Opinion
DOCKET NO. A-2192-14T3
04-20-2016
IN THE MATTER OF THE PETITION OF THE PINE HILL SCHOOL DISTRICT FROM THE NOVEMBER 1, 2013 DENIAL OF INCENTIVES IN CONNECTION WITH ITS ENERGY SAVINGS PLAN
Richard W. Hunt argued the cause for appellant Pine Hill School District (Parker McCay, PA, attorneys; Stacy L. Moore, Jr., of counsel; Mr. Hunt, on the brief). Christopher M. Psihoules, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (Robert Lougy, Acting Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Mr. Psihoules, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer, Haas and Manahan. On appeal from the New Jersey Board of Public Utilities, Docket No. QO14010020. Richard W. Hunt argued the cause for appellant Pine Hill School District (Parker McCay, PA, attorneys; Stacy L. Moore, Jr., of counsel; Mr. Hunt, on the brief). Christopher M. Psihoules, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (Robert Lougy, Acting Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Mr. Psihoules, on the brief). PER CURIAM
Appellant Pine Hill School District (Pine Hill) appeals from the December 1, 2014 final decision of the Board of Public Utilities (the BPU), denying Pine Hill's application for Combined Heat and Power (CHP) incentives. We affirm.
I.
Pursuant to authority granted to it under the Electric Discount and Energy Competition Act, N.J.S.A. 48:3-49 to -109, the BPU administers the New Jersey Clean Energy Program (the NJCEP). The NJCEP includes several separate programs that offer financial incentives to residential, commercial, and industrial customers of electric and natural gas utilities to invest in energy efficient and renewable energy measures. The BPU has designated a private company, TRC Energy Solutions (TRC), to act as the market manager for these programs. In this role, TRC reviews applications for large scale efficiency incentives offered by the NJCEP, including applications under the CHP program. Another company, Applied Energy Group (AEG), serves as the NJCEP program coordinator.
Customers that are interested in receiving CHP incentives to assist them in purchasing and installing CHP systems have to complete a detailed written application, which is then reviewed by TRC. During its review, TRC determines whether the applicant meets minimum program requirements, and evaluates the efficiency, environmental performance, and economic viability of the applicant's proposed CHP system. TRC also examines the system's projected annual utilization, and determines whether the system will meet "[g]eneral programmatic goals." TRC also conducts an on-site inspection of the facility where the proposed system will be installed.
Under guidelines established by the Federal Environmental Protection Agency (EPA) and followed by TRC and the BPU, a CHP system is a good fit for a facility when the system operates a minimum of 5000 full-run hours per year. Where a project fails to meet this standard, the application for financial incentives will not be approved because the proposed CHP system will not be energy efficient or provide a benefit to the ratepayers who fund the incentives through their monthly utility bills.
At the time Pine Hill submitted its application, the standard was higher, and an applicant had to demonstrate that its proposed CHP system would operate 6000 hours per year. However, the BPU applied the updated, and less demanding, 5000 hours per year standard to evaluate the application. --------
The application for CHP incentives specifically advises the applicant that if the application is approved, TRC "will forward [the a]pplicant an [a]pproval [l]etter with the committed incentive amount." The application further states that "[t]o be eligible to receive a program incentive, [the a]pplicant must receive an [a]pproval [l]etter from [TRC] prior to equipment installation." If the CHP incentives sought by the applicant are less than $500,000, TRC will issue the required approval letter. However, if the incentives exceed $500,000, only the BPU may approve the application.
The BPU also operates the Energy Savings Improvement Program (ESIP), which is separate from the CHP program. This program, which is authorized by N.J.S.A. 48:3-109(a), allows qualifying public entities to leverage the future values of energy savings to pay for the upfront costs of implementing energy conservation measures (ECMs). A school district, like Pine Hill, is eligible to implement an ESIP. N.J.S.A. 18A:18A-4.6(a)(1). An applicant seeking to employ an ESIP submits the proposed ECMs in a document captioned "the Energy Savings Plan" (ESP). N.J.S.A. 18A:18A-4.6(g). An ESP may include a variety of ECMs, including CHP projects. However, the BPU's staff, rather than TRC, reviews the financial viability of the proposed ECMs to determine whether the applicant's ESP will be approved. As noted above, CHP incentives are approved by either TRC or the BPU, depending on the amount of CHP incentives sought by the applicant.
