Power Resource Group v. Public Utility Com'n of Tx

• Decision Date: 17 August 2005
• Docket Number: No. 04-50807.,04-50807.
• Citation: 422 F.3d 231
• Parties: POWER RESOURCE GROUP, INC., Plaintiff-Appellant, v. PUBLIC UTILITY COMMISSION OF TEXAS, Barry T. Smitherman, In his Official Capacity as Commissioner of the Public Utility Commission of Texas, Julie Parsley, Commissioner of the Texas Public Utility Commission, Paul Hudson, Chairman of the Texas Public Utility Commission, Defendants-Appellees, Texas New Mexico Power Company, Intervenor Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

422 F.3d 231

POWER RESOURCE GROUP, INC., Plaintiff-Appellant, v. PUBLIC UTILITY COMMISSION OF TEXAS, Barry T. Smitherman, In his Official Capacity as Commissioner of the Public Utility Commission of Texas, Julie Parsley, Commissioner of

the Texas Public Utility Commission, Paul Hudson, Chairman of the Texas Public Utility Commission, Defendants-Appellees,

Texas New Mexico Power Company, Intervenor Defendant-Appellee.

No. 04-50807.

United States Court of Appeals, Fifth Circuit.

August 17, 2005.

Clifford B. Levine (argued), Thorp, Reed & Armstrong, Pittsburg, PA, Robert McRae O'Boyle, Strasburger & Price, Austin, TX, for Plaintiff-Appellant.

Kristen L. Worman, Asst. Atty. Gen. (argued), Austin, TX, for Public Utility Com'n of Texas, Barry T. Smitherman, Julie Parsley and Paul Hudson.

Louis S. Zimmerman (argued), James Elliott Guy, Fulbright & Jaworski, Austin, TX, for Texas New Mexico Power Co.

Appeal from the United States District Court for the Western District of Texas.

Before GARWOOD, SMITH and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

In this regulatory action, Power Resource Group ("PRG") challenges Texas's implementation of the Public Utility Regulatory Policies Act of 1978 ("PURPA"). After purchase negotiations between PRG and Texas New Mexico Power Company ("TNMP") failed, PRG sought to compel TNMP to purchase power pursuant to a legally enforceable obligation ("LEO") from its still-unbuilt plant. The Public Utility Commission of Texas ("PUC") determined that because its rules implementing PURPA provide for a legally enforceable obligation only if a facility is within ninety days of delivering power, TNMP had no obligation to purchase power from PRG. PRG sought relief in Texas courts, which denied its request to overturn the PUC's decision. PRG then brought suit in federal district court, which held that it had jurisdiction only to determine whether the PUC had fully implemented PURPA, and dismissed PRG's remaining claims. Finding that the PUC did, in fact, fully implement PURPA, including providing for the option of a LEO, the district court granted summary judgment in favor of the PUC and TNMP. PRG now appeals. For the reasons that follow, we affirm the judgment of the district court.

I. FACTS AND PROCEEDINGS

This case concerns Texas's interpretation and implementation of a federal statutory and regulatory scheme governing the contracting for the purchase of energy between public utilities and certain energy production facilities. The facts are not in dispute. Congress enacted PURPA to reduce the dependence of electric utilities on foreign oil and natural gas, in part by encouraging development of alternative energy sources such as cogeneration and small power production facilities ("qualifying facilities" or "QFs"). Brazos Elec. Power Coop. Inc. v. FERC, 205 F.3d 235, 237 (5th Cir.2000); see also FERC v. Mississippi, 456 U.S. 742, 745-46, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982) (citing S.Rep. No. 95-442, p. 9 (1977)). PURPA directs the Federal Energy Regulatory Commission ("FERC") to promulgate regulations that would promote energy purchase from QFs. 16 U.S.C. § 824a-3(a). State regulatory agencies, such as the PUC, are directed to adopt rules which comply with FERC's regulations and implement PURPA. 16 U.S.C. § 824a-3(f). The Texas rule at issue here, PUC Substantive Rule 25.242(f)(1)(B),¹ controls when and under what conditions a utility must purchase power from a QF pursuant to a LEO, as opposed to voluntarily contracting with the QF. Rule 25.242(f)(1)(B), or the "90-day rule," provides that a utility may be compelled purchase power from a QF pursuant to a LEO only if the QF can provide that power within 90 days. PUC SUBST. R. 25.242(f)(1)(B).

PRG is a Delaware corporation and an experienced developer of independent power projects. TNMP is a Texas electric utility under the authority of the PUC. Prior to 1995, TNMP contracted with Texas Utilities Electric Company to purchase power. In 1995, TNMP issued a request for proposal for energy to fill its anticipated need for 1999 or 2000. PRG responded to the request, proposing construction of a QF, a natural gas-fired generation facility, to be located in Lewisville, Texas—the Lewisville Power Project. In March of 1996, PRG and TNMP entered into negotiations for the Lewisville Power Project to provide power to TNMP. The Lewisville Power Project was certified as a QF on September 20, 1996 pursuant to 18 C.F.R. § 292.207(a)(1). PRG secured sources of equity, identified a site, held zoning discussions, and undertook various other steps in furtherance of the Lewisville Power Project. On February 13, 1998, PRG made a final written commitment which, it argues, gave rise to a LEO. TNMP then denied the existence of a LEO and refused to execute an agreement with PRG. TNMP instead renegotiated with its previous provider at a rate higher than that offered by PRG.

