A recent Virginia regulatory ruling could make it much easier for homeowners, businesses and other building owners to go solar, potentially boosting the state’s lagging efforts to generate power from the sun.

A hearing examiner for the State Corporation Commission, Virginia’s utility regulator, ruled that nothing in state law bars ratepayers from tapping third-party financing for solar panels.

The hearing examiner rejected a contention by one utility serving the state, Appalachian Power, that third-party financing, including relatively inexpensive “power purchase agreements,” is generally not legal in Virginia.

Under a power purchase agreement, a building owner leases rather than buys solar panels. The company that owns the solar panels sells the electricity generated to the local power company. The solar company provides a share of that revenue to the building owner to reduce the structure’s monthly utility bill.

Appalachian Power, a unit of Ohio-based American Electric Power, argued that third-party solar financing increases the costs of electricity to customers who aren’t generating power onsite, and as such are not permitted in Virginia.

The ruling specifically addresses power purchase agreements involving a consortium of colleges.  However, Will Cleveland, an attorney with the Southern Environmental Law Center, said that the relevant portion of the Virginia code makes no distinction between residential and nonresidential customers.

The hearing examiner’s ruling now goes to the full State Corporation Commission, which will likely make a final decision later this year, Cleveland said.

Appalachian Power spokesman John Shepelwich noted that the company had proposed an alternative that would allow customers to purchase 100 percent renewable energy in a way that “does not impact other customers.” The Appalachian proposal would require that customers pay $30 a month just to participate in the program.

The hearing examiner, however, rejected Appalachian’s proposal. The company is evaluating its next steps, Shepelwich said.

Virginia lags behind all but one of its neighboring states in the amount of solar power capacity. Advocates say a major factor has been the inability of consumers in the Old Dominion to finance the steep upfront costs.

Though the 12th most populous state, Virginia ranked 32nd in the amount of solar capacity in 2015, with only 22 megawatts installed, according to  Solar Energy Industries Association data. The District of Columbia had 15 megawatts, by comparison. 

Gov. Terry McAuliffe has made expansion of solar power a priority, and several large-scale solar power stations have been announced this year. But rooftop solar capacity lags badly.

Neighboring North Carolina, which has long had polices supporting solar power, had almost 2,300MW of solar power capacity in 2015, ranking it No. 3 in the nation. Tennessee, Virginia’s neighbor to the southwest, had 123MW.

Among the other Bay states, New York had 716MW of installed solar capacity in 2015. Maryland had 465MW, and Pennsylvania had 265MW. The smallest state in the watershed, Delaware, had 84MW installed.

The only state in the watershed or the region that Virginia outshines is West Virginia, according to the industry association.  The Mountain State, with the second lowest median income in the nation, had only 3.4 MW in 2015, enough to power just 300 homes.

Whatever the State Corporation Commission decides, the General Assembly is likely to take up the issue next year. The Southern Environmental Law Center’s Cleveland predicted that rival bills would be introduced, one to enshrine power purchase agreements in state law and one to ban them.