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sPower Development Company LLC v. Public Utilities Commission

United States District Court, D. Colorado

February 22, 2018

COLORADO PUBLIC UTILITIES COMMISSION, a regulatory agency of the State of Colorado; JEFFREY P. ACKERMANN, in his official capacity as Commissioner and Chairman of the Colorado Public Utilities Commission; FRANCES A. KONCILJA, in her official capacity as Commissioner of the Colorado Public Utilities Commission; WENDY M. MOSER, in her official capacity as Commissioner of the Colorado Public Utilities Commission; and BLACK HILLS/COLORADO ELECTRIC UTILITY COMPANY, LP, Defendants.


          Nina Y. Wang, United States Magistrate Judge

         This matter comes before the court on Defendants Colorado Public Utilities Commission, Jeffery P. Ackermann, Frances A. Koncilja, and Wendy M. Moser's (collectively, “Defendants”) Motion to Dismiss First Amended Complaint Under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) (“Motion” or “Motion to Dismiss”), filed October 27, 2017. [#52]. The undersigned considers the Motion pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated May 1, 2017 [#32], and the memorandum dated October 31, 2017 [#53]. This court concludes that oral argument would not materially assist in the resolution of this matter. Accordingly, upon careful review of the Motion and associated briefing, the applicable law, and entire case file, I respectfully RECOMMEND that the Motion to Dismiss be DENIED.


         Plaintiff sPower Development Company, LLC (“Plaintiff” or “sPower”) initiated this action by filing its Complaint for declaratory and injunctive relief on March 16, 2017. [#1]. Defendants moved to dismiss Plaintiff's Complaint for lack of standing and failure to state a claim. See [#16]. The undersigned agreed that Plaintiff lacked standing, and recommended that Plaintiff's Complaint be dismissed for want of federal subject matter jurisdiction. See [#41]. sPower then moved to amend its Complaint to cure the perceived deficiencies; the presiding judge, the Honorable Christine M. Arguello, granted Plaintiff's Motion to Amend, see [#51], and Plaintiff's First Amended Complaint (“FAC”) became the operative pleading in this matter, see [#62].[1] The following facts, drawn from the FAC, are relevant to the instant Motion to Dismiss.

         Plaintiff, a Delaware limited liability company, develops and builds electric generation facilities powered by renewable energy resources. [#62 at ¶ 5]. It is currently developing eleven (11) electric generation facilities in Colorado-facilities the Federal Energy Regulatory Commission (“FERC”) certified as Qualifying Facilities (“QFs”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA” or “Act”). [Id. at ¶¶ 5-6, 17-18]; see also 16 U.S.C. § 824a-3; 18 C.F.R. § 292.101(b)(1). Under the Act and FERC's implementing regulations, electric utilities are required to purchase a QF's offered energy and capacity at the utility's “avoided costs, ” i.e., “the incremental costs to the utility” of capacity and energy that the utility would have produced or purchased elsewhere had it not purchased the energy/capacity from the QF. [Id. at ¶¶ 2, 19-21]. This is commonly referred to as PURPA's “must-buy” provision. See [id. at ¶¶ 2, 19]; see also 16 U.S.C. § 824a-3(a); 18 C.F.R. § 292.303(a). QFs and utilities have the ability to enter into contracts or legally enforceable obligations under the “must-buy” provision. [Id. at ¶ 2].

         Plaintiff avers that, although state regulatory authorities have some latitude in setting avoided costs, they must still comply with the Act's “must-buy” provision and FERC's implementing regulations. [Id. at ¶¶ 2, 23-29]. Here, sPower levies a facial challenge to Defendants' Rule 3902(c) of the Rules Regulating Electric Utilities, which applies to QFs with a design capacity of greater than 100 kilowatts (“kWs”). [Id. at ¶¶ 3, 33-34]; see also 4 Colo. Code Regs. § 723-3:3902(c) (obligating utilities to purchase capacity from QFs “only if the [QF] is awarded a contract under the bid or auction or combination process.”). sPower alleges that Rule 3902(c) “places an unlawful restriction on a QF's ability to enter a contract with a utility at an avoided cost rate, thereby violating PURPA's must-buy requirement[.]” [#62 at ¶ 38]. Specifically, FERC's regulations provide QFs with two mechanisms for selling their electrical output to a utility: (1) on an “as available” basis with avoided costs calculated at the time of delivery; or (2) through a contract or legally enforceable obligation with avoided costs calculated at the time of delivery or at the time the obligation is incurred. See [id. at ¶¶ 24, 40]; 18 C.F.R. § 292.304(d). sPower asserts, however, that Rule 3902(c) prevents QFs over 100 kWs from exercising these rights by requiring each to win “an infrequently-held [request for proposals]” before selling its output. [#62 at ¶ 41].