On August 7, 1998, PRG petitioned the PUC to order TNMP to purchase power from PRG's Lewisville Power Project. On March 25, 1999, the PUC dismissed PRG's petition without prejudice, interpreting the applicable rule, PUC SUBST. R. 25.242(f)(1)(B), such that utilities were required to purchase from a QF pursuant to a LEO only if the QF could deliver power within 90 days of notifying the utility that energy would be available. The PUC determined that under Texas law, because PRG's QF was not yet completed and therefore incapable of producing power for delivery within 90 days, a LEO was not created when PRG offered to supply energy to TNMP.

PRG then sought judicial review of the PUC's order in state court in Travis County, Texas. The Travis County District Court affirmed the PUC's final order on March 8, 2001. PRG appealed the ruling to the Third Court of Appeals in Austin. On January 10, 2002, that court affirmed the Texas trial court and the PUC, holding that "the [PUC]'s interpretation of [Rule 25.242(f)(1)(B)] is reasonable and not preempted by federal law and that the [PUC] did not act arbitrarily or capriciously in refusing to compel TNMP to contract with [PRG]." Power Res. Group, Inc. v. Pub. Util. Comm'n of Tex., 73 S.W.3d 354, 363 (Tex.App.-Austin 2002). (pet. denied). PRG petitioned for review by the Texas Supreme Court; that petition was denied on October 10, 2002.

PRG then petitioned FERC pursuant to 16 U.S.C. § 824a-3(h)(2)(B), requesting that FERC undertake an enforcement action against the PUC for its failure to implement PURPA's regulatory scheme. After FERC had not acted on PRG's petition for 60 days, PRG filed a complaint in the United States District Court for the Western District of Texas, as authorized under 16 U.S.C. § 824a-3(h)(2)(B) (providing that a United States District Court may "require such State regulatory authority . . . to comply with such requirements [of section 824a-3(f)], and such court may issue such injunctive or other relief as may be appropriate").

The PUC and TNMP, as an intervenor, moved to dismiss PRG's action, arguing that (1) the Rooker-Feldman doctrine barred district court review of PRG's claim because proper review of the federal question was available via a petition for certiorari to the United States Supreme Court; (2) because the Texas state courts had decided the issues presented, res judicata and/or collateral estoppel barred the same claims in federal court; (3) PRG had no standing under § 824a-3(h)(2)(B) because it is not a QF; and (4) sovereign immunity barred pursuit of the claim in federal court. PRG responded that Rooker-Feldman, res judicata, and collateral estoppel did not apply because federal courts have exclusive jurisdiction over claims under PURPA. It also argued that it was a certified QF and, therefore, had standing, and that the prospective relief it requested was not barred by sovereign immunity.

On February 18, 2004, the district court ruled on the motion to dismiss, denying the motion as to PRG's implementation claim. The district court analyzed the effect of PURPA's unique "multi-layered" enforcement provisions on the defendants' Rooker-Feldman and preclusion arguments. As the district court explained, "[t]he type of claim brought by the petitioner will determine whether state court FERC or federal district court is the appropriate forum under the statute." See 16 U.S.C. § 824a-3(g)-(h). Subsection (g) of § 824a-3 mandates that state courts will review the state rules promulgated to implement PURPA and its associated FERC regulations. See 16 U.S.C. § 824a-3(g)(1)-(2); see also Windway Techs. v. Midland Power Coop., 2001 WL 1248741, at *4, 2001 U.S. Dist. LEXIS 3430, at *14 (N.D.Iowa Mar. 5, 2001). Subsection (h)(1) mandates that FERC regulations promulgated to implement PURPA are to be treated like Federal Power Act ("FPA") rules, which are enforceable by FERC in federal district court. See 16 U.S.C. §§ 824a-3(h)(1) and 825m; see also Windway Techs., at *4, 2001 U.S. Dist. LEXIS 3430, at *15. Subsection h(2)(A) of PURPA allows FERC to bring an enforcement action against a state regulatory authority such as the PUC or a nonregulated utility in district court. See 16 U.S.C. §§ 824a-3(h)(2)(A); see also Windway Techs., at *4, 2001 U.S. Dist. LEXIS 3430, at *15. Subsection (h)(2)(B) provides that any utility or qualifying facility may petition FERC to enforce subsection (f), which governs the responsibilities of state regulatory authorities and utilities to implement PURPA and FERC regulations. See 16 U.S.C. §§ 824a-3(h)(2)(B); see also Windway Techs., at *4, 2001 U.S. Dist. LEXIS 3430, at *15. If FERC does not bring an enforcement action within 60 days following the date on which a petition is filed, the utility or qualifying facility may bring an enforcement action in federal district court. 16 U.S.C. §§ 824a-3(h)(2)(B); Windway Techs., at *5, 2001 U.S. Dist. LEXIS 3430, at *15.

The district court then elucidated the distinction between two types of enforcement claims under PURPA, "as applied"...