Nichols v. Markell

• Decision Date: 17 April 2014
• Docket Number: Civil Action No. 12-777-CJB
• Parties: JOHN A. NICHOLS and FUELCELL ENERGY, INC., a Delaware Corporation, Plaintiffs, v. JACK MARKELL, in his official capacity as the Governor of Delaware; WILLIAM O'BRIEN, in his official capacity as Executive Director of the Delaware Public Service Commission; JAYMES B. LESTER, in his official capacity as Commissioner of the Delaware Public Service Commission; JOANN CONAWAY, in her official capacity as Commissioner of the Delaware Public Service Commission; DALLAS WINSLOW, in his official capacity as Commissioner of the Delaware Public Service Commission; and JEFFREY CLARK, in his official capacity as Commissioner of the Delaware Public Service Commission, Defendants.
• Court: U.S. District Court — District of Delaware

JOHN A. NICHOLS and FUELCELL ENERGY, INC.,a Delaware Corporation, Plaintiffs, v. JACK MARKELL, in his official capacity as the Governor of Delaware;

WILLIAM O'BRIEN, in his official capacity as Executive Director

of the Delaware Public Service Commission; JAYMES B. LESTER,

in his official capacity as Commissioner of the Delaware Public Service Commission;

JOANN CONAWAY, in her official capacity as Commissioner

of the Delaware Public Service Commission; DALLAS WINSLOW,

in his official capacity as Commissioner of the Delaware Public Service Commission;

and JEFFREY CLARK, in his official capacity as Commissioner

of the Delaware Public Service Commission, Defendants.

Civil Action No. 12-777-CJB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

Dated: April 17, 2014

Vernon R. Proctor, Esquire, Kurt M. Heyman, Esquire, and Meghan A. Adams, Esquire, of PROCTOR HEYMAN LLP, Wilmington, DE.

Of Counsel: Michael D. Pepson, Esquire, of CAUSE OF ACTION, INC., Washington, D.C.

Attorneys for Plaintiffs.

David C. McBride, Esquire, Martin S. Lessner, Esquire, and Adam W. Poff, Esquire, of YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, DE and James McC. Geddes, Esquire, Stephen E. Jenkins, Esquire, and F. Tropue Mickler IV, Esquire, of ASHBY & GEDDES, Wilmington, DE.

Attorneys for Defendants.

MEMORANDUM OPINION

April 17, 2014

Wilmington, Delaware

BURKE, United States Magistrate Judge

In this action filed pursuant to 28 U.S.C. § 2201 and 42 U.S.C. § 1983, Plaintiffs John A. Nichols ("Nichols") and FuelCell Energy, Inc. ("FuelCell") (collectively, "Plaintiffs"), brought suit against Defendants Governor Jack Markell, William O'Brien, Jaymes B. Lester, Joann Conaway, Dallas Winslow, and Jeffrey Clark, all in their official capacities (collectively, "Defendants"). Presently pending before the Court is Defendants' Motion to Dismiss For Lack of Subject Matter Jurisdiction and Failure to State a Claim ("Motion"). (D.I. 19) For the reasons that follow, the Court orders that the Motion be GRANTED-IN-PART and DENIED-IN-PART.

I. BACKGROUND

A. The Parties

Nichols is a Middletown, Delaware resident who purchases electricity from Delmarva Power & Light Co. ("Delmarva"), which is used to provide electricity to his home. (D.I. 1 at ¶ 5; D.I. 23 (hereinafter "Nichols Affidavit") at ¶¶ 2-3) Plaintiff FuelCell is a Delaware corporation with its principal place of business in Danbury, Connecticut. (D.I. 1 at ¶ 9) It manufactures ultra-clean stationary fuel cells in Torrington, Connecticut, (id.), and the nature of its business is further described below.

Defendant Governor Jack Markell, named in his official capacity, is the Governor of Delaware. (Id. at ¶ 11) Governor Markell oversees, inter alia, the Delaware Public Service Commission ("DPSC"). (Id.) Defendant William O'Brien, named in his official capacity, is the Executive Director of the DPSC. (Id. at ¶ 12) The remaining Defendants, all sued in their official capacities, are Commissioners of the DPSC. (Id. at ¶¶ 13-16)

B. REPSA and the 2011 Amendments to REPSA

The Delaware Renewable Energy Portfolio Standards Act ("REPSA"), codified at Del. Ann. tit. 26, §§ 351 et seq., was enacted in 2005. In enacting and subsequently amending this law, the Delaware General Assembly found that the "benefits of electricity from renewable energy resources accrue to the public at large, and that electric suppliers and consumers share an obligation to develop a minimum level of these resources in the electricity supply portfolio of the state." Del. Code Ann. tit. 26, § 351(b). The General Assembly noted that among the benefits of this kind of electricity were "improved regional and local air quality, improved public health, increased electric supply diversity, increased protection against price volatility and supply disruption, improved transmission and distribution performance, and new economic development opportunities." Id. Accordingly, the law's purpose and intent was "to establish a market for electricity from [renewable energy] resources in Delaware, and to lower the cost to consumers of electricity from these resources." Id. at § 351(c).

