Allco Renewable Energy Ltd. v. Mass. Elec. Co., No. 17-1296

• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Writing for the Court: TORRUELLA, Circuit Judge.
• Citation: 875 F.3d 64
• Parties: ALLCO RENEWABLE ENERGY LIMITED, Plaintiff, Appellant, v. MASSACHUSETTS ELECTRIC COMPANY, agent of National Grid; Angela M. O'Connor, individually and in her official capacity as Chairperson of the DPU; Jolette A. Westbrook, individually and in her official capacity as Commissioner of the DPU; Robert Hayden, individually and in his official capacity as Commissioner of the DPU; Judith Judson, individually and in her official capacity as Commissioner of the MDER, Defendants, Appellees.
• Docket Number: No. 17-1296
• Decision Date: 13 November 2017

875 F.3d 64

ALLCO RENEWABLE ENERGY LIMITED, Plaintiff, Appellant,
v.
MASSACHUSETTS ELECTRIC COMPANY, agent of National Grid; Angela M. O'Connor, individually and in her official capacity as Chairperson of the DPU; Jolette A. Westbrook, individually and in her official capacity as Commissioner of the DPU; Robert Hayden, individually and in his official capacity as Commissioner of the DPU; Judith Judson, individually and in her official capacity as Commissioner of the MDER, Defendants, Appellees.

No. 17-1296

United States Court of Appeals, First Circuit.

November 13, 2017

Eric L. Christensen, with whom Cairncross & Hempelmann, P.S., Seattle, WA, Thomas Melone, and Allco Renewable Energy Limited were on brief, for appellant.

Michael Kunselman, with whom Alston & Bird LLP, Washington, DC, Anthony J. Marchetta, and Day Pitney LLP, Parsippany, NJ, were on brief, for appellee Massachusetts Electric Company d/b/a National Grid.

Timothy J. Casey, Assistant Attorney General, Government Bureau, with whom Maura Healey, Attorney General of Massachusetts, was on brief, for state appellees O'Connor, Westbrook, Hayden, and Judson.

Before Torruella, Thompson, and Barron, Circuit Judges.

TORRUELLA, Circuit Judge.

This case arises from the efforts of Allco Renewable Energy Limited ("Allco") to enforce section 210 of the Public Utility Regulatory Policies Act ("PURPA"), 16 U.S.C. § 824a-3, against Massachusetts Electric Company d/b/a National Grid ("National Grid"). The district court dismissed Allco's claim against National Grid because section 210 does not provide a

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private right of action against utility companies (such as National Grid). The district court was correct, so we affirm that dismissal. Allco also appeals the district court's denial of its motion for additional relief against various Massachusetts Department of Public Utilities (MDPU) officials (collectively, the "state defendants") after the district court invalidated certain MDPU regulations as inconsistent with PURPA. The district court did not abuse its discretion in doing so, so we affirm that decision as well.

I. BACKGROUND

A.

We begin with an overview of the statutory scheme at the heart of this case. Congress passed PURPA in 1978 in response to the ongoing energy crisis that plagued the nation. FERC v. Mississippi, 456 U.S. 742, 745, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982). Section 210 of PURPA seeks to lessen the United States' reliance on oil and natural gas by encouraging the development of energy-efficient cogeneration and small power production facilities. Id. at 750, 102 S.Ct. 2126. See 16 U.S.C. § 824a-3. "Cogeneration facilities capture otherwise-wasted heat and turn it into thermal energy; small power-production facilities produce energy (fewer than 80 megawatts) primarily by using ‘biomass, waste, renewable resources, geothermal resources, or any combination thereof.’ " Portland Gen. Elec. Co. v. FERC, 854 F.3d 692, 695 (D.C. Cir. 2017) (quoting 16 U.S.C. § 796(17) ). Both of these categories of facilities are known as "qualifying facilities" ("QFs") under PURPA.

Congress found that traditional electric utilities' reluctance to transact with these nontraditional facilities posed an obstacle to facilitating their development. FERC, 456 U.S. at 750, 102 S.Ct. 2126. It sought to address this by requiring utilities to do so. Thus, section 210(a) of PURPA directed the Federal Energy Regulatory Commission ("FERC") to promulgate rules mandating that electric utilities purchase energy from QFs. 16 U.S.C. § 824a-3(a). Those rules, section 210(b) specified, were not to "provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy." Id. § 824a-3(b). PURPA defines "incremental cost" as "the cost to the electric utility of the electric energy which, but for the purchase from such cogenerator or small power producer, such utility would generate or purchase from another source." Id. § 824a-3(d). In accordance with this directive, FERC promulgated regulations requiring utilities to purchase electricity from QFs "at a rate equal to the utility's full avoided cost." Am. Paper Inst. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 405-06, 103 S.Ct. 1921, 76 L.Ed.2d 22 (1983) (citing 18 C.F.R. 292.304(b)(2) ). Crucially, given section 210's purpose, the avoided cost rate "usually exceeds the market price for wholesale power." Portland Gen., 854 F.3d at 695. Additionally, section 210(f) of PURPA instructs state regulatory authorities to implement these FERC rules. 16 U.S.C. § 824a-3(f) ; see also Portland Gen., 854 F.3d at 695 ("Under PURPA, state utility commissions are responsible for calculating the avoided-cost rates for utilities subject to their jurisdiction").

