20140110Augmentation of Record.pdf

DONOVAN E. WALKER
Lead Gounsel
[e-mail]
January 10,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
47 2 W est Wash i ngton Street
Boise, ldaho 83702
Re: Case No. IPC-E-11-15
Grand View PV Solar Two, LLC,
Power Company's Augmentation
Authority
Dear Ms. Jewell:
3tffi*.
An IDACORP Company
vs. ldaho Power Company - ldaho
of Record to Consider New Lega!
On May 29, 2012, counsel for Grand View Solar PV Two, LLC ("Grand View")
filed with the ldaho Public Utilities Commission ("Commission") a request to augment
the record to consider new legal authority with the Federal Energy Regulatory
Commission's ("FERC") Notice of lntent Not to Act and Declaratory Order in
Morgantown Energy Associafes, Docket Nos. EL12-36-000 and QF89-25-008, and City
of New Martinsville, West Virginia, Docket Nos. EL12-48-000 and QF85-541-00, issued
on Apri! 24,2012. Counse! for Grand View filed a copy of FERC's Declaratory Order,
139 FERC fl 61,066.
Subsequent to FERC's April 24,2012, Declaratory Order provided by counsel for
Grand View, the same matter was brought before the United States District Court for the
Southern District of West Virginia as an enforcement action against the Public Service
Commission of West Virginia. Civil Action No. 2:12-cv-6327. On September 30, 2013,
the Federal District Court entered a Memorandum Opinion and Order dismissing the
case. A copy of the Federal District Court's Memorandum Opinion and Order is
attached hereto and provided for the Commission's consideration.
Counsel for Grand View quoted a passage from FERC's non-binding, non-
appealable Declaratory Order stating in part, "To the extent that the West Virginia Order
finds that avoided-cost rates under PURPA also compensate for RECs, the West
Virginia Order is inconsistent with PURPA.' The Federal District Court's Opinion and
Order disagrees stating, "The [West Virginia] Commission Order is consistent with
PURPA . . . ;' See Memorandum Opinion and Order,2013 WL 5462386, pp. 22-26.
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
Jean D. Jewell, Secretary
January 10,2014
Page 2 of 2
The West Virginia Commission's Order was also appealed to the West Virginia
Supreme Court of Appeals, which affirmed the West Virginia Commission's Order in full,
despite FERC's Declaratory Order, as provided to this Commission by counsel for
Grand View, purporting to find the West Virginia Commission in violation of the PURPA.
City of Martinsville v. Public Seruice Com'n of West Virginia,229W.Va. 353, 729 S.E.2d
188 (2012). The Court disagreed with FERC and "concluded that the Commission's
decision is not inconsistent with PURPA but, rather, is a well-reasoned decision based
upon our state law." Memorandum Opinion and Order, p. 9 (Federal Court quoting
West Virginia Supreme Court of Appeals). The Federal District Court stated and
explained its agreement with the decision of the West Virginia Supreme Court of
Appeals in this Memorandum Opinion and Order. See Memorandum Opinion and
Order, p.22.
Grand View filed the FERC Declaratory Order with this Commission stating that
the FERC Order "specifically address [sic] a state commission's legal ability to issue a
ruling on REC ownership" and "Grand View respectfully requests that the ldaho Public
Utilities Commission augment its record and rule on this matter with the attached FERC
order aiding to inform its decision."
Because both the West Virginia Supreme Court of Appeals and the Federal
District Court for the Southern District of West Virginia both reached contrary decisions
to the FERC Declaratory Order provided by counsel for Grand View, ldaho Power
hereby respectfully requests that the record reflect those subsequent decisions as we!!.
West Virginia Supreme Court of Appeals Opinion:
o City of Martinsville v. Public Service Com'n of West Virginia, 229
W.Va. 353, 729 S.E.2d 188 (2012).
Federal District Court for the Southern District of West Virginia Opinion:
o Morgantown Energy Assocrafes v. Public Serylce Com'n of West
Virginia, Case No.2:12-cv-6327, Document No.36, Memorandum Opinion and Order-
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868 (2013).
Copies of both decisions are submitted herewith.
DEW:csb
Enclosures
Donald L. Howell, ll (via e-mail)
Service List
Donovan E. Walker
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 1Ofr day of January 20141 served a true and
correct copy of the LETTER DATED JANUARY 10,2014, TO JEAN D. JEWELL upon
the following named parties by the method indicated below, and addressed to the
following:
Commission Staff
Kristine A. Sasser
Deputy Attomey General
Idaho Public Utilities Commission
472 W est Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
Grand View PV Solar Two, LLC
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27fr Street
Boise, ldaho 83702
Avista Corporation
Michael G. Andrea, Senior Counsel
Avista Corporation
1411 East Mission Avenue - MSC-23
P.O. Box 3727
S pokane, Wash i ngt on 99220 -37 27
Clint Kalich, Manager
Resource Planning and Analysis
Avista Corporation
1411 East Mission Avenue - MSC-7
P.O. Box 3727
S po kane, Wash i ngto n 99220-37 27
X Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email [e-mail]
Hand DeliveredX U.S. Mail
Ovemight Mail
FAXX Email [e-mail]
[e-mail]
_Hand DeliveredX U.S. Mail
_Overnight Mai!
_FAXX Email [e-mail]
Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email [e-mail]
CERTIFICATE OF SERVICE
WestIaw.
729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229 W .Ya. 353,729 S.E.2d 188)
lt
Supreme Court of Appeals of
West Virginia.
CITY OF NEW MARTINSVILLE, Petitioner
v.
The PUBLIC SERVICE COMMISSION OF WEST
VIRGINIA; and Monongahela Power Company and
The Potomac Edison Company, Both Doing
Business as Allegheny Power, Respondents
and
Morgantown Energy Associates, Petitioner
The Public Service Co#issio, of West Virginia;
and Monongahela Power Company and the
Potomac Edison Company, Both Doing Business as
Allegheny Power, Respondents.
Nos. ll-1738, ll-1739.
Submitted April 10, 20 12.
Decided June I1,2012.
Background: Electric generators appealed Public
Service Commission decision that alternative and
renewable energy resource credits attributable to
energy purchases by utilities from the generators
were owned by the utilities during the terms of the
electric energy purchase agreements (EEPA)
between the entities.
Holdings: The Supreme Court of Appeals held that:(l) PSC portfolio standard rules did not apply
retroactively to Public Utility Regulatory Policies
Act (PURPA) EEPAs between utility and generators;
(2) PSC decision was not preempted by PURPA;
(3) PSC could consider its statutory charge to keep
utility rates fair and reasonable; and(4) PSC had jurisdiction and authority to deem
generator's cogeneration facility certified to
generate alternative and renewable energy resource
credits.
Page I of 16
Page I
Affirmed.
West Headnotes
ll I Public Utilities 317a t$l94
3l7A Public Utilities
3lTAIII Public Service Commissions or Boards
3l TAIII(C) Judicial Review or Intervention
3l7Akl88 Appeal from Orders of
Commission 3l7Akl94 k. Review and
determination in general. Most Cited Cases
Standard for review of an order of the Public
Service Commission may be summarized as
follows: (l) whether the Commission exceeded its
statutory jurisdiction and powers, (2) whether there
is adequate evidence to support the Commission's
findings, and, (3) whether the substantive result of
the Commission's order is proper.
l2l Public Utilities 317a S194
3l7A Public utilities
3 I TAIII Public Service Commissions or Boards
3lTAIII(C) Judicial Review or Intervention3l7Akl88 Appeal from Orders of
Commission 3l71.kl94 k. Review and
determination in general. Most Cited Cases
An order of the Public Service Commission
(PSC) based upon its finding of facts will not be
disturbed unless such finding is contrary to the
evidence, or is without evidence to support it, or is
arbitrary, or results from a misapplication of legal
principles.
[3] Electricity las Fll(a)
145 Electricity
l45k I I Supply of Electricity in General
l45kl l(4) k. Regulation of supply and use.
Most Cited Cases
Public Service Commission's (PSC) portfolio
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http,,llweb2.westlaw.com/print/printstream.aspx?stid=oh7b49b77176-895e-40a6-b57a-923... lll0l20l4
729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d f88)
standard rules did not apply retroactively to Public
Utility Regulatory Policies Act (PURPA) electric
energy purchase agreements (EEPA) between
utility and electric generators that were executed
long before the creation of credits in West Virginia
and before the widespread creation of credits in
other jurisdictions; there was no indication, either
expressly or impliedly, that the portfolio standard
rules were meant to be applied retroactively. Public
Utility Regulatory Policies Act of 1978, S 2 et seq.,
16 U.S.C.A. $ 2601 et seq.
[4] Electricity 1a5 Sl
145 Electricity
l45kl k. Regulation in
ordinances. Most Cited Cases
States 360 €=f8.73
360 States
statutes and
360I Political Status and Relations
360I(8) Federal Supremacy; Preemption
360k18.73 k. Public utilities. Most Cited
Cases
Public Utility Regulatory Policies Act
(PURPA) did not preempt Public Service
Commission (PSC) decision that alternative and
renewable energy resource credits attributable to
energy purchases by utilities from electric
generators through electric enerry purchase
agreements (EEPA) were owned by the utilities
during the terms of the electric energy purchase
agreements between the generators; PSC only
interpreted the EEPAs to evaluate the utilities'
obligations under them and their ownership of the
electricity at the time it is generated but did not
interfere with the generators' federally-granted rightto be exempt from certain utility-type state
regulation. Public Utility Regulatory Policies Act
of 1978, $ 2 et seq., 16 U.S.C.A. $ 2601 et seq.
[5] Electricity 145 (Fll(3)
145 Electricity
l45kl I Supply of Electricity in General
Page2 of 16
145kll(3) k. Contracts for supply
Most Cited Cases
Public Service Commission (PSC) decision that
alternative and renewable enerry resource credits
attributable to enerry purchases by utilities from
electric generators through electric energy purchase
agreements (EEPA) were owned by the utilities
during the terms of the electric enerry purchase
agreements between the generators did not result in
violation of general contract law principles through
failure of generators to receive consideration for the
credits, where credits were created after the
generation of electricity and, therefore, were owned
by the utilities.
16l Constitutional Law 92 e-.4B71
92 Constitutional Law
92XXVII Due Process
92XXVII(G) Particular Issues and
92XXVI(G)17 Carriers and Public Utilities
92k4371 k. Gas and electricity. Most
Cited Cases
Electricity 145 Fll(4)
145 Elecricity
145k1 I Supply of Electricity in General
l45kll(4) k. Regulation of supply and use.
Most Cited Cases
Public Service Commission (PSC) decision that
alternative and renewable enerry resource credits
attributable to energy purchases by utilities from
electric generators through electric energy purchase
agreements (EEPA) were owned by the utilities did
not result in the taking of generators' property
without due process of law; PSC determined that
the credits were owned by the utilities in the first
instance, and, thus, no property owned by the
generators was taken. U.S.C.A. Const.Amend. 14.
[7] Electricity 145 tPl1(4)
145 Electricity
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o/67b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 3 of l6
Page 3729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
l45kl I Supply of Electricity in General
l45kll(4) k. Regulation of supply and use.
Most Cited CasesOrder by Federal Energy Regulatory
Commission (FERC) that, while certain statementsin Public Service Commission's (PSC) decision
were inconsistent witlt the requirements of Public
Utility Regulatory Policies Act (PURPA), it would
not initiate an enforcement action had no bearing
upon appeal by electric generators from PSC
decision that alternative and renewable energy
resource credits attributable to energy purchases by
utilities from the generators were owned by the
utilities during the terms of the electric energy
purchase agreements (EEPA) between the entities;
FERC order announcing its interpretation of
PURPA or implementing regulations was of no
legal moment unless and until judicial adoption and
PSC decision was well-reasoned and based upon
state law.
[8] Electricity 145 Q-I1.3(l)
145 Electricity
l45kl1.3 Regulation of Charges
145k11.3(l) k. In general. Most Cited Cases
Public Service Commission (PSC) could
consider its statutory charge to keep utility rates
fair and reasonable in reaching its decision that
alternative and renewable energy resource credits
attributable to energy purchases by utilities from
electric generators through electric energy purchase
agreements (EEPA) were owned by the utilities
during the terms of the electric energy purchase
agreements between the generators did not result in
violation of general contract law principles through
failure of generators to receive consideration for the
credits. West's Ann. W.Va.C ode, 24-2F 2(7 ).
[9] Electricity 145 H.4
145 Electricity
145k8.4 k. Generating facilities in general. Most
Cited Cases
Public Service Commission (PSC) had
jurisdiction and authority to deem the electric
generator's cogeneration facility certified to
generate alternative and renewable energy resource
credits, which were purchased by utilities, under
the portfolio standard rules; credits were owned by
the utilities, deeming the project certified was the
only mechanism by which the utilities could receive
certification that the energy they were purchasing
satisfied the requirements of the Alternative and
Renewable Energy Portfolio Act (AREPA),
portfolio standard rules provided for waiver thereof
upon a showing of hardship or unusual difficulty in
complying with any one rule, and a hardship on
ratepayers would have occurred if the qualiffing
credits owned by the utilities were not certified.
West's Ann.W.Va.Code, 242F-l et seq.; W.Va.
Code St. R., $ 150-34-1.5a.
*{'190 *355 Syllabus by the Court
1. "The detailed standard for our review of an
order of the Public Service Commission contained
in Syllabus Point 2 of Monongahela Power Co. v.
Public Service Commission, 166 W.Va. 423, 276
S.E.2d 179 (1981), may be summarized as follows:(l) whether the Commission exceeded its statutory
jurisdiction and powers; (2) whether there is
adequate evidence to support the Commission's
findings; and, (3) whether the substantive result of
the Commission's order is proper." Syllabus Pointl, Central West Virginia Refuse, Inc. v. Public
Service Commission of West Virginia, 190 W.Va.
416,438 S.E.2d s96 (1993).
2. " ' "[A]n order of the public service
commission based upon its finding of facts will not
be disturbed unless such finding is contrary to the
evidence, or is without evidence to support it, or is
arbitrary, or results from a misapplication of legal
principles." United Fuel Gas Compony v. The
Public Service Commission, 143 W.Va. 33, 199
S.E.2d 1 (1957) l.' Syllabus Point 5, in part, Boggs
v. Public Service Comm'n, 154 W.Va. 146, 174
S.E.2d 331 (1970)." Syllabus Point l, Broadmoor/
Timberline Apartments v. Public Service
Commission of l{est Virginia, 180 W.Va. 387,376
s.E.2d 593 (1988).
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 4 of l6
729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,lU
(Cite as: 229W.Ya.353,729 S.E.2d 188)
Robert R. Rodecker, Erq., Charleston, WV,
Attomey for the City of New Martinsville.
E. Dandridge McDonald, Esq., Ancil G. Ramey,
Esq., Steptoe & Johnson PLLC, Charleston, WV,
Attorneys for Morgantown Energy Associates.
Richard E. Hitt, Esq., Charleston, WV, Attorney for
the Public Service Commission.
Christopher L. Callas, Esq., Stephen N. Chambers,
Esq., Elizabeth A. Amandus, Esq., Jackson KellyPLLC, Charleston, WV, Attomeys for
Monongahela Power Company and The Potomac
Edison Company.
PERCURIAM:
This case is before this Court upon appeal of a
final order of the Public Service Commission of
West Virginia (hereinafter "Commission") FNr
entered on November 22,201l, ruling upon a Joint
Petition for Declaratory Order filed by the
respondents herein, Monongahela Power Company
and the Potomac Edison Company, both doing
business as Allegheny Power (hereinafter referredto separately as "Mon Power" and "PE, or
collectively as "the Utilities"). In its final order, the
Commission held that the alternative and renewable
energy resource credits attributable to energy
purchases by the Utilities from the petitioners
herein, the City of New Martinsville and
Morgantown Energy Associates (hereinafter
referred to separately as o'the City" and "MEA" or
collectively as "the Generators") are owned by the
Utilities during the terms of the Electric Energy
Purchase Agreements between the entities.
FNl. Pursuant to W. Va.Code $ 24-5-l(1979) (Repl.Vol.2008), "Any party
feeling aggrieved by the entry of a final
order by the [C]ommission, affecting him
or it, may present a petition in writing to
the Supreme Court of Appeals, or to ajudge thereof in vacation, within thirly
days after the entry of such order, praying
Page 4
forthe suspension ofsuch final order."
In this appeal, the Generators contend that the
Commission erred in its ruling and that the energy
resource credits are owned by them.rN2 MEA also
argues that the Commission*356 **191 erred by
holding that it would deem MEA's Morgantown
project as a certified facility under the Alternative
and Renewable Energy Portfolio Act, W. Va.Code
$$ 24-2F-l to - 12, for the purpose of generating
energy resource credits upon the submission of
sufficient evidence by the Utilities.
FN2. The Generators filed separate
petitions for appeal, and this Court
assigned separate case numbers thereto.
Because the Generators are appealing the
s:Ime order, the appeals have been
considered together for purposes of oral
argument and decision.
This Court has before it the petitions for
appeal, the responses thereto including the
Statement of Reasons filed by the Commission, and
the appendices filed by the parties. For the reasons
set forth below, the final order of the Commission
is affirmed.
I. FACTS
In response to the energy crisis of the 1970s,
Congress amended the Federal Power Act, 16
U.S.C. $ 791 et seq., and enacted the Public Utility
Regulatory Policies Act of 1978, Pub.L. No.
95417, 92 Stat. 3ll7 (1978) (hereinafter*PURPA"). The purpose of PURPA was to reduce
the nation's electric utilities' dependence on foreign
fossil fuels by promoting the development and use
of alterative sources of energy. Id. To that end,
PURPA created a new class of electric generating
facilities known as quali$ing facilities or o'QFs"
that include congeneration facilities and small
power producers. A cogeneration facility produces
both electricity and some other form of useful
energy such as steam or heat, whereas a small
power production facility produces electric energy
using biomass, waste or renewable resources. 16
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:Yo7b49b77176-895e-40a6-b57a-923... ll10/2014
Page 5 of l6
Page 5729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
u.s.c. $ 7e6(r8xA) & (r7xA).
