Vote Solar v. City of Farmington ( 2021 )

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
June 28, 2021
UNITED STATES COURT OF APPEALS
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
VOTE SOLAR; MICHAEL EISENFELD;
JAMES NEIDHART; JEFFREY
NEIDHART; STEVEN BAIR; NEIL
TRIBBETT; JERRY KNUTSON; VICKIE
SLIKKERVEER; THE COLISEUM, INC.,
d/b/a The Colosseum Gym; DAVID
FOSDECK; STEPHEN ELLISON; ERIN
HOURIHAN,
Plaintiffs - Appellants,
v. No. 20-2028
CITY OF FARMINGTON, d/b/a
Farmington Electric Utility System,
Defendant - Appellee.
_________________________________
Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:19-CV-00753-JAP-CG)
_________________________________
David C. Bender (Sara Gersen and Chinyere Osuala, with him on the briefs),
Earthjustice, Madison, Wisconsin, for Plaintiffs - Appellants.
Kristen Connolly McCullough (Sean M. Neal, Duncan, Weinberg, Genzer & Pembroke,
PC, and Jennifer Breakell, City Attorney for the City of Farmington, New Mexico, with
her on the brief), Duncan, Weinberg, Genzer & Pembroke, PC, Washington, DC, for
Defendant - Appellee.
_________________________________
Before McHUGH, Circuit Judge, LUCERO, Senior Circuit Judge, and CARSON,
Circuit Judge.
_________________________________
LUCERO, Senior Circuit Judge.
_________________________________
This is a case about the contours of federal versus state jurisdiction under the
jurisdictional scheme established by the Public Utility Regulatory Policies Act
(PURPA). Pub. L. 95–617, 92 Stat. 3117 (1978). Generally, federal courts are
understood to have jurisdiction over facial, or “as-implemented,” claims regarding
the implementation of federal agency rules by individual utilities or state utility
commissions, while state courts hear individual “as-applied” claims regarding the
application of those implementations to individual parties. In this case, the district
court rejected that established distinction, introducing a particularized and novel
interpretation of PURPA’s jurisdictional scheme under which federal courts have
jurisdiction only if a utility fails to make any reasonable effort to implement a
Federal Energy Regulatory Commission (FERC) rule. In light of this interpretation,
the district court granted defendant City of Farmington, New Mexico’s motion to
dismiss a claim brought by Plaintiffs, a number of Farmington residents who have
installed solar panels on their homes or businesses and an advocacy group called
Vote Solar.
An adoption of the district court’s interpretation would create a circuit split on
this issue. We see no reason to do so. The statutory text supports the jurisdictional
framework as consistently interpreted by other federal courts, and every circuit court
to address the issue, as well as the relevant federal agency, has operated under this
framework since PURPA’s passage. We join them.
2
We reverse the district court’s grant of the motion to dismiss and remand for
further proceedings.
I
We proceed in two parts. Part A covers the events that led to the proceedings
below and this appeal; Part B discusses the statutory background to this case.
A
In 2017, the City of Farmington (Defendant) adopted an ordinance that
imposed additional charges on customers who generate their own electricity. See
City of Farmington Res. 2017-1616. Defendant argues this change reflected the true
cost imposed by these customers on the electric grid; Plaintiffs argue the charges
amounted to price discrimination in violation of FERC rules. See 18 C.F.R.
§§ 292.304(a), 292.305(a). This appeal does not require resolution of that
substantive dispute.
After FERC declined Plaintiffs’ petition to intervene, Plaintiffs brought suit in
federal district court. Defendant moved to dismiss Vote Solar and several of the
other plaintiffs for lack of standing. Sua sponte, the district court requested
supplemental briefing concerning its statutory subject-matter jurisdiction. The
parties, operating under the assumption that the as-implemented versus as-applied
framework governed subject-matter jurisdiction, submitted the requested briefing,
with Plaintiffs arguing they were lodging an as-implemented claim and Defendant
characterizing the claim as as-applied. Due to its interpretation of PURPA’s
jurisdictional provisions, the district court concluded otherwise, dismissing the case
3
for failure to state a claim under Rule 12(b)(6). This dismissal was based on the
court’s conclusion that because Plaintiffs did not argue that Defendant had made no
effort to implement FERC’s price discrimination rules, its claim did not fall within
the district court’s jurisdiction. It also deemed Defendant’s motion regarding
standing moot. 1 Plaintiffs now appeal.
