Alliance to Protect Nantucket Sound, Inc. v. Dep't of Pub. Utilities

• Decision Date: 28 December 2011
• Docket Number: SJC–10934.
• Citation: 959 N.E.2d 413,461 Mass. 166
• Parties: ALLIANCE TO PROTECT NANTUCKET SOUND, INC., & others 1 v. DEPARTMENT OF PUBLIC UTILITIES & others 2 (No. 1).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

461 Mass. 166

959 N.E.2d 413

ALLIANCE TO PROTECT NANTUCKET SOUND, INC., & others 1

v.DEPARTMENT OF PUBLIC UTILITIES & others 2 (No. 1).

SJC–10934.

Supreme Judicial Court of Massachusetts, Suffolk.

Submitted Sept. 8, 2011.Decided Dec. 28, 2011.

Evan T. Lawson, Boston (Glenn S. Benson, of the District of Columbia, & Michele A. Hunton with him) for Alliance to Protect Nantucket Sound, Inc.

Richard A. Kanoff, Boston, for New England Power Generators Association, Inc.

Robert A. Rio (Robert R. Ruddock, Boston, with him) for Associated Industries of Massachusetts.Kenneth W. Salinger, Assistant Attorney General, for the defendant.David S. Rosenzweig (Erika J. Hafner with him), Boston, for Massachusetts Electric Company & others.Robert M. Buchanan, Jr., & Nellie E. Staley, Boston, for TransCanada Power Marketing Ltd., submitted a brief.Susan M. Reid, Boston, Matthew F. Pawa, Newton, Katherine Kennedy, & Brandi Colander, for Conservation Law Foundation & others, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, & DUFFLY, JJ.

BOTSFORD, J.

This matter comes before us on a reservation and report by a single justice of this court of a decision and final order of the Department of Public Utilities (department) approving a power purchase agreement (PPA or contract) that Massachusetts Electric Company and Nantucket Electric Company, each doing business as National Grid (collectively, National Grid) entered into with Cape Wind Associates, LLC (Cape Wind). The four parties bringing this appeal—the Alliance to Protect Nantucket Sound, Inc. (Alliance); Associated Industries of Massachusetts (AIM); New England Power Generators Association (NEPGA); and TransCanada Power Marketing Ltd. (TransCanada)—were all interveners in the department's proceeding.³ They claim that the PPA violates the commerce clause of the United States Constitution; the department improperly found that the PPA was cost effective and in the public interest; the contract should have been solicited through competitive bidding and subject to a cap on its size; and the department erroneously both approved a method for recovering costs from all distribution customers and required that the contract facilitate financing of a renewable energy generation source. The interveners seek reversal of the department's decision and order, and a remand to the department for further proceedings. The single justice on remand will affirm the department's decision.

1. Background.⁴ National Grid is a distribution company ⁵ that provides electricity to Massachusetts customers. Cape Wind is building a wind-powered renewable energy generation facility in Federal waters adjacent to the Commonwealth that are part of Nantucket Sound. National Grid and Cape Wind negotiated and entered into the PPA under the Green Communities Act, St.2008, c. 169 (GCA, or Act). The Governor signed the GCA, with an emergency preamble, into law on July 2, 2008. The stated purpose of the GCA is to “provide forthwith for renewable and alternative energy and energy efficiency in the [C]ommonwealth.” St.2008, c. 169, emergency preamble. At issue in this case is § 83 of the GCA, St.2008, c. 169, § 83 (§ 83), which requires electricity distribution companies to seek proposals from renewable energy developers twice in a five-year period beginning on July 1, 2009, and, if reasonable proposals are received, enter into long-term PPAs to facilitate the financing of renewable energy generation facilities. St.2008, c. 169, § 83, first and second pars. As enacted, the GCA contains a provision requiring the renewable energy facilities to be located within the Commonwealth, including State and adjacent Federal waters (geographic limitation provision). St.2008, c. 169, § 83, first par.⁶ Distribution companies must consult with the Department of Energy Resources (DOER) regarding their proposed method of soliciting and executing these long-term contracts. The method, as well as the resulting contracts, are also subject to the department's review and approval. St.2008, c. 169, § 83, first and second pars.

In evaluating a PPA proposed under § 83, the department must consider its costs and benefits, and may only approve the contract on a finding that it is a “cost effective mechanism for procuring renewable energy on a long-term basis.” St.2008, c. 169, § 83, third par. The renewable energy generation source that is the subject of the PPA must have a commercial operation date on or after January 1, 2008, and be found to enhance electricity reliability within the Commonwealth and create additional employment in the Commonwealth, where feasible. Id. The GCA does not require that distribution companies enter into long-term PPAs with renewable energy developers for more than three per cent of the demand from all distribution customers within their service area. St.2008, c. 169, § 83, fourth par.

Distribution companies entering into PPAs under § 83 are entitled to resell the renewable energy purchased pursuant to those contracts to their customers and use the renewable energy credits (RECs) obtained to meet the “renewable energy portfolio standard” (RPS) requirements separately established by G.L. c. 25A, § 11F (§ 11F).⁷ Alternatively, distribution companies may sell the renewable energy into the wholesale spot market and sell the RECs by competitive bidding. St.2008, c. 169, § 83, fifth par. The GCA describes a reconciliation process by which companies that choose the second, competitive bidding, option may recover the cost of the renewable energy purchased pursuant to a PPA, St.2008, c. 169, § 83, sixth par., but the Act does not prescribe the methodology for cost recovery under the first, resell to customers, option. Finally, § 83 states that if any provision of the section is “subject to a judicial challenge,” the department is entitled to suspend the applicability of the challenged provision pending the outcome of the judicial proceeding, and to issue any necessary orders to ensure that the unchallenged sections of the Act remain in effect. St.2008, c. 169, § 83, tenth par.

On December 3, 2009, pursuant to § 83, first and second pars., National Grid requested approval from the department to conduct individual negotiations with Cape Wind for long-term PPAs. The department approved the proposed solicitation process on December 29, 2009. National Grid, D.P.U. 09–138, at 13 (2009) (D.P.U. 09–138). After conducting these negotiations, on May 7, 2010, National Grid and Cape Wind executed two PPAs, referred to by the parties as PPA–1 and PPA–2. PPA–1, with a contract term of fifteen years, calls for National Grid to purchase fifty per cent of the energy, capacity, and RECs produced by the Cape Wind facility, up to a maximum of 234 megawatts (MWs). This amount equals approximately 3.5 per cent of National Grid's total distribution load as measured in 2008. PPA–1 is to last for fifteen years from the commercial operation date of the new generation facility.⁸ PPA–2, for the purchase of the other fifty per cent of the Cape Wind output, is nearly identical to PPA–1, except that, as drafted, it is intended to be assigned by National Grid to another purchaser.

On April 16, 2010, TransCanada filed suit in the United States District Court for the District of Massachusetts, alleging in principal part that the provision in § 83 requiring distribution companies to contract with companies engaged in renewable energy generation within Massachusetts or adjacent Federal waters was unconstitutional because it discriminated against out-of-State generators in violation of the commerce clause. In response to this claim, on June 9, 2010, the department exercised its power under § 83, tenth par., to suspend the applicability of the sections of § 83 that were alleged to discriminate against interstate commerce. It issued an order, D.P.U. 10–58 (2010) (D.P.U. 10–58), that removed the words “within the jurisdictional boundaries of the commonwealth, including state waters, or in adjacent federal waters” from § 83, first par. D.P.U. 10–58 at 5. The department's order also removed the words “within the Commonwealth of Massachusetts, its waters, and adjacent federal waters” from its regulations at 220 Code Mass. Regs. § 17.01(1) (2009) and “in the Commonwealth of Massachusetts” from 220 Code Mass. Regs. § 17.05(1)(c)(4) (2009). Id.

Approximately one month before the department's suspension order, on May 10, 2010, National Grid filed PPA–1 and PPA–2 with the department for approval. The department docketed the matter as D.P.U. 10–54 and held public hearings on June 16, 21, and 22, 2010. The Attorney General intervened in the proceeding, as did eighteen other parties, including each of the parties bringing this appeal. The parties provided written testimony, and the department held thirteen days of evidentiary hearings between September 7 and 24, 2010. In total, the administrative record contains 838 exhibits and twenty responses to record requests. On November 22, 2010, the department issued its decision approving PPA–1 and denying approval of PPA–2. The interveners each appealed separately from the department's decision approving PPA–1 pursuant to G.L. c. 25, § 5.⁹ A single justice consolidated the various appeals and reserved and reported them to this court without decision.

2. Discussion. Review of the department's decision is governed by G.L. c. 25, § 5. “The burden of proof is on the appealing part[ies] to show that the order appealed from is invalid, and we have observed that this burden is heavy.... Moreover, we give deference to the department's expertise and experience in areas where the Legislature has delegated to it decision-making authority, pursuant to G.L. c. 30A, § 14.” DSCI Corp. v. Department of Telecomm. & Energy, 449 Mass. 597, 603, 870 N.E.2d 1096 (2007), quoting Massachusetts Inst. of Tech. v. Department of Pub. Utils., 425 Mass. 856, 867–868, 684 N.E.2d 585 (1997). We consider separately...