20181214Defendants Reply to Motion to Dismss.pdf

DEFENDANTS’ REPLY BRIEF -1-

LAWRENCE G. WASDEN
IDAHO ATTORNEY GENERAL

Brandon Karpen, ISB No. 7956
Edith Pacillo, ISB No. 5430
Deputy Attorneys General, Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Telephone No. [phone]
Facsimile No. [phone]
[e-mail]

Scott Zanzig, ISB No. 9361
Deputy Attorney General, Civil Litigation Division
945 West Jefferson Street, 2nd Floor
P.O. Box 83720
Boise, Idaho 83720-0010
Telephone No. [phone]
Facsimile No. [phone]
[e-mail]

Attorneys for Defendants

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

FRANKLIN ENERGY STORAGE ONE, LLC,
FRANKLIN ENERGY STORAGE TWO, LLC,
FRANKLIN ENERGY STORAGE THREE, LLC,
FRANKLIN ENERGY STORAGE FOUR, LLC,

Plaintiffs,

vs.

PAUL KJELLANDER, KRISTINE RAPER, AND
ERIC ANDERSON, in their official capacity as
Commissioners of the IDAHO PUBLIC UTILITIES
COMMISSION.

Defendants.

Case No. 1:18-cv-00236-REB

DEFENDANTS’ RE
’
TO DEFENDANTS’ MOTION

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Defendants Paul Kjellander, Kristine Raper, and Eric Anderson, in their official capacities
as Commissioners of the Idaho Public Utilities Commission (collectively “Defendants”), through
counsel reply as follows to Plaintiffs’ Response to Defendants’ Motion to Dismiss or, in the
alternative, Cross-Motion for Summary Judgment. Briefly, Plaintiffs’ Amended Complaint must
be dismissed with prejudice because this Court lacks subject matter jurisdiction, Plaintiffs’ claims
are time-barred, and the Amended Complaint is facially implausible with no legal or factual
support. Plaintiffs’ entire case is based on a specious claim that Defendants determined Plaintiffs’
QF status, which is indisputably false.
SUMMARY OF ISSUES AND ANSWERS
1. Did Defendants challenge Plaintiffs’ self-certification as “qualifying facilities”
under PURPA?
Answer: No. Defendants accepted Plaintiffs’ self-certification of QF status as
battery QFs.

2. Does the Court have subject matter jurisdiction?
Answer: No. The Idaho Supreme Court has exclusive subject matter jurisdiction
over the matters raised in Plaintiffs’ Complaint, which challenges the Idaho Public
Utilities Commission’s determination of the duration, pricing and other terms of
the power purchase agreement for which Plaintiffs are eligible under PURPA.

3. What statute of limitations applies?
Answer: Idaho Code § 61-627 and Idaho App. R. 14 required Plaintiffs to seek
judicial review in the Idaho Supreme Court within 42 days after the PUC denied
the Plaintiffs’ request for reconsideration.

ARGUMENT
1. Whether Plaintiffs are Battery QFs Was Never at Issue or Decided by the Public
Utilities Commission (“PUC”)

There is no dispute that FERC has exclusive jurisdiction to determine QF status.
Nonetheless, Plaintiffs’ parsing of Defendants’ ordering language results in what it calls “active
and blatant determination of the QF status of the Franklin projects.” Plaintiffs’ Reply, Dkt 46 at 2.
A plain and simple reading of the PUC’s order belies Plaintiffs’ attempt to re-characterize the
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decision. Plaintiffs offer a moving target, claiming on one hand that Defendants did not accept
Plaintiffs self-certification, while conceding on the other hand that Defendants accepted the self-
certification, but improperly evaluated the QF when determining what contract terms were
appropriate.
On July 13, 2017, the PUC issued Order No. 33785. Therein, Defendants stressed that
“[t]he battery storage facilities’ QF status is a matter within FERC’s jurisdiction and is not at issue
in this case.” Answer, Exhibit 6. Defendants also exercised their discretion as allowed by FERC’s
PURPA regulations (18 C.F.R. § 292.304(c)(2)), to find that the primary energy source is solar
and the capacities of Plaintiffs’ facilities exceed the 100 kW eligibility cap for published rates. See
Defendants’ Motion at 14 (Dkt. 42-1). Defendants thus determined that Plaintiffs were entitled to
two-year contracts with rates to be negotiated with Idaho Power using Idaho’s IRP-based avoided
cost method.
On August 3, 2017, Plaintiffs petitioned the PUC for reconsideration. Plaintiffs’ sole point
of error was, and continues to be, that Defendants improperly determined Plaintiffs’ QF status. On
August 29, 2017, Defendants issued Order No. 33858 denying reconsideration. Defendants again
explained:
[Plaintiffs] assert[] that, contrary to Indep. Energy Producers, we determined the
QF status of battery storage facilities in the Final Order. We did not. [Plaintiffs’]
mischaracterization of our Final Order is a frivolous effort to contrive a legal basis
for reconsideration

