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Power Development Co. LLC v. Colorado Public Utilities Commission

United States District Court, D. Colorado

July 18, 2019

POWER DEVELOPMENT COMPANY, LLC, a Delaware limited liability company, Plaintiff,
v.
COLORADO PUBLIC UTILITIES COMMISSION, an agency of the State of Colorado, JEFFREY P. ACKERMANN, in his official capacity as Commissioner and Chairman o 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, PUBLIC SERVICE COMPANY OF COLORADO, and BLACK HILLS COLORADO ELECTRIC, INC., Defendants.

          ORDER DENYING PLAINTIFF'S MOTION TO REOPEN CASE AND DISMISSING CASE AS MOOT

          CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Plaintiff sPower Development Company, LLC's (“sPower”) Motion to Reopen the Case (Doc. # 92), as well as the parties' various Notices updating the Court on the status of a rulemaking proceeding and application proceedings (Doc. ## 91, 93, 94). For the reasons discussed herein, the Court denies sPower's Motion to Reopen the Case and dismisses this action in its entirety as moot.

         I. BACKGROUND

         The Court recited the applicable factual and procedural background of this matter in its June 18, 2018 Order Adopting the Recommendation of United States Magistrate Judge (Doc. # 69) and in its November 15, 2018 Order Granting Defendants' Joint Request for Administrative Closure (Doc. # 90). Those Orders are incorporated herein by reference. Additional factual and procedural background will be reiterated only to the extent necessary to address sPower's Motion to Reopen the Case and the parties' Notices.

         As the Court previously explained, sPower develops and builds electric generation facilities, including qualifying facilities (“QFs”), powered by renewable energy sources in Colorado.[1] (Doc. # 62 at 3.) sPower initiated this action on March 15, 2017, against Defendant Colorado Public Utilities Commission (the “PUC”) and its Commissioners[2] to challenge the PUC's promulgation of Rule 3902(c) of its Rules Regulating Electric Utilities. (Doc. ## 1, 62.) Defendants Public Service Company of Colorado (“Public Service”) and Black Hills Colorado Electric, Inc. (“Black Hills”), with whom sPower had unsuccessfully attempted to enter long-term contracts for the purchase of sPower's energy and capacity, joined this action shortly thereafter. (Doc. ## 58-60); see (Doc. # 46-6 at 2.)

         At the time sPower brought suit, Rule 3902(c) stated:

A utility shall use a bid or an auction or a combination procedure to establish its avoided costs for facilities with a design capacity of greater than 100 KW. The utility is obligated to purchase capacity or energy from a qualifying facility only if the qualifying facility is awarded a contract under the bid or auction or combination procedure.

4 C.C.R. § 723-3:3902(c) (2017) (emphasis added). The bid, auction, or combination procedure-in other words, a competitive solicitation or a request for proposals- referred to in Rule 3902(c) is a component of the electric resource planning (“ERP”) process, which each regulated utility undergoes every four years. 4 C.C.R. § 723-3:3603(a); 4 C.C.R. § 723-3:3611. Importantly, “[t]hrough [PUC] Rule 3902(c), QFs are awarded a contract ‘only' if they win a competitive bid.” In the Matter of the Application of Pub. Serv. Co. of Colo. For Approval of Its 2016 Elec. Res. Plan., 16A-0396E, 2016 WL 7430542, *2 (Dec. 19, 2016); see also 4 C.C.R. § 723-3:3611(a) (“It is the Commission's policy that a competitive acquisition process will normally be used to acquire new utility resources.”).

         sPower argues that “[c]ontrary to [the Public Utility Regulatory Policies Act of 1978 (‘PURPA'), 16 U.S.C. § 824a-3(a), ] and the [Federal Energy Regulatory Commission's (‘FERC')] regulations implementing PURPA, ” Rule 3902(c) unreasonably restricts “the rights of [QFs] to enter into long-term obligations by requiring QFs, such as those [sPower owned], to win a competitive solicitation process before they may enter into a contract or legally enforceable obligation with a regulated electric utility in Colorado.” (Doc. # 62 at 2.) sPower's sole claim is for declaratory relief; it seeks a declaration by the Court that “the second sentence of [Defendant PUC's] Rule 3902(c) is inconsistent with and does not comply with the requirements of PURPA or FERC's regulations implementing PURPA, ” as well as an order enjoining the PUC “from enforcing the second sentence of Rule 3902(c) or otherwise taking any action inconsistent with . . . PURPA.” (Id. at 16-18) (emphasis added).

         On July 25, 2018, approximately a month after the Court denied the PUC's Motion to Dismiss, see (Doc. # 69), the PUC issued a Notice of Proposed Rulemaking (“NOPR”) to strike the sentence in Rule 3902(c) with which sPower takes issue, the second sentence: “The utility is obligated to purchase capacity or energy from a qualifying facility only if the qualifying facility is awarded a contract under the bid or auction or combination process.” PUC Proceeding No. 18R-0492E, Notice of Proposed Rulemaking, Decision No. C18-0601 (July 25, 2018); see 7 C.C.R. § 723-3:3902(c); (Doc. # 74-1.)

         On July 30 and 31, 2018, sPower filed 18 new applications with the PUC, “requesting the adjudication and enforcement of a legally enforceable obligation under PURPA requiring [Defendant] Public Service (for 17 of the applications) and [Defendant] Black Hills (for one of the applications) to purchase energy and capacity” from sPower's QFs. See (Doc. # 86 at 3.)

