Nextera Energy Res. LLC v. Iowa Util. Bd.

• Citation: 815 N.W.2d 30
• Decision Date: 08 June 2012
• Docket Number: No. 10–2080.,10–2080.
• Parties: NEXTERA ENERGY RESOURCES LLC, Appellant, v. IOWA UTILITIES BOARD, Appellee, MidAmerican Energy Company and Office of Consumer Advocate, Intervenors–Appellees.
• Court: United States State Supreme Court of Iowa

815 N.W.2d 30

NEXTERA ENERGY RESOURCES LLC, Appellant,

v. IOWA UTILITIES BOARD, Appellee,MidAmerican Energy Company and Office of Consumer Advocate, Intervenors–Appellees.

No. 10–2080.

Supreme Court of Iowa.

June 8, 2012.

Bret A. Dublinske of Gonzalez Saggio & Harlan LLP, West Des Moines, Victoria J. Place, Des Moines, and Peter L. Gardon and Bryan K. Nowicki of Reinhart Boerner Van Deuren S.C., Madison, Wisconsin, for appellant.

David J. Lynch and Gary D. Stump, Des Moines, for appellee Iowa Utilities Board.

Steven L. Nelson of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, and Steven R. Weiss and Charles R. Montgomery, Urbandale, for appellee MidAmerican Energy Company.

Mark R. Schuling and Ronald C. Polle, Des Moines, for appellee Office of Consumer Advocate.

WIGGINS, Justice.

NextEra Energy Resources, LLC, appeals the Iowa Utility Board's decision to grant advance ratemaking principles to MidAmerican Energy Company for the Wind VII Iowa Project, a proposed wind generation facility. NextEra raises issues pertaining to the Board's interpretation of Iowa Code section 476.53 (2009), whether substantial evidence supported the Board's findings, the applicability of section 476.43 to the ratemaking proceeding, and section 476.53's constitutionality as applied to a rate-regulated public utility that may compete in the wholesale energy market. After the Board approved MidAmerican's application, NextEra sought judicial review of that decision. The district court affirmed the Board.

On appeal, we find (1) the Board properly interpreted and applied section 476.53, (2) substantial evidence supported the Board's findings, (3) section 476.43 is not applicable to this ratemaking proceeding, and (4) section 476.53 as applied to a rate-regulated public utility that may compete in the wholesale energy market does not violate the Equal Protection Clauses of the Iowa or United States Constitutions or the Commerce Clause of the United States Constitution. Accordingly, we affirm the judgment of the district court affirming the judgment of the Board.

I. Background Facts and Proceedings.

On March 25, 2009, MidAmerican filed an application with the Board for advance ratemaking principles for Wind VII, a project involving the generation of up to 1001 megawatts of wind energy. MidAmerican is a rate-regulated utility subject to the Board's regulatory authority pursuant to chapter 476 of the Iowa Code. MidAmerican is obligated to serve all retail electric customers in its exclusive service territory and sells excess power in the wholesale market subject to the Board's regulations. Prior to its application for ratemaking principles for Wind VII, MidAmerican sought and received ratemaking principles for six wind generation projects ranging from 50 to 540 megawatts.

Before filing its application, MidAmerican entered into a stipulation and agreement with the Office of Consumer Advocate. The agreement, which accompanied MidAmerican's application, addressed twelve ratemaking principles. It also stipulated MidAmerican had met the conditions precedent for receiving ratemaking principles.

MidAmerican stated numerous reasons for pursuing Wind VII. In particular, MidAmerican stated the following reasons underlie its decision to expand its wind power generating capacity: (1) the State's encouragement of the generation of renewable energy; (2) positive experiences with its own existing wind projects; (3) timing and economics that are advantageous for MidAmerican's customers; (4) soft market conditions, which allow MidAmerican to obtain reasonably priced turbines; (5) a projection that Wind VII will essentially pay for itself over its twenty-year depreciable life, mitigating the need to increase rates in the future; (6) an increased likelihood that Congress will enact carbon legislation, making wind power more valuable to MidAmerican's customers; and (7) its desire to further increase fuel diversity.

On April 17, NextEra filed a petition to intervene and objected to the stipulation and agreement, arguing the Board should not award advance ratemaking principles to MidAmerican for Wind VII.¹ NextEra is an independent wholesale energy producer that sells electricity in the wholesale market. It is North America's largest producer of wind energy and, in August 2009, owned sixty-five wind facilities in the United States and Canada, including facilities in Iowa. Because it is an independent energy producer, chapter 476 does not apply to NextEra, the Board does not regulate NextEra, and NextEra does not have an obligation to serve retail customers.

