Puerto Rico extended a key rooftop solar policy. Then came the lawsuit.

Earlier this year, Puerto Rico passed a law that extends the island’s highly successful rooftop solar program through 2031. Lawmakers and solar advocates say the measure is needed to maintain the clean energy boom that’s helping households and communities across the U.S. territory to keep the lights on during its frequent grid failures.

But a powerful government entity wants to overturn that law, known as Act 10.

Last week, the Financial Oversight and Management Board (FOMB) sued Puerto Rico Governor Pedro Pierluisi in a federal district court, arguing that officials are improperly interfering with the island’s independent energy regulator. The board had previously urged the governor and lawmakers to repeal Act 10 during the most recent legislative session, which they didn’t do.

Local solar advocates and trade groups are now circulating petitions, hosting community events, and meeting with Puerto Rican legislators to try and defend Act 10 from the legal challenge.

The FOMB was created by federal law in 2016 to resolve the fiscal crisis facing Puerto Rico’s government, which at one point owed $74 billion to bondholders. The board consists of seven members appointed by the U.S. president and one ex officio member designated by the governor of Puerto Rico.

It’s not the first time that the FOMB has taken legal action against the government to stop laws that purportedly violate court-approved debt restructuring agreements or mandated fiscal plans, a spokesperson said. But typically the litigation involves budget concerns or pension payments, not energy-related issues.

At the heart of the latest dispute is Puerto Rico’s net-metering program. Under the current design, solar-equipped households are compensated for the electricity their panels supply to the grid. They receive the same rate that Luma Energy, the island’s transmission and distribution operator, charges its 1.5 million customers for electricity.

Net metering helps defray the costs of installing rooftop solar and battery systems, enabling more people to access the technology — and to better navigate the major challenges facing the central electricity system. Chronic power outages have plagued the territory ever since Hurricane Maria ravaged power lines and flooded substations in 2017. Most recently, in June, around 350,000 customers lost power during a dangerous heat wave.

Rooftop solar ​“allows folks to get through the blackouts, to get through the heat waves,” David Ortiz, the Puerto Rico program director for the nonprofit Solar United Neighbors, told Canary Media. ​“You could see those homes light up while the others have no electricity in their community.”

Today, over 120,000 homes, businesses, and critical facilities are enrolled in net metering, with systems totaling over 825 megawatts in capacity, according to utility data. That’s up from more than 15,000 net-metered systems totaling over 150 MW in capacity in 2019.

At the same time, Puerto Rico is working to install large renewable energy projects to help replace its aging fossil-fuel power plants. In late July, the U.S. Department of Energy’s Loan Programs Office announced an $861 million loan guarantee to help finance 200 MW of utility-scale solar capacity and 285 MW of stand-alone battery systems in Puerto Rico.

Still, despite this significant progress, only about 6 percent of Puerto Rico’s annual electricity generation comes from renewable sources, including rooftop solar. Experts say the territory is unlikely to meet its near-term target of getting 40 percent of electricity from renewables by 2025, nor is it on track to achieve its long-term goal of 100 percent renewables by 2050.

Given that deficit, and the grid’s persistent shortcomings, Puerto Rico’s lawmakers passed Act 10 in January, which amends an existing net-metering law to cement the policy in place for the next seven years.

Before Governor Pierluisi signed the law, the Puerto Rico Energy Bureau had been scheduled to reevaluate the program — a move that solar proponents worried would lead to weaker incentives. Now, under Act 10, the bureau can’t undertake a comprehensive review of net metering until January 2030, and any changes wouldn’t take effect until the following year.

The FOMB argues that Act 10 imposes ​“corrosive and dangerous politically motivated restrictions on the Energy Bureau” and is driven by special interest groups, including the island’s rooftop solar installer lobby. Act 10 goes against the intentions of a separate 2019 law, known as Act 17, that established the bureau as an independent energy regulator, the board said.

“The energy system has only just begun to recover from decades of political mismanagement that left the people of Puerto Rico with a failing electric system,” Robert F. Mujica Jr., FOMB’s executive director, wrote in a July 29 column.

The new law ​“removes the referee from an important element of Puerto Rico’s energy transformation. It is as if we remove the umpire for one inning. It’s not how a good game is played,” he said. ​“That is why the Oversight Board believes Act 10 must not stand.”

The oversight board insists that it supports net metering, rooftop solar, and Puerto Rico’s broader efforts to achieve 100 percent renewables. On its website, the FOMB says that invalidating Act 10 won’t change the current net-metering program or prevent new customers from enrolling. Instead, it will create space ​“for an honest dialogue based on facts and data” by allowing the Energy Bureau to complete its study, which could ultimately uphold net metering.

A draft version of the Energy Bureau’s study, published in June, raises questions about whether net metering is the most efficient or equitable pricing mechanism for driving renewable energy adoption, particularly as residential rooftop solar grows. The regulator argues that net-metering customers are overcompensated compared to the value of service they provide to the broader grid — a shortfall that’s borne by utility customers that don’t participate in net metering.

“New methods need to [be] explored and adopted,” according to the draft report, which called for a ​“collaborative approach” to evaluating and implementing net-metering alternatives.

The debate is reminiscent of battles playing out in states like Arizona, California, Hawaii, and Nevada, where critics of those net-metering regimes say the policies unjustly shift costs from those who can afford solar to those who can’t. Meanwhile, solar industry advocates and environmental groups argue that weakening net metering will slow momentum for rooftop solar at a pivotal moment in the nation’s clean energy transition. In California, home rooftop solar projects have plummeted since regulators slashed incentives last year.

For Puerto Ricans, ​“Net metering is the only thing that exists that gives people an additional financial reason to move towards solar,” said Ortiz of Solar United Neighbors. The nonprofit works with communities to develop solar-powered resilience centers, which provide places for people to cool off, refrigerate their medicine, and seek shelter during weather events and grid outages. He said the centers use the electricity bill savings to provide such services to residents.

“When I hear them [FOMB] say they’re only trying to look out for the interest of the people, it really concerns me,” Ortiz said. ​“Because this is the will of the people, that the net-metering law should be left as is.”