B
In 1978, Congress passed PURPA, a law intended to promote the development
of small-scale renewable energy generation. See New York v. F.E.R.C., 535 U.S. 1,
9 (2002). PURPA prohibited utilities from engaging in price discrimination when
they bought or sold supplemental power from or to small energy producers. For
example, when a home or business with solar panels needs to buy extra power from
or wants to sell surplus power to the local utility, PURPA bars the utility from
charging that home or business different rates than it would any other customer or
supplier. See 16 U.S.C. § 824a-3-(b) (“Section 210(b)” 2). PURPA directs FERC to
1
Both parties addressed standing in their briefs, but both also acknowledged
that we do not need to resolve the issue on appeal. We agree and refrain from doing
so. Defendant’s standing challenge never asserted that all of the plaintiffs lack
standing; our independent duty to ensure our Article III jurisdiction is satisfied.
Because the district court did not rule on standing, we leave that issue for the district
court on remand.
2
PURPA’s provisions are generally referred to by their location in the original
act rather than their codification in the code. We accordingly use the PURPA
sections to discuss the provisions relevant to this case. They are each codified at 16
U.S.C. § 824a.
4
promulgate rules that would effectuate this anti-price discrimination scheme. See
Section 210(a).
The jurisdictional scheme established in PURPA’s Section 210 is what is at
issue in this case. In one respect, it is a simple scheme. Section 210(a) directs FERC
to issue the anti-price discrimination rules required by Section 210(b). Section 210(f)
requires state public utility commissions and nonregulated independent utilities 3 to
“implement” the rules issued by FERC under Section 210(a) by incorporating them
into their regulations and procedures. What complicates the scheme is the question
this case demands we answer: how—or, rather, where—the anti-price discrimination
requirement is to be enforced. If a utility fails to meet its Section 210(f) obligations
to “implement such rule[s],” there are two jurisdictional subsections that govern
enforcement actions. Section 210(g) gives state courts jurisdiction to consider any
person’s challenge to “any proceeding conducted by a [utility] for purposes of
implementing any requirement of a rule under [Section 210(a)].” Alternatively,
Section 210(h) permits small power producers to ask FERC to enforce a utility’s
obligation to implement its rules under Section 210(f), and, if FERC does not do so,
the small power producer may bring suit in federal district court against the utility to
enforce those Section 210(f) requirements.
3
A “nonregulated independent utility” is simply a utility in a state that lacks a
public utility commission, a state body that regulates local utilities. New Mexico is a
state without a public utility commission, so Defendant’s utility is considered a
nonregulated independent utility. This is merely nomenclature; for purposes of this
case, nothing hinges on the distinction. For ease of reference, we refer to all covered
entities under Section 210(f) simply as “utilities.”
5
Demarcating the precise boundaries of state versus federal jurisdiction under
Section 210 was left to the courts. While no single approach has been unanimously
adopted, the most prominent paradigm came to center on a distinction between “as-
implemented” and “as-applied” claims. As-implemented claims involve a contention
that a utility failed to implement a FERC rule, rendering its regulations or procedures
facially illegitimate. These claims fall within the jurisdiction of federal courts
provided by Section 210(h)(2). In contrast, as-applied claims revolve around
allegations that a utility’s implementation plan is unlawful as applied to the
individual petitioner. State courts have jurisdiction over as-applied claims under
Section 210(g). This paradigm emerged from two district court cases 4 and has been
adopted by the First, Fifth, and Eleventh Circuits. 5 We have never considered the
issue, but a separate District of New Mexico court recently employed this framework.
See Great Divide Wind Farm 2 LLC v. Becenti Aguilar, 405 F. Supp. 3d 1071, 1091-
92 (D.N.M. 2019).
This District of New Mexico court diverged, resolving this case by way of a
different and novel interpretation of Section 210’s jurisdictional scheme. Rejecting
the as-implemented versus as-applied paradigm, the district court concluded that the
4
Mass. Inst. of Tech. v. Mass. Dep’t of Pub. Utils., 941 F. Supp. 233, 236-37
(D. Mass. 1996); Greensboro Lumber Co. v. Ga. Power Co., 643 F. Supp. 1345, 1374
(N.D. Ga. 1986).