(Answer, Exhibit 7). The question before the PUC was never QF status. Rather, it was simply:
what contract terms (duration and rates) apply to Franklin’s QFs? Defendants fully accepted
Plaintiffs’ self-certification of QF status, and merely resolved a dispute between Idaho Power and
Plaintiffs of what contract length and rates should apply. In determining these issues, Defendants
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exercised their discretion to implement FERC’s § 210(a) rules well within the parameters set by
federal law.
a. Defendants applied Luz Dev. And Fin. Corp., 51 FERC ¶ 61,078 to
decide what contract terms should apply to Plaintiffs’ battery QFs.

In Luz, FERC considered battery storage QFs and provided the following guidance:
[T]he primary energy source of the battery system is not the electrochemical
reaction. Rather, it is the electric energy which is utilized to initiate that reaction,
for without that energy, the storage facility could not store or produce the electric
energy which is to be delivered at some later time. Since this energy is the primary
energy source of the facility, it is necessary to look to the source of this energy as
the ultimate primary energy source of the facility.

Luz Dev. & Fin. Corp., 51 FERC ¶ 61,078, at 61,171 (1990) (emphasis supplied). Under PURPA,
the PUC, not FERC, is the appropriate forum to establish avoided cost rates, set rate eligibility,
review and approve contracts, and resolve disputes between QFs and electric utilities. I.C. §§ 61-
502, 61-503; see also, Idaho Power Co. v. Idaho Pub. Utils. Comm’n, 155 Idaho 780 at 786-89;
A.W. Brown Co., Inc. v. Idaho Power Co., 121 Idaho 812, 816 (1992). Specific to this case, the
PUC also has the authority under FERC’s PURPA regulations (18 C.F.R. § 292.304(c)(2)) to
determine whether and to what extent to make standard rates (or “published rates” as they are
termed in the underlying PUC decision), available to facilities with nameplate ratings that exceed
100 Kw. Consistent with this authority, the PUC has implemented PURPA through a case-by-
case analysis. Rosebud Enters. Inc. v. Idaho Pub. Utils. Comm’n, 128 Idaho 609, 615 (1996).
Contrary to Plaintiffs’ assertion, in deciding what contract terms apply between a utility and a QF,
the PUC is not required to ignore the QF’s actual characteristics. Rather, the PUC can, and did,
look to the QF’s description of itself before FERC in deciding what contract terms should apply
to the power being sold.
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In this case, Defendants looked to Luz to guide their evaluation of what contract terms
apply. In so doing, Defendants: (1) accepted Plaintiffs’ self-certification of battery QF status; and
(2) looked to the primary source of energy supplying Plaintiffs’ batteries to determine what rates
apply. Because Plaintiffs’ primary (and only) claimed source of energy was solar, Defendants
found that the contract terms and rates applicable to solar QFs were appropriately applied to
Plaintiffs’ facilities.
It’s true that, because Plaintiffs operate “battery QFs,” they would deliver solar energy
stored in batteries, and not directly from the solar panels that generated that energy as would a
more typical QF that sells solar power to a utility (i.e., a standard “solar QF”). But Plaintiffs step
beyond this to claim Defendants found the primary energy source is the QF. This is simply not
true:
This Commission did not find that the primary energy source behind a battery is
the QF, nor did we assert that Luz stands for such a proposition. In the Final Order,
we explicitly recognized that “battery storage facilities’ QF status is a matter within
FERC’s jurisdiction” and we acknowledged the self-certifications of [Plaintiffs’]
QFs. Final Order No. 33785 at 3, 10-11. Consistent with FERC’s analysis in Luz,
we looked to the primary energy source of [Plaintiffs’] battery storage QFs to
determine the projects’ eligibility to particular avoided cost rates and contract
terms.

Answer, Exhibit 7. The plain language of the PUC’s orders speaks for itself. Defendants did not
determine Plaintiffs’ QF status. They determined which rates and terms should apply to the
Plaintiffs QF in their contracts with Idaho Power. Defendants would engage in a similar analysis
when deciding what contract terms should apply to a battery QF fed by wind power, water power,
or some other source. The PUC would scrutinize the battery QF, decide where its energy comes
from, and decides contract length and rates based on that analysis. The PUC indisputably has the
responsibility and authority to make such determinations.
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Finally, Plaintiffs incorrectly claim that “[a]ccording to the IPUC, an energy storage QF
using solar energy for 51% of its energy inputs will be deemed a solar QF for PURPA
implementation purposes. However, energy storage facilities, such as the Franklin QFs, have the
ability, and are specifically allowed by FERC, to vary the sources of renewable energy inputs.”
Plaintiffs’ Reply, Dkt. 46 at 8. This hypothetical set of facts was not at issue before the PUC and
the PUC made no ruling with respect to them. In this case, solar energy was Plaintiffs’ primary
and only claimed generation source.
2. This Court Lacks Subject Matter Jurisdiction
Despite Plaintiffs’ strenuous and strained attempt at rhetorical re-characterization, their
claim is plainly a challenge to the Defendants’ order determining contract terms. This is an as-
applied claim that is properly rooted in state courts. While Plaintiffs claim Defendants’ determined
their QF status, the reality is that Plaintiffs simply do not like the contract terms for which they are
eligible.
Even assuming, for the sake of argument, that Plaintiffs had a cognizable grievance with
the Defendants determination concerning the contract terms for which Plaintiffs’ battery QFs are
eligible, that grievance would have to be redressed through state court appellate review. See 16
U.S.C. § 824a–3(g), section 210(g) of PURPA. Section 824a-3(g)) makes clear that applications
of PURPA rules — such as Defendants’ ruling that Plaintiffs seek to attack with its complaint —
must be heard in state court. The federal courts lack jurisdiction over such claims. See, e.g., Exelon
Wind 1, LLC v. Nelson, 766 F.3d 380, 388-391 (5th Cir. 2014).
Section 210 of PURPA creates “an overlapping scheme of federal and state judicial review
of state regulatory actions taken pursuant to PURPA.” Allco Renewable Energy v. Mass. Elec. Co.,
875 F.3d 64, 67 (1st Cir. 2017). Section 210 limits actions by a QF in federal court to
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implementation challenges, 16 U.S.C. § 824a-3(h)(2)(B). Claims by QF relating to how a state or
utility executes its responsibilities under PURPA are defined as “as-applied challenges,” and must
be brought in state court. 16 U.S.C. § 824a-3(g). See Snow Mountain Pine Co. v. CP National
Corp., FERC Docket No. EL84–25–000, issued March 19, 1985; See also, Portland General
Electric Co. v. Federal Energy Regulatory Comm’n, 854 F.3d 692, 698 (D.C. Cir. 2017)(stating,
“State-based adjudication serves as the mainstay for enforcing PURPA rights [,]” and “the statute
channels actions under this subsection into ‘the appropriate State court[.]’”) Here, Plaintiffs
present an as-applied claim.
As-applied claims most commonly involve issues related to whether a specific state
agency’s order properly implements PURPA regulations, or whether a state agency properly
interpreted its own rules. See Exelon, 766 F.3d at 389-91. Further, as-applied claims frequently
question assigned rates under a state’s implementation plan, and whether they are “non-
discriminatory, just and reasonable.” See Greensboro Lumber Co. v. Georgia Power Co., 643
F.Supp. 1345, 1374-75 (N.D. Ga. 1986); Mass. Inst. of Tech. v. Mass. Dept. of Pub. Utils., 941
F.Supp. 233, 236-38 (D. Mass. 1996).
Here, the substance of Plaintiffs’ claim is that Defendants improperly applied the Idaho
PUC’s own PURPA implementation scheme when it determined the contract terms and rates that
apply to Plaintiffs’ facilities. This is a paradigmatic as-applied claim, over which PURPA Section
210(g) vests exclusive jurisdiction in the Idaho Supreme Court.
a. The Eleventh Amendment Bars Plaintiffs’ Complaint