In this case, Pine Hill applied for an ESIP in 2012. It retained a company, Tozour Energy Systems, Inc. (Tozour), to prepare the application and to represent Pine Hill during the review process. Tozour prepared an ESP, which it submitted to the BPU for review. As part of the ESP, Tozour stated that Pine Hill proposed to install CHP systems in four of its schools.
On June 4, 2013, Tozour separately filed four applications for CHP incentives to obtain additional funding for Pine Hill. In these applications, Pine Hill sought CHP incentives "totaling a little more than $1 million and ranging in value from $169,000 [for one of the four schools] to $506,000 [for another]." Because the total incentives sought exceeded $500,000, the BPU had to approve the project by issuing an approval letter before the CHP systems could be installed and before any financial aid could be provided to Pine Hill.
On June 10, 2013, TRC's Senior Energy Engineer (TRC's engineer) sent an email to Tozour, reminding it that the CHP "application approval letter must be issued before the [CHP] systems are installed." TRC's engineer also told Tozour that Pine Hill could "purchase the equipment, but again this would be at their own risk until the application has been reviewed and approved/funds committed."
On June 19, 2013, TRC's engineer sent another email to Tozour advising that the applications would not be reviewed for several weeks. TRC's engineer also stated that, if the CHP incentives Pine Hill was seeking exceeded $500,000, "the applications [would] have to go to the [BPU] for approval on the first available board agenda."
On June 20, 2013, TRC sent Tozour a third email confirming its receipt of the four CHP applications. This email again reminded Tozour that "[a]pplications must be approved PRIOR to installation of eligible measures." (emphasis in original). On July 18, 2013, TRC's engineer sent an email to Tozour identifying technical issues with Pine Hill's applications. TRC's engineer advised Tozour that "these issues need to be addressed so that we feel comfortable recommending these projects for approval by the [BPU]." On September 10, 2013, BPU staff conducted a site review of the four sites where Pine Hill proposed to install the CHP systems.
On September 13, 2013, the BPU's ESIP coordinator sent an email to Tozour's representative. This email stated:
After reviewing your spread sheet analysis of the co-generation part of the project and the 15[-]year energy savings portion of the project, I [am] happy to approve your Energy Saving Plan. The analysis uses only four years of demand response payments for the co-generation portion and has the potential of nearly one million dollars in earnings for the school district after this four-year period is over. I will forward a formal letter to you next week with more detail.As noted above, an Energy Saving Plan (ESP) is part of the ESIP program. Through Tozour, Pine Hill had sought approval of its ESP. BPU staff members may approve an applicant's ESP. However, only TRC or the BPU can approve CHP incentives. BPU's ESIP coordinator's September 13, 2013 email does not refer to CHP incentives. Nevertheless, within two minutes of receiving the ESIP coordinator's email, Tozour's representative authorized the release of the CHP units to Pine Hill so that they could be delivered and installed at the four schools.
[(emphasis added).]
A few weeks later, on October 3, 2013, a Tozour representative emailed TRC's engineer to inquire about the CHP incentive payments. In response, TRC's engineer advised Tozour that the BPU's ESIP coordinator had only approved Pine Hill's ESP, not the CHP incentives.
On November 1, 2013, TRC denied Pine Hill's applications for CHP incentives. TRC found that Pine Hill did "not meet the eligibility requirements or conditions of the program." Specifically, Pine Hill's application, and the worksheets and other materials submitted to TRC by Tozour, indicated that each of the four systems would, under the most generous calculations, only "operate in the range of 2900 [to] 4700 hours per year, at part load operation, resulting in a very low annual system utilization." TRC also observed that, "[w]hen considering full load operation, [Pine Hill's] annual system utilization is even lower." This was well below the minimum program standards specifying that in order to be deemed energy efficient, a CHP system must operate at least 5000 full-run hours per year. Thus, TRC determined that Pine Hill's "proposed low annual system utilization" did not justify the CHP incentives it sought.