         On August 22, 2018, Defendants filed a Joint Motion Requesting Administrative Closure on the grounds that “[t]he rulemaking proceeding at [the PUC, concerning Rule 3902(c)], along with the 18 sPower application proceedings, could resolve or significantly impact the proceedings in this case.” (Id.) The Court granted Defendants' request and administratively closed this matter on November 15, 2018. (Doc. # 90.) Weighing the five String Cheese Incident factors relevant to staying a civil action, see Atkins v. HCA-HealthONE, LLC, No. 15-CV-00037-WYD-KLM, 2015 WL 1298507, *4 (D. Colo. Mar. 19, 2015) (citing String Cheese Incident, LLC v. Stylus Shows, Inc., No. 1:02-CV-01934-LTB-PA, 2006 WL 894955, *2 (D. Colo. Mar. 30, 2006) (internal citation omitted)), the Court concluded that it was appropriate to administratively close the case until the NOPR regarding the second sentence of Rule 2902(c) and sPower's 18 application proceedings were completed and “pending a showing of good cause to reopen.” (Doc. # 90 at 13-14.) It further ordered that within ten days of the completion of the rulemaking proceeding and sPower's application proceedings, the parties were to notify the Court of the outcome of the proceedings and to request either that the case be dismissed or reopened. (Id. at 14-15.)

         A. RULEMAKING PROCEEDING REGARDING RULE 3902(C)

         As the Court stated above, the PUC issued a NOPR to strike the second sentence in Rule 3902(c) on July 25, 2018. PUC Proceeding No. 18R-0492E, Notice of Proposed Rulemaking, Decision No. C18-0601 (July 25, 2018); see (Doc. # 74-1.) The PUC explained in the NOPR that its staff had been hosting workshops with stakeholders to discuss possible changes to the Electric Rules and had learned from stakeholders that Rule 3902(c) “had not been updated to reflect that various alternative avenues for utility resource procurement in later-promulgated ERP . . . rules for a QF to present a contract or legally enforceable obligation from a utility.” (Id. at 2-3.) Striking the second sentence of Rule 3902(c) would “clarif[y] that the ERP process is not the only opportunity to receive a contract or legally enforceable obligation from a utility, ” according to the PUC. (Id. at 3.)

         The Commission received written and oral comments concerning the proposed deletion of Rule 3902(c)'s second sentence before and at a public comment hearing on September 14, 2018. It later described that “several commentators, including the Colorado Energy Office, agree[d] that the rule is in direct conflict with existing practices and rules.” PUC Proceeding No. 18R-0492E, Decision Adopting Rule Revision, Decision No. C18-1045 at 7 (Oct. 31, 2018); see (Doc. # 91-1). It also noted some commentators' concern “that striking the rule has directly encouraged sPower's pleadings in 18 adjudication filings” and that utilities opposed revising Rule 3902(c) at least in part because of that concern. Id. Finally, the Commission observed, “Numerous participants in this rulemaking proceeding also provide differing comments and analysis regarding federal statutory obligations pursuant to PURPA as it relates to Colorado's implementation of the Electric Rules, generally, including the second sentence of the specific rule at issue here.” Id.

         On October 31, 2018, the PUC adopted its proposed revision and struck the second sentence because it was “in conflict with current [PUC] rules, including without limitation Rules 3615 and 3656.” Id. at 10; see (Doc. # 91-1). It noted that the rule change “[was] prospective, ” like any of its rule changes, and would go into effect on November 27, 2018. Id. at 8, 10. As to sPower's 18 previously-filed applications to the PUC, the PUC explained that sPower's applications were “submitted pursuant to Rule 3002(a)(XIX) regarding application processes that generally permit a non-utility to file applicants for relief before [the PUC].” Id. at 6. The majority of sPower's applications were consolidated, and, at the time of the PUC's decision, two proceedings were assigned to an Administrative Law Judge (“ALJ”) and had a “statutory deadline for a decision . . . in April of 2019.” Id. The PUC concluded that with these “18 current adjudications pending, a determination on the request from sPower on adjudications under the rules [was] both beyond the limited scope of the instant rulemaking and inappropriate” because it “implicate[d] litigation strategies in ongoing and current proceedings.” Id. at 8.

         On March 20, 2019, the PUC upheld the striking of Rule 3902(c)'s second sentence and denied Requests for Rehearing, Reargument, or Reconsideration (“Rehearing”) of its decision. PUC Proceeding No. 18R-0492E, Decision Denying Applications for Rehearing, Reargument, or Reconsideration, Decision No. C19-0304 at 2 (March 20, 2019); see (Doc. # 91-2). It reaffirmed that “[t]he [previous] rule language that proffer[ed] a competitive bidding process [was] the ‘only' means to procure a legally enforceable obligation [was] inconsistent with other provisions in the Electric Rules.” Id. at 7-8. The PUC's decision to uphold its revision to Rule 3902(c) became effective on April 8, 2019. Id. at 1.

         The parties agree that the PUC's rulemaking proceeding with respect to Rule 3902(c) is now complete. See (Doc. # 91 at 3; Doc. # 94 at 3.)

         B. sPOWER'S ...


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