Key to this case is understanding PURPA's framework for enforcing its requirement that states implement FERC's PURPA-implementing rules. Sections 210(g)-(h) of PURPA create "an overlapping scheme of federal and state judicial review of state regulatory action taken pursuant to PURPA." Greenwood ex rel. Estate of Greenwood v. N.H. Pub. Utils. Comm'n, 527 F.3d 8, 10 n.1 (1st Cir. 2008). First, PURPA allows a QF to petition FERC to bring an enforcement action

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against a state on the grounds that the state has failed to properly implement PURPA. 16 U.S.C. § 824a-3(h). With respect to private enforcement, PURPA's enforcement scheme contemplates two types of private actions against a state utility regulatory agency: "implementation" challenges and "as-applied" challenges. Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d 380, 388 (5th Cir. 2014) ; Power Res. Grp., Inc., v. Pub. Util. Comm'n of Tex., 422 F.3d 231, 234-35 (5th Cir. 2005).

Implementation challenges involve claims that a state agency has failed to properly implement FERC's regulations governing the purchase of energy from QFs. Power Res. Grp., 422 F.3d at 235. As-applied challenges, meanwhile, involve claims that a utility has failed to abide by a state's regulations implementing PURPA. See Portland Gen., 854 F.3d at 698 (citing 16 U.S.C. § 824a-3(g)(2) ). While federal district courts have exclusive jurisdiction over implementation challenges, only state courts may hear as-applied challenges. Id. Additionally, an individual seeking to bring an implementation challenge may only do so after having petitioned FERC to bring an implementation enforcement action, and only if FERC has not initiated an action within sixty days of receiving the petition. 16 U.S.C. § 824a-3(h)(2)(B).

Finally, and crucially, PURPA's text does not make any reference to the possibility of a QF bringing any sort of action against a utility in federal court.

B.

On March 28, 2011, Allco offered to sell National Grid the entire generation output from eleven of its solar energy generating QFs located in Massachusetts. These QFs all have a production capacity between one and thirty megawatts. Consistent with Mass. Code Regs. § 8.03(1)(b)(2), Allco offered to negotiate a purchase agreement with National Grid. On April 18, 2011, National Grid declined to negotiate a contract with Allco, but offered instead to purchase Allco's energy under its standard power purchase contract. The methodology for arriving at the price rate in National Grid's standard contract complied with the relevant MDPU regulations governing that calculation. See 220 Mass. Code Regs. § 8.05(2)(a).

On August 3, 2011, Allco, pursuant to 220 Mass. Code Regs. § 8.03(1)(c), petitioned the MDPU to investigate the reasonableness of National Grid's response to Allco's offer. Allco further requested a declaration that National Grid was legally obligated to purchase energy from Allco's QFs for a term of twenty-five years, at the rate of its avoided costs, calculated using the rate-forecasting methodology the MDPU employed in a specific 2010 proceeding. The MDPU denied that petition on July 22, 2014, finding National Grid's offer to Allco both reasonable and consistent with its regulations.

In response, Allco petitioned the FERC to bring an enforcement action against MDPU on the grounds that MDPU's regulations clashed with PURPA. FERC declined to do so. Under PURPA, that allowed Allco to sue the MDPU. See 16 U.S.C. § 824a-3(h)(2)(B).

C.

On October 6, 2015, Allco sued National Grid and the state defendants in the District of Massachusetts. Allco contended that the MDPU regulations at issue conflicted with FERC's regulations implementing PURPA. Specifically, it maintained that the MDPU regulations ran afoul of 18 C.F.R § 292.304(d)(2) in denying QFs the option of calculating the utility's avoided costs either "at the time of delivery" or"at the time the obligation is

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incurred." Allco also sought a declaration that National Grid had a "legally enforceable obligation" to buy the output of Allco's QFs for a twenty-five-year term, at the rate of National Grid's long-term avoided costs. Finally, Allco requested damages from National Grid for its lost income. National Grid moved to dismiss Allco's complaint for failure to state a claim. Allco moved for summary judgment of its claims against National Grid and the state...