VEPCO v. SCC ( 2021 )

PRESENT: Lemons, C.J., Mims, Powell, Kelsey, McCullough, and Chafin, JJ., and Russell, S.J.
VIRGINIA ELECTRIC AND POWER
COMPANY
OPINION BY
v. Record No. 201172 JUSTICE TERESA M. CHAFIN
JULY 15, 2021
STATE CORPORATION COMMISSION, ET AL.
FROM THE STATE CORPORATION COMMISSION
Virginia Electric and Power Company (“VEPCO”) appeals from a declaratory judgment
of the State Corporation Commission (“SCC” or “Commission”) in which the Commission found
that a pumped storage hydroelectric facility (or “pumped storage”) generates “renewable energy”
under the former definition in Code § 56-576, and that the amended definition would not apply
to contracts executed before the amendment’s effective date. VEPCO argues that the
Commission erred in its interpretation of the former definition and in refusing to apply the
amended definition prospectively from its effective date. For the reasons that follow, we
disagree and affirm the Commission’s decision.
I.
Constellation NewEnergy, Inc. (“Constellation”) is a competitive service provider
participating in the retail choice program of Code § 56-577(A)(5) (“Subsection (A)(5)”).
Subsection (A)(5) permits individual retail customers to “purchase electric energy provided 100
percent from renewable energy” from licensed suppliers if the incumbent electric utility does not
offer the same. Code § 56-577(A)(5)(a).
In December 2019, Constellation began contracting with customers to provide electricity
from renewable energy as permitted by Subsection (A)(5). “Renewable energy” is a defined
term within the statutory scheme, as set out in Code § 56-576. At the time Constellation entered
into its contracts, renewable energy was defined as
energy derived from sunlight, wind, falling water, biomass,
sustainable or otherwise, (the definitions of which shall be liberally
construed), energy from waste, landfill gas, municipal solid waste,
wave motion, tides, and geothermal power, and does not include
energy derived from coal, oil, natural gas, or nuclear power.
Renewable energy shall also include the proportion of the thermal
or electric energy from a facility that results from the co-firing of
biomass.
Code § 56-576 (2019). In contracting with its retail customers, Constellation agreed to provide
“100% Renewable Electricity Supply,” which was set out as being sourced from a “facility . . .
that generates electricity using [wind, solar, falling water (pumped storage hydroelectric or
hydroelectric) or any other resource that generates electricity that meets the definition of
‘Renewable Energy’ under . . . Code § 56-576] (collectively, ‘Renewable Generation
Facilities’).” (Brackets in original.) The provision further specified, “Seller reserves the right to
substitute supply from any other Renewable Generation Facilities without prior notice to
Customer.”
That same month, Constellation notified VEPCO of its Subsection (A)(5) customer
enrollment, and VEPCO requested documentation confirming that Constellation would provide
customers with electricity sourced “100 percent from renewable energy.” Constellation
responded that it intended to supply its customers with energy sourced from wind and pumped
storage hydroelectric facilities, contending that pumped storage “generates electricity from
falling water,” consistent with the statutory definition. 1 Attached to its response, Constellation
1
A pumped storage hydroelectric facility is “a configuration of two water reservoirs at
different elevations that can generate power (discharge) as water moves down through a turbine”
and then “draws power as it pumps water (recharge) to the upper reservoir.” U.S. Department of
2
provided copies of its wholesale contracts, including the contract with the pumped storage
hydroelectric facility that took effect on February 8, 2020. On April 1, 2020, VEPCO replied
that it disagreed with Constellation’s position regarding pumped storage, asserting that pumped
storage did not meet the statutory definition of renewable energy “except in the case of any run-
of-river production that can be quantified and verified.”
In the meantime, the General Assembly enacted the Virginia Clean Economy Act
(“VCEA”) during its 2020 session. 2020 Acts chs. 1193, 1194. As part of the VCEA, and to
become effective July 1, 2020, the General Assembly amended the definition of renewable
energy in Code § 56-576. The definition maintained the language referenced above, but added a
new sentence: “‘Renewable energy’ does not include waste heat from fossil-fired facilities or
electricity generated from pumped storage but includes run-of-river generation from a combined
pumped-storage and run-of-river facility.” Code § 56-576 (current).
On April 17, 2020, Constellation petitioned the SCC for a declaratory judgment that
procuring electricity from a pumped storage hydroelectric facility qualified as renewable energy
under the definition in Code § 56-576 in effect at the time, such that Constellation could rely on
that electricity to meet its load requirements under the retail choice program of Subsection
(A)(5). Constellation further requested a finding that the revised definition, which would
become effective on July 1, 2020, “applies prospectively” and would not prohibit Constellation
from relying on pumped storage “for the duration of its retail contracts.” Constellation asserted
that the issues raised in its petition could be decided without an evidentiary hearing and
Energy, Office of Energy Efficiency & Renewable Energy, Pumped-Storage Hydropower,
https://www.energy.gov/eere/water/pumped-storage-hydropower (last visited Mar. 31, 2021).