TRC's November 1, 2013 letter advised Pine Hill that it could seek further review of TRC's decision by filing "a formal petition with the [BPU] to appeal [the] decision." TRC provided Pine Hill with instructions for pursuing this review.
Pursuant to the Board's dispute resolution procedures, Tozour first requested that AEG review the matter. After considering Tozour's arguments, AEG found no basis for disturbing TRC's decision. In a thorough written decision, AEG concluded that the information Tozour submitted concerning the proposed operation of the four CHP systems clearly demonstrated that none of them would meet the minimum annual 5000-hour operating standard needed to merit the award of financial incentives.
AEG also rejected Tozour's contention that Pine Hill should be granted CHP incentives because Tozour believed that the BPU's ESIP coordinator's September 13, 2013 email approving Pine Hill's ESP also constituted approval of the CHP incentives. AEG found that Tozour had been repeatedly advised that only the BPU could approve the CHP incentives sought by Pine Hill, and that a BPU approval letter had to be issued before any systems were installed.
At the end of its decision, AEG advised Tozour that "you may wish to pursue this matter further by filing a formal appeal with the [BPU], which will include the appointment of a hearing officer and the building of a formal factual record. To do so, you should follow the attached procedures." The attachment specifically advised Tozour and Pine Hill what needed to be included in the petition and that the BPU would "then review the matter to determine if it is a 'contested case'" which required a hearing before either the BPU or the Office of Administrative Law.
Pine Hill filed a formal petition of appeal with the Board on January 16, 2014. Following a public meeting on November 21, 2014, the BPU issued its December 1, 2014 final decision denying Pine Hill's request for CHP incentives. Because there were "no material facts in dispute[,]" the BPU determined that this was not a "contested case" under N.J.S.A. 52:14B-2(b) and, therefore, a hearing was not required to resolve the matter. Based upon the data submitted on its behalf by Tozour, which included its concession that none of its CHP systems would operate more than 2478 full-run hours per year, the BPU found that Pine Hill clearly failed to meet the 5000-hour minimum operating standards for the award of CHP incentives.
The BPU rejected Pine Hill's claim that it was subjected to "a new run-hour standard" when its application was considered. As discussed above, TRC was using a 6000-hour minimum operating standard when Pine Hill submitted its application. That standard had changed to 5000 hours by the time the application came before the BPU, but that change was in Pine Hill's favor because it was now less demanding than before. Pine Hill's proposal did not come close to meeting this "lower threshold standard" and, therefore, the BPU denied Pine Hill's request for CHP incentives.
Pine Hill also argued that the BPU should be equitably estopped from denying its application. Pine Hill again asserted that it reasonably relied upon the ESIP coordinator's approval of its ESP when it purchased and installed the CHP systems. Therefore, Pine Hill argued that the BPU should be estopped from denying its application for CHP incentives.
The BPU found that the record did not support Pine Hill's claims. The ESIP coordinator's email clearly referred to Pine Hill's ESP, not the separate CHP incentive application. Moreover, the CHP incentive application form made clear that only the BPU could approve an application for CHP incentives, and TRC had reminded Tozour of this fact throughout the review process. Thus, the BPU concluded that Pine Hill's alleged "reliance on the [ESIP coordinator's] September 13, 2013 email as approval of its CHP incentives is neither reasonable nor sufficient to invoke the doctrine of equitable estoppel against the Board." This appeal followed.
II.
On appeal, Pine Hill argues that the Board should have conducted a hearing before denying its application for CHP incentives. In addition, Pine Hill asserts that because AEG advised Pine Hill that it could file a "formal appeal with the [BPU], which will include the appointment of a hearing officer and the building of a formal factual record[,]" the BPU was equitably estopped from determining that a hearing was not required. Pine Hill also contends that the BPU relied upon "undisclosed evidence" in reviewing its application, and again contends that the BPU should be equitably estopped from denying its application based upon the ESIP coordinator's September 13, 2013 email.