Pursuant to PURPA, an electric utility whose
service territory includes a QF is required to
purchase power from the QF at the utility's avoided
cost-the incremental energy and capacity costs
that the utility would have incurred from generating
the electricity or purchasing the electricity from
another source but for the purchase of the
elechicity from the QF. l8 C.F.R. $ 292.101(bX6).
The contracts between electric utilities and QFs
setting forth, inter alia, the avoided cost, are knownas Electric Energy Purchase Agreements
(hereinafter "EEPAs").
In 2009, the West Virginia Legislature enacted
the Alternative and Renewable Energy Portfolio
Act (hereinafter "Portfolio Act"), W. Va.Code $$24-2F-l to - 12. The Portfolio Act requires that
electric utilities acquire or generate a certain
percentage of their electric supply from specified
energy sources. In order to establish, verifu and
monitor the generation of electricity from
alternative and renewable energy resource facilities,
the Portfolio Act created a system of tradable
instruments known as alternative and renewable
energy resource credits (hereinafter "credits"). W.
Va.Code 24-2F-3(4) (Repl.Vol.2008 &
Supp.20ll). Depending upon the type of facility,
one, two or three credits are created by each
megawatt hour of electricity generated. 150 C.S.R.
$ 34A. Pursuant to W. Va.Code S 2+2F-5(d)
(Repl.Vol.2008 & Supp.20l l):
(l) For the period beginning January 1,2015,
and ending December 31, 2019, an electric utility
shall each year own credits in an amount equal to
at least ten percent of the electric energy sold by
the electric utility to retail customers in this state
in the preceding calendar year; and
(2) For the period beginning January 1,2020,
and ending December 31,2024, an electric utility
shall each year own credits in an amount equal to
at least fifteen percent of the electric energy sold
by the electric utility to retail customers in this
state in the preceding calendar year.
Subsequently, "[o]n and after January 1,2025,
an electric utility shall each year own credits in an
amount equal to at least twenty-five percent of the
electric energy sold by the electric utility to retail
customers in this state in the preceding calendar
year." W. Va.Code $ 2a-2F-5(c).
The parties in this case executed EEPAs in the
1980s, long before the creation of credits in West
Virginia and before the widespread creation of
credits in other jurisdictions. Thus, the EEPAs are
silent on the issue of ownership of and entitlementto credits generated from QFs. The three QFs
involved in this case are: (l) the Hannibal project, a
run-of-river hydropower facility located on the
Ohio River in New Martinsville, West Virginia, and
owned by the City; (2) the Grant Town project, a
generation facility using coal and waste coal
located in Grant Town, West Virginia, and ownedby American*357 r"'192 Bituminous Power
Partners, L.P. (hereinafter "AmBit"); nNr and (3)
the Morgantown project, a cogeneration facility
using coal and waste coal located in Morgantown,
West Virginia, and owned by MEA. Hannibal and
Grant Town have been certified as qualified energy
resources to generate credits under the
Commission's Rules Governing Alternative and
Renewable Energy Portfolio Standard (hereinafter
referred to as "Portfolio Standard Rules"),150
C.S.R. $ 34 (201l).FNa While MEA's Morgantown
project may qualifo for certification as a qualified
energy resource under the Portfolio Standard Rules,it has not sought such certification and indicatesthat it does not intend to do s6.FNs The
Morgantown project is certihed to generate credits
under Pennsylvania law. The terms and conditions
of the EEPAs between the Utilities and the QFs
vary.t'u Each EEPA contains a different purchase
price based on the parties' negotiations and
determination of avoided costs at the time of the
contract negotiations or Commission adjudication. rN7
FN3. The Commission invited AmBit to
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/printiprintstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0/2014
Page 6 of 16
Page 6729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
participate as a party in this proceeding by
order entered on May l, 2011. AmBit
elected to not participate and is not a party
herein. According to the Utilities, Ambit
has ceded its right to the PURPA credits
associated with the generation from the
Grant Town project; however, the parties'
"Letter of Understanding" on this issue
provides that if the Commission
determines that QFs are entitled to own thePURPA credits, the "Letter of
Understanding" will be terminated.
Consequently, the Utilities acknowledge
that this Court's decision also affects the
PURPA credits generated by the Grant
Town project.
FN4. The Legislature directed the
Commission to promulgate rules to
effectuate the purposes of the PortfolioAct. See W. Va.Code S 24-2F-12
(Repl.Vol.2008 & Supp.2O I 1 ).
FN5. By Commission order dated July 20,
2011, the Hannibal project was certified asa qualified energy resource to generate
credits pursuant to the Portfolio Standard
Rules. As a renewable energy resource
facility, the Hannibal project creates two
credits for every megawatt hour of
electricity generated. See 150 C.S.R. $34A. According to the Utilities, the
Morgantown project would be entitled to
one credit for each megawatt of electricity
generated if it were certified.
FN6. The EEPAs were executed by the
QFs and Mon Power, but the Commission
now regulates the combined West Virginia
operations of Mon Power and PE as a
single entity, including the combined costs
and rates.
FN7. The purchase prices for the Hannibal
and Morgantown projects were arrived out
of negotiations between the parties; the
Grant Town purchase price was established
by the Commission.
On February 23, 2011, the Utilities sought a
declaratory order from the Commission requesting
that the Commission hold that the Utilities own the
credits from the QFs as well as any other
environmental attributes from the QFs during the
terms of the EEPAs.rNs On March 4, 2011, the
City filed a Petition to Intervene and Response in
Opposition to the Utilities' petition for a declaratory
order. On April 19, 2011, the Commission granted
the City's motion to intervene and also named MEA
as a respondent in the case. The Commission also
entered an order prohibiting MEA and the City
from selling or transferring or committing to sell or
transfer any credits generated from their QFs
pending the Commission's ruling.FNe On April 22,
201 1, the Utilities requested leave to amend their
Joint Petition, asking that the Commission compel
MEA to seek certification of the Morgantown
project so that it is qualified to generate credits
under the Portfolio Act. Alternatively, the Utilities
asked that the Commission use its inherent
authority under the Portfolio Act to certiry the
Morgantown project as qualified to generate credits
if the Commission concluded that the credits were
owned by the Utilities and the QF declined to
obtain certification. Evidentiary hearings were then
scheduled and held *358 **193 on August 25, ard
26,2011. On November 22,201l, the Commission
entered its order ruling in favor of the Utilities.
FN8. The EEPA for the Hannibal project
was approved in 1986 and extends until
2034. The EEPA for the Grant Town
project was approved in 1988 and extends
to 2036. The EEPA for the Morgantown
project was approved in 1989 and extends
until2027.
FN9. Various regional entities serve as
"bankso' that keep track of the credits. The
entity that services West Virginia and
Pennsylvania, as well as some other states,is PJM-Environmental Information
c:^2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o27b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 7 of l6
Page 7729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229 W .Y a. 353, 729 S.E.2d 188)
Services, Inc. (hereinafter "PJM"). The
system that PJM uses to account for the
credits is the Generation Attribute
Tracking System. Once a credit created by
the generation of a particular megawatt-
hour of electricity is redeemed in a state, it
cannot be used to meet another's state's
alternative energy, advanced energy,
renewable energy or similar energy
portfolio standard. W. Va.Code $Z4-2F-5(e). In other words, double-
counting of credits is prohibited.
In its November 22, 2011, order, the
Commission concluded that the Utilities own the
credits associated with the generation of electricity
from the QFs because of three separate but
interrelated bases. The Commission's order states:
(i) consistent with the Act, the utility that is
obligated to purchase PURPA generation (which
also qualifies as eligible generation under the
Portfolio Act) should own the credits that exist
for the purpose of measuring utility compliance
with the portfolio standard, (ii) Mon Power and
PE's ownership of the credits is based on their
ownership of the qualifying energy as it is
generated, and (iii) under the circumstances of
the case in which the Portfolio Act and the
EEPAs do not contain provisions that specifu
credit ownership by the utility or the QF, it is
appropriate to consider equity and fairness and
the impact of our decision on utility rates in
determining credit ownership under the EEPAs
based on the provisions of ll/.Va.Code 24-2F-l
et seq. that require that the costs associated with
the Act are reasonable and the provisions of
Chapter 24 of the West Virginia Codethat require
the Commission to ensure fair and reasonable
rates and to balance the interests of the current
and future utility customers, the utilities, and the
state economy.
With respect to the Utilities' request that the
Morgantown project be certified under the Portfolio
Act to generate credits, the order states that the
Commission
will consider the relief requested in the [Utilities']
amended Joint Petition and determine whether
the Morgantown project may be certified as a
qualified energy resource to generate credits
provided that adequate information is provided to
support certification of the facilities under the
Commission Portfolio Standard Rules. We
determine that allowing qualifying credits that
are owned by the [Utilities] to not be certified
would work a hardship on ratepayers and that due
to the unusual difficulty involved if the [Utilities]
would seek or expect cooperation from the MEAin obtaining certification of the [Morgantownprojectl it is reasonable to allow the [Utilities] to
seek certification of the credits they own as a
result of the Morgantown EEPA.
On December 15,201l, MEA filed a Motion to
Stay the November 22, 2011, order with the
Commission. The followinB day, the City filed its
response supporting MEA's motion to stay. By
order entered on December 20, 2011, the
Commission granted the Motion to Stay. MEA and
the City filed their separate petitions for appeal
with this Court on December 22,2011.
II. STANDARD OF REVIEW
[][2] In Syllabus Point I of Central West
Virginia Refuse, Inc. v. Public Service Commission
of West Virginia, 190 W.Va. 416, 438 S.E.2d 596
(1993), this Court explained:
The detailed standard for our review of an
order of the Public Service Commission
contained in Syllabus Point 2 of Monongahela
Power Co. v. Public Service Commission, 166
W.Ya. 423, 276 S.E.2d 179 (1981), may be
summarized as follows: (l) whether the
Commission exceeded its statutory jurisdiction
and powers; (2) whether there is adequate
evidence to support the Commission's findings;
and, (3) whether the substantive result of the
Commission's order is proper.
This Court has also stated that
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid=o/o7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 8 of l6
Page 8729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P2'1,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
'o oan order of the public service commission
based upon its finding of facts will not be
disturbed unless such finding is contrary to the
evidence, or is without evidence to support it, or
is arbitrary, or results from a misapplication of
legal principles.' United Fuel Gas Company v.
The Public Service Commission, 143 W.Va. 33,
[99 S.E.2d I (1957) ]." Syllabus Point 5, in part,
Boggs v. Public Service Comm'n, 154 W.Va. 146,
r74S.E.2d33l (r970).
Syllabus Point l, Broadmoor/Timberline
Apartments v. Public Service Commission of West
Virginia, 180 W.Va. 387, 376 S.E.2d 593 (1988).
With these standards in mind, the issues presented
in these appeals will be considered.
**194 *359 III. DISCUSSION
As noted, the City and MEA filed separate
petitions for appeal with this Court. Both of them,
however, challenge the Commission's decision
declaring that the credits at issue are owned by the
Utilities. While some of the arguments presented on
this issue overlap to a significant extent, each party
has also made distinct arguments specific to its
particular circumstances. In the analysis that
follows, the party or parties making each argument
will be identified. Also, as previously noted, the
second assignment of error only relates to MEA and
concerns whether the Commission has jurisdiction
and authority to deem MEA's Morgantown project
certified under the Portfolio Standard Rules. Each
assignment of error will be considered in turn below.
A. Ownership of the Credits
Traditionally, state utility commissions had no
authority with regard to wholesale power contracts.
Rather, exclusive jurisdiction over such contracts
belonged to the Federal Energy Regulatory
Commission (hereinafter *FERC") under the
Federal Power Act, 16 U.S.C. 791 et seq. With the
enactment of PURPA, however, state utility
commissions have been authorized to initially set
the avoided cost rates for qualifing PURPA
projects. Once the state commission approves the
EEPA though, it is generally without jurisdiction to
modiS the terms of the agreement. 16 U.S.C. S
824a-3. Pursuant to regulations promulgated by
FERC, any QF is "exempted ... from State law or
regulations respecting: (i) the rates of electric
utilities; and (ii) the financial and organizational
regulation of electric utilities." l8 C.F.R. $
292.602(c).
With the enactment of portfolio standard laws
in several states, which generally require electric
utilities to acquire or generate a certain percentage
of their electric supply from specified energy
resources, and the creation of credits as a means of
monitoring compliance therewith, the question of
credit ownership under PURPA contracts arose. In
2003, FERC issued a decision in American
Ref-Fuel Co., Covanta Energt Group, Montenay
Power Corp. and lVheelabrator Tech., Inc., 105
FERC tT 61004 (October l, 2003), declaring that the
issue of credit ownership under PURPA contracts is
a matter to be decided by the states based on state
law.
ln American Ref-Fuel, FERC granted a petition
for declaratory judgment filed by the owners of
several QFs across the United States "to the extent
that they ask [FERC] to declare that contracts for
the sale of QF capacity and energy entered into
pursuant to PURPA do not convey [credits] to the
purchasing utility (absent express provision in a
contract to the contrary)." 105 FERC at 61005. In
so holding, FERC explained:
What is relevant here is that the [credits] are
created by the States. They exist outside the
confines of PURPA. PURPA thus does not
address the ownership of [credits]. And the
contracts for sales of QF capacity and energy,
entered into pursuant to PURPA, likewise do not
control the ownership of the [credits] (absent an
express provision in the contract). States, in
creating [credits] have the power to determine
who owns the [credits] in the initial instance, and
how they may be sold or traded; it is not an issue
controlled by PURPA.
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/printlpintstream.aspx?stid:Yo7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 9 of l6
Page 9729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
105 FERC at 61007. Thus, FERC concluded
that "[w]hile a state may decide that a sale of power
at wholesale automatically transfers ownership of
the state-created [credits], that requirement must
find its authority in state law, not PURPA." /d.
In this case, the City and MEA argue that our
state law resolves the issue of credit ownership in
favor of the QFs and that the Commission's
decision to the contrary must be reversed.
l. Applicability of the Commission's
Portfolio Standard Rules. First, both the City and
MEA contend that the Commission erred by not
applying the Portfolio Standard Rules which it
promulgated and which provide that the credits are
owned by the Generators. The City primarily argues
that Rule 5.6 of the Portfolio Standard Rules FNro
specifuing*360 **195 that credits can be sold
bundled or unbundled with the energy necessarily
means that the generator owns the credits
associated with the energy it produces. MEA
maintains that Portfolio Standard Rule 5.2 FNt'
which permits non-utility generators to be certifiedto generate credits constitutes an affirmative,
knowing determination on the part of the
Commission that non-utility generators are to be
awarded credits automatically and in every
instance. In support of their arguments, the
Generators note that this Court has stated that "[a]n
administrative agency is, of course, obligated to
'follow and apply its rules and regulations in
existence at the time of agency action.' " In re Tax
Assessment Agairat American Bituminous Power
Partners, L.P., 208 W.Va. 250, 256, 539 S.E.2d
757,763 (2000) (quoting Appalachian Power Co. v.
State Tac Dep't of lYest Virginia, 195 W.Va. 573,
583 n. 8, 466 S.E.2d 424,434 n. 8 (1995)).
FNl0. 150 C.S.R. $ 34-5.6 states as follows:
An electric utility may meet the
altemative and renewable energy
Portfolio Standard requirements set forthin this rule by purchasing additional
credits awarded pursuant to Rule 5.2. An
electric utility purchasing power may
meet the Portfolio Standard requirements
set forth in this rule, provided that the
credit awarded pursuant to Rule 5.2 is
included in, or bundled with, the
purchase of the power. Credits may alsobe purchased independently, or
unbundled from, purchased power.
FNll. 150 C.S.R. $ 34-5.2 provides: "A
qualified energy resource certified under
Rule 4.2.a or 4.2.c shall be awarded
certified alternative and renewable energy
resource credits as summarized in Table
150-34A at the end of this rule and as
described below[.]"
Conversely, the Utilities assert that ownershipof credits associated with the EEPAs was not
contemplated during the rulemaking process and
that the Commission correctly concluded that the
Portfolio Standard Rules do not apply to PURPA
contracts that existed prior to the enactment of the
Portfolio Act and promulgation of the Portfolio
Standard Rules. In its order, the Commission
acknowledges that "MEA and [the] City are correct
that a non-utility generator may be entitled to the
credits for qualified generation from its generating
facility based on the Commission Portfolio
Standard Rules issued by the Commission in
General Order No. 184.25." FNr2 'lhe Commission
explained, however, that the rulemaking proceeding
"did not address PURPA EEPAs executed prior to
the Act, and the unbundling provision of the Rules
was not intended to apply to these pre-existing
agreements." The Commission concluded that
"[t]he Rules cannot reasonably be applied
retroactively to these PURPA EEPAs and were
intended to apply prospectively to agreements for
the purchase of electricity entered into after January
4,2011, the effective date of the Rules."
FNl2. The Portfolio Act required the
Commission to consider extending, by
rule, the awarding of credits to "electric
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llweb2.westlaw.com/print/printstream.aspx?stid=%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 10 of l6
Page l0729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
distribution companies or electric
generation suppliers other than electric
utilities" or to non-utility generators. W.
Va.Code S 24-2F-10(b). Thus, by its
November 10, 2010, order issuing the
Portfolio Standard Rules, the Commission
extended the award of credits representingthe generation of electricity from
alternative and renewable energy resources
to non-utility generators, but limited the
award of credits for greenhouse gas
emissions or reduction or offset projects
and energy efficient and demand-side
energy initiative projects to the state
electric utilities.
t31 Upon review, it is clear that the
Commission did not en by refusing to apply the
Portfolio Standard Rules to the PURPA EEPAs at
issue in this case. This Court has long held that,"[a] statute is presumed to operate prospectively
unless the intent that it shall operate retroactively is
clearly expressed by its terms or is necessarily
implied from the language of the statute." Syllabus
Point 3, Shanholtz v. Monongahela Power Co., 165
W.Va. 305, 270 S.E.2d 178 (1980). Moreover, this
Court has further explained that "[b]ecause
legislative rules have the force and effect of
statutes, the presumption of prospective application
applies equally to such rules." Summers v. West
Virginia Consolidated Public Retirement Bd., 217
W.Va. 399, 405, 618 S.E.2d 408, 414 (2005); see
also Far Away Farm, LLC v. Jefferson County Bd.
of Zoning Appeals, 222 W.Ya. 252, 664 S.E.2d 137
(2008) (finding that amendments to a zoning
ordinance could not be applied retroactively to a
permit application). Here, there is no indication,
either expressly or impliedly, that the Portfolio
Standard Rules were meant to be applied
retroactively. Accordingly, there is no merit to the
Generators' argument that Portfolio Standard Rules
are applicable.