The PUC is an arm of the state protected by the Eleventh Amendment. See Sable Commc'ns
of Cal., Inc. v. Pac. Tel. & Tel. Co, 890 F.2d 184, 191 (9th Cir. 1989); see Edelman v. Jordan, 415
U.S. 651, 662-63 (1974); Niagara Mohawk Power Corp. v. FERC, 162 F. Supp. 2d 107, 143-44
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(N.D.N.Y. 2001); N. Am. Natural Res., Inc. v. Mich. Pub. Serv. Comm’n, 41 F. Supp. 2d 736, 741-
42 (W.D. Mich. 1998), vacated on other grounds in N. Am. Natural Res., Inc. v. Strand, 252 F.3d
808 (6th Cir. 2001). The Eleventh Amendment bars a federal court from directing a state agency
how to conform its conduct to state law. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S.
89, 105-106 (1984) (“[It] is difficult to think of a greater intrusion on state sovereignty than when
a federal court instructs state officials on how to conform their conduct to state law.”)
Plaintiffs allege that Defendants’ actions violate PURPA by usurping FERC’s authority to
determine QF status -a federal function. As Defendants have demonstrated, however, Defendants
did not determine QF status. Instead, Defendants accepted that Plaintiffs were battery QFs and
then decided what contract terms should apply to them (a state function). Because QF contract
terms are a matter of state, not federal, law, the Eleventh Amendment bars Plaintiffs claims. See
New York v. FERC, 535 U.S. 1, 24 (2002); Conn. Light & Power, 324 U.S. 575, 525-26 (1945).
Va. Off. for Prot. & Advocacy v. Stewart, 563 U.S. 247, 254-255 (2011), Ex Parte Young, 209 U.S.
123, 159-160 (1908). Plaintiffs apparently recognized this deficiency when they filed their
Amended Complaint, which replaced the PUC as the Defendant with the individual PUC
Commissioners in their official capacities. It is well settled that even when a suit is commenced
against individual officials, the State has a continuing interest in the litigation whenever state
policies or procedures are at stake. Idaho v. Coeur d’Alene Tribe, 521 U.S. 261, 262 (1997).
Plaintiffs cannot invoke the fiction of Young because the requested relief intrudes upon a clear
state function: the determination of applicable terms of a QF. “The dignity and status of its
statehood allows Idaho to rely on its Eleventh Amendment immunity and to insist upon responding
to these claims in its own courts, which are open to hear and determine the case.” Id.

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3. The Statute of Limitations Bars Plaintiffs’ Complaint
Plaintiffs do not address the merits of Defendants statute of limitations defense. Rather,
they simply allege that because Defendants allegedly exceeded their authority, “any claimed
statute of limitations must fail….” See Response, Dkt. 47 at 9.
PURPA and FERC regulations are silent as to applicable time limitations. Likewise, this
Court should “impose [the] state limitations ‘most closely analogous’ to the federal act in need.”
See New York State Elec. & Gas Corp. v. Saranac Power Partners L.P., 117 F.Supp.2d 211, 246-
47 (N.D. New York 2000) (citing Reed v. United Transp. Union, 488 U.S. 319, 323 (1989)). The
applicable state limitations period is clearly spelled out: Plaintiffs must appeal the PUC’s decisions
within 42 days after the PUC denied their request for reconsideration. See Idaho Appellate Rule
14(b) (“The time for an appeal from such decision, order or award of the [PUC] begins to run when
an application for rehearing is denied.”) See Neal v. Harris, 100 Idaho 348, 350 (1979) (noting
that Idaho Appellate Rule 14 limits the time to appeal PUC decisions).
The PUC’s Final Order on Reconsideration was issued August 29, 2017. Plaintiffs filed
their section 210(h) enforcement action against Defendants with FERC on December 14, 2017,
106 days after the PUC’s Final Order, and its claims with this Court 167 days after FERC rejected
Plaintiffs’ request. Plaintiffs’ claims are, therefore, time-barred.
///

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CONCLUSION
For the foregoing reasons, and those set forth in Defendants’ moving papers, the Court
should dismiss Plaintiffs’ First Amended Complaint in its entirety. It is unsupported by the
uncontested facts, and is beyond the Court’s jurisdiction.

DATED this 14th day of December 2018.

OFFICE OF THE ATTORNEY GENERAL

/s/ Brandon Karpen_______
Brandon Karpen
Deputy Attorney General
Attorney for Defendants
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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the 14th day of December, 2018, I filed the foregoing
electronically through the CM/ECF system, which caused the following parties or counsel to be
served by electronic means, as more fully reflected on the Notice of Electronic Filing:

Peter Richardson, Attorney for Plaintiffs
(email: [e-mail])

Robert C. Huntley, Attorney for Plaintiffs
(email: [e-mail])

Steven B. Anderson, Attorney for Intervenor Idaho Power Company
(email: [e-mail])

Wade L. Woodard, Attorney for Intervenor Idaho Power Company
(email: [e-mail])

RESPECTFULLY SUBMITTED this 14th day of December, 2018.

/s/ Brandon Karpen____________________
Brandon Karpen

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