3
requested an expedited review in order for the Commission to consider the issues before the
VCEA’s effective date.
VEPCO filed a notice of participation and a subsequent response to Constellation’s
petition. VEPCO asserted that a pumped storage hydroelectric facility did not generate
renewable energy under Code § 56-576 because it was more akin to a battery that stores energy,
unlike the rest of the sources in the statute which generated kinetic or potential energy. VEPCO
further argued that if the Commission found that pumped storage was renewable energy under
the former definition, Constellation should not be allowed to rely upon the former definition
where the amendment was a valid exercise of the Commonwealth’s police power.
By order on May 29, 2020, the Commission granted Constellation’s petition for
declaratory judgment. Applying rules of statutory interpretation, the Commission found that
there was no ambiguity in the phrase “derived from . . . falling water,” and that electricity
generated from a pumped storage hydroelectric facility is therefore “renewable energy” because
it is derived from water that falls from a higher point to a lower point. Thus, pumped storage
satisfied the statutory definition of renewable energy in effect at the time Constellation executed
its contracts. With respect to the amended definition, the Commission declined to find that the
amendment would apply “retroactively” to Constellation’s 2019 contracts where the amendment
would not take effect until July 1, 2020. The Commission relied on Bailey v. Spangler, 289 Va.
353, 358 (2015), for the proposition that retroactivity is generally disfavored absent a manifest
legislative intent to the contrary. VEPCO appealed to this Court, assigning error to both
findings.
4
II.
VEPCO presents two primary arguments on appeal. First, VEPCO contends that the
Commission erred in finding that a pumped storage hydroelectric facility met the definition of
renewable energy under former Code § 56-576. Second, VEPCO contends that the Commission
erred in refusing to find that the amended definition of renewable energy applies to
Constellation’s existing contracts from July 1, 2020 onward. These arguments present issues of
statutory interpretation and other issues of law that are subject to de novo review. See Virginia
Marine Res. Comm’n v. Chincoteague Inn, 287 Va. 371, 380 (2014); Anthony v. Verizon Va.,
Inc., 288 Va. 20, 29 (2014). On review in this Court, “the SCC’s statutory construction ‘is
entitled to the respect due judgments of a tribunal informed by experience.’” City of Alexandria
v. State Corp. Comm’n, 296 Va. 79, 93 (2018) (quoting Virginia Elec. & Power Co. v. State
Corp. Comm’n, 295 Va. 265, 263 (2018)).
A.
VEPCO, the Commission, and Constellation all contend that the plain language of the
former definition is unambiguous but disagree as to its meaning. VEPCO argues that the
language plainly excludes pumped storage from the definition, whereas the Commission and
Constellation argue that the plain language squarely includes pumped storage.
“When the language of a statute is unambiguous, we are bound by the plain meaning of
that language.” Virginia Elec. & Power Co., 295 Va. at 263. “When construing a statute, our
primary objective is to ascertain and give effect to legislative intent, as expressed by the
language used in the statute.” Id. at 262-63 (quoting Cuccinelli v. Rector & Visitors of the Univ.
of Va., 283 Va. 420, 425 (2012)). In doing so, we “consider the entire statute ‘to place its terms
in context,’” REVI, LLC v. Chicago Title Ins. Co., 290 Va. 203, 208 (2015) (quoting Eberhardt
5
v. Fairfax Cnty. Emps. Ret. Sys. Bd. of Trustees, 283 Va. 190, 194 (2012)), because it is “our
duty to interpret the several parts of a statute as a consistent and harmonious whole so as to
effectuate the legislative goal,” id. (quoting Virginia Elec. and Power Co. v. Board of Cnty.
Supervisors, 226 Va. 382, 387-88 (1983)).
“Renewable energy” is one definition among many contained in Code § 56-576. These
definitions are confined in application to “this chapter”—Chapter 23 of Title 56—otherwise
known as the Virginia Electric Utility Regulation Act (“VEURA”). Thus, the definition of
renewable energy determines the permissible sources of electricity that may be relied upon to
supply the “100 percent renewable energy” required by Subsection (A)(5), which is contained in
the same chapter as part of the VEURA. The language presently at issue is a phrase in the
former definition of renewable energy: “derived from . . . falling water.” Code § 56-576 (2019).
We disagree with VEPCO’s contention that the former definition excluded pumped
storage. Like the Commission, we find that the plain language of the former definition is clear
and unambiguous; thus, we will give the terms their ordinary meanings. “Derived from”
generally refers to a thing that comes from something else. See Webster’s Third New
International Dictionary 608 (2002) (defining “derived” as “formed or developed out of
something else”). As used in the definition, renewable energy would be energy formed or
developed out of the enumerated sources.