Established precedents guide our task on appeal. Our scope of review of an administrative agency's final determination is limited. In re Herrmann, 192 N.J. 19, 27 (2007). "'[A] strong presumption of reasonableness attaches'" to the agency's decision. In re Carroll, 339 N.J. Super. 429, 437 (App. Div.) (quoting In re Vey, 272 N.J. Super. 199, 205 (App. Div. 1993), aff'd, 135 N.J. 306 (1994)), certif. denied, 170 N.J. 85 (2001). The burden is upon the appellant to demonstrate grounds for reversal. McGowan v. N.J. State Parole Bd., 347 N.J. Super. 544, 563 (App. Div. 2002); see also Bowden v. Bayside State Prison, 268 N.J. Super. 301, 304 (App. Div. 1993) (holding that "[t]he burden of showing the agency's action was arbitrary, unreasonable[,] or capricious rests upon the appellant"), certif. denied, 135 N.J. 469 (1994).
To that end, we will "not disturb an administrative agency's determinations or findings unless there is a clear showing that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the decision was not supported by substantial evidence." In re Application of Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422 (2008); see also Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9-10 (2009). We are not, however, in any way "bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).
Applying these principles, we discern no reason to disturb the BPU's reasoned determination that, because Pine Hill would not operate its CHP systems enough hours to enable them to be energy efficient, they were not eligible for CHP incentives. This determination was based upon Tozour's own calculations that plainly demonstrated that none of the four CHP systems would operate more than 2478 hours per year, which was well below the 5000-hour minimum standard.
Contrary to Pine Hill's unsupported contention, the BPU did not rely upon "undisclosed evidence" in its decision. The 5000-hour minimum standard was based upon the EPA standard for determining whether a system will be energy efficient and benefit the ratepayers who subsidize these types of projects. This standard was well known in the industry and to Tozour, Pine Hill's consultant. Indeed, at the time Pine Hill submitted its application to TRC, a 6000-hour standard was used to review application for CHP incentives. Nevertheless, Pine Hill received the benefit of the updated, and reduced, 5000-hour standard when the BPU considered its appeal. Thus, the BPU's decision is fully supported by the record and is neither arbitrary, capricious, nor unreasonable.
The BPU also properly determined that a hearing was not required to review Pine Hill's contentions. Pursuant to N.J.S.A. 52:14F-7(a), the BPU had the authority to determine whether this matter was a "contested case" that required a hearing to resolve. A "contested case" is defined as
a proceeding . . . in which the legal rights, duties, obligations, privileges, benefits[,] or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing[.]Clearly, Pine Hill has not demonstrated the existence of a constitutional or statutory right to a contested case-type hearing.
[N.J.S.A. 52:14B-2.]
In addition, entitlement to a trial-type hearing in administrative proceedings "is generally limited to the situation where adjudicatory facts -- that is, facts pertaining to a particular party -- are in issue." High Horizons Dev. Co. v. N.J. Dep't of Transp., 120 N.J. 40, 49 (1990) (internal quotation marks and citations omitted). Adjudicative facts "usually answer the question of who did what, where, when, how, why, with what motive[.]" Ibid. Furthermore, "[i]t is the presence of disputed adjudicative facts, not the vital interests at stake, that requires the protection of formal trial procedure." J.D. v. N.J. Div. of Developmental Disabilities, 329 N.J. Super. 516, 525 (App. Div. 2000) (citing High Horizons Dev. Co., supra, 120 N.J. at 53).
Here, there were no material facts in dispute. Indeed, the BPU based its review upon Tozour's own submissions, including Tozour's calculations that demonstrated none of Pine Hill's four proposed CHP systems met the minimum 5000-hour operation standard. Under these circumstances, a contested case hearing was not required.