**196 *361 2. Alleged Contractual
Modification. Both the City and MEA argue that
the Commission's decision to award the credits to
the Utilities modifies the EEPAs between the
entities contrary to both PURPA and West Virginia
contract law.
a. Preemption. The Generators contend that
the Commission's decision modifies the avoided
cost rate in the EEPAs which is expressly
prohibited by PURPA. In other words, MEA and
the City argue that the avoided cost rate in the
EEPAs now pays for energy, capacity and the
credits. Therefore, they conclude that the avoided
cost rate received by the QFs is lowered by the
value of the credits such that the QFs' compensation
for energy and capacity is less than the full avoided
cost rate it received before. The Generators
maintain that this modification of the EEPA's price
terms constitutes a "utility-type regulation" in
violation of PURPA, 16 U.S.C. $ 824a-3(e). In
support of their argument, the parties rely upon
Freehold Cogeneration Associates, L.P. v. Board of
Regulatory Commissioners of the State of New
Jersey,44 F.3d I178 (3rd Cir.1995).
ln Freehold, a state regulatory agency ordered
a QF to renegotiate the terms of its energy purchase
agreement with the utility in response to decreases
in the cost of obtaining electrical power. The QF
then filed a declaratory judgment action seeking a
declaration that the state agency was preempted by
PURPA from modifying the terms of the previously
approved power purchase agreement. ln granting
relief to the QF, the United States Court of Appeals
for the Third Circuit observed that under PURPA, it
is FERC and not state agencies that is responsible
for regulating the rates charged by QFs in power
purchase agreements. 44 F.3d at ll9l. The Third
Circuit recognized that state regulatory agencies
have the authority to implement PURPA by initially
reviewing and approving contracts for the sale of
electricity. Id. Once the state agency has approved
the agreement, however, any attempt to modift the
agreement would subject the QF to "utility-type"
regulation barred by Section 210(e) of PURPA. /d
at 1192.
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llweb2.westlaw.com/print/printstream.aspx?stid:%o7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page ll of16
Page ll729 S.E.2d 188
229 W.Ya. 353,729 S.E.2d 188, Util. L. Rep. P 27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
[4] Upon review, we find that Freehold has no
application in this instance. Contrary to the
assertions of the Generators, the Commission has
not modified the terms of the existing EEPAs but,
instead, has only determined ownership of
assets-the credits-which were not contemplated
and, thus, not provided for in the EEPAs. Other
jurisdictions that have considered this same issue
agree that an interpretation of a power purchase
agreement which is silent on the issue of credit
ownership does not violate PURPA. See
l{heelabrator Lisbon, Inc. v. Connecticut Dept. of
Public Utility Control, 531 F.3d 183 (2nd Cir.2008)
(finding that Department of Public Utility Control
did not order the renegotiation of the terms of the
electric energy purchase agreement in violation of
PURPA but simply exercised its authority to
interpret the agreement's provisions when it
concluded that electric utility was entitled to the
renewable energy credits); ARIPPA v. Pennsylvania
Public Utility Comm'n, 966 A.2d 1204, l2ll
(Pa.Cmwlth.2009) (concluding that "PURPA didnot preempt the Commission's authority to
determine the ownership of altemative energy
credits at issue"). Here, the Commission considered
the EEPAs and concluded that because the Utilities
own the electricity as it is generated, they also own
the credits which only come into existence after the
electricity is generated. The Commission explained
in its order that
the purchase of generation under the PURPA
EEPAs results in the utility owning the
generation and the credits associated with the
generation. The [utilities] own the electricity
because under PURPA and the EEPAs, Mon
Power is required to purchase all of the
qualifying electricity generated from the PURPA
facilities as that electricity is generated. Because
the credits are created by state law and exist only
as the electricity is generated, it follows that Mon
Power as the purchaser and owner of the
qualifoing generation at the time the electricity is
generated owns the credits under the EEPAs.
Thus, in reaching its decision, the Commission
has only interpreted the EEPAs to evaluate the
Utilities' obligations under them and their
ownership of the electricity at the time it is
generated. The Commission has not interfered with
the Generators' federally-t'362 1.t'197 granted right
to be exempt from certain utility-type state
regulation. Accordingly, we find no merit to the
Generators' argument.
b. Application of West Virginia contract
law. MEA argues the Commission's conveyance of
the credits under the EEPAs to the Utilities
contravenes West Virginia contract law. In that
regard, MEA says that nothing in West Virginia
contract law permits the Commission to read a
conveyance of credits into the EEPA when the
EEPA contains no such conveyance and makes no
mention of credits because they did not exist at the
time the EEPA was executed. MEA notes that this
Court long ago stated that "the intention of the
parties is controlling, and must be ascertained from
the language of the instrument." Berry v.
Humphreys, 76 W.Va. 668, 670, 86 S.E. 568, 568
(1915). MEA further argues that the Commission's
conclusion that the Utilities own the credits because
they purchase the electricity and the credits only
come into existence after the electricity is generated
is not logical considering the fact that steam is also
generated along with the electricity yet it is not
conveyed under the EEPA.
t5lt6] With regard to MEA's argument which
attempts to equate the steam by-product of its
generation with the credits, the record shows that
steam was recognized at the time the EEPA was
created as a tangible by-product of the generation
with a separate commercial value. In fact, the steam
is separately captured and sold to West Virginia
University. By contrast, the credits are an
intangible creation of state law that only exist
because of the electric generation from a
statutorily-recognized plant. Because the
Commission concluded that the Utilities own the
credits in the first instance since they own the
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llweb2.westlaw.com/printiprintstream.aspx?stid:oh7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page l2 ofl6
Page 12729 S.E.2d 188
229W-Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
electricity as it is generated, there is simply no
merit to MEA's claim that the credits were
conveyed to the Utilities without consideration. In
other words, it is irrelevant that the EEPA provides
no consideration for the credits because the credits
are created after the generation of electricity and
are, therefore, owned by the Utilities.FNt3
FNl3. MEA also argues that Commission's
decision to award the credits to the
Utilities results in the taking of private
property without just compensation to the
owners, i.e., the Generators, in violation of
the federal and state constitutions. Again,
we find no merit to this argument becausethe Commission determined that the
credits were owned by the Utilities in the
first instance. The Commission's decision
could not constitute an unconstitutional
taking because no property owned by the
Generators was taken.
c. Applicability of Energt Dev. Corp. v. Moss,
214 W.Va. 577, S9l S.E.2d 135 (2003). The City
also contends that the Commission erred by
refusing to find that its EEPA contains a latent
ambiguity based upon this Court's holding in
Energt Development Corporation v. Moss, 214
W.Ya. 577,591 S.E.2d 135 (2003). In that case,
this Court considered whether a standard oil and
gas lease executed in 1986 conveyed to the lessee
the right to drill into the lessor's coal seams in orderto produce coalbed methane, absent any specific
language in the lease addressing the issue. When
the lease was signed, coalbed methane was a
relatively new source of energy that had not been
commercially available in West Virginia. This
Court determined that the lease, absent a clear
conveyance of the coalbed methane, contained a
latent ambiguity. Therefore, the lease was deemed
ambiguous. Based on the intent of the parties,
including the fact that the lessee may have been
aware of the value of the coalbed methane when the
lease was executed, but the lessor was not, and that
no coalbed methane wells had been drilled in the
area, this Court held that the lease did not give the
lessee the right to drill for coalbed methane gas.
The City argues that Energt Development
Corporation is directly on point. Here, the EEPA
between the City and Mon Power was executed in
1986 and amended in 2004. At the time the EEPA
was initially signed, credits did not exist.
According to the City, when the EEPA was
amended n 2004, Mon Power was in possession of
information regarding the possibility that there
were tradeable credits associated with the energy
produced by the Hannibal project. The City argues
that there is a latent ambiguity in the EEPA becauseit does not address the credits and, therefore,
pursuant to this Court's decision in *363**198
Energt Development Corporation , the
Commission should have ruled that the credits
belong to the City.
The Commission found that Energt
Development Corporation was not applicable in
this instance for two reasons. First, the Commission
concluded that the 2004 amendment to the
Hannibal EEPA did not amend the material terms
thereof in such a manner that it constituted a new
agreement. Secondly, and consequently, unlike the
parties n Energt Development Corporation who
knew of the existence of coalbed methane, the
parties here were not aware of the credits because
they did not exist in fact or in law at the time the
EEPAs were executed. The Commission concluded
that *[i]t defies logic to say that one party or the
other was responsible for a latent ambiguity." Upon
review, we agree with the Commission's findings
because the Portfolio Act that created the credits
did not exist at the time the EEPAs were executed.
Therefore, neither party can be found to have
created a latent ambiguity. Accordingly, there is no
merit to the City's argument.
3. Public Policy Considerations. Finally, the
Generators say that it is apparent the Commission
based its decision to award the credits to the
Utilities on its notions of policy and its general
charge to keep utility rates down. The Generators
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o/q7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page l3 of l6
729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
assert that the Commission's idea of the best policy
and its general rate charges is no substitute for clear
legal rules already established by the Legislature
and judicial opinions. The Generators assert that
while the Commission may believe that the QFswill receive what they bargained for in the EEPAs,
this conclusion ignores the fact that the credits have
value. The Generators note that the Commission
has indicated that its mission is "to ensure fair and
reasonable rates and to balance the interest of the
current and future utility customers, the utilities,
and the state economy." The Generators assert that
missing from this "balancing of interests" are the
QFs who serve PURPA and the Portfolio Act's
goals of expanding the nation's use of alternative
energy resources.
The Commission acknowledges that its
decision was based, in part, upon the legislative
intent in enacting the Portfolio Act and the
Commission's statutory charge to balance the
interests of utilities, the public, and the state's
economy in making its assessments. In this regard,
the Commission explained:
The Portfolio Act does not contain a specific
provision that the utility or a PURPA generator
owns the credits under the EEPAs that predate
the Act. In the absence of specific statutory
provisions in the Act governing the ownership of
the credits under the EEPAs, the Commission
must construe the [Portfolio] Act provisions,
together with the provisions of Chapter 24
requiring the Commission to prescribe rates, to
determine just and reasonable rates, and to
balance the interest of current and future
ratepayers, the utilities, and that state's economy.
The Commission further reasoned that
[i]t would be contrary to the intent of the
Portfolio Act to require the utility that has a
continuing mandatory statutory obligation to
purchase the qualifying generation at rates that
are guaranteed pursuant to Commission Orders to
separately purchase the credits from the PURPA
generator, or to acquire additional credits at the
Page 13
expense of the utility and its customers. The
credits are a measure of utility compliance with
the [Portfolio] Act by purchasing qualified
generation. Because it is a given that the utility
has purchased and will continue to purchase
qualified generation from PURPA projects, it
would be wrong to require the utility to now
purchase credits to "veriff" those purchases for
the purpose of demonstrating compliance.
In summary, the Commission concluded that
the public interest favored awarding ownership of
the credits to the Utilities. A decision to the
contrary would result in the imposition of
additional and significant expenses to ratepayers of
approximately S50 to $100 million.
[7][8] As previously discussed and contrary to
the assertions of the Generators, the Commission
did not ignore or violate state law in reaching its
decision that the credits at issue are owned by the
Utilities. Likewise, the Commission did not err in
considering its statutory charge to keep utility rates
fair and reasonable in reaching its decision. The
purpose of the Portfolio Act is to encourage the*364 **199 creation and use of energy from
alternative sources of energy. West Virginia Code $242F2(7) (Repl.Vol.2008 & Supp.20ll) states:
"lt is in the public interest for the state to encouragethe construction of alternative and renewable
energy resources facilities that increase the capacityto provide for current and anticipated electric
energy demand at a reasonable price." The credits
at issue here are the means of effectuating the goals
of the Portfolio Act. Because the Utilities have
already agreed to purchase energy from an
alternative energy facility, admittedly by a contract
that is silent on the issue of credit ownership, the
purpose of Portfolio Act has nonetheless been
achieved. Given that the EEPAs are silent on the
issue of credit ownership and there is no controlling
statutory language in the Portfolio Act with regardto ownership of credits under these particular
circumstances, we find that the Commission's
decision is well-reasoned and supported by the
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 14 ofl6
Page 14729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
evidence.rNra In summary, we find no merit to the
arguments asserted by the Generators and,
therefore, the decision of the Commission finding
that the credits at issue are owned by the Utilities is
affirmed.FNr5
enforcement on March 14, 2012. On April
24, 2012, FERC ruled upon the petition for
enforcement by issuing a "Notice of Intent
Not to Act and Declaratory OrdeC' in
which it concluded that "certain statementsin [the Commission's order] are
inconsistent with the requirements of
PURPA" but also advised that it
"decline[d] to initiate an enforcement
action pursuant to section 210(h) of
PURPA." Thereafter, by order entered on
May l, 2012, this Court ordered the parties
to file supplemental briefs pursuant to Rulel0(f) of the Revised Rules of Appellate
Procedure addressing the impact of the
FERC order, including the extent to whichadditional proceedings before the
Commission were necessary prior to the
Court's resolution of these appeals. The
Generators responded by stating that the
FERC order supported their position and
confirmed that this Court should vacate the
Commission's order. In contrast, the
Utilities and the Commission took the
position that the FERC order has no impactupon this appeal. All parties agreed,
however, that no additional proceedings
were necessary and that this Court should
proceed with resolution of the pending
appeals.
Upon review, this Court finds that
FERC's decision has no bearing upon
this appeal. " 'An order that does no
more than announce the [Federal Energy
Regulatoryl Commission's interpretation
of the PURPA or one of the agency's
implementing regulations is of no legal
moment unless and until a district court
adopts that interpretation when called
upon to enforce the PURPA.' " Xcel
Energt Services, Inc. v. Federal Energt
Regulatory Comm'n, 407 F.3d 1242,
1244 (D.C.Cir.2005) (quoting Niagaro
Mohowk Power Corp. v. FERC, ll7
FNl4. Like MEA, the
challenged the
City has also
Commission's
determination that its decision should be
based in part upon its statutory obligation
and duties in setting fair and reasonable
rates for utility companies and their
customers. Specifically, the City has
asserted that the Commission failed to
adequately balance its interests as both a
producer of electricity and a public utility
subject to the requirements of the PortfolioAct. We find no merit to the City's
argument, however, as the evidence
showed that without the Hannibal credits,the City will have more than enough
credits through 2025 to comply with the
Portfolio Act. By contrast, absent the
credits related to the PURPA facilities, the
Utilities would have a deficit by 2020 and
be required to obtain over 9 million credits
through 2025 at a conservative cost
estimate of over $50 million.
FNl5. Concurrent with the filing of this
appeal, MEA also filed a petition for
enforcement with FERC alleging that
Commission's order violated PURPA in
three ways: ( l) that the order incorrectly
held that the avoided cost rate paid by the
Utilities to MEA is sufficient to transfer
credits, together with energy and capacity;
(2) that the order incorrectly held that the
Commission has the authority to find MEA
certified, or deem MEA certified, as a
qualified energy resource able to produce
credits; and (3) that the order discriminates
against MEA with respect to its QF status.
The City filed a motion to intervene and
comments in support of MEA's petition for
A 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o/o7b49b77176-895e-40a6-b57a-923... 1ll0l20l4
Page l5 of 16
Page 15729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d 188)
F.3d 1485, 1488 (D.C.Cir.l997)).
Moreover, as explained in the analysis
above, this Court has concluded that the
Commission's decision is not
inconsistent with PURPA but, rather, is a
well-reasoned decision based upon our
state law.
B. CertiJicalion of the Morgontown Project
MEA also assigns as elror the Commission's
conclusion that it has jurisdiction and authority to
deem the Morgantown project certified to generate
credits under the Portfolio Standard Rules upon the
submission of sufficient information by the Utilities
regarding the generation atffibutes of the
Morgantown project. MEA argues that the
Commission's conclusion that it can "deem" the
Morgantown project certified to create credits
recognized by West Virginia law contradicts MEA's
federally-created exemption from "utility-type"
state law regulation. As noted previously, QFs are
exempted from *365 **200 state laws relating to
rates of electric utilities and the financial and
organizational regulation of electric utilities. While
the states are granted authority to approve PURPA
contracts, they may not regulate QFs inconsistently
with PURPA. MEA contends that requiring it to
certiry its facility because it is a QF constitutes
impermissible "financial" and "organizational"
regulation. [n other words, MEA contends that the
Commission cannot make management decisions
for MEA in its capacity as a QF that affect its
financial affairs, its rates, or its managerial
discretion in the same way that the Commission can
regulate a utility.
MEA further asserts that the Commission's
conclusion that it can 'odeem" the Morgantown
project as certified to create credits recognized by
West Virginia law squarely contradicts its own
clear and unambiguous regulation on the subject.
The Commission's own regulations state that a QF
must be certified as such to create credits pursuant
to the Portfolio Act and the Portfolio Standard
Rules. MEA says that while the Commission may
believe that its refusal to request certification of the
Morgantown project is "unreasonable," there is
simply no authority for the Commission to deem
the Morgantown project certified to create credits
in West Virginia.
[9] Upon review, we find no merit to MEA's
argument. As discussed above, the Commission has
determined that the credits are owned by the
Utilities in the first instance. Given MEA's refusal
to seek certification of its Morgantown project
under the Portfolio Standard Rules, the
Commission's decision to deem the project certified
is the only mechanism by which the Utilities can
receive certification that the energy they are
purchasing satisfies the requirements of the
Portfolio Act. The Portfolio Standard Rules provide
for waiver thereof upon a showing of hardship or
unusual difficulty in complying with any one rule.
150 C.S.R. $ 34-1.5a. Certainly, a hardship on
ratepayers would occur in this instance if the
qualifring credits owned by the Utilities were not
certified.
Contrary to the assertions of MEA, the
Commission's decision that it will certifr the
Morgantown project to create credits under the
Portfolio Act, upon the submission of sufficient
information establishing that the Morgantown
project satisfies the qualifications for such
certification, does not constitute impermissible
"utility-type" regulation prohibited by PURPA. The
Commission's decision is simply an extension of its
jurisdiction over public utilities and the authority
conferred upon it by the Portfolio Act. By deeming
the Morgantown project certified, the Commission
is not regulating the Morgantown project in any
respect; instead, it is only providing a mechanism
for the owner of the energy, the Utilities, to receive
certification that the energy they are purchasing
qualifies for the purpose of satisfuing the
requirements of the Portfolio Act. Accordingly, the
Commission's decision providing for certificationof the Morgantown project under the Portfolio
Standard Rules upon the submission of sufficient
A 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%o7b49b77176-895e-40a6-b57a-923... lll0l20l4
729 S.E.2d 188
229W.Ya.353,729 S.E.2d 188, Util. L. Rep. P27,184
(Cite as: 229W.Ya.353,729 S.E.2d ltE)
evidence by the Utilities is affirmed.
TV. CONCLUSION
For the reasons set forth above, the final order
of the Commission entered on November 22, 2011,
is affirmed.
Affinned.
W.Ya.,2012.
City of New Martinsville v. Public Service Com'n
of West Virginia
229 W.Ya. 353, 729 S.E.2d 188, Util. L. Rep. P
27,184
END OF DOCUMENT
Page l6of16
Page 16
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:Yo7b49b77176-895e-40a6-b57a-923... lll0l20l4
Westtaw.
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
H
United States District Court, S.D. West Virginia.
MORGANTOWN ENERGY ASSOCIATES,
Plaintiff,
PUBLIC SERVICE CJTT,TT,TISSTON OF WEST
VIRGINIA and Michael A. Albert, in his official
capacity as Chairman of the Public Service
Commission, and Jon W. McKinney, in his official
capacity as Commissioner of the Public Service
Commission, and Ryan B. Palmer, in his official
capacity as Commissioner of the Public Service
Commission, and Monongahela Power Company
and The Potomac Edison Company, Defendants.
Civil Action No. 2:12--cv4327 .
Sept. 30, 2013.
Pamela C. Deem, Rebecca A. Betts, Kay Casto &
Chaney, Charleston, WV, for Plaintiff.
Benjamin L. Bailey, Jonathan S. Deem, Bailey &
Glasser, Charleston, WV, for Defendants.
MEMORANDUM OPINION AND ORDER
JOHN T. COPENHAVEF" JR., District Judge.*l Pending is the motion to dismiss by
defendants Public Service Commission of West
Virginia, and Commissioners Michael A. Albert,
Chairman, Jon W. McKinney, and Ryan B. Palmer
(collectively, oothe Commission"), filed December
7, 2012. Also pending is the motion for judgment
on the pleadings by defendants Monongahela
Power Company ("Mon Power") and The Potomac
Edison Company ('Potomac Edison" and together
with Mon Power, "the Utilities"), filed January 25,
2013.
The plaintifl Morgantown Energy Associates
("MEA"), is a general partnership with a principal
place of business in Morgantown, West Virginia.
Compl. 'l[ 7. MEA is engaged in generating electric
power from altemative energy resources which it
Page I of25
Page I
sells to electric utilities. Compl. flll 19, 41. The
Public Service Commission is an administrative
agency of the State of West Virgini4 having the
"authority and duty to enforce and regulate the
practices, services and rates of public utilities." W.
Va.Code $ 2a-1-l(a). Mon Power is an electric
utility in West Virginia and Potomac Edison is its
sister company. Id. n D.
I. Background
This case arises from a dispute over ownershipof altemative and renewable enerry credits
(commonly called "RECs," or "credits") that are a
relatively recent creature of state law. Here, the
credits relate to electric enerry provided by MEA
to the Utilities under a pre-existing 1989 contract
that runs until2027, pursuant to federal law.
Congress enacted the Public Utility Regulatory
Policies Act ("PURPA") in 1978, in the wake of the
energy crisis of the 1970s, to promote greater use of
domestic alternative and renewable energy and to
decrease the nation's dependence on foreign oil.
Pub.L. No. 95417, 92 Stat. 3117; FERC v.
Mississippi, 456 U.S. 742, 746 (1982). Under
PURPA, certain facilities that produce electricity in
nontraditional ways are desigrated as "qualified
facilities" ("QFs"). 16 U.S.C. $ 824a-3.
Rulemaking power to encourage proliferation of
QFs is generally held by the Federal Energy
Regulatory Commission ("FERC"), while state
regulatory commissions are charged with
implementing FNr those rules. 16 U.S.C. 824a1(a,f). Under PURPA, utilities must purchase any
electricity made available to them by a QF at a
special price called the "avoided cost" rate. Id.; 18
C.F.R. $$ 292.303 - 304. The avoided cost rate is a
rate equal to the costs that the utility would have
incurred from generating the electricity or
purchasing the electricity from another source. 16
U.S.C. $ 824a-3(d); 18 C.F.R. $$ 2e2.l0l(bx6),
292.303. The contracts by which utilities purchase
electicity supplied by a facility, whether or not it is
a QF, are commonly called electric energy purchase
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page2 of25
Page2
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
agreements ("EEP Agreements" or "EEPAs") or
power purchase agreements ("PPAs").
FNl. The contours of the state
commission's power to "implement" the
regulations are discussed infro, Part III.B,
PP.3g3.
West Virginia is among that states that,
independent of PURPA, have enacted their own
laws to "encourage the development of more
efficient, lower-emitting and reasonably priced
alternative and renewable energy resources." W.
Va.Code $$ 24-2F-1, 24-2F2(3). West, Virginia's
Alternative and Renewable Energy Portfolio Act
("the W.Va. Portfolio Act" or "the Portfolio Act")
was enacted in 2009, and tasks the Public Service
Commission with rulemaking to "establish a system
of tradable credits to establish, verify and monitor
the generation and sale of electricity generated
from alternative and renewable energy resources
facilities." Id. S 24-2F4(a). A "qualified facility"
under PURPA is not necessarily an "alternative and
renewable energy resource" facility under the
Portfolio Act, and vice versa. The two classification
schemes operate independently of one another and
do not have the same requirements.
*2 The Portfolio Act awards one REC to
electric utilities for each megawatt hour of
electricity purchased or generated from specified
alternative enerry resource facilities. Id. $24-2F4(b)(l-2). Utilities earn two RECs for each
megawatt hour from specified renewable energy
resource facilities. Id. S 24-2F4(b)(2). The
specified facilities include those located within
West Virginia, such as MEA's Morgantown facility.
These statecreated credits can be accumulated for
use in years to come. Beginning in 2015, the
Portfolio Act requires electric utilities to own RECs
in amounts equal to at least l0 percent of the
energy they sold to West Virginia retail customers
in the preceding calendar year. Id. S 24-2F-5(dXl).
The requirement increases to 15 percent in 2020,
and settles at 25 percent in 2025. Id. $ 24-2F5(c),
(dxl-2). If a utility cannot meet its requirement for
a given year, the Commission will assess a per-
credit penalty of at least the lesser of200 percent of
the average market value of a credit or 50 dollars.
Id . S 2aaF-5(9,). In meeting the Portfolio Act
requirements, RECs may not be used more than
once, but excess RECs may be carried over for use
in future years. Id. S 24-2F-5(b, 0.
On November 5, 2010, the Commission issued
General Order No. 184.25, setting forth final rules
for the Portfolio Act. The final rules provide that
RECs may be obtained from non-utility generatorsof electricity from alternative and renewable
resources, such as the plaintiff, MEA, either by
purchasing the credits and the enerry bundled
together or by purchasing the credits independently,
unbundled from the energy. W. Va.Code R. $
150-34-5.6.
This dispute concerns a circumstance that the
final rules do not directly address: who should own
the credits when a nonutility QF sells electricity to
utilities through an EEPA that predates the
Portfolio Act and consequently does not specifu
who owns the credits? On November 22,2011, the
Commission issued an order ("the Commission
Ordet'') that assigned the credits to the purchasing
utilities. In this case, the court is asked to consider
whether the Commission violated PURPA or
otherwise erred in making that determination.
A. Federal Statutora Framework
As noted, PURPA created a class of electricity
generating facilities known as "qualified facilities,"
or o'QFs". QFs include cogeneration,FN2 biomass,
waste, and renewable resource facilities. See 16
U.S.C. $ 824a-3. In addition to meeting any
regulatory requirements for energy output or the
manner in which energy is generated, a facility
must also be certified to be a QF. rN: If a facility
does not seek certification, even if it would meet allof the other requirements necessary to be a
qualified facility, it is not a "qualified facility"
under the regulations. A facility may either file a
notice of self-certification with FERC or apply
directly to FERC for certification. 18 C.F.R. $
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http,llweb2.westlaw.com/print/printstream.aspx?stid:o/e7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 3 of25
Page 3
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
292.203. Whether to seek QF certification is up to
the facility, as no part of PURPA or the FERC
regulations requires an otherwise qualified facility
to do so. See generally 16 U.S.C. $$ 824 - 824a-3;
l8 C.F.R. $$ 292.101 -292.602. The plaintiff, MEA,
is a qualified facility.
FN2. A "cogeneration" facility is one that
produces both electric energy and steam or
some other form of energy useful for
"industrial, commercial, heating, or
cooling purposes." l6 U.S.C. $ 796.
FN3. There is an exception: "Any facility
with a net power production capacity of I
MW or less is exempt from the filing
requirements." I 8 C.F.R. g 292.203(d).
*3 To encourage the development of QFs,
PURPA obligates electric utilities to buy any
electricity made available by a QF at the avoided
cost rate. The QF may sell power on an "as
available" basis, in which case the purchasing
utility will buy at the avoided cost rate at the timeof purchase. l8 C.F.R. $ 292.304(dX I ).
Alternatively, the QF can enter into a contract with
a utility (known as EEPAs or PPAs), where the
price may be either the avoided cost at the time of
contracting or the avoided cost at the time of
delivery. l8 C.F.R. S 292.304(d)(2).
PURPA directs the Federal Energy Regulatory
Commission ('FERC") to prescribe "such rules as it
determines necessary to encourage cogeneration
and small power production." PURPA $ 210(a), 16
U.S.C. $ 824a-3(a). Section 210(0, headed
"Implementation of rules for qualiffing
cogeneration and qualiffing small power
production facilities," then directs "each State
regulatory authority" to "implement such [FERC]
rule (or revised rule) for each electric utility for
which it has ratemaking authority." Id. $ 210(f), 16
U.S.C. $ 82aa-3(f).
PURPA $ 210(e) instructs FERC to prescribe
rules exempting qualiffing facilities from certain
federal and state utility regulation, including "Statelaws and regulations respecting the rates, or
respecting the financial or organizational
regulation, of electric utilities." l6 U.S.C. $824a1(e); see also Wheelabrator Lisbon, lnc. v.
Conn. Dept. of Pub. Util. Ctr.,53l F .3d 183, 185
n. 7 (2d Cir.2008). FERC regulations accordingly
provide, that any QF is "exempted ... from State
laws or regulations respecting: (i) The rates of
electric utilities; and (ii) The financial and
organizational regulation of electric utilities." l8
C.F.R. S 292.602(c). The exemption "is referred toas the 'exempt[ion] from utility-type
regulation.' " Ilheelabrator, 531 F.3d at 185 n. 7
(quoting Freehold Cogeneration Assocs., L.P. v.
Bd. of Reg. Comm'rs of N.J., 44 F.3d 1178, ll85
(3d Cir.l995)).
ln Freehold, the Third Circuit concluded that a
state regulatory agency had impermissibly modified
an EEPA by ordering the QF and utility to
renegotiate the agreement's purchase rate terms. 44
F.3d at 1190. The court observed that PURPA
reseryes for FERC, not state regulators, the
responsibility of regulating the rates at which
electricity is purchased under EEPAs. Id. at 1191.PURPA gives state regulatory agencies the
authority to review and approve EEPAs with a QFas a party, but once an EEPA is approved,
modification of the EEPA or revocation of the
approval of an EEPA constitutes "utility-type"
regulation of the QF, in violation of $ 210(e). Id at
tt9t-92.
B. Ownership of RECs for Electricity Sold
Under Preexisting EEPAs
Previous disputes have arisen regarding
whether the generator or the electric utility should
own the RECs associated with EEPAs that predate
the relevant state portfolio act. In 2003, FERC
issued a decision declaring that REC ownership in
the context of preexisting PURPA EEPAs is a
matter to be decided by the states under state law.
American Ref-Fuel Co., 105 F.E.R.C. fl 61,004
(2003). ln American Ref-Fuel, FERC considered a
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llweb2.westlaw.com/print/printstream.aspx?stid:oh7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 4 of25
Page 4
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
petition from owners of several QFs seeking a
declaratory judgment that PURPA EEPAs
compensate QFs only for energy and capacity, not
for any "environmental attributes," and therefore
should not "inherently convey to the purchasing
utiliry any renewable energy credits." 105 F.E.R.C.
fl 61,005, at I2. FERC granted the petition to the
extent that it sought a declaration that FERC's
"avoided cost regulations did not contemplate the
existence of RECs and that the avoided cost ratesfor capacity and energy sold under contracts
entered into pursuant to PURPA do not convey the
RECs, in the absence of an express contractual
provision." Id. n 61,006, at !f 18. FERC concluded
that "[w]hile a state may decide that a sale of power
at wholesale automatically transfers ownership of
the statecreated RECs, that requirement must find
its authority in state law, not PURPA." Id. n 61,007,
atn24.
*4 The Second Circuit considered the issue in
Wheelabrator Lisbon. 531 F.3d at 190. There, the
plaintiff, a QF, had challenged a ruling by the
Connecticut Department of Public Utility Control
("DPUC") that the parties' EEPA "conveyed to [the
utility, Connecticut Light and Power,] any RECs
arising from" the production of its subject
electricity. Id. at 187. The plaintiff argued that
DPUC's ruling "modified the terms of the [EEPA]and thereby imposed utility-type regulation in
conflict with Section 210(e) of [PURPA]." Id. at 185.
The Second Circuit agreed with the district
court that DPUC's interpretation of the EEPA with
respect to ownership of RECs did not constitute a
modification of the EEPA:
As the District Court explained, "the DPUC
decisions are unlike the [state agency] order that
was the subject of Freehold. " Unlike the New
Jersey agency in Freehold, "the DPUC has not
ordered the [qualifying facility] to renegotiate the
contract purchase price or ordered lower rates.
Rather, the DPUC considered the [gnergy
purchase agreement] at issue and concluded that
[it] transferred the renewable energy and the
associated GIS Certificates to CL & P." We agree
that the DPUC did not order the renegotiation of
the terms of the Agreement but simply exercisedits authority to interpret the Agreement's
provisions-as it happens, in a manner that was
unfavorable to Wheelabrator. We hold, therefore,
that the 2004 DPUC Decision does not modiff
the terms of the Agreement and, accordingly,
does not violate Section 210(e) of PURPA.
Id at 188-89.
The Second Circuit also found that FERC's
decision in American Ref-Fuel did not preempt
DPUC's decision. The plaintiff had argued that
American RefFuel required "RECs to be sold
through express contractual provisions and that, in
the absence of such a provision, an electricity
purchase agreement cannot convey RECs." 1d at
189. The court disagreed, again adopting the lower
court's reasoning:
We agree with the District Court, and with
FERC, that American Ref-Fuel did not impose
such a rule. As the District Court correctly
observed:
lln American Ref-Fuel,l [t]he FERC concluded
that RECs are created by the State and
controlled by state law, not PURPA, and that
they may be decoupled from the renewable
energy.... Taken as a whole, however,
American Ref-Fuel does not stand for the
proposition that PURPA requires an express
contractual provision in order for RECs ... to be
transferred to a public utility pursuant to a
PURPA contract.... In its order denying
rehearing, the FERC noted that the reference to
an "express contractual provision" seems to
have been misunderstood. The FERC
elaborated: "We did not mean to suggest that
the parties to a PURPA contract, by contract,
could undo the requirements of State law in
this regard. All we intended by this language
was to indicate that a PUI(PA contract did not
A20A Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid=o/e7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 5 of25
Page 5
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
inherently convey any RECs, and
correspondingly that, assuming State law did
not provide to the contrary, the [qualifying
facilityl by contract could separately convey
the RECs."
*5 In sum, the FERC decision in American
Ref-Fuel does not evince an intent to occupy the
relevant field-namely, the regulation of
renewable energy credits. Rather, it explicitly
acknowledges that state law governs the
conveyance of RECs. We conclude, therefore,
that the American Ref-Fuel does not preempt the
2004 DPUC Decision.
Id. at 189-90 (internal citations omitted).
New Jersey and Pennsylvania state courts have
also considered the issue and concluded that state
regulatory authorities did not run afoul of PURPA
by decreeing ownership of RECs to utilities absent
a contrary contractual provision. See ARIPPA v. Pq
Pub. Util. Comm'n, 966 A.2d 1204, 1209
(Pa.Commw.Ct.2009); In re Ownership of
Renewable Energt Certificates (" Ownership of
RECs "), 913 A.2d 825, 828, 830
(N.J.Super.Ct.App.Div.2007). In Ownership of
MCs, a New Jersey state court found that certain
language in American RdFuel "might be
construed as helpful to appellants," who were QFs,
but that "the balance" of that opinion supported the
regulator's decision that the RECs belonged to the
utility. 913 A.zd at 83 I . It concluded that
"according to FERC, states decide who owns the
REC in the initial instance." Id. ln ARIPPA, a
Pennsylvania state court similarly found that the
Pennsylvania Public Utility Commission "has not
modified the terms of an existing and approved
contract, but rather has determined ownership of
assets which were not contemplated, let alone
provided for in the contracts at issue." 966 A.2d at
1209.
C. Factual and Procedural Background
Plaintiff MEA owns and operates a 60.8 MW
cogeneration facility in Morgantown, West Virginia
(the "Morgantown facility") that utilizes circulated
fluidized bed combustion technology to burn
bituminous coal refuse as its primary energy
source. Compl. '![ 7. As earlier noted, it is a
qualified facility under PURPA. Id. n 15. On MarchI, 1989, MEA and Mon Power entered into a
longterm EEPA, whereby Mon Power has
purchased the energy and capacity generated by
MEA. ld. fl lg.t*o The EEPA is in effect until
2027. Comm'n Order 48.
FN4. While Mon Power executed the
EEPA, "the Commission now regulates the
combined West Virginia operations of
Mon Power and [Potomac Edison] as a
single entity, including the combined costs
and rates." City of New Martinsville v.
Pub. Serv. Comm'n of IV. Va., 729 S.E.2d
188 n.6 (W.Va.2012), consolidated onappeal with Morgantown Energt
Associates v. Pub. Serv. Comm'n of ll/. Va.,No. ll-1739, [hereinafter Neyy
Martinsville/MEA l.
In 2006, MEA registered its Morgantown
facility as an alternative energy resource under the
Pennsylvania Portfolio Act ("the Pa. Portfolio
Act"). CompLn32;73 P.S. $$ 1648.1-1648.8. The
Pa. Portfolio Act was enacted in 2005, and like the
later W.Va. Portfolio Act, it requires electric
utilities to create or purchase alternative FN5
energy credits ("Pa.-RECs") if they sell energy to
retail customers in Pennsylvania. 73 P.S. $1648.3(a)(l). Any energy generated from
alternative sources within the service territory of
PJM lnterconnection, LLC ("PJM"), a FERC-
regulated, interstate regional transmission
organization, or its successor, is eligible to meet the
requirements of the Pa. Portfolio Act. 73 P.S. $
1648.4. The Morgantown facility is within the PJM
service territory and began generating Pa.-RECs in
2006. Compl. 25, 28. Under the Pa. Portfolio Act,
MEA asserts that it owns the Pa.-RECs. See 73 P.S.
$ 16a8.3(e)(12) (providing that unless a contract for
electricity "explicitly assigns alternative energy
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:oh7b4gb77176-895e-40a6-b57a-923... 1ll0l20l4
Page 6 of25
Page 6
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
credits in a different manner, the owner of the
alternative energy system ... owns any and all
alternative energy credits associated with or created
by the production of the electric energy by such
facility") .rN6 MEA has "banked" the Pa.-RECSwith PJM's subsidiary, PJM-Environmental
Information Services, Inc. ("PJM-EIS") and has
also "engaged in transactions ... in which it has sold
its PaRECs to electric utilities." Compl. fltT 25,
32-33. MEA has not alleged whether it sells any
elecffic energy or RECs to entities located in
Pennsylvania.
FN5. Though an energy source under the
West Virginia law may be "renewable,"
"alternative," or neither, under the
Pennsylvania law a source may only be
"alternative" or not. 73 P.S. $ 1648.3. The
"alternative" category does not include the
same types of energy sources in each state.For instance, some sources considered
"renewable" under the West Virginia law,
like solar plants, are "alternative" underthe Pennsylvania law. W. Va.Code $24-2F-3 (l3XA); 73 P.S. $ 1648.3(b). For
simplicity and uniformity, the court refersto credits under the Pennsylvania law as
Pa.-RECs.
FN6. The Pennsylvania legislature
amended the Pa. Portfolio Act in 2007 to
include this provision, which did not apply
n ANPPA. ARIPPA,966 A.2d at 1207.
*6 MEA's Morgantown facility also qualifies
as an alternative energy resource under the W.Va.
Portfolio Act. Id. fl 41. MEA, however, has not
filed and currently has not made a determination to
file an application to become certified under the
W.Va. Porlfolio Act to generate West Virginia
credits. Id. n 41. It asserts that it has no legal
obligation to pursue certification, and it points out
that although a facility may be capable of
generating credits recognized by two different
states, the credits can be transferred only once to a
utility. Id. fl\27,41. As stated above, MEA alleges
that it has "engaged in transactions" involving such
transfers. Id.n33.
The EEPA between Mon Power and MEA,
predating both states' porrfolio acts, is silent
regarding ownership of any potential RECs
generated by the Morgantown facility. Id. n 42.
1. The Commission Order
On February 23, 2011, the Utilities filed a
petition for declaratory relief with the Commission,
requesting a ruling that the Utilities were entitled to
W.Va. Portfolio Act RECs attributable to three non-
utility QFs: (l) MEA's Morgantown facility, (2) a
facility of the City of New Martinsville, (3) and the
Grant Town Project.FNT Id. n 44 & n. 2. On April
19, the Commission named MEA as a respondent in
the case.
FN7. The second of these facilities is the
subject of concurrent litigation pending
before this court as City of Netu
Mortinsville v. Public Service Commission
of West Virginia, No. 2:12-+v-1809. The
owner of the other project, the Grant Town
Project, was not a party to the proceedings
before the Commission. Compl. !f 39 n. 9.
On November 22, 2011, the Commission
issued an order (the "Commission Order")
resolving the following two issues in the affirmative:
l. Whether, under EEPAs that predate the
Portfolio Act and Commission Portfolio Standord
Rules and that are silent on the issue of credit
ownership, [the Utilities] or the QFs own the
credits associated with QF generation; and,
2. If the utilities own and are entitled to credits
from the facilities, whether the Commission has
the jurisdiction and authority to order a QF to
certi$/ the facilities or to deem the facilities
certified to generate credits under the Portfulio
Standard Rules ....
Comm'n Order 10.
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http,llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... 1ll0l20l4
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 5462386 (S.D.W.Va.))
At the outset, the Commission noted that the
Utilities estimate the cost of "acquir[ing] additional
compliance credits to replace" the credits generated
by MEA and the other two facilities to be
"approximately $50 million through 2025." Id. The
Commission later refers to this as a "conseryative
cost estimate .* Id. at 32.
The Commission determined that the Utilities
own the credits based on "ttfee separate but
intenelated bases":
(i) consistent with the [Portfolio] Act, the utility
that is obtigated to purchase PURPA generation
(which also qualifies as eligible generation under
the Portfolio Act) should own the credits that
exist for the purpose of measuring utility
compliance with the portfolio standard,
(ii) [the Utilities'] ownership of the credits is
based on their ownership of the qualifuing energyas it is generated, and (iii) under the
circumstances of the case in which the Portfolio
Act and the EEPAs do not contain provisions that
specifr credit ownership by the utility or the QF,it is appropriate to consider equity and fairness
and the impact of our decision on utility rates in
determining credit ownership under the EEPAs
based on the provisions of ll.Va.Code S 242F-l
et seq. that require that the costs associated with
the [Portfolio] Act are reasonable and the
provisions of Chapter 24 of the West Virginia
Code that require the Commission to ensure fair
and reasonable rates and to balance the interests
of the current and future utility customers, the
utilities and the state economy.
*7 Id. at43.
The Commission concluded that:
It would be unreasonable to require the utility to
purchase, and ratepayers to pay the additional
cost of credits, to veri$ the purchases of PURPA
generation that the utility has purchased and will
continue to purchase which qualifies as eligible
PageT of25
generation under the Portfolio Act.
t ] In the absence of an express statutory
provision governing the issue of credit ownership
under PURPA EEPAs that predate the Portfolio
Act and that are silent on the issue of credit[ ]
ownership, the credits under the PURPA EEPAs
are owned by the elechic utility, Mon Power and
PE, not the QFs, consistent with the intent and
mandates of the Act and principles of equity and
fairness.
Id. at 55.
The Commission expressly disavowed any
reliance on federal law: "The Commission is not
modifying the existing PURPA Agreements or
exercising utility-type jurisdiction over MEA; we
are determining the ownership of the credits in light
of state law." Id. at 37. lt made the following
conclusions respecting the EEPAs:
17. When the three EEPAs in question were
negotiated and approved by the Commission, the
statutory created credits did not exist and the
retention of the credits was not a part of the
confact and agreement between the parties. The
PURPA facilities received what they bargained
for, and all that they were entitled to, when
agreements were finalized setting forth the
avoided cost rates and terms that would apply to
the final EEPAs.
18. By the very nature of the PURPA EEPAs, no
additional consideration is contemplated or
needed other than the substantial consideration
that the projects received and that is not usually
available to merchant power generators.
Id. at 54.
Respecting certification of the Morgantown
facility, the Commission observed that "allowing
qualifying credits that are owned by the [Utilities]to not be certified would work a hardship on
ratepayers." Id. at 42. It took note of the "unusual
difficulty" the Utilities would encounter should
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/printlpintstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923...Ut0l20t4
Page 8 of25
Page 8
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 54623E6 (S.D.W.Va.))
they "seek or expect cooperation from MEA in
obtaining certification" of the Morgantown facility.
1d. Consequently, the Commission concluded that,
"it would be reasonable to allow the [Utilities] to
seek certification of the credits we have determined
they own." 1d.
The Commission again found its authority for
the decision in state law:
[T]he Commission has jurisdiction and authority
over the Morgantown project to deem the facility
certified to generate credits under the
Commission Portfolio Standard Rzles based on
the jurisdiction and authority provided in the
Portfolio Act and in Chapter 24 of the llest
Virginia Code to resolve the issues of credit
ownership and to enable [the Utilities] to meet
the compliance requirements of the [Portfolio]Act based on our decision in this case. The
Commission's assertion of jurisdiction to resolve
the dispute over credit ownership does not
conflict with federal jurisdiction over PURPA
and the PURPA facilities. As FERC determined
in American Ref-Fuel, the states have jurisdiction
to resolve the issues of credit ownership arising
under the PURPA contracts. ... We believe that
because our decision to certi$ the Morgantown
facility is an extension of the Commission's
jurisdiction over public utilities, the portfolio
standard and credit trading system established by
the Portfolio Act, our Order does not violate the
PURPA's prohibition against "utility-type" state
law regulation.
*8|d. at4243.
Generally, the Commission, in its order,
discusses o'the credits," without limitation on when
the credits were generated and without distinction
between RECs created under West Virginia law or
RECs created under Pennsylvania law. However,
the Commission did offer the following:
The Commission clarifies that [the Utilities are]
entitled to the credits for the duration of the term
of the EEPAs. Credits are based on energy
generated by qualified facilities and double
counting of credits is prohibited. Because we are
holding that [the Utilities] own the credits related
to the power they purchase from the PURPA
facilities for the remaining term of the EEPAs,
credits that are based on the energy output of the
QFs and that could be obtained under other state
laws are necessarily under the control of [the
utilitiesl.
Id. at 34. In addition, the Commission ordered
"that credits related to the electricity generatedfrom the Morgantown project owned by
Morgantown Energy Associates; and sold pursuantto the electric energy purchase agreements
discussed herein belong to the purchaser," and also
ordered that the "[Utilities] take reasonable steps to
secure the credits from the Morgantown facility that
are currently in the MEA [ ] account, including, but
not limited to, contacting PJM-EIS to advise it of
the ruling in this case." Id. at 56.
ln December 2011, MEA and the City of New
Martinsville filed appeals of the Commission Order
with the West Virginia Supreme Court of Appeals,
which the high court subsequently consolidated.
Compl. fl 53.
2. The April FERC Order
On February 24, 2012, while the state appeal
was pending, MEA petitioned FERC to bring an
enforcement action against the Commission to
require compliance with PURPA. Compl. fl 54. The
petition asserted that the Commission's order
violates PURPA in three respects: (l) by
concluding that Mon Power's payments under the
EEPA warranted giving Mon Power the credits, (2)by concluding that the Commission has the
authority to deem MEA's facility certified under the
W.Va. Portfolio Act, and (3) by discriminating
against MEA based on its QF status under PURPA
in setting electricity rates, in violation of 16 U.S.C.
$ 82aa-3(b)(2) and 18 C .F.R. $ 2e230a@)Q),
because the Commission purportedly does not also
deem RECs generated by a facility that is not
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 9 of25
Page 9
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
qualified under PURPA to be owned by the utility
to which the facility sells power. Id. n 55.
On April 24, 2012, FERC issued a Notice of
lntent Not to Act and Declaratory Order. FERC
declined to exercise its discretionary enforcement
authority under $ 210(h) of PURPA. Morgantown
Energ,t Associates (Morgantown I), 139 F.E.R.C. 'lT
61,066, at n 4445 (2012). It quoted from and
reiterated its holding in American Ref-Fuel:
[FERC] has recognized that PURPA does not
address the ownership of RECs and that states
have the authority to determine ownership of
RECs in the initial instance, as well as how they
are transferred from one entity to another.
*9 Id. n 46. It further explained the rationale
behind American Ref-Fuel, stating that the rates at
which the utilities must purchase power from QFs"must be just and reasonable to the electric
customer of the public utility and in the public
interest," but an electric utility is not required to
pay the QF more than the avoided cost. Id. n 47.
Nonetheless, FERC found that "certain
statements in the [Commission] Order are
inconsistent with PURPA." Id. fl 45. FERC
concluded that "[t]o the extent that the
[Commission] Order finds that avoided-cost rates
under PURPA also compensate for RECs, the
[Commission] Order is inconsistent with PURPA."
Id. n 47. In a footnote, FERC further explains the
perceived inconsistency:
The West Virginia Order relies primarily on the
avoided cost rate in the contract[ ] between
Morgantown Energy and Monongahela Power ...
as justification for finding that the RECs
produced by the QFs are owned by the
purchasing utility in the first instance. See, e.g.,
West Virginia Order at 28-jl. For example, the
West Virginia Order states that avoided cost rate
contracts under PURPA provide a substantial
consideration to the QF sufficient to compensatenot only for the energy and capacity
contemplated in the contracts, but also for the
RECs produced by the QFs. See West Virginia
Order at 28.
Id.147 n.68.
3. The Appeal to the West Virginia Supreme
Court
On June ll, 2012, in New Martinsville/MEA,
729 S.E.zd 188 (W.Va.2012), the West Virginia
Supreme Court of Appeals affirmed the
Commission Order in full. The court held,
[T]he Commission has not modified the terms ofthe existing EEPAs but, instead, has only
determined ownership of assets-the
credits-which were not contemplated and, thus,
not provided for in the EEPAs.
Id. at 196.It further explained,
[T]he Commission considered the EEPAs and
concluded that because the Utilities own the
elechicity as it is generated, they also own the
credits which only come into existence after the
"-:::'o is generated
Thus, in reaching its decision, the Commission
has only interpreted the EEPAs to evaluate the
Utilities' obligations under them and their
ownership of the electricity at the time it is
generated. The Commission has not interfered
with the Generators' federally granted right to be
exempt from certain utility-type state regulation.
Id. 196-97.
The court found that the April FERC order
"ha[d] no bearing upon" the appeal before it. Id. at
199 n. 15. Consequently, the court disagreed with
FERC's concerns and "concluded that the
Commission's decision is not inconsistent with
PURPA but, rather, is a well-reasoned decision
based upon our state law." Id.
The court next addressed MEA's contention
A 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o/o7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 10 of25
Page l0
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 5462386 (S.D.w.va.))
that the Commission violated MEA's federal
exemption from "utility-type" state law regulation
by deeming MEA certified to create West Virginia
RECs. The court found that the Commission has an
appropriate state law basis for its determination:
*10 Given MEA's refusal to seek certification ofits Morgantown project under the Portfolio
Standard Rules, the Commission's decision to
deem the project certified is the only mechanism
by which the Utilities can receive certification
that the energy they are purchasing satisfies the
requirements of the Portfolio Act. The Portfolio
Standard Rules provide for waiver thereof upon a
showing of hardship or unusual difficulty in
complying with any one rule. 150 C.S.R. $
34-1.5a. Certainly, a hardship on ratepayers
would occur in this instance if the qualifuing
credits owned by the Utilities were not certified.
Id. at200.
Given this state-law justif,rcation for certifying
MEA to generate RECs, the high court then
explained why it did not consider the certification
to be "utility-type" regulation:
Contrary to the assertions of MEA, the
Commission's decision that it will certiff the
Morgantown project to create credits under the
Portfolio Act ... does not constitute impermissible
"utility-type" regulation prohibited by PURPA.The Commission's decision is simply an
extension of its jurisdiction over public utilities
and the authority conferred upon it by the
Portfolio Act. By deeming the Morgantown
project certified, the Commission is not
regulating the Morgantown project in any
respect; instead, it is only providing a mechanism
for the owner of the energy, the Utilities, to
receive certification that the energy they are
purchasing qualifies for the purpose of satisfring
the requirements of the Portfolio Act.
rd.
4. The September FERC Order
On May 6, 2012, the Utilities filed with FERC
a request for clarification or, alternatively, a motion
for rehearing of FERC's April Order. Morgantown
Energt Associates (Morgantown II), 140 F .E.R.C.
n 61,223, at I 3 (2012). The Utilities claimed that
the order did not identifo which statements in the
Commission order were inconsistent with PURPA,
and that FERC erred in determining that the
Commission Order found that avoided cost rates
compensate the QF for both RECs and energy. Id.
On September 20, 2012, FERC issued an order
denying a request by the Utilities for
reconsideration of its April order. 1d f 1. FERC
acknowledged the Supreme Court of Appeals
affirmance, but did not comment on its substance,
instead focusing on the Commission Order. Id.I 14
& n. 34.In the September order FERC explained its
concerns regarding one of the perceived rationales
for the Commission's decision:
While the [Commission] Order may also identify
other bases for its decision to find that RECs
produced by QFs belong to the purchasing utility,we cannot ignore those portions of the
[Commission] Order that clearly refer to the
avoided cost rate under PURPA as justifrcation
for its finding that RECs produced by QFs belong
to the purchasing utility in the first instance. It is
likewise significant, we find, that the West
Virginia Commission implied that RECs
produced by non-QFs could be considered to be
owned by the non-QF generator in the first
instance rather than the first purchaser of the
output of the non-QF generator. The only
reasonable reading of the [Commission] Order is
that the West Virginia Commission's finding that
the RECs produced by QFs, as opposed to RECs
produced by non-QFs, are owned by the
purchasing utilities in the frst instance is based
on the West Virginia Commission's belief that the
PURPA avoided cost rates are overly generous
and therefore must include RECs.
r'll Id. fl 21. It continued,
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page ll of25
Page I I
We
did
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 5462386 (S.D.W.Va.))
note ... that the West Virginia Commission
not find the sale of power at wholesale
automatically transfers RECs. Instead, the West
Virginia Commission found that RECs produced
by QFs are owned by the purchasing utility
(while RECs produced by non-QFs are not); and
the West Virginia Commission clearly based this
finding on its expressly stated belief that avoided
cost rates were overly generous to utilities and
unfair to consumers. Under these circumstances it
is clear that to this extent, at least, the West
Virginia Order is inconsistent with the
Commission's ruling in American Ref-Fuel that
avoided cost rates "in short, are not intended to
compensate the QF for more than capacity and
energy."
Id. (quoting Am. ReJ-Fuel, 105 F.E.R.C. tT
61,004, atn22).
The order then makes clear that FERC's
criticism is limited to the rationale perceived by it
in the Commission Order, not the Commission's
actual decision to assign credits to the utilities:
Because the ownership of the RECs is a matter of
West Virginia law, we are not dictating to West
Virginia whether a generator or the electric utility
purchasing capacity and energy from the
generator should own RECs at their creation.
Rather, we merely find that the West Virginia
Commission cannot, consistent with PURPA,
assign ownership of the RECs to the Utilities on
the grounds that the avoided cost rates in their
PURPA [agreements] compensate the QFs for
RECs in addition to energy and capacity.
Id. n 24. In addition, FERC acknowledged that
the Commission Order rested on other justifications
as well: (l) that "it is unreasonable to retroactively
apply [the unbundling provision, Porfolio
Standard Rule 5.6) to PURPA [EEPAs] entered into
prior to the rule's effective date," and (2) that
"because RECs are a tool for ensuring that electric
utilities purchase energy that satisfies their
renewable portfolio standard obligations, RECs are
not necessary in the presence of PURPA [EEPAs]because PURPA [EEPAs] perform the same
function as RECs." Id. n 2l n. 45. Ultimately,
FERC denied the request, rejecting the Utilities'
arguments for reconsideration. Id. 126.
5. Federal District Court
Under PURPA, when FERC declines to bring
an enforcement action within 60 days of the filingof a petition, the petitioner may bring its own
enforcement action against the state regulatory
authority in the appropriate U.S. district court. 16
U.S.C. $ 824a-3(hX2XB). Pursuant to that
provision, MEA filed the present action on October
8,2012.
The complaint names as defendants the
Commission and its individual commissioners. It
asserts six counts. Count I seeks a declaratory
judgment that the Commission Order violates
PURPA and its implementing regulations. Count II
claims that the Commission Order is preempted
because it has the effect of modiffing the avoided
cost in the EEP agreement, a power reserved solelyto FERC under PURPA. Count III seeks a
declaration that the Commission Order violates
PURPA's exemption of QFs from state utility-type
regulation. Count IV seeks a declaration that the
Commission Order violates PURPA $ 210(b) by
discriminating against QFs. Count V seeks an order
enjoining the Commission from enforcing the
Commission Order. Lastly, Count VI alleges that
the individual commissioners violated the Takings
Clause of the Fifth Amendment by granting
ownership of MEA's Pa.-RECs to the Utilities
without just compensation.
*12 The original defendants, consisting of the
Commission and its commissioners, filed their
pending motion to dismiss under Federal Rules of
Civil Procedure l2(b)(l) and l2(bx6) on December
7,2012. On January 10, 2013, the court granted the
Utilities' motion to intervene as party defendants,
and on January 25, 2013 the Utilities filed their
pending motion for judgment on the pleadings
under FederalRule of Civil Procedure l2(c).
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:o%7b49b77176-895e-40a6-b57a-923... lll012014
Page 12 of25
Page 12
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
In their motions,federal jurisdiction
defendants assert thatbarred by the
Rooker-Feldmar doctrine. They also contend that
this action is not properly before this court becauseit is not a challenge to the Commission's
"implementation" of PURPA, but rather an "as
applied" challenge. The Utilities additionally argue
that the court should abstain from adjudicating the
controversy under various abstention doctrines.
Should the court recognize jurisdiction and
decline to abstain, the defendants maintain that
preclusion principles require it to honor the state
decisions granting credit ownership to the electric
utilities. The Utilities also argue that each CountsI-V of the complaint should be dismissed for
failure to state a claim, and the Commission argues
that Count VI should be dismissed for failure to
state a claim.
II. Governing Standard
Under Federal Rule of Civil Procedure 8(a)(l),
a complaint must contain "a short and plain
statement of the grounds for the court'sjurisdiction." Rule l2(bXl) correspondingly
permits a defendant to assert, by motion, that the
plaintiffs claim for relief fails for "lack of subject-
matter jurisdiction." Fed.R.Civ.P. l2(bXl). The
plaintiff has the burden of proving that subject
matter jurisdiction exists. Evans v. B.F. Perkins,
Co., 166 F.3d 642, 647 (4th Cir.l999). "When a
defendant challenges subject matter jurisdiction
pursuant to Rule l2(bxl), 'the disffict court is to
regard the pleadings as mere evidence on the issue,
and may consider evidence outside the pleadings
without converting the proceeding to one for
summary judgment.' " Id. (quoting Richmond,
Fredericksburg & Potomac R. Co. v. United States,
945 F.2d 765, 768 (4th Cir.l99l)). The court
"should grant the Rule l2(b)(l) motion to dismiss
'only if the material jurisdictional facts are not in
dispute and the moving party is entitled to prevail
as a matter of law.' " Id. (quoting Richmond, 945
F.2d at 768).
Under Rule 8(a)(2), the complaint must contain
"a short and plain statement of the claim showing
that the pleader is entitled to relief." Rule l2(b)(6)
correspondingly permits a defendant to challenge a
complaint when it "fail[s] to state a claim upon
which relief can be granted." Fed.R.Civ.P. l2(bX6).
The required "short and plain statement" must
provide "fair notice of what the ... claim is and the
grounds upon which it rests.' " Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 545 (2007) (quoting
Conley v. Gibson,355 U.S. 41,47 (1957)); see also
Anderson v. Sara Lee Corp., 508 F.3d I 8 l, I 88 (4th
Cir.2007). "To suryive a motion to dismiss, a
complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.' " Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at
570); see qlso Monroe v. City of Charlottesville,
579 F.3d 380, 386 (4th Cir.2009). Facial
plausibility exists when the court is able "to draw
the reasonable inference that the defendant is liable
for the misconduct alleged." Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 556). The
plausibility standard "is not akin to a 'probability
requirement,' " but it requires more than a "sheer
possibility that a defendant has acted unlawfully."
1d (quoting Twombly,550 U.S. at 556).
*13 [n assessing plausibility, the court must
accept as true the factual allegations contained in
the complaint, but not the legal conclusions. .Id.
"Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements,do not suffice." Id. The determination is
"context-specific" and requires "the reviewing
court to draw on its judicial experience and
common sense." Id. at679.
Federal Rule of Civil Procedure l2(c) provides
that "[a]fter the pleadings are closed-but early
enough not to delay trial-a party may move for
judgment on the pleadings." Fed.R.Civ.P. l2(c). A
Rule l2(c) motion "is assessed under the same
standard that applies to a Rule l2(bx6) motion."
I{alker v. Kelley,589 F.3d 127, 139 (4th Cir.2009);
Independence News, Inc. v. City of Charlotte, 568
the
is
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http,,llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 13 of25
Page 13
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
F.3d 148, 154 (4th Cir.2009) (citing Edwards v.
City of Goldsboro, 178F.3d231,243 (4th Cir.1999)).
III. Discussion
A. The Rooker-Feldmaz Doctrine
The defendants argue that the Rooker-Feldmsn
doctrine bars this court's jurisdiction. The United
States Supreme Court holds that the doctrine
"recognizes that 28 U.S.C. $ l33l is a grant of
original jurisdiction, and does not authorize district
courts to exercise appellate jurisdiction over state-
court judgments, which Congress has reserved to
this Court." Verizon Md., Inc. v. Pub. Serv. Comm'n
of Md., 535 U.S. 635, 644 n. 3 (2002).It is named
for the only two Supreme Court cases in which it
has been applied: Rooker v. Fidelity Trust Co., 263
U.S. 413 (1923), and Columbia Court of Appeals v.
Feldmqn, 460 U.S. 462 (1983). See Exxon Mobil
Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280,
283 (200s).
ln Exxon Mobil, the Supreme Court warned
that lower courts had at times applied the doctrine
"far beyond the contours of the Rooker and
Feldmqn cases, overriding Congress' conferral of
federal-court jurisdiction concurrent withjurisdiction exercised by state courts, and
superseding the ordinary application of preclusion
law pursuant to 28 U.S.C. $ 1738." 544 U.S. at283.
The Court clarified that the doctrine is limited to
"cases brought by state-court losers complaining of
injuries caused by state-court judgments rendered
before the district court proceedings commenced
and inviting district court review and rejection of
those judgments." Id. at284.
It added that the Rooker-Feldman doctrine
does not become applicable "simply because a
party attempts to litigate in federal court a matter
previously litigated in state court." Id. at 293. The
federal district court still has jurisdiction if the case
before it "present[s] some independent claim' "
even if that claim "denies a legal conclusion that a
state court has reached in a case to which [theplaintiffl was a party.' " /d. (quoting GASH Assocs.
v. Rosemont, 995 F.2d 726, 728 (7th Cir.l993)).
Thus, in Exxon Mobil, the Court declined to apply
Rooker-Feldmqn where the plaintiff did not "repair
[ ] to federal court to undo the [state court]
ludgment in its favor" but rather "filed suit in
Federal District Court ... to protect itself in the
event it lost in state court on grounds (such as the
state statute of limitations) that might not preclude
relief in the federal venue." Id. at293-94.
*14 Discussing the impact of Exxon Mobil, our
court of appeals explained,
Whereas [before Exxon I we examined whether
the statecourt loser who files suit in federal court
is attempting to litigate claims he either litigated
or could have litigated before the state court,
Exxon requires us to examine whether the state-
court loser who files suit in federal district court
seeks redress for an injury caused by the state-
court decision itself. If he is not challenging the
state-court decision, the Rooker-Feldman
doctrine does not Dapply.
Davani v. Virginia Department ,/
Transportation, 434 F.3d 712, 718 (4th Cir.2006)(footnote omitted) (permiuing a federal
employment discrimination and retaliation action
following the state court's refusal to overturn theplaintiffs grievance with the employer). It
borrowed this example from the Second Circuit:
Suppose a plaintiff sues his employer in state
court for violating ... anti-discrimination law and
... loses. If the plaintiff then brings the same suit
in federal court, he will be seeking a decision
from the federal court that denies the state court's
conclusion that the employer is not liable, but hewill not be alleging injury from the state
judgment. Instead, he will be alleging injury
based on the employer's discrimination. The fact
that the state court chose not to remedy the injury
does not transform the subsequent federal suit on
the same maffer into an appeal, forbidden by
Roo ker-F eldman, of the state-court judgment.
Id. at719.
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 14 of25
Page 14
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
The Supreme Court further emphasized the
doctrine's limits in Lance v. Dennis, decided the
term following Ewon Mobil:
Neither Rooker nor Feldman elaborated a
rationale for a wide-reaching bar on the
jurisdiction of lower federal courts, and our cases
snce Feldmqn have tended to emphasize the
niurowness of the Rooker-Feldman rule. See
Exxon Mobil, 544 U.S., at 292, 125 S.Ct. l5l7 (
RookerFeldman does not apply to parallel state
and federal litigation); Verizon Md. Inc. v. Public
Serv. Comm'n of Md., 535 U.S. 635, 644, n. 3,
122 S.Ct. 1753, 152 L.Ed.2d 871 (2002) (
Rooker-Feldmqn "has no application to judicial
review of executive action, including
determinations made by a state administrative
agency"); Johnson v. De Grandy, 512 U.5.997,
1005-1006, lt4 s.ct. 2647, 129 L.Ed.2d 775
(1994) (Rooker-Feldman does not bar actions bya nonparty to the earlier state suit). Indeed,
during that period, "this Court has never applied
Rooker-Feldman to dismiss an action for want of
jurisdiction." Exxon Mobil, supra, at 287, 125
s.ct. 1517.
546 U.S. 459, 464 (2006). Particularly relevant
to this case is the admonition that "[t]he doctrine
has no application to judicial review of executive
action, including determinations made by a state
administrative agency." Verizon Md., 535 U.S. at
644 n.3.
The facts in Verizon Maryland were somewhat
analogous to those here. Pursuant to the
Telecommunications Act of 1996, the Maryland
Public Service Commission had approved an
"interconnection agreement" and "reciprocal
compensation arrangement" through which Verizon
would share its network with WorldCom and other
competitors. Id. at 638-39. Sometime thereafter,
Verizon informed WorldCom that it would no
longer pay for certain calls which it contended were
not subject to the interconnection agreement. 1d.
WorldCom filed a complaint with the commission
challenging Verizon's claim, and the commission
found in favor of WorldCom. Id . On appeal, a
Maryland state court affirmed the order. 1d.
*15 Verizon then filed an action in federal
district court, alleging that the commission's ruling
violated the 1996 Act and a later FCC
determination. Id at 640. The district court
dismissed the action, and the Fourth Circuit
affnmed on immunity grounds. Id. On appeal to the
Supreme Court, the commission suggested that
Rooker-Feldman should have precluded federal
jurisdiction. The Court dismissed the argument in a
footnote, stating that Rooker-Feldman limits
jurisdiction "over state-court judgments" and
therefore does not apply "to judicial review of
executive action, including determinations made by
a state administrative agency." Id. at 644 n. 3.
This court finds the Rooker-Feldman doctrine
likewise inapplicable to MEA's claims. MEA has
not brought a direct challenge to the West Virginia
Supreme Court's judgment. MEA is challenging the
Commission's ruling regarding credit ownership, a
determination by a state administrative agency, just
.rs in Verizon Maryland. While the federal
challenge may "deny" the West Virginia Supreme
Court's legal conclusion that the Commission Order
is consistent with PURPA, that denial does not
make this action a challenge to a state court
judgment. See Exxon Mobil Corp., 544 U.S. at 293.
The Commission's further argument that the state
high court created the injury by making the
Commission order the "law of the land in West
Virginia" is unpersuasive. Comm'n's Mem. Supp.
Mot. Dismiss 18. Such a rationale would apply to
any state high court decision and considerably
broaden a doctrine whose application the Supreme
Court has expressly left rather narrow.
Having found that this case is not a direct
challenge to a state court judgment, the court neednot address MEA's two altemative arguments
against the application of Rooker-Feldman: l) that
this action began with the FERC petition and
therefore preceded the state court judgment and 2)
that the doctrine is inapplicable because this court
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%o7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page l5 of25
Page l5
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
has exclusive jurisdiction over
implementation challenges.
B. Statutory Jurisdiction Under PURPA
PURPA
The defendants also assert that this case does
not challenge the Commission's "implementation"of FERC rules for electric utilities, and
consequently fails to qualify for PURPA's statutory
grant of jurisdiction to federal district courts. See
PURPA $ 210(f, h), l6 U.S.C. $ 82aa-3(f, h).
Section 210 of PURPA provides the
mechanism though which qualifuing facilities can
bring an action in federal district court. As
discussed above, g 210(0 concerns the
"[i]mplementation of rules for qualifying
cogeneration and qualifuing small power
production facilities" and requires "each State
regulatory authority"-in this case, the
Commission-to "implement such rule (or revised
rule) for each electric utility for which it has
ratemaking authority." Id. The implementation
must occur "on or before the date one year after"
FERC prescribed the rule. Id. If the regulatory
authority fails to implement the FERC rules, $210(h) provides that "[a]ny electric utility,
quali$ing cogenerator, or qualiffing small power
producer may petition [FERC] to enforce the
requirements of subsection (f)." Id. $824a3(hX2XB). If FERC declines to bring an
enforcement action, $ 210(h) then authorizes the
electric utility, qualiffing cogenerator, or
qualifuing small power producer to bring an action
against the state regulatory authority in "the
appropriate United States district court." Id.
*16 MEA's complaint expressly provides $
210(h) as the basis for this court's jurisdiction for
claims against the Commission arising under
PURPA. Compl. fl 5. The defendants, however,
contend that this lawsuit does not relate to the
Commission's "implementation" of FERC rules
because the initial assignment of RECs is controlled
by state law, not by PURPA. They consequently
assert that this court lacks jurisdiction under $
210(h) to review the Commission Order.
The court believes its exercise of jurisdiction is
proper in this instance. While Wheelabrator and
American Ref-Fuel conclude that state regulatory
agencies' assignment of RECs is a matter of state
law, these opinions do not stand for the further
position that the assignment of state credits can
never result in a violation of PURPA. Consistent
with those opinions, a state commission would
violate PURPA by assigning credits in a way that
directly modifies EEPAs, that is, by ruling that the
EEPAs "inherently convey" the credits. Am.
Ref-Fuel, 105 F.E.R.C. fl 61,005. That is what
MEA alleges has happened in this case.
FERC, in somewhat qualified language,
appears to agree with MEA, and though it declined
to initiate an enforcement action, FERC expressly
stated that MEA "may bring its own enforcement
action ... in the appropriate United States district
court." 139 F.E.R.C. fl 61,066 at !f 45. The
defendants argue that the court is not obligated to
follow a FERC order. See Xcel Energt Servs., Inc.
v. FERC, 407 F.3d 1242, 1244 (D.D.C.2005) ("An
order that does no more than announce [FERC's]
interpretation of the PURPA or one of the agency's
implementing regulations is of no legal moment
unless and until a district court adopts that
interpretation when called upon to enforce the
PURPA."). While that may be, close scrutiny of
FERC's conclusions is inappropriate in the contextof a jurisdictional inquiry, and the court,
accordingly, takes FERC's conclusions at face value
as support for jurisdiction. See Hartley v. CSX
Transp., Inc., 187 F.3d 422, 425 (4th Cir.l999)
("[A] jurisdictional inquiry is not the appropriate
stage of litigation to resolve these various uncertain
questions of law and fact. ... To permit extensive
litigation of the merits of a case while determining
jurisdiction thwarts the purpose of jurisdictional
rules.").
Section 210 gives this court jurisdiction over
challenges to PURPA implementation, and this is
such a challenge. Whether it is also a fruitful
challenge should not be determined within the
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http://web2.westlaw.com/printiprintstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page l6 of25
Page 16
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 562386 (S.D.W.Va.))
threshold jurisdictional inquiry. The court
concludes that jurisdiction is proper and leaves
consideration of American Ref-Fuel for the
discussion of MEA's specific claims.
The court rejects the defendants' argument that
the assignment of Portfolio Act credits is not a
matter of PURPA implementation because, it says,
"implementation" occurred in l98l, when it
implemented West Virginia's PURPA program.
Comm'n's Mem. Supp. Mot. Dismiss 25. See also
Mem. Supp. Utilities' Mot. J. Pleadings 13, 20. A
1983 FERC policy statement clarifies that
implementation enforcement under $ 210 extends to
state regulatory authorities that "completed the
implementation process, but have promulgated
regulations which are inconsistent with or contraryto [FERC's] regulations." Policy Statement
Regarding the Commission's Enforcement Role
Under Section 210 of the PURPA (" Policy
Statement "), 23 F.E.R.C. 'lt] 61,304, at 'T 61,644
(1983). The policy statement continues: "Thus, for
example, an allegation that a State regulatory
authority had promulgated regulations which
include a purchase rate standard contrary to [FERC]
regulations would properly lie before [FERC] or
before a judicial forum of proper jurisdiction." /d;
see also Occidental Chem. Corp. v. La. Pub. Serv.
Comm'n, 494 F.Supp.2d 401, 409 (M.D.La.2007) (
"Federal jurisdiction under $ 210(h) exists
whenever a state regulatory authority has adopted
requirements that 'include a purchase rate standard
contrary to existing [FERC] regulations.' " (quoting
Policy Statement,23 F.E.R.C. at'!J 61,644)). Section
210 "implementation" actions are not limited to thereview of a regulatory authority's initial
implementation. If the Commission Order modifiedthe EEPA purchase rates contrary to FERC
regulations, as MEA alleges, then the Commission
has failed to implement PURPA.
*17 The court likewise disagrees with the
defendants' related contention that jurisdiction is
improper because the complaint can "[a]t best" be
construed as an "as applied" challenge. Comm'n's
Mem. Supp. Mot. Dismiss 24-25; see also Utilities'
Mem. Supp. Mot. J. Pleadings ll. As one court
explained,
An implementation claim involves a
contention that the state agency has failed to
implement a lawful implementation plan under g
210(0 of PURPA. An as-applied claim, in
confast, involves a contention that the agency's
implementation plan is unlawful, as it applies to
or affects an individual petitioner.
Mass. Inst. of Tech. v. Mass. Dep't of Pub. Util.(* MIT "), 941 F.Supp. 233, 237 (D.Mass.l996).
"Because the jurisdictional grant in $ 210(h) of
PURPA extends only to cases in which a federal
court is asked to require a state agency ... to
implement, federal courts have refused to hear as-
applied claims." Id. (crting Greensboro Lumber Co.v. Ga. Power Co., 643 F.Supp. 1345, 1374
(N.D.Ga.l986), offd 844 F.2d 1538, 1542 (llth
Cir.l988) ("The district court held that it lacked
subject matter jurisdiction over Greensboro's oas
applied' claim, and we find its reasoning
persuasive.")).
In arguing that the pending action is an "as
applied" challenge, the defendants rely on
Greensboro Lumber and MIT. The court observes
that the instant case differs from those "as applied"
cases in that the complaint alleges an impermissible
modification of preexisting EEPAs that would
broadly affect all West Virginia QFs. ln Occidental
Chemical Corp., the district court distinguished
Greensboro Lumber and MIT on grounds that are
equally apt in this case. See 494 F.Supp.2d at 410
("Inasmuch as the Greensboro Lumber Co. court
relied upon the allegation that the non-regulated
utility violated PURPA as-applied to the plaintiff
alone, the case is distinguishable. In the case sub
iudice, neither Carville nor Occidental allege that
the [state regulatory] order violates PURPA as-
applied to either plaintiff alone."); id. ("Like
Greensboro Lumber Co., Mass. Inst. of Tech. is
distinguishable because neither Carville nor
Occidental allege that either is the only QF
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:oh7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page 17 of25
Page 17
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 5462386 (S.D.W.Va.))
subjected to the new methodology for calculating
avoided cost. To the contrary, Occidental alleges
that 'the [state regulator's] failure to implement
PURPA is demonstrated by the broad scope of
entities to whom the [state regulator's] Order
applies....' ").FN8 The Commission Order sets forth
a rule that broadly applies to PURPA QFs and thatis allegedly "inconsistent with or contrary to
[FERC's] regulations." Policy Statement, 23
F.E.R.C. at n 61644. The Commission Order does
not relate to a "particular qualifring facility," Ns
Greensboro Lumber, 643 F.Supp. at 1374, and the
court is satisfied that this action is not an "as
applied" challenge.
FN8. The Commission argues that
Occidental Chemical is itself
distinguishable because in that case the
state regulator expressly authorized
modification of the QF's avoided cost
rates, whereas this case "indirectly reduces
the QFs avoided cost rate previously
implemented." Comm'n Reply 19. But
MEA claims precisely the contrary: that,
inasmuch as the Commission relied on the
avoided cost rates :rs grounds for its
decision, it directly modified the rates.
Moreover, even if such a distinction is
tenable, it is of no consequence to the
grounds on which Occidental Chemical
distinguished Greensboro Lumber and MIT.
FN9. The Commission acknowledged the
breadth of the Commission Order's impact
when, in arguing for the application of
Rooker-Feldman, it stated that the
Commission Order had become the "law of
the land in West Virginia." Comm'n's
Mem. Supp. Mot. Dismiss 18.
C. Abstention
The Utilities argue that this court should
abstain from adjudicating MEA's claims under the
Younger, Burford, Pullman, Princess Lida, and
Colorado Rlver abstention doctrines because the
"exact claims" have already been adjudicated in
state proceedings before the Commission and the
West Virginia Supreme Court of Appeals. Utilities'
Mem. Supp. Mot. J. Pleadings 3, 24-25. The
Utilities' opening brief dedicates a mere three
sentences of argument to these several complex
doctrines. The reply brief simply gives a short
discussion of Burford followed by a series of
sentences, each one of which describes why a
different abstention doctrine applies to this case.
The court concludes that the abstention arguments
have not been seriously raised by the Utilities. In
any event, the court declines to abstain under the
aforementioned doctrines. The case has been fully
resolved in the West Virginia Supreme Court of
Appeals and there is no ongoing, parallel state
proceeding, so abstention is not warranted under
Younger, Colorado River, or Pullman. See England
v. Louisiana State Bd. of Medical Examiners, 375
U.S. 4l l, 416 n. 7 (1964) (Pullman ); United States
v. South Carolina, 720 F.3d 518, 527 (4th Cir.20l3)
(Younger ); Ackerman v. ExxonMobil Corp.,
-F.3d
-,
2013 WL 4008699, at *3 (4th Cir.20l3)
(Colorado River ). There are no unresolved
questions of state law, so abstention is not
warranted under Burford. See Town of Nags Head
v. Toloczko, 728 F.3d 391,2013 WL 4517074 at *3
(4th Cir.20l3). Finally, MEA does not request that
the court take control of property over which a state
court has obtained jurisdiction. Rather than asking
the court to control the RECs, MEA asks for an
injunction against the Commission, damages, and
declaratory relief. Therefore, abstention is not
warranted undet Princess Lida. See Gannett Co.,
Inc. v. Clark Const. Group, Inc., 286 F.3d 737, 747
n .9 (4th Cir.2002).rNto
FNl0. The court also declines to abstain
pursuant to the discussion in the order
dismissing the companion case before it,
City of New Martinsville v. Public Service
Comm'n of West Virginia, 2:12-<v-1809.
D. Res Judicata and Collateral Estoppel*18 The defendants assert that res judicata and
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b7717 6-895e-40a6-b57a-923... lll0l20l4
Page l8 of25
Page 18
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
collateral estoppel bar MEA's complaint because
the issues have been fully litigated within the
Commission's proceeding and the state court appeal.
The Full Faith and Credit Act, 28 U.S.C. $
1738 requires the federal court to "give the same
preclusive effect to a statecourt judgment as
another court of that State would give." Parsons
Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 523
(1986). The application of preclusion principles is
subject to a two-part inquiry:
First, a federal court must look to state law to
determine the preclusive effect of the state court
judgment. If state law would not bar relitigationof an issue or claim decided in the earlier
proceeding, then the inquiry ends-a federal court
will not give the state court judgment preclusive
effect either. If state law would afford the
judgment preclusive effect, however, then a
federal court must engage in a second step-it
must determine if Congress created an exception
to $ 1738. Only if "some exception to $ 1738
applie [s]" can a federal court refuse to give a
judgment the preclusive effect to which it is
entitled under state law. An exception "will not
be recognized unless a later statute contains an
express or implied partial repeal" of $ 1738.
ln re Genesys Data Techs., Inc., 204 F.3d 124,
128 (4th Cir.2000) (citations omitted); see also
Jaffe v. Acuedited Sur. and Cas. Co., 294 F.3d
584, 590 (4th Cir.2002).
Under the relevant state law, res judicata
prevents relitigation when three elements are
satisfied:
First, there must have been a final adjudication
on the merits in the prior action by a court having
jurisdiction of the proceedings. Second, the two
actions must involve either the same parties or
persons in privity with those same parties. Third,
the cause of action identified for resolution in the
subsequent proceeding either must be identical to
the cause of action determined in the prior action
or must be such that it could have been resolved,
had it been presented, in the prior action.
Blake v. Charleston Area Med. Ctr., Inc., 498
S.E.2d 41, 49 (W . Va.l997) (quoting Hunnah v.
Beasley, 53 S.E.2d 729, 732 (W.Va.1949)). The
West Virginia Supreme Court of Appeals has
further expounded on what constitutes the same
cause ofaction in the resjudicata context:
"[F]or purposes of res judicata, 'a cause of
action' is the fact or facts which establish or give
rise to a right of action, the existence of which
affords a party a right to judicial relief.... The test
to determine if the ... cause of action involved in
the two suits is identical is to inquire whether the
same evidence would support both actions or
issues.... If the two cases require substantially
different evidence to sustain them, the second
cannot be said to be the same cause of action and
barred by res judicata."
Id. at 48 (quoting White v. SIYCC, 262 S.E.2d
752, 756 (W.Va.1980)). For res judicata to be
applicable, a prior adjudication need not have
formally and directly addressed a matter:*19 "[A]n adjudication by a court having
jurisdiction of the subject-matter and the parties
is final and conclusive, not only as to the matters
actually determined, but as to every other matter
which the parties might have litigated as incident
thereto and coming within the legitimate purviewof the subject-matter of the action. It is not
essential that the matter should have been
formally put in issue in a former suit, but it is
sufficient that the status of the suit was such that
the parties might have had the matter disposed of
on its merits."
1d. (quoting Syl. ft. l, Conley v. Spillers, 301
S.E.2d 216, 217 (W.Va. I 983)).
For administrative agency decisions, the
preclusion rule is derived from Page v. Columbia
Nalural Resources, lnc. and provides as follows:
A 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0/2014
Page 19 of25
Page 19
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
An assessment of three factors is ordinarily made
in determining whether res judicata and collateral
estoppel may be applied to a hearing body: (l)
whether the body acts in a judicial capacity; (2)
whether the parties were afforded a full and fair
opportunity to litigate the matters in dispute; and
(3) whether applying the doctrines is consistentwith the express or implied policy in the
legislation which created the body.
480 S.E.2d 817, 831 (W.Va.) (quoting Syl. ft.
3, Mellon-Stuart Co. v. Hall, 359 S.E.2d 124, 126
(w.Va.le87)).
One need not pause to consider whether the
proceedings that culminated in the Commission
Order met this test. According preclusive effect to
the Commission Order would be inconsistent with
the framework through which the court conducts its
review, inasmuch as Section 210(h) gives the court
jurisdiction to review regulatory authority decisions
for compliance with PURPA implementation rules.
Barring review due to the Commission's own
proceedings would significantly impair the court's
ability to carry out that congressionally granted
function.
The court, however, concludes
Supreme Court of Appeals' decision
Martinsville/MEA bars relitigation of MEA's
claims. First, Neur Mqrtinsville/MEA was a final
adjudication on the merits by a court having
jurisdiction of the proceedings. Blake, 498 S.E.2d
at 49. The high court affirmed the Commission's
order as consistent with both PURPA and state
law. New Martinsville/MEA, 729 S.E.2d at
196-97, 199 ("[W]e find no merit to the arguments
asserted by the Generators and, therefore, the
decision of the Commission finding that the credits
at issue are owned by the Utilities is affirmed."). As
expressly recognized by FERC, the high court had
jurisdiction to consider PURPA implementation
claims:
[T]he Commission [ (FERC) ] believes that its
jurisdiction to review and enforce the section
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
that the
in New
210(f) implementation requirement (i.e., the
requirement that State regulatory authorities ...
promulgate rules consistent with the requirements
established by this Commission under section
210(a) of PURPA) is not exclusive. In fact, we
would anticipate that generally proceedings
would be initiated at the State level.
*20 Policy Statement,23 F.E.R.C. !f 61,304, at
1161,664.
MEA's position to the contrary-that this courthas exclusive jurisdiction over PURPA
enforcement claims-is based on the following
statement from a federal court ofappeals:
Congress created in S 210 a complete and
independent scheme by which the purposes of
PURPA are to be realized. That scheme involves
the promulgation of regulations by the FERC,
and their subsequent enforcement exclusively in
federal district court, at the insistence of either a
private party or the FERC itself.
Industrial Cogenerators v. FERC, 47 F.3d
1231, 1235-36 (D.C.Cir.l995). MEA overlooks
that the appeals court made the statement in the
context of the plaintiffs direct challenge to a FERC
order. Under PURPA, a plaintiff may opt to pursuejudicial enforcement of a state's PURPA
implementation in one of two ways: directly, at the
state level under $ 210(g); or in federal district
couft after petitioning FERC under $ 210(h). See
Rainbow Ranch Wind, LLC & Rainbow West lfind,
LLC, 139 F.E.R.C. fl 61,304 ("Section 210(g) and
section 210(h) of PURPA provide for separate state
and federal rights to challenge a state's
implementation of PURPA. A state's
implementation of PURPA and the Commission's
rules implementing PURPA may be challenged
either through the state courts under section 210(g)
of PURPA, or separately at the Commission under
section 210(h) of PURPA, or both."). Industrial
Cogenerators' discussion of exclusivity stands only
for the proposition that a direct challenge to a
FERC order must occur under g 210(h), at the
http:llweb2.westlaw.com/print/printstream.aspx?stid:o/s7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page20 of25
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as:2013 WL 5462386 (S.D.W.Va.))
federal district court. Here, MEA is challenging a
state implementation enforcement action, not a
FERC order.
The second element required for applying
preclusion is satisfied since, in both this case and
New Mqrtinsville/MEA, MEA is challenging the
Commission Order and the Commission and the
Utilities are defending. See Blake,498 S.E.2d at 49.
While the individual Commissioners were not
parties to New Martinsville/MEA, MEA does not
assert that the Commissioners were not in privity
with the Public Service Commission. Indeed, the
Commissioners, sued here in their official capacity,
are in privity with the Public Service Commission.
While the West Virginia cases are relatively silenton the matter, there exists other persuasive
authority on the issue. See, e.g., Tait v. Western
Maryland R. Co ., 289 U.S. 620 (1933) (tax
collector in privity with Commissioner of tnternal
Revenue); Mears v. Town of Oxford, Md., 762 F.zd
368, 371 n. 3 (4th Cir.l985) (applying Maryland
law).
Finally, the causes of action identified for
resolution in this action are identical to the causes
of action determined n New Martinsville/MEA, or
such that they could have been resolved, had they
been presented. See id. The West Virginia Supreme
Court of Appeals addressed and rejected MEA's
Count I argument that the Commission improperly
modified the EEPAs: "the Commission has not
modified the terms of the existing EEPAs but,
instead, has only determined ownership of
assets-the credits-which were not contemplated
and, thus, not provided for in the EEPAs." NeL
M artinwil le/ M EA, 729 S.E.2d at 196.
*21 The same discussion also addresses MEA's
Count II preemption claim, which arises from the
allegedly improper modification. Count II alleges
"[s]pecifically" that the Commission was prohibited
from "holding that the payment of avoided cost
rates included compensation for RECs." Compl. !f
72. Notably, the high court addressed this issue. It
recognized that modi8/ing the EEPA is something
the Commission cannot do under $ 210(e) of
PURPA, citing Freehold, 44 F.3d at 1192; and it
concluded that the Commission's actions were not
preempted because the Commission did not modi$
the terms of the EEPA. Nevv Martinsville/MEA, 729
S.E.2d at 196.
Nan MartinsvilleJMEA directly and thoroughly
resolved MEA's Count III claim that the decision to
certify the Morgantown facility constituted utility-
type regulation, concluding that it did not. /d. at
196-97, 200. There the court noted that 'MEA
argues that the Commission's conclusion that it can
'deem' the Morgantown project certified to create
credits recognized by West Virginia law contradictsMEA's federally-created exemption from
'utility-type' state law regulation." Id. at 199. Here,
MEA makes the same claim in Count III: "The
[Commission's] decision that it 'has the jurisdiction
and authority to deem' MEA's facility certified as a
qualified enerry resource to generate WV-RECsexerts impermissible 'financial' and
'organizational' regulation of MEA." Compl. !f 79.
In Count IV, MEA asserts that "[t]he
[Commission] Order violates PURPA's anti-
discrimination provision by determining that the
avoided cost rates paid to MEA ... include MEA's
WV-RECs." Compl. tT 86. PURPA mandates that
rates for the purchase of energy by a utility must
not discriminate against QFs (as compared to
facilities that are not qualified). 16 U.S.C. $82aa1$)(2). MEA claims that under West
Virginia law, a non-QF will retain any RECs
associated with the energy it generates. As a result,
MEA argues, the Commission Order discriminates
because QFs do not get to keep their
RECs-instead they go to the utility with which the
QF has a contract.