One of those sources is “falling water.” Because there is no language in the statutory
definition for this term prescribing that “falling water” must come from a naturally occurring
source or that it cannot be a part of a closed system, it is reasonable to apply the plain meaning of
water that falls from one height to another. Therefore, where water falls from a higher reservoir
to a lower reservoir as part of a process that generates electricity, such as happens in a pumped
6
storage hydroelectric facility, the electric energy was derived from falling water. Under this
interpretation, the resulting energy satisfied the former definition of renewable energy in Code
§ 56-576 (2019).
VEPCO maintains that the interpretation of the definition adopted by the Commission
and applied here by this Court creates an inconsistency where falling water is set apart from the
other identified sources. This, it argues, is because the other named sources point to the original
natural source of energy, whereas applying “derived from . . . falling water” to pumped storage
ignores the original source of energy in favor of the method of production.
However, VEPCO’s position would add language to the definition that simply was not
included in the statute. We “‘presume that the legislature chose, with care, the specific words of
the statute’ and that ‘[t]he act of choosing carefully some words necessarily implies others are
omitted with equal care.’” Wal-Mart Stores East, LP v. State Corp. Comm’n, 299 Va. 57, 70
(2020) (quoting Rickman v. Commonwealth, 294 Va. 531, 540 n.3 (2017)). Indeed, as we have
observed, we regularly reject invitations to “read into [a] statute language that is not there,”
because of the long-established rule that “[c]ourts cannot add language to [a] statute the General
Assembly has not seen fit to include.” Wakole v. Barber, 283 Va. 488, 495-96 (2012) (quoting
Jackson v. Fidelity & Deposit Co., 269 Va. 303, 313 (2005)); see also Holsapple v.
Commonwealth, 266 Va. 593, 599 (2003) (same). There are numerous substitutions or
qualifying words the General Assembly could have utilized to achieve VEPCO’s narrower
interpretation, but it did not do so. Because such limiting words were not used, we conclude that
the legislature did not intend to impose such a narrow meaning on “derived from . . . falling
water” as those terms were used in the former statute.
7
We also disagree with VEPCO’s contention that former Code § 56-585.2 (2016) implies
that the former definition excluded pumped storage. Former Code § 56-585.2 (2016), located in
the same chapter, codified a voluntary renewable portfolio standard (“RPS”) program which
incentivized the incorporation of renewable energy into electric energy sales portfolios. For
purposes of the voluntary RPS program, “[a]s used in this section: ‘[r]enewable energy’ shall
have the same meaning ascribed to it in [Code] § 56-576;” however, “‘[r]enewable energy’ shall
not include electricity generated from pumped storage, but shall include run-of-river generation
from a combined pumped-storage and run-of-river facility.” Code § 56-585.2(A) (2016). 2
If the language of Code § 56-576 already excluded pumped storage, then the language
expressly excluding pumped storage in the voluntary RPS program would be surplusage,
“contrary to the settled rule in this Commonwealth that every provision in or part of a statute
shall be given effect if possible.” Travelers Prop. Cas. Co. of Am. v. Ely, 276 Va. 339, 345
(2008)). Further, as we have observed, “[w]ords in a statute should be interpreted, if possible, to
avoid rendering words superfluous.” Cook v. Commonwealth, 268 Va. 111, 114 (2004)
(collecting cases). This is so because, as we have long recognized, we must assume that in
enacting legislation, “the [General Assembly] did not intend to do a vain and useless thing.”
Williams v. Commonwealth, 190 Va. 280, 293 (1949). A more reasonable interpretation of the
statute is that the voluntary RPS program, as an aspirational program designed to encourage
adoption of renewable technologies, narrowed the type of eligible pumped storage facilities
under “this section” to only those that were combined with a run-of-river facility. Code § 56-
585.2 (2016).
2
As part of the VCEA, the voluntary RPS program was repealed and replaced by a
mandatory RPS program in Code § 56-585.5.
8
Lastly, we must call attention to the clearest indication that energy from pumped storage
was not excluded from the former definition of renewable energy: the fact that the General
Assembly changed the definition in order to expressly exclude pumped storage facilities that do
not incorporate run-of-river facilities. Code § 56-576. “Legislation is presumed to effect a
change in the law unless there is a clear indication that the General Assembly intended that the
legislation declare or explain existing law.” Chappell v. Perkins, 266 Va. 413, 420 (2003).
Nothing in the amended language indicates that the amendment was intended to clarify the
meaning of the former definition. In fact, the language used to exclude pumped storage in the
amended definition was substantially similar to the exclusion language that had been in the
voluntary RPS program. As a result, we must presume that the amendment was intended to
change the definition of renewable energy so as to generally exclude pumped storage facilities
from the definition where they had not previously been excluded.