Pine Hill next argues that the BPU should have been equitably estopped from denying its request for a hearing because AEG allegedly advised it that a hearing was definitely going to be conducted. Pine Hill also argues that the BPU should be equitably estopped from denying its application for CHP incentives because Tozour construed the ESIP coordinator's approval of Pine Hill's ESP as approval for the CHP incentives and, as a result, Pine Hill proceeded to purchase and install the four CHP systems. We disagree.
The doctrine of equitable estoppel requires proof of
a misrepresentation or concealment of material facts, known to the party allegedly estopped and unknown to the party claiming estoppel, done with the intention or expectation that it will be acted upon by the other party and on which the other party does in fact rely in such a manner as to change his [or her] position for the worse.
[Carlsen v. Masters, Mates & Pilots Pension Plan Tr., 80 N.J. 334, 339 (1979); see also In re Johnson, 215 N.J. 366, 378-79 (2013).]The reliance must be "reasonable and justifiable" and the burden of proof is on the party asserting the estoppel. Foley Mach. Co. v. Amland Contractors, Inc., 209 N.J. Super. 70, 75-76 (App. Div. 1986).
"Equitable estoppel is 'rarely invoked against a governmental entity[,]'" Middleton Twp. Policeman's Benevolent Ass'n Local No. 124 v. Twp. of Middletown, 162 N.J. 361, 367 (2000) (quoting Wood v. Borough of Wildwood Crest, 319 N.J. Super. 650, 656 (App. Div. 1999)), particularly when estoppel would interfere with "essential governmental functions[.]" Vogt v. Borough of Belmar, 14 N.J. 195, 205 (1954). However, the doctrine "will be applied in the appropriate circumstances unless the application would 'prejudice essential governmental functions.'" Middletown Twp. Policeman's Benevolent Ass'n, supra, 162 N.J. at 367 (quoting Wood, supra, 319 N.J. at 656). This is because "government must 'turn square corners'" in its dealings with others, "rather than exploit litigational or bargaining advantages that might otherwise be available to private citizens." W.V. Pangborne & Co. v. N.J. Dep't of Transp., 116 N.J. 543, 561 (1989) (citing F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985)).
Pine Hill failed to meet its burden of proof on its equitable estoppel claims. AEG advised Tozour that Pine Hill could file a formal appeal with the BPU concerning the denial of its application, "which will include the appointment of a hearing officer and the building of a formal factual record." However, AEG also provided Tozour with a copy of the BPU's written "Procedure[s] for Filing a Petition for a Formal Hearing." Those procedures clearly advised Tozour and Pine Hill that the BPU would review the petition and determine whether the matter constituted a "contested case" warranting a hearing.
Thus, Pine Hill was fully aware that a hearing would not be automatically conducted and that the BPU would determine whether there were any factual disputes requiring a hearing. As discussed above, there were no disputes as to any of the material facts in this matter and the BPU's decision was based upon Tozour's submissions, including Tozour's own calculation of the number of full-run hours each of the four proposed CHP systems would operate each year. Therefore, the doctrine of equitable estoppel did not require the BPU to conduct a hearing.
The BPU was also not equitably estopped from considering and denying Pine Hill's application on its merits. Contrary to Pine Hill's contention, the ESIP coordinator's September 13, 2014 email discussed and approved Pine Hill's ESP, not its application for CHP incentives. Therefore, there was no misrepresentation or concealment of any material fact.
Throughout the application process, TRC also repeatedly advised Tozour that only the BPU could approve the incentives, and that a formal approval letter from the BPU was needed before any equipment was installed. Thus, any reliance Pine Hill or Tozour placed on the ESIP coordinator's approval of a separate and distinct application was plainly not reasonable under the circumstances of this case.
Finally, invoking the doctrine of equitable estoppel under the circumstances of this case would interfere with essential governmental functions. Funding for CHP incentives is limited. Therefore, the BPU must ensure that funds are granted only to those projects which meet the minimum program standards necessary to ensure energy efficiency. Pine Hill's project did not meet those standards and, therefore, the BPU properly declined to apply the doctrine in this case.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION