Direct Energy Bus. v. Duke Energy Ohio, Inc.
| Decision Date | 15 November 2021 |
| Docket Number | 1:21-cv-310 |
| Parties | DIRECT ENERGY BUSINESS, LLC, Plaintiff, v. DUKE ENERGY OHIO, INC., Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
REPORT AND RECOMMENDATION
Plaintiff Direct Energy Business, LLC (“Direct”) alleges that defendant Duke Energy Ohio, Inc. (“Duke”) failed to report accurate electricity consumption data to the regional transmission organization responsible for settling wholesale electricity transactions. This matter is before the Court on Duke's motion to dismiss the complaint (Doc 10), Direct's memorandum in opposition (Doc. 12), and Duke's reply memorandum (Doc. 15).
Energy distribution in Ohio is governed by a complicated collection of laws, regulations, and agreements. In this case, however, the facts alleged are relatively straightforward.
Duke exclusively provides electric distribution to electric load centers in a defined territory. Duke also sells electricity to retail consumers, but not exclusively. In an effort to keep electricity as affordable as possible, the Public Utility Commission of Ohio (“PUCO”) certifies competitive retail electric suppliers (“CRES”) who also sell electricity to retail consumers in Duke's distribution territory. Direct is one such CRES.
Direct, as a CRES, purchases electric generation service from a wholesale market operator, in this case PJM Interconnection, LLC (“PJM”), a regional transmission organization regulated by the Federal Energy Regulatory Commission (“FERC”). Direct then sells the purchased energy to retail customers.
Because Direct sells electricity to customers in Duke's exclusive distribution territory, Duke and Direct must coordinate. In this case, Duke served as the meter-data-management agent (“MDMA”) for Direct. The relationship between Duke and Direct is fully described in two agreements: (1) the Certified Supplier Agreement (“Supplier Agreement”) (Doc. 1-1); and (2) the PUCO Certified Supplier Tariff (“Supplier Tariff”) (Doc. 1-2). Section 14.1 of the Supplier Tariff provides:
(Doc. 1-2 at PAGEID 55) (footnote added).
In this case, then, Duke, as the MDMA, provided hourly load data to PJM. PJM then used that data to settle wholesale transactions between and among Duke, Direct, and others, and issue invoices accordingly.
Prior to January 2013, SunCoke, a large industrial customer in Middletown, Ohio, received electric generation service from Duke. SunCoke also generated electricity. Because the metering configuration at SunCoke did not automatically “net” monthly generation and consumption, Duke manually performed the necessary calculations to provide accurate bills to SunCoke and accurate load data to PJM.
In January 2013, SunCoke switched from Duke to Direct for electric generation supply. SunCoke continued to generate electricity as well. As the MDMA, Duke remained responsible for metering SunCoke's usage and reporting hourly load data to PJM. When SunCoke switched to Direct for electric generation service, Duke ceased performing the manual calculations necessary to net SunCoke's electricity production and electricity consumption. As a result, Duke reported far higher usage to PJM than SunCoke actually consumed from January through July 2013.
“One of PJM's basic functions is to track who puts energy onto the grid, who takes it off, and how much net-buyers owe to net-sellers.” (Doc. 12 at PAGEID 126). PJM uses the consumption data Duke supplies “to issue invoices to Direct and other suppliers-payment is due on receipt, and PJM disburses the funds to the appropriate market participant.” (Id.)
The OATT required Direct to pay PJM's invoices upon receipt, subject to the “resettlement” provisions contained in the OATT. Direct successfully corrected the payments from March through July 2013 through the resettlement process. However, due to the strict 60-day deadline for initiating resettlements, the January and February 2013 invoices have not been corrected. Direct alleges that Duke's inaccurate meter load data for January and February 2013 caused Direct to overpay by approximately $1.6 million for wholesale energy charges.
In July 2014, Direct filed a complaint against Duke with the PUCO, alleging that Duke violated the Supplier Tariff by furnishing erroneous load data to PJM. (PUCO Case No. 14-1277-EL-CSS).[3] PUCO found in favor of Direct on April 10, 2019. (Doc. 1 at PAGEID 6). Duke appealed the PUCO decision, and the Supreme Court of Ohio reversed and remanded the case to the PUCO with instructions to dismiss Direct's complaint. (Id.). According to the Ohio Supreme Court, Duke acted as a meter-data-management agent in this case rather than as a public utility so the PUCO lacked jurisdiction under Ohio law. In re Complaint of Direct Energy Business, LLC v. Duke Energy Ohio, Inc., 162 N.E.2d 764, 769 (Ohio 2020). PUCO formally dismissed the complaint in December 2020.
Direct then initiated this action. According to Direct, Duke's failure to provide accurate load data to PJM or timely remedy the errors violated the Supplier Agreement. (Doc. 1 at PAGEID 7). Direct further alleges that Duke acted negligently in performing its duties under the OATT and Supplier Tariff and negligently misrepresented material facts to Direct regarding the need to net SunCoke's energy production and consumption. (Id. at PAGEID 8-9).
Duke moved to dismiss Direct's complaint in its entirety. (Doc. 10). According to Duke, the Court must dismiss Direct's complaint because the FERC maintains exclusive jurisdiction over this dispute. Duke further contends that Direct's claims are precluded by the hold harmless clause of the Supplier Tariff, and all claims are barred by the applicable statutes of limitation and/or the economic loss rule. (Doc. 10 at PAGEID 89).
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To withstand a motion to dismiss, a complaint must comply with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Rule 8(a)).
A complaint must include sufficient facts to state a claim that is plausible on its face and not speculative. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Mere “labels and conclusions [or] a formulaic recitation of the elements of a cause of action” will not suffice. Twombly, 550 U.S. at 555. A district court examining the sufficiency of a complaint must accept well-pleaded facts as true, but not legal conclusions or legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678-79.
“Considering whether jurisdiction to hear a case exists is the ‘first and fundamental question presented by every case brought to the federal courts.'” Metro Hydroelectric Co., LLC v. Metro Parks, 541 F.3d 605, 610 (6th Cir. 2008) (quoting Caudill v. N. Am. Media Corp., 200 F.3d 914, 916 (6th Cir. 2000)). As courts of limited jurisdiction, federal courts possess only the power authorized in the Constitution or statutes. Id. Thus, the burden to establish jurisdiction lies with the party asserting jurisdiction. Id.
In this case, Direct asserts diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) because Direct is a citizen of Delaware and Pennsylvania, Duke is a citizen of Ohio, and the amount in dispute exceeds $75, 000. (Doc. 1 at PAGEID 1-2). Duke does not dispute these allegations.
Rather, Duke raises two closely related concepts: the filed rate doctrine and field preemption.[4] According to Duke, the Federal Power Act (“FPA”), 16 U.S.C. § 791a et seq., “gives FERC exclusive jurisdiction to regulate the transmission and wholesale sale of electric energy in interstate commerce.” (Doc. 10 at PAGEID 95 (quoting AEP Texas N. Co. v. Texas Indus. Energy Consumers, 473 F.3d 581, 584 (5th Cir. 2006)). “Under the FPA, Congress sought to protect energy markets and consumers (principally from monopolistic public utilities) by putting them under the governance of a commission of experts.” In re FirstEnergy Solutions Corp., 945 F.3d 431, 451 (6th Cir. 2019).
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