Therefore, we find no error in the Commission’s interpretation of the statute or its finding
that pumped storage satisfied the former definition of renewable energy.
B.
Next, VEPCO argues that the amended definition of renewable energy should apply
“prospectively” to Constellation’s 2019 contracts as of the July 1, 2020 effective date and that
the Commission erred in refusing this application. VEPCO misconstrues the concepts of
retroactive and prospective application of statutes. In general terms, applying legislation
prospectively concerns the rights and claims that arise subsequent to the legislation, whereas a
retroactive application reaches back to affect rights and duties accrued prior to the legislation.
VEPCO claims that it is arguing for a prospective application when it is actually arguing for an
application that reaches back to impact Constellation’s contracts executed prior to the statutory
9
amendment and changes a term of the contract affecting Constellation’s performance. Thus, the
question is not one of prospective application, but it is one of retroactivity and whether the
statutory amendment to a definition that does not grant substantive rights changes the previously
existing contractual obligations of the parties. In the present circumstances, and in consideration
of the statutory scheme, we conclude it does not.
As noted by the Commission in its final order, statutes will not be applied retroactively
absent a manifest intent to the contrary. See, e.g., City of Charlottesville v. Payne, 299 Va. ___,
___, slip op. at 11 (April 1, 2021) (“It has long been the law of the Commonwealth that
retroactive application of statutes is disfavored and that “statutes are to be construed to operate
prospectively only unless a contrary intention is manifest and plain.”) (quoting Town of Culpeper
v. Virginia Elec. & Power Co., 215 Va. 189, 194 (1974)). The Commission based its decision on
Bailey v. Spangler, 289 Va. 353, 358-59 (2015). In Bailey, this Court addressed a certified
question as to whether a statutory presumption regarding mine void ownership applied to deeds
executed before the statute was enacted in 1981. See id. at 355. Responding in the negative, this
Court reiterated that “Virginia law does not favor retroactive application of statutes;” instead,
“we interpret statutes to apply prospectively ‘unless a contrary legislative intent is manifest.’”
Id. at 358-59 (quoting Board of Supervisors v. Windmill Meadows, 287 Va. 170, 180 (2014)).
This rule is “somewhat relaxed” in cases of remedial or procedural statutes, but this is not
the case where “contract rights are involved.” Gloucester Realty Corp. v. Guthrie, 182 Va. 869,
873 (1944). “[R]ights accrued . . . under the former law . . . before the passage of an amended
statute will not be affected by [the amendment], but will be governed by the original statute,
unless a contrary intention is expressed in the later statute.” Id. (quoting Ferguson v. Ferguson,
169 Va. 77, 87 (1937)). Stated otherwise, “new legislation will ordinarily not be construed to
10
interfere with existing contracts.” Bailey, 289 Va. at 359 (quoting Harbour Gate Owners’ Ass’n,
Inc. v. Berg, 232 Va. 98, 103 (1986)). “Absent an express manifestation of intent by the
legislature, this Court will not infer” an intent to interfere with rights accrued pursuant to a
contract executed prior to the statutory amendment. Id.In the statute at issue, there is no express manifestation of an intent to apply the statute
retroactively or to interfere with the rights and obligations of contracts executed prior to the
amendment. There is also no declaration that the future performance of those preexisting
obligations must comply with the amended definition. Quite simply, there is nothing in the
statute to indicate that the General Assembly intended a departure from the norm of a presumed
prospective application, i.e., to contracts executed after the effective date of the statute.
To that end, Constellation argues that it has “vested” rights in its pre-amendment
contracts such that it can rely upon the former statutory definition for the remaining duration of
those service contracts where the statute evidences no manifest intent to interfere with its
existing contracts. Though the Commission did not hold an evidentiary hearing or make express
findings of fact on this issue, the Commission did have the materials provided in discovery—
including the previously mentioned portions of Constellation’s service contracts—at its disposal
when considering the questions posed by Constellation’s petition. We must assume that the
Commission, in reviewing the terms of the contracts, determined that Constellation and its
customers possessed contractual rights regarding the supply of renewable energy that accrued as
a result of incorporating the former statute by reference. The statute became a material “part of
the contract of the parties by mutual agreement.” See Gloucester Realty Corp., 182 Va. at 874.
“It will not be presumed that the legislature would intentionally and advisedly amend a statute
that would so materially affect such an important contract right.” Id. Therefore, absent any
11
indication of intent to disrupt established contractual relationships, this Court will not presume
that such an effect was intended.
Nevertheless, VEPCO asserts that a threshold finding of intent to apply to existing
contracts is unnecessary because contracts “must be considered as containing an implied
condition that [they are] subject to the exercise of the State’s regulatory police power,”
Haughton v. Lankford, 189 Va. 183, 190 (1949), and that a state’s energy policy and regulation
of the industry are regarded as some of the most important functions of that power, see Arkansas
Elec. Co-op. Corp. v. Arkansas Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983) (observing that
regulation of utilities is one of “most important of the functions traditionally associated with the
police power of the States”); Pacific Gas and Elec. Co. v. State Energy Res. Conservation &
Dev. Comm’n, 461 U.S. 190, 205 (1983) (recognizing the traditional responsibilities of states in
“determining questions of need, reliability, cost and other related state concerns” regarding
energy policy).
While VEPCO is correct that contracts are subject to valid exercises of police power,
“private contract rights must yield to the public welfare [only] where the latter is appropriately
declared and defined and the two conflict.” Commonwealth ex rel. Page Milling Co. v.
Shenandoah River Light & Power Corp., 135 Va. 47, 57 (1923). The General Assembly could
have clearly expressed that contract rights accrued under the former statute would be subject to
the amended language. As noted above, however, there is no express declaration and simply no
inherent structure or language in the amendment at issue here suggesting that the General
Assembly intended to invoke that power in a way that would conflict with pre-existing private
contract rights. Because we find no intent to affect existing contract rights, there is no conflict
between continued recognition and enforcement of those rights and the amended statute.
12
Therefore, we need not reach VEPCO’s argument that the amendment was a valid exercise of the
Commonwealth’s police power.
Further, a provision in the Subsection (A)(5) retail choice program implies that the
General Assembly is predisposed to the opposite intent within this particular statutory scheme.
While Code § 56-577(A)(5)(a) enables retail customers’ participation in the retail choice
program, Code § 56-577(A)(5)(b) allows those same retail customers “[t]o continue purchasing
renewable energy pursuant to the terms of a power purchase agreement . . . for the duration of
such agreement” even after the incumbent electric utility files a tariff to offer electricity provided
from 100 percent renewable energy. Code § 56-577(A)(5)(b) (emphasis added). Unlike
Code § 56-576, which is a definitional statute, Subsection (A)(5) grants and governs substantive
rights pertaining to who can participate in the retail choice scheme and in what way. Allowing
customers to continue with the arrangement for which they originally contracted shows that,
even in this heavily regulated industry that is subject to the Commonwealth’s police power, the
legislature appears inclined to leave certain contractual obligations intact despite a change in
circumstances that would normally impact participation in the retail choice program.
VEPCO contends that the absence of similar grandfathering language in the amended
definition means that the Court should not read such language into its terms. However, relying
upon the statutory scheme for context as to how its parts should be applied is not reading
language into a statute, but is applying general rules of construction to interpret the statute as part
of a consistent whole. See REVI, LLC, 290 Va. at 208 (it is “our duty to interpret the several
parts of a statute as a consistent and harmonious whole so as to effectuate the legislative goal”).
We find that this interpretation is the logical choice in light of the context provided by the
structure of the retail choice program.
13
Lastly, in evaluating this construction of the statutory terms, we must again recognize
that the Commission is due the respect of a “tribunal informed by experience.’” City of
Alexandria, 296 Va. at 93 (citation omitted). As the body tasked by the General Assembly with
overseeing not just the implementation of the Subsection (A)(5) retail choice program, but the
VEURA as a whole, the Commission’s determination is one viewed with deference to its
expertise. Though language cannot be added by interpretation where it was not included by text,
“we presume that where the General Assembly has not placed an express limitation in a statutory
grant of authority, it intended for the Commission, as an expert body, to exercise sound
discretion.” Virginia Elec. & Power Co., 284 Va. at 741. Thus, in the absence of an express
direction as to how amendments to the chapter definitions should be applied, it is reasonable to
assume that the Commission exercised its discretion in interpreting and applying the amended
definition in a manner consistent with both the larger statutory scheme and general principles
pertaining to application of new legislation to existing rights.
Therefore, it is apparent that the Commission determined that Constellation accrued
contractual rights under the former definition of renewable energy, and—since the amended
statute contains no express indication that it is to be applied retroactively to interfere with
existing contract rights—we find that the Commission did not err in refusing to retroactively
apply the amended statutory definition of renewable energy to Constellation’s contracts that were
executed before the amendment took effect.
III.
For the reasons stated, we affirm the decision of the Commission.
Affirmed.
14
JUSTICE KELSEY, with whom CHIEF JUSTICE LEMONS and JUSTICE McCULLOUGH
join, concurring in part and dissenting in part.
