in Land Use Controversies, 75 Columbia Law Review 1021 (1975).

18. See, e.g., the 37-state summary of judicial attitudes presented in Williams, American Land Planning Law § 6 (1975).

19. Solar Rights, supra note 8, at 33-36.

20. A good example is provided by the authors: Suppose Party A has three trees on his land, and these trees shade the solar collector of Party B. Assume that tree 1 shades part of the collector for only 20 minutes in the morning (near sunrise) while trees 2 and 3 shade most of the collector for most of the day. Obviously trees 2 and 3 must be removed if B's collector is to function; but should A be required to cut down tree 1? If A is not required to cut tree 1, he may find the solar right concept somewhat more agreeable that if he had to cut down all three trees. If the solar zoning ordinance is written so that A is not required to cut tree 1, the ordinance is trading off a small part of B's solar right in return for A's approval (ordiminished disapproval) of the solar right concept. Id. at 54.

21. This angle was chosen in recognition of the significant variation of the energy value of different angles of the sun's rays. A relatively large angle can be blocked with a small resulting energy loss. Id. at 55-60. The authors do not admit that this trade-off system is necessary to the constitutionality of their proposal.

22. Colorado Springs Report, supra note 8, at 92. This conclusion does not address the problem of uncertainties caused by the possibility of future shading. The city also noted that changes in technology could undermine the assumptions behind current legislative proposals.

23. Colorado Springs Report, supra note 8.

24. Berman v. Parker, 348 U.S. 26 (1954). See generally Costonis, supra note 17, at 1036 and cases cited therein.

25. See generally Williams, American Land Planning Law, chs. 67-75 (1975).

26. Other technical and economic studies funded in this series of NSF awards are directed specifically toward many of these issues. See Rosenberg speech, supra note 1.

27. Col. Rev. Stat. § 115-5-1.

28. See Rosenberg speech, supra note 1.

29. Colo. Pub. Util. Comm'n, No. 87640 (Oct. 21, 1975).

30. See, e.g., Comment, Electric Utility Rate Design: The Move Towards Peak Load Pricing, 5 ELR 10084 (1975); 'Lifeline Rates' — Are They Useful?, in Environmental Law Institute Energy Conservation Project Report (Jan. 1976). See also New PSC Rate May Dim Colorado Solar Heat Future, Denver Post. Apr. 25, 1976, at 22.

31. For a utility industry analysis of this problem, see Spencer, Solar Energy: A View From An Electric Utility Standpoint (Electric Power Research Inst. Paper, 1975).

32. This possibility was recognized in a utility journal editorial. See EPRI Journal 9 (Feb. 1976).

33. Breakthroughs are occurring in the cost of meters. See Feldman & Anderson, Financial Incentives for the Adoption of Solar Energy Design: Peak Load Pricing of Back-Up Systems, 17 Solar Energy 339, 343 (1976).

34. Colo. Pub Utilities Comm'n, No. 87640 (Oct. 21, 1975). Other states have moved closer towards accepting off-peak pricing concepts. See Wisc. Pub. Serv. Comm'n, No. 2-U 7423, Findings of Fact and Order (Aug. 8, 1974); N.Y. Pub. Serv. Comm'n, No. 26806, Proceedings on Rate Design for Electric Corporations (Jan. 7, 1976). See also National Conference of State Legislatures, Energy Report to the States, Electric Utilities and Solar Energy, No. 76-8 (Mar. 26, 1976).

35. Use of natural gas for decorative purposes has already been limited by the PUC. See note 42 infra and accompanying text.

36. Colo. Pub. Util. Comm'n, No. 831, Investigation and Suspension of Proposed Tariff of Mountain View Electric Ass'n, Inc. (1974).

37. PUC v. Miller, __ Colo. __, 525 P.2d 443 (1974).

38. See notes 45-51 infra and accompanying text. Three New England utilities have decided to place a limited number of solar water heaters in the homes of their customers as an experiment. See Solar Energy Intelligence Report 111 (Sept. 15, 1975).

39. Denver & Rio Grande W.R.R. v. PUC, 142 Colo. 400, 351 P.2d 278 (1960).

40. Cooper, State Administrative Law 744 (1965).

41. Subsidy for Electric Heat Is Ruled Illegal, N.Y. Times, Dec. 31, 1975.

42. Colo. Pub. Util. Comm'n, No. 87640 (Oct. 21, 1975). See also similar decisions by commissions in New York, Leroy Fantasies, Inc. v. Joseph Swidler, 44 A.D.2d 266, 345 N.Y.S.2d 182, 4 PUC 4th 334 (1974), and California, Ban on Heated Pools Leaves Californians Boiling, N.Y. Times, Feb. 5, 1976.

43. Colo. Pub. Serv. Comm'n, No. 831, Investigation and Suspensiono of Proposed Tariff of Mountain View Electric Ass'n, Inc., Recommended Decision of Commissioner Howard S. Fjelland (1974). Cf. N.Y. Pub. Serv. Comm'n, Nos. 26286, 26292 (upholding minimum insulation standards).

44. PUC v. Miller, __ Colo. __, 525 P.2d 443 (1974).

45. Assistance in the research for this section was provided by Mark Fetzer and Gary Gottesfeld, law students at the University of Denver Law School.

46. Colo. Rev. Stat. § 40-4-102.

47. Town of Fountain v. PUC, 167 Colo. 302, 447 P.2d 527 (1968).

48. Colo. Rev. Stat. § 40-1-103(1) (1973). Subsection (2) expands this definition to include every "supplier of electrical energy."

49. Western Colorado Power Co. v. PUC, 163 Colo. 61, 428 P.2d 922 (1967).

50. Colo. Const. Art. XXV.

51. City and County of Denver v. PUC, 181 Colo. 38, 507 P.2d 871 (1973).

6 ELR 50039 | Environmental Law Reporter | copyright © 1976 | All rights reserved