REPSA attempts to accomplish these goals by requiring that an increasing percentage of retail sales of electricity "delivered to Delaware end-use customers by a retail electricity supplier or municipal electric company . . . include a minimum percentage of electrical energy sales with eligible energy resources and solar photovoltaics[.]" Id. at § 354(a). This requirement is referred to as the "[r]enewable energy portfolio standard" or "RPS[.]" Id. at § 352(19). Pursuant to REPSA, there were two ways in which a retail electricity supplier¹ could satisfy its RPSobligations. (D.I. 1 at ¶ 21) The first is by delivering electricity produced by eligible energy resources.² DEL. CODE ANN. tit. 26, § 354(a). The second is by purchasing tradable instruments, referred to as Renewable Energy Credits ("RECs") and Solar Renewable Energy Credits ("SRECs"). Id. at §§ 352(18), (25). Each purchased REC or SREC is treated, respectively, as the equivalent of one megawatt-hour of retail electricity sales in the State from eligible energy resources or from solar photovoltaic energy resources. Id. at §§ 352(18), (25) & 354.

Delmarva is one of the retail electricity suppliers that must comply with REPSA, and a significant one. It is the sole DPSC-regulated utility in Delaware, and, as of 2011, it provided electrical power to approximately half of Delaware's residents. (D.I. 1 at ¶ 2; D.I. 21, ex. A (hereinafter, "Consultant Report") at 27) And so, like any other retail electricity supplier (or municipal electricity company), Delmarva could satisfy its RPS obligations under REPSA in either of the two ways referenced above.

In July 2011, however, REPSA was amended (hereinafter referred to as the "2011 Amendments" or the "Amendments"). See S.B. No. 124, 146th General Assembly, 1st Reg. Sess. (Del. 2011); (D.I. 20 at 2-3; Consultant Report at 1). These 2011 Amendments, inter alia, provided another method by which Delmarva could satisfy its RPS obligations.

Pursuant to the Amendments, a "commission-regulated electric company" (i.e., Delmarva—again, the only DPSC-regulated utility in the State) could use energy generated by a "qualified fuel cell provider project[,]" to fulfill a portion of its "state-mandated REC and SREC requirements." DEL. CODE ANN. tit. 26, § 353(d). A "[q]ualified fuel cell provider project"("QFCPP"), according to the 2011 Amendments, is "a fuel cell power generation project located in Delaware" which is "owned and/or operated by a qualified fuel cell provider" and operates "under a tariff approved by the [DPSC.]" Id. at § 352(17) (emphasis added). A "[q]ualified fuel cell provider" ("QFCP"), in turn, is an entity that: (1) "manufactures fuel cells in Delaware that are capable of being powered by renewable fuels[;]" and (2) "is designated by the Director of the Delaware Economic Development Office and the Secretary of [the Delaware Department of Natural Resources and Environmental Control ("DNREC")] as an economic development opportunity." Id. at § 352(16) (emphasis added). Thus, pursuant to the 2011 Amendments, REPSA now allowed "Delmarva to use the energy output from a Qualified Fuel Cell Provider Project . . . to 'fulfill'—technically, to reduce—a portion of [Delmarva's] [REC and SREC requirements]." (Consultant Report at 4; see also D.I. 1 at ¶ 30)

C. Bloom Energy, Inc. and its Relationship to FuelCell

The 2011 Amendments were enacted to "provide for a regulatory framework pursuant to which" Bloom Energy, Inc. ("Bloom"), a fuel cell manufacturer, "would build a manufacturing facility in Newark, Delaware . . . to produce fuel cells[.]" (Consultant Report at 1, 14; D.I. 1 at ¶ 3)³ In consideration of the "associated employment and other economic benefits" that were likely to accrue to Delaware if Bloom built this in-state facility—and pursuant to the terms of the later-enacted 2011 Amendments—Delmarva's ratepayers would in turn "pay over a [20-plus]-year period charges for the output of 30 MWs of fuel cells under [the] tariff[.]" (Consultant Report at 1)

The State of Delaware had negotiated with Bloom, prior to the passage of the 2011 Amendments, with regard to this manufacturing plan.⁴ Bloom, in turn, had agreed that it would only build the manufacturing facility in question in Delaware if the DPSC first approved the tariff called for by the 2011 Amendments. (Consultant Report at 6, 28) Bloom also agreed to enter into a termination agreement with the State of Delaware, by which Bloom agreed to pay the State certain monies in the event that Bloom did not meet its fuel cell manufacturing obligations called for in the Amendments. (D.I. 21, ex. B ("DPSC Order No. 8079") at 19; see also Consultant Report at 31)

Prior to its negotiations with the State of Delaware, all of the Bloom fuel cell projects that had been built had been installed in California. (Consultant Report at 14) For the proposed Delaware manufacturing facility, however, Bloom's "target market area" for the sale of the energy it would produce was "(at least, initially) . . . primarily the northeastern United States [targeting] similar types of large-end use consumers as [Bloom had in] California." (Id. at 15, see also id. at 35) In a report authored by a DPSC consultant, which was hired to evaluate whether a proposed tariff met the goals set out by the 2011 Amendments (the "Consultant Report"), it was noted that Bloom "has indicated that New York, Connecticut, New Jersey and Pennsylvania have forms of subsidy programs, providing a combination of rebates or RECs, taxcredits or tax exemptions for fuel cells operating on natural gas." (Id. at 35) The Consultant Report also explained that "the market demand created by the [QFCPP set out in the 2011 Amendments] coupled with the new manufacturing facility could help Bloom in improving its products and lowering its costs, which [the Secretary of the DNREC] stated (in a...