I agree that the phrase “energy derived from . . . falling water” in former Code § 56-576
included energy produced by pumped-storage facilities. Effective July 1, 2020, however, an
amendment to Code § 56-576 excluded from the statutory definition of renewable energy any
electricity solely “generated from pumped storage” facilities. See 2020 Acts chs. 1193, 1194, at
2501, 2530. The majority holds that this statutory amendment does not apply to Constellation’s
monthly sales of electricity from pumped-storage facilities after July 1, 2020, because those sales
were contemplated in several long-term contracts executed before that date.
We all agree that the legislature did not intend the 2020 statutory amendment to be
applied retroactively. It was meant only to apply prospectively. We disagree, however, about
what “prospectively” means. Does the 2020 statutory amendment affect monthly sales of
electricity from pumped-storage facilities between Constellation and its retail customers that take
place after the effective date of the amendment? The majority’s answer is no — the amendment
has no effect because applying it would defeat our agreed-upon premise that unless the
legislature clearly says so, a new law should not “be applied retroactively to interfere with
existing contract rights.” Ante at 14. My answer is yes — the amendment applies to
Constellation’s monthly sales after the amendment’s effective date because doing so involves a
prospective, not retroactive, application that does not unconstitutionally impair Constellation’s
contractual obligations.
I. RETROACTIVE VS. PROSPECTIVE APPLICATION
“While statutory retroactivity has long been disfavored, deciding when a statute operates
‘retroactively’ is not always a simple or mechanical task.” Landgraf v. USI Film Prods., 511
U.S. 244, 268 (1994). Justice Story, however, provided a clear starting point, explaining that
15
statutes have a “retrospective” application when they, “though operating only from their passage,
affect vested rights and past transactions.” Id. at 268-69 (quoting Society for the Propagation of
the Gospel v. Wheeler, 22 F. Cas. 756, 767 (C.C.D.N.H. 1814) (No. 13,156) (Story, J.)). “The
inquiry into whether a statute operates retroactively demands a commonsense, functional
judgment about ‘whether the new provision attaches new legal consequences to events completed
before its enactment.’” Martin v. Hadix, 527 U.S. 343, 357-58 (1999) (emphasis added) (citation
omitted).
Applying that standard to the principal question in this case, the answer is uncomplicated:
Constellation’s sales completed before the effective date of the 2020 statutory amendment are
unaffected by it, and those sales completed after the effective date of the 2020 statutory
amendment are governed by it. The fact that all of Constellation’s sales arise out of executory
contracts existing prior to the new law changes nothing. “[L]egislation affecting future
performance and termination of contracts in existence when a legislative act became effective”
must be distinguished from “a legislative effort to make statutes retroactive so as to affect pre-
statutory performance or termination of such contracts.” Heublein, Inc. v. Dep’t of Alcoholic
Beverage Control, 237 Va. 192, 197 (1989) (emphasis in original). This distinction polices the
maxim that “[o]ne whose rights . . . are subject to state restriction, cannot remove them from the
power of the State by making a contract about them.” Working Waterman’s Ass’n of Va. v.
Seafood Harvesters, Inc., 227 Va. 101, 110 (1984) (quoting Hudson Cnty. Water Co. v.
McCarter, 209 U.S. 349, 357 (1908) (Holmes, J.)).
The United States Supreme Court applied these principles in a closely analogous case a
century ago. In Union Dry Goods Co. v. Georgia Public Service Corp., the state had mandated a
rate increase for sales of electricity, and the increase became effective on year two of a five-year
16
sales contract between a supplier and buyer of electricity. See 248 U.S. 372, 373 (1919). The
Court held that the legally prescribed rate prospectively applied to all sales of electricity after the
effective date of the rate increase. See id. at 375-77. It did not matter that the parties before the
court still had three more years left on their contract subject to the lower price. On the date of
the state’s lawful “exercise of its police power” to regulate electricity prices, no “private
contract” can thereafter supersede the uniform application of law to all buyers and sellers. Id. at
375, 377; see also Producers’ Transp. Co. v. Railroad Comm’n of State of Cal., 251 U.S. 228,
232 (1920) (“That some of the contracts before mentioned were entered into before the statute
was adopted or the order made is not material.”).
In another similar case, we considered whether statutes giving the State Corporation
Commission “power to control, regulate, and prescribe the light and power rates of such public
service corporations, operate prospectively only” and whether applying a new rate schedule to
private contracts entered into before the statutes’ enactment gave those statutes a “retroactive
effect.” Commonwealth ex rel. Page Milling Co. v. Shenandoah River Light & Power Corp.,
135 Va. 47, 55 (1923). Our answers to these questions were clear:
Of course there can be no doubt about the general rule that statutes
operate prospectively, and not retroactively; but it is illogical to
say that the construction which the Commission has given to these
statutes gives them a retroactive effect, for it is not claimed that the
rates charged or collected for service performed before they
became effective can in any way be affected thereby. Clearly these
statutes operate prospectively, and only upon such rates as are
thereafter lawfully prescribed pursuant thereto.