For the moment, the court sets aside whether
MEA is correct about the state of the law in West
Virginia and its discriminatory effect. The viability
of MEA's cause of action is not at issue in an
analysis of res judicata. All the court need
determine is whether MEA asserts the same cause
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http.llwebLwestlaw.com/print/printstream.aspx?stid:o/o7b49b77176-895e-40a6-b57a-923... lll0l20I4
Page2l of25
Page2l
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
of action as in New Martinsville/MEA.FNtl
FN I l. Nevertheless, the court does
ultimately examine the merits of MEA's
discrimination claim and concludes that
MEA makes an incorrect statement of the
law and that the Commission Order is not
discriminatory. See infra Part III.E.4, pp.
6143.
As to whether MEA asserts the same cause ofaction as in New Martinsville/MEA, the
discrimination argument in Count IV appears
directly in MEA's brief presented before the West
Virginia Supreme Court of Appeals. Utilities' Mot.
Dismiss, Exh. A 32. Therefore, even if the
discrimination claim did not constitute the same
cause of action as in the instant case-which it did
because there is no additional evidence required to
pursue it-it clearly could have been made in New
Mqrtinsville/MEA, inasmuch as the argument was,
in fact, presented there. That is enough for res
judicata.
*22 Count V merely requests injunctive relief,
and is not a stand-alone claim. Finally, respecting
Count VI, the West Virginia Supreme Court of
Appeals directly considered and rejected MEA's
argument that the Commission Order "results in thetaking of private property without just
compensation." Nevt Martinsville/MEA, 729 S.E.2d
at 197 n. 13 ("[W]e furd no merit to this argument
because the Commission determined that the credits
were owned by the Utilities in the first instance.
The Commission's decision could not constitute an
unconstitutional taking because no property owned
by [MEA] was taken.").
Despite the overlap between this case and Nq,v
Martinsville/MEA, MEA insists that the two cases
are entirely distinct claims: "The object of this
case---+nforcement of a PURPA implementation
claim-is separate and distinct from the issue of
REC ownership presented in the New Mqrtinsville
case." FNr2 Opp'n to Comm'n's Mot. Dismiss 23.
As stated above, however, state law interprets a
"cause of action" for purposes of res judicata as
"the fact or facts which establish or give rise to a
right of action, the existence of which affords a
party a right to judicial relief." See Blake, 498
S.E.2d at 48. In both Nevv Martinsville/MEA andthis case, MEA attempts to overtum the
Commission Order, and it is the circumstances of
the PURPA implementation claims and takings
claim that give rise to the right of action in each
case. Therefore, the causes ofaction are identical.
FN 12. Even if this were the case, it
appears that New Martinsville/MEA's
underlying conclusions would merit
preclusive effect on collateral estoppel
grounds. See Bland v. State, 737 S.E.2d291, 297 (W.Ya.2012) ("Collateral
estoppel will bar a claim if four conditions
are met: (l) The issue previously decidedis identical to the one presented in the
action in question; (2) there is a final
adjudication on the merits of the prior
action; (3) the party against whom the
doctrine is invoked was a party or in
privity with a party to a prior action; and
(4) the party against whom the doctrine is
raised had a full and fair opportunity to
litigate the issue in the prior action."
(quoting Syl. ft. l, State v. Miller, 459
S.E.2d I la (W.Va.l9e5))).
MEA suggests that even if the requirements for
res judicata are satisfied, the court may nonetheless
decline to enforce the doctrine. MEA is right that
the court is not obligated to apply the doctrine:
"[E]ven though the requirements of res judicata
may be satisfied, we do 'not rigidly enforce [this
doctrinel where to do so would plainly defeat the
ends of Justice.' " Blake, 498 S.E .2d at 50 (quoting
Gentry v. Farruggia, 53 S.E.2d 741, 742
(W.Va.1949)). However, it is unclear how MEA
believes the West Virginia Supreme Court of
Appeals' decision in New Martinsville/MEA would
"plainly defeat the ends of justice," apart from the
mere fact that MEA disagrees with its outcome.
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page22 of25
Page22
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
Moreover, as discussed below, this court
substantially agrees with Na,v Martinsville/MEA
-although it need not agree to apply res judicata.
See Blake, 498 S.E.2d at 49 ("An erroneous ruling
of the court will not prevent the matter from being
res judicata." (quoting Syl. ft. l, Conley, 301
S.E.2d at2t7)).
Accordingly, res judicata applies to each and
every count brought by MEA in its complaint, and
bars them all from relitigation in this court.
E. Sufficiency of the ClaimsFNr3
FNl3. MEA asserts that "these issues are
inappropriate for a motion to dismiss and
are contrary to the agreement of the parties
to present the issues to the Court in two
steps." Opp'n to Utilities' Mot. J. Pleadings17. The court's January 10, 2013
bifurcation order, however, did not limit
the motions to procedural issues, and the
Utilities' arguments are appropriate at this
juncture. Moreover, the arguments overlap
considerably with what the parties haveelsewhere deemed "procedural"
arguments, and, in any case, MEA has had
an opportunity to respond.
Apart from the application of res judicata, the
court agrees with the Utilities assertion that MEA's
PURPA claims in Counts I through V fail as a
matter of law.FNr4
FNl4. The parties do not address the
merits of Count VI, the takings claim,which is only asserted against the
Commission. That is, they do not address
whether the Commission Order effected an
unconstitutional taking. The Commission
and MEA do argue over how sovereign
immunity might bar relief under Count VI,
but they both agree that even after
applying sovereign immunity, prospective
injunctive relief would still be available
against the individual Commissioners.
Inasmuch as resolving the sovereign
immunity arguments would not eliminate
Count VI outright, and because the court
dismisses Count VI on res judicata
grounds, there is little utility to addressing
the sovereign immunity claims, and the
court declines to do so.
1. Count I: Violation of PURPA
Count I alleges the Commission Order violates
PURPA and FERC's regulations implementing
PURPA by "granting ownership of WVRECs to
Mon Power without requiring the payment of
compensation to MEA beyond the avoided cost rate
in the parties'PURPA EEP[A]." Compl. !f 67.
*23 The Utilities seek dismissal on the ground
that the Commission Order was purely a matter of
state law and did not violate PURPA.FN'5 They
argue that the Commission Order assigns credits
based exclusively on state law authority, consistent
with American Ref-Fuel, and that MEA has no
grounds for challenging that decision. The basis forthe decision, the Commission states, was the
assessment of the Portfolio Act's policy goals and
the determination that granting credits to the
generators would be an "un-bargained for windfall"
for the generator and would be "unfair to the
utilities and rate-paying public." Comm'n Reply 6.
FNl5. The Commission raised these
arguments in the jurisdictional context, but
the court, for reasons discussed above,
finds it more appropriate to consider the
arguments with respect to the merits.
MEA relies on "FERC's view" that the
Commission Order violated PURPA by
"impermissibly discriminat[ing]" against West
Virginia QFs with PURPA-approved EEPAs. Opp'n
to Comm'n 12. MEA quotes the FERC's conclusion
that "[t]he only reasonable reading" of the
[Commission] Order is that the West Virginia
Commission's finding ... is based on the West
Virginia Commission's belief that the PURPA
avoided cost rates are overly generous and therefore
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/prinVprintstream.aspx?stid:o/o7b49b77176-895e-40a6-b57a-923... llI0l20l4
Page23 of25
Page23
Slip Copy,2013 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
must include RECs." 140 F.E.R.C. n 61,223 atl2l.
MEA further points to statements that the
Commission Order was "inconsistent with
PURPA," 139 F.E.R.C. fl 61,066 at n 47, and was
"inconsistent with IFERC's] ruling in American
Ref-Fuel that avoided cost rates 'in short, are not
intended to compensate the QF for more than
capacity and energy,' " 140 F.E.R.C.I61,223 atl
21.
The court agrees with the Supreme Court of
Appeals' reasoning in New Martinsville/MEA.
There, the high court found that the Commission, in
accordance with the legislative intent of the
Portfolio Act and its statutory charge to balance the
interests of the utilities, the public, and the state's
economy in making its assessment, "concluded that
the public interest favored awarding ownership of
the credits to the Utilities;' New Martinsville/MEA,
729 S.E.2d at 198. Thus, the Commission's
determination is consistent with FERC's guidance
in American Ref-Fuel that a state regulator should
"find its authority [for assigning RECs] in state
law, not PURPA." 105 F.E.R.C. 'lT 61,007, at n 24.
Other courts have noted and approved similar
public policy grounds for assigring RECs. See
Ownership of RECs, 913 A.2d 825, 830
(N.J.Super.Ct.App.Div.2007) ("[A]s the [state
regulator] concluded, assignment of the Renewable
Energy Certificates to appellants necessarily would
have meant that retail consumers would have had to
pay more for electricity. This result would be unfairto retail consumers, who have already paid for
appellants' electricity, and is entirely inconsistent
with the governing state legislation."); ARIPPA v.
Pq Pub. Util. Comm'n, 966 A.2d 1204, l2l4
(Pa.Commw.Ct.2009) (accepting the state
regulator's "conclu[sion] that the public interest
favored awarding ownership rights in the credits to
the distribution company" where there was "no
controlling statutory language in the applicable
version of [the state portfolio standards act], no
controlling precedent, and no guiding language in
the contracts themselves").
*24 The Commission Order does not conclude,
as proscribed by American Ref-Fuel, that the
avoided cost rate inherently compensates for more
than capacity and energy. As the Supreme Court ofAppeals observed, the Commission "only
interpreted the EEPAs to evaluate the Utilities'
obligations under them and their ownership of the
electricity at the time it is generated." New
Martinsville, 729 S.E.2d at 196. It did not
"interfere[ ] with the Generators' federally-granted
right to be exempt from certain utility-type state
regulation." ld. at 196-97.
In implementing the Portfolio Act, the
Commission necessarily had to consider the
circumstances surrounding the PURPA
EEPAs-agreements that are directly relevant to
the Portfolio Act's policy goals of providing
renewable energy at reasonable prices. Id. 198-99
("The purpose of the Portfolio Act is to encourage
the creation and use of energy from alternative
sources of energy. West Virginia Code $
24-2F-2(7) (Repl.Vol.2008 & Supp.2Oll) states:
'It is in the public interest for the state to encourage
the construction of alternative and renewable
energy resources facilities that increase the capacityto provide for current and anticipated electric
energy demand at a reasonable price.' "). The
Commission's finding that PURPA EEPAs are
generous and require no additional consideration is
merely an assessment of policy concerns. It does
not signify a belief that the EEPAs "inherently"
convey RECs. See 105 F.E.R.C. 1[ 61,005, at n 2.
The Commission Order is not based on PURPA and
does not modifo the EEPA's avoided cost rates.
FERC's April and September orders do not
require the court to reach a different outcome. As
the defendants emphasize, FERC's conclusions are
not binding upon this court, though the court does
consider FERC's studied and informed
pronouncements respectfully. FERC's opinion that
the Commission Order in one respect is inconsistent
with PURPA does not diminish the determination
of the Commission and the West Virginia Supreme
A2014 Thomson Reuters. No Claim to Orig. US Gov. Works,
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4
Page24 of25
Page24
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
Court that the Commission's conclusion, that the
RECs at issue belong to the Utilities, is based on
state law. Having determined that Count I does not
assert a cognizable violation of PURPA, the court
concludes that MEA is not entitled to declaratory
relief.
2. Count II: Federal Preemption
Count II asserts that the Commission Order is
preempted by federal law in that it is contrary to
and inconsistent with the Commission's PURPA $
2 I 0(f) implementation requirement.
As stated by the Second Circuit in
Wheelabrator, "The FERC decision in American
Ref-Fuel does not evince an intent to occupy the
relevant field-namely, the regulation of renewable
energy credits. Rather, it explicitly acknowledges
that state law govems the conveyance of RECs."
531 F.3d at 190. This court has concluded that West
Virginia state law-particularly the W.Va. Portfolio
Act-appropriately governed the Commission's
conveyance of RECs. The Commission Order is
consistent with PUMA, and MEA has failed to
state grounds for its preemption claim.
3. Count III: Exemption of QFs from State
Regulation*25 In Count III, MEA seeks a declaration thatthe Commission Order violates PURPA's
exemption of QFs from state laws relating to
utility-type regulation. MEA asserts that the
Commission's "decision that it 'has the jurisdiction
and authority to deem' MEA's facility certified ... to
generate WV-RECs exerts impermissible
'financial' and 'organizational' regulation of
MEA." Compl. !f 79. The Utilities contend that this
count fails because certirying the MEA facility
would not amount to the "management" of MEA.
The court does not agree that the Commission's
certification of the Morgantown facility constitutes
utility-type regulation. Nalu Martinsville/MEA is
again persuasive. That court aptly found that sincethe Utilities owned the credits "in the first
instance," unilateral certification by the
Commission was the "only mechanism by which
the [Utilities] can receive certification that the
energy they are purchasing satisfies the
requirements of the Portfolio Act." New
Mart insv i I le/ M EA, 7 29 S.E.zd at 200.
Given this state-law justification, the court
agrees with the state supreme court's further
conclusion that the decision was "simply an
extension of [the Commission's] jurisdiction over
public utilities and the authority conferred upon it
by the Portfolio Act;' New Martinsville/MEA, 729
S.E.2d at 200. It "provid[ed] a mechanism for the
owner of the energy, the Utilities, to receive
certification that the energy they are purchasing
qualifies for the purpose of satisfying the
requirements of the Portfolio Act." Id.; see also
Comm'n Order 42 (recogrrizing the need "to allow
the [Utilities] to seek certification of the credits we
have determined they own" given the "unusualdifficulty"). Rather than regulating the
organizational or financial aspects of the
Morgantown facility, its certification merely
recognizes the Utilities' compliance with the
Portfolio Act. Count III fails to state a claim of
utility-type regulation.
4. Count IV: PURPA's Anti-Discrimination
ProvisionAs noted, Count IV asserts that the
Commission Order violates PURPA $ 210(b) and
l8 C.F.R. $ 29230a@)(l) by creating a rate for the
purchase of energy that discriminates against QFs.
PURPA regulation 18 C.F.R. $ 29230a(p) provides
that "[r]ates for purchases shall: (i) Be just and
reasonable to the electric consumer of the electric
utility and in the public interest; and (ii) Not
discriminate against quali$ing cogeneration and
small power production facilities." MEA contends
that the Commission Order is discriminatory
against QFs because it concludes that the PURPA
EEPAs convey the credits whereas, under state law,
non-QF generators are able to sell their electricity
while retaining the credits associated with the
energy they generate. Id.186.
@ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6 -b57a-923... lll0l20l4
Page2i of25
Page25
Slip Copy,20l3 WL 5462386 (S.D.W.Va.), Util. L. Rep. P 14,868
(Cite as: 2013 WL 5462386 (S.D.W.Va.))
MEA's characterization of state law as
discriminatory appears to arise from a statement in
the Commission Order that "[t]he unbundling
provision in Rule 5.6 of the Commission Portfulio
Standqrd Rules cannot reasonab[ly] be applied
retroactively; it was intended to apply prospectively
to agreements for the purchase of electricity entered
[into] after January 4,2011, the effective date of
the Rules." Comm'n Order 53. According to MEA,
this statement means that a non-utility generator
that is not a QF under PURPA with a post January
4, 20ll contract gets to keep its RECs, because
under the rules it can unbundle the RECs from the
power it sells to a utility and sell those RECs
separately. Pl.'s Resp. Utilities' Mot. J. Pleadings
23. While that may be true, MEA fails to show how
such a rule is discriminatory against QFs. If the
Commission Order were to discriminate against
MEA, it must do so with respect to a similarly
situated non-QF, that is, a facility not qualified
under PURPA that had a long-term contract to sell
power that it entered into before the effective date
of the rules. The Commission Order says nothing
about a non-utility non-QF that had a long-term
contract to sell power that it entered into before
January 4, 2011, nor does the Commission order
address REC ownership for QFs that have not
entered into a contract before January 4, 2011.
Indeed, parties fitting those descriptions were not
before the Commission. The Commission Order
merely states that its unbundling rules were not
meant to apply to preexisting contracts, a ruling
that depends not upon QF status, but upon whether
a non-utility generator entered into an energy sale
contract before the effective date of the rules.
*26 In addition, the Utilities make a different
argument for dismissing Count IV. They argue thatthe anti-discrimination provision prohibits
discrimination in the setting of cost rates, not in the
determination of REC ownership. REC ownership,
they argue, is not controlled by PURPA and is a
matter of state law according to American
Ref-Fuel. They contend that because the
Commission Order determined REC ownership and
did not set cost rates, it cannot violate the anti-
discrimination provision. The court agrees. Having
already concluded that the Commission Order
assigned credits as a matter of state law and not as a
modification of EEPA avoided cost rates required
under PURPA, there is no change in any EEPA rate
that could be deemed discriminatory. Count IV fails
to state a claim.
5. Count V: Injunctive Relief
Count V merely asserts that "[b]ecause the
[Commission] Order violates PURPA, MEA is
entitled to an Order enjoining the Commission from
enforcing the [Commission] Order." Compl. ![ 89.
Since the court finds the Commission Order to be
consistent with PURPA, injunctive relief is
unwarranted.
Iv.
It is, accordingly, ORDERED as follows:
l. The motion to dismiss, frled by the
Commission and the Commissioners on
December 7,2012, be, and it hereby is, granted;
2. The Utilities' motion for judgment on the
pleadings, filed January 25, 2013, be, and it
hereby is, granted; and
3. This action be, and it hereby is, dismissed and
stricken from the docket.
The Clerk is directed to transmit copies of this
order to all counsel of record and any unrepresented
parties.
S.D.W.Va.,2013.
Morgantown Energy Associates v. Public Service
Com'n of West Virginia
Slip Copy, 2013 WL 5462386 (S.D.W.Va.), Util. L.
Rep. P 14,868
END OF DOCUMENT
@2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
http:llweb2.westlaw.com/print/printstream.aspx?stid:%7b49b77176-895e-40a6-b57a-923... lll0l20l4