         Plaintiff contends it has expended significant amounts of company resources and money readying its QFs for operation, but Public Service Company of Colorado (“Public Service”) refused to enter into a long-term contract or other obligation with Plaintiff to purchase energy and capacity because of Rule 3902(c). See [id. at ¶¶ 42-54]. sPower's attempts to petition the Colorado Public Utilities Commission (“COPUC”) to waive the requirements of Rule 3902(c), which the COPUC does on occasion [id. at ¶ 39], and its challenge to the validity of Rule 3902(c) were unsuccessful. See [id. at ¶¶ 55-56]. sPower also challenged (unsuccessfully) Rule 3902(c)'s electronic resource planning (“ERP”) bidding requirement with FERC, given that FERC had twice before rejected similar state rules. See [id. at ¶¶ 60-68]; 16 U.S.C. § 824a-3(h).

         Plaintiff then filed the instant action pursuant to section 210(h)(2)(B) of the Act. [#62 at ¶ 68]; 16 U.S.C. § 824a-3(h)(2)(B). sPower requests that the court “overturn” Rule 3902(c) for violating both PURPA and FERC's implementing regulations. As Defendants, Plaintiff names the COPUC and its Commissioners Mr. Ackermann and Mses. Koncilja and Moser in their official capacities, see [#62]; Black Hills/Colorado Electric Utility Company, LP (“Black Hills”) has since intervened as an additional Defendant, see [#60].

         Defendants again move to dismiss the FAC because Plaintiff lacks standing to challenge Rule 3902(c), its challenge is unripe, and it fails to plead a plausible claim for relief. [#52]. In the alternative to dismissal, Defendants request the court stay this matter under the abstention doctrine of Burford v. Sun Oil Company, 319 U.S. 315 (1943). [Id.]. Plaintiff has filed its Response and Defendants their Reply. [#54; #55]. The Motion to Dismiss is now ripe for recommendation.


         I. Rule 12(b)(1)

         Federal courts are courts of limited jurisdiction and, as such, “are duty bound to examine facts and law in every lawsuit before them to ensure that they possess subject matter jurisdiction.” The Wilderness Soc. v. Kane Cty., Utah, 632 F.3d 1162, 1179 n.3 (10th Cir. 2011) (Gorsuch, J., concurring). Indeed, courts have an independent obligation to determine whether subject matter jurisdiction exists, even in the absence of a challenge from any party. 1mage Software, Inc. v. Reynolds & Reynolds, Co., 459 F.3d 1044, 1048 (10th Cir. 2006) (citing Arbaugh v. Y & H Corp., 546 U.S. 500 (2006)).

         Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may bring either a facial or factual attack on subject matter jurisdiction, and a court must dismiss a complaint if it lacks subject matter jurisdiction. See generally Pueblo of Jemez v. United States, 790 F.3d 1143, 1147 n.4 (10th Cir. 2015). For a facial attack, the court takes the allegations in the Complaint as true, but when reviewing a factual attack the court may not presume the truthfulness of the Complaint's factual allegations and may consider affidavits or other documents to resolve jurisdictional facts. Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir. 1995). The burden of establishing jurisdiction rests with the party asserting jurisdiction. Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).

         II. Rule 12(b)(6)

         Under Rule 12(b)(6) a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion under Rule 12(b)(6), the court must “accept as true all well-pleaded factual allegations . . . and view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). In some instances, the court may consider materials outside the complaint without converting a motion to dismiss to one for summary judgment if the documents are central to the plaintiff's claims, referred to in the complaint, and the parties do not dispute their authenticity. See Cty. of Santa Fe, N.M. v. Public Serv. Co. of N.M., 311 F.3d 1031, 1035 (10th Cir. 2002). Additionally, the court may take judicial notice of undisputed court documents and matters of public record. See Tal v. Hogan, 453 F.3d 1244, 1264 n. 24 (10th Cir. 2006).

         In any case, a plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); see also Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (explaining that plausibility refers “to the scope of the allegations in a complaint, ” and that the allegations must be sufficient to nudge a plaintiff's claim(s) “across the line from conceivable to plausible.”). The ultimate duty of the court is to “determine whether the complaint ...

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