Id. at 56.
This makes perfect sense. “[A] right cannot be considered a vested right, unless it is
something more than such a mere expectation as may be based upon an anticipated continuance
of the present general laws.” Thomas M. Cooley, A Treatise on the Constitutional Limitations
17
511 (Victor H. Lane ed., 7th ed. 1903). It has long been held that parties to commercial contracts
in heavily regulated industries 1 must necessarily expect “that changes in the law applicable to
their contracts may be made,” and thus, “in the nature of things,” there is “no vested right in an
existing law which precludes its change or repeal, nor vested right in the omission to legislate
upon a particular subject which exempts a contract from the effect of subsequent legislation upon
its subject matter by competent legislative authority.” Louisville & Nashville R.R. v. Mottley,
219 U.S. 467, 484 (1911) (citation omitted).2
Likewise, “there is no implied promise on the part of the State to protect its citizens
against incidental injury occasioned by changes in the law.” Cooley, supra, at 402. As Professor
Lile succinctly put the point, “one has no vested right in a mere rule of law.” W.M. Lile, Notes
on Statutes 11 (1911). A contrary view would be wholly unworkable. “If every time a man
relied on existing law in arranging his affairs, he were made secure against any change in legal
rules, the whole body of our law would be ossified forever.” Landgraf, 511 U.S. at 269 n.24(citation omitted); see also McCabe v. Commonwealth, 274 Va. 558, 566 (2007) (“[A]s a general
proposition, there is no right to rely on the continued existence of civil statutes.”). Nothing in
our law permits a party to “obtain immunity from the state regulation by making private
contractual arrangements.” United States Tr. Co. of N.Y. v. New Jersey, 431 U.S. 1, 22 (1977).
Here, by enacting the 2020 statutory amendment, the General Assembly did not attempt
to unravel Constellation’s monthly sales of renewable energy from pumped-storage facilities
1
As a “[c]ompetitive service provider,” Constellation is heavily regulated by the State
Corporation Commission. See Code § 56-577(A)(5) & (B); 20 VAC §§ 5-312-10 to -110.
2
See also National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry., 470 U.S.
451, 469 (1985); Energy Rsrvs. Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 416
(1983).
18
before the effective date of the 2020 statutory amendment. 3 Those sales were lawful at that time.
After July 1, 2020, however, the legislative intent is unmistakable: Going forward — that is,
prospectively — electricity solely generated from pumped-storage facilities can no longer be
deemed to be lawful renewable energy. Looking backward — that is, retrospectively — the
2020 statutory amendment said nothing because nothing needed to be said. As of July 1, 2020,
what was done was done, and the new law did not disturb it. 4 Constellation had no vested right
in the assumption that the legislature would never change the legal definition of renewable
energy during the multi-year duration of its executory, retail contracts — particularly since the
definition of renewable energy had already been statutorily changed in 2008, 2009, and 2012.
In short, I agree with the majority that if the General Assembly intends to apply a new
law retroactively in a manner that “attaches new legal consequences to events completed before
its enactment,’” Martin, 527 U.S. at 358 (emphasis added) (citation omitted), the legislature must
expressly state such an intent, see City of Charlottesville v. Payne, 299 Va. ___, ___, 856 S.E.2d
203, 209-10 (2021). But we have never held that the General Assembly must expressly state its
intent that a new law will apply prospectively. That intent is inherent in the very nature of
3
This fact renders irrelevant Constellation’s heavy reliance on Bailey v. Spangler, which
addressed the retroactive application of a statute to deeds executed and to vested property rights
transferred before a new statute’s effective date, see 289 Va. 353, 358 (2015). Neither Bailey’s
facts nor its legal analysis addressed the prospective application of a new law on events
completed after its effective date. The same can be said of Ferguson v. Ferguson, which dealt
with the retroactive application of a new statute to a will contest that was filed before the
statute’s enactment and challenged a will offered to probate before the statute’s enactment. See
169 Va. 77, 86-88 (1937).
4
See 2008 Acts ch. 272, at 409; 2009 Acts ch. 748, at 1595; 2012 Acts chs. 46, 200, at
62, 317.
19
legislation because a “statute is always to be construed as operating prospectively,” Allen v.
Mottley Constr. Co., 160 Va. 875, 881 (1933) (citation omitted). 5
II. IMPAIRMENT OF THE OBLIGATION OF CONTRACTS
To be clear, I accept that Constellation’s executory, retail contracts are “contracts” within
the meaning of the provisions in the Virginia and United States Constitutions that prohibit laws
“impairing the obligation of contracts,” U.S. Const. art. I, § 10, cl. 1; Va. Const. art. I, § 11. But
this fact tells us nothing about whether Constellation’s contractual obligations were impaired by
the prospective application of the 2020 statutory amendment. I do not see how they could have
been.