NextEra believes that MidAmerican is pursuing Wind VII solely as a vehicle to increase MidAmerican's presence in the wholesale energy market and that the awarding of ratemaking principles would give MidAmerican a competitive advantage in the wholesale market. NextEra believes the award of ratemaking principles for Wind VII would impose risks on MidAmerican's ratepayers that should instead be borne by its shareholders. Further, NextEra would like to sell renewable energy to MidAmerican, either through a purchase power agreement or by developing and selling a wind farm to MidAmerican.

The Board granted advance ratemaking principles for Wind VII to MidAmerican. NextEra timely filed a petition for judicial review. The district court affirmed the Board's decision. NextEra appeals. Additional background facts and proceedings will be set out below as they relate to each issue.

II. Issues.

NextEra presents the following issues for review: (1) whether the Board incorrectly applied the “need” requirement of section 476.53; (2) whether the Board failed to require MidAmerican to compare Wind VII with other feasible alternatives as required by section 476.53(4)( c )(2); (3) whether the Board's decision to grant advance ratemaking principles to NextEra was supported by substantial evidence; (4) whether the Board erred in determining section 476.43 did not apply to MidAmerican's application for advance ratemaking principles for Wind VII; (5) whether section 476.53, as applied to a rate-regulated utility that may compete in the wholesale energy market, violates the equal protection guarantees of the United States or Iowa Constitutions; and (6) whether section 476.53, as applied to a rate-regulated utility that may compete in the wholesale energy market, violates the Commerce Clause of the United States Constitution.

III. Interpretation of the “Need” Requirement of Section 476.53.

When a rate-regulated public utility files an application to construct a wind energy generating facility, Iowa Code section 476.53 requires the Board to specify in advance the ratemaking principles that will apply when the costs of the facility are included in regulated electric rates. Iowa Code § 476.53(4)( a )(1). Before the Board may determine the applicable ratemaking principles, section 476.53(4) requires the Board to find that “[t]he rate-regulated public utility has demonstrated to the board that the public utility has considered other sources for long-term electric supply and that the facility ... is reasonable when compared to other feasible alternative sources of supply.” Id. § 476.53(4)( c )(2). Section 476.53(4) then contemplates that the utility may satisfy this requirement “through a competitive bidding process, under rules adopted by the board, which demonstrate the facility ... is a reasonable alternative to meet its electric supply needs.” Id. NextEra argues the Board incorrectly applied this “need” requirement.

A. Scope of Review.Iowa Code section 17A.19(10) governs judicial review of administrative agency decisions. Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 589 (Iowa 2004). To decide this issue we must interpret section 476.53. To determine the applicable standard of review of an agency's interpretation of a statute, we must determine whether the legislature clearly vested the agency with the authority to interpret the statute at issue. Doe v. Iowa Dep't of Human Servs., 786 N.W.2d 853, 857 (Iowa 2010). If the legislature clearly vested the agency with the authority to interpret specific terms of a statute, then we defer to the agency's interpretation of the statute and may only reverse if the interpretation is “irrational, illogical, or wholly unjustifiable.” Id.; accord Renda v. Iowa Civil Rights Comm'n, 784 N.W.2d 8, 10 (Iowa 2010); see alsoIowa Code § 17A.19(10)( l ). If, however, the legislature did not clearly vest the agency with the authority to interpret the statute, then our review is for correction of errors at law. Doe, 786 N.W.2d at 857;see alsoIowa Code § 17A.19(10)( c ).

When making this determination, we look carefully “at the specific language the agency has interpreted as well as the specific duties and authority given to the agency with respect to enforcing particular statutes.” Renda, 784 N.W.2d at 13. Although “[t]he legislature may explicitly vest the authority to interpret an entire statutory scheme with an agency[,] ... the fact that an agency has been granted rule making authority does not ‘give[ ] an agency the authority to interpret all statutory language.’ ” Evercom Sys., Inc. v. Iowa Utils. Bd., 805 N.W.2d 758, 762 (Iowa 2011) (quoting Renda, 784 N.W.2d at 13). Furthermore, “broad articulations of an agency's authority, or lack of authority, should be avoided in the absence of an express grant of broad interpretive authority.” Renda, 784 N.W.2d at 14.

Certain guidelines have emerged to help us determine whether the legislature clearly vested interpretative authority in the agency, two of which are relevant here. Id. First, “when the statutory provision being interpreted is a substantive term within the special expertise of the agency, ... the agency has been vested with the authority to interpret the provisions.” Id. Second, “[w]hen a term has an independent legal definition that is not uniquely within the subject matter expertise of the agency, we generally conclude the...