Constellation’s retail contracts did not require it to sell electricity generated from
pumped-storage facilities. See 1 J.A. at 148. The contracts only promised that customers would
receive 100% renewable energy from statutorily recognized renewable-energy sources. See id.
Those sources could include wind, solar, biomass, waste, landfill gas, geothermal, inter alia —
not just “falling water” at pumped-storage facilities. The 2020 statutory amendment simply took
one renewable-energy option off the table, leaving all others wholly untouched. As a matter of
law, therefore, the 2020 statutory amendment did not impair Constellation’s contractual
5
The legislature has the power to grandfather unvested contractual expectancies by
postponing the effective date of a change in the law for the duration of preexisting contracts.
The legislature did just that in Code § 56-577(A)(5)(b), by permitting retail customers “[t]o
continue purchasing renewable energy pursuant to the terms of a power purchase agreement in
effect on the date there is filed with the Commission a tariff for the incumbent electric utility . . .
to offer electric energy provided 100 percent from renewable energy, for the duration of such
agreement.” This grandfathering provision, however, does not apply to Constellation’s existing
retail contracts regarding electricity provided from pumped-storage facilities because the
statutory amendment removing electricity generated by pumped-storage facilities from the
definition of renewable energy was effective on July 1, 2020, and because the incumbent electric
utility did not file a tariff with the Commission until July 2.
20
obligations because Constellation was never legally obligated to provide electricity generated
from pumped-storage facilities.
Even if Constellation had an enforceable obligation (rather than a self-determined option)
to provide electricity from pumped-storage facilities, the prospective application of the 2020
statutory amendment to monthly sales after the amendment’s effective date would not be an
unconstitutional impairment. “While the Contract Clause appears literally to proscribe ‘any’
impairment, the prohibition is not an absolute one and is not to be read with literal exactness like
a mathematical formula.” United States Tr. Co. of N.Y., 431 U.S. at 21 (citation omitted). “The
threshold inquiry is ‘whether the state law has, in fact, operated as a substantial impairment,’”
and “[t]he severity of the impairment is said to increase the level of scrutiny to which the
legislation will be subjected.” Energy Rsrvs. Grp., Inc. v. Kansas Power & Light Co., 459 U.S.
400, 411 (1983). “Minimal alteration of contractual obligations may end the inquiry at its first
stage.” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 245 (1978). “[S]tate regulation
that restricts a party to gains it reasonably expected from the contract does not necessarily
constitute a substantial impairment,” and “[i]n determining the extent of the impairment, we are
to consider whether the industry the complaining party has entered has been regulated in the
past.” Id. Because Constellation could fulfill its retail contracts by providing renewable energy
from other statutorily recognized renewable-energy sources and because Constellation is
operating in an industry that has been heavily regulated in the past, any impairment cannot be
considered substantial.
To be sure, even if the 2020 statutory amendment had substantially impaired
Constellation’s contractual obligations, it still would not be an unconstitutional impairment if
there was a reasonable police-power justification for doing so. Under settled law, “a contract . . .
21
must be considered as containing an implied condition that it is subject to the exercise of the
State’s regulatory police power.” Haughton v. Lankford, 189 Va. 183, 190 (1949); see also
Working Waterman’s Ass’n of Va., 227 Va. at 110. We have described the “police power” as the
inherent, sovereign power “to promote the health, peace, morals, education, and good order of
the people, and to legislate so as to increase the industries of the State, develop its resources, and
add to its wealth and prosperity.” Elizabeth River Crossings OpCo, LLC v. Meeks, 286 Va. 286,
321 (2013) (alteration and citation omitted).
The General Assembly’s regulation of the supply of electricity to Virginia citizens and
industries to promote efficiency, reliability, and environmental compatibility falls squarely
within the historic definition of the Commonwealth’s police power. See generally Arkansas
Elec. Coop. Corp. v. Arkansas Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983) (“[T]he regulation
of [retail electric and other energy] utilities is one of the most important of the functions
traditionally associated with the police power of the States.”). Anticipating prospective
application of new laws, “contracts are deemed to implicitly incorporate the existing law and the
reserved power of the state to amend the law or enact additional laws for the public welfare.”
Smith v. Commonwealth, 286 Va. 52, 58 (2013).
III. CONCLUSION
In sum, I agree that the phrase “energy derived from . . . falling water” in former Code
§ 56-576 included energy produced by pumped-storage facilities. I respectfully disagree,
however, that the presumption against retroactivity required the General Assembly to expressly
state that its 2020 statutory amendment governs prospectively — as it does here — to
Constellation’s monthly sales after the amendment’s effective date.
I thus concur in part and dissent in part.
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