5
Allco Renewable Energy Ltd. v. Mass. Elec. Co., 875 F.3d 64, 67-68 (1st Cir.
2017); Exelon Wind 1, L.L.C. v. Nelson, 766 F.3d 380, 388 (5th Cir. 2014);
Greensboro Lumber Co. v. Ga. Power Co., 844 F.2d 1538, 1542 (11th Cir. 1988).
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jurisdiction of federal courts is substantially more limited. It asserted that federal
district courts may only address claims concerning whether a utility “outright fail[ed]
to implement a FERC rule.” Vote Solar v. City of Farmington, 2020 WL 673087, at
*8 (D.N.M. Feb. 11, 2020). By this the district court appears to have redefined the
question as whether the utility made any reasonable effort at implementation, rather
than whether the implementation was successful or consistent with the FERC rule.
See id. (“This reading . . . focuses on distinguishing compliance with FERC rules
versus compliance with PURPA’s mandate to make reasonable implementation
efforts. Federal jurisdiction . . . should not be stretched to cover disputes over how
well a regulatory entity implements FERC’s rules.” (emphasis in original)). Under
the district court’s interpretation, the task of ensuring that a utility’s actions actually
“comply with FERC’s requirements” is left with state courts alone. Id.II
“The legal sufficiency of a complaint is a question of law, and a Rule 12(b)(6)
dismissal is reviewed de novo.” Smith v. United States, 561 F.3d 1090, 1098 (10th
Cir. 2009). We also review questions of statutory interpretation de novo. Ausmus v.
Perdue, 908 F.3d 1248, 1252 (10th Cir. 2018).
Section 210(h)(2) empowers federal courts to “enforce the requirements of
subsection (f),” and subsection (f) states that utilities “shall, after notice and
opportunity for public hearing, implement [FERC’s] rule[s].” The scope of federal
jurisdiction under Section 210 is thus fixed by the word “implement.” At bottom, the
district court reinterpreted the word ‘implement’ to require only a reasonable effort
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by the utility to incorporate a FERC rule, while Plaintiffs argue that to ‘implement’ a
rule requires the utility to act or regulate consistently with the rule.
Of these two proposed definitions, Plaintiffs’ is the more persuasive. At the
level of plain meaning, it seems to us a non sequitur to claim that a utility can
“implement” a rule by issuing a regulation that is inconsistent with that rule. For
example, if a supervisor establishes guidelines and tells an employee under
supervision to implement them (picture here a doctor-nurse, architect-draftsman,
judge-clerk situation), and due to a good-faith misunderstanding the employees fails
to take the designated action despite making a reasonable attempt to do so, it can
hardly be said that the employee has implemented the guideline action.
The Oxford English Dictionary defines “Implement” as “To complete,
perform, carry into effect (a contract, agreement, etc.); to fulfill (an engagement or
promise).” “Implement, v.,” OED Online (last visited June 6, 2021). Effort, good
faith, or reasonable attempt play no role in the word’s common usage or its
dictionary definition. Indeed, the district court’s use of modifiers—“attempt to
implement,” “reasonable implementation efforts”—reveals the infirmity of its
approach.
Other courts have repeatedly operated under the meaning urged by Plaintiffs,
leaving the district court alone in its interpretation of Section 210’s approach to
jurisdiction. A number of circuit courts have held that federal courts have
jurisdiction to consider whether utilities’ regulations are consistent with FERC rules,
not merely whether the regulations constitute a reasonable effort at incorporating the
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rules. For example, the D.C. Circuit held, “The failure of a state commission to
ensure that a rate does not exceed a utility’s avoided cost is a failure to [implement]”
and would therefore “be challenged through an enforcement action brought in district
court under § 210(h).” New York State Elec. & Gas Corp. v. F.E.R.C., 117 F.3d
1473, 1476 (D.C. Cir. 1997). The question was not whether the state commission
tried to ensure that the rate was lawful—the question was whether it was lawful.
Similarly, in Allco, the First Circuit explained that federal courts have jurisdiction to
consider whether a utility “failed to properly implement FERC’s regulations.” 875
F.3d at 68. Again, the question revolved around whether there was a “proper”
implementation, not whether it was a reasonable attempt at one. And no one has
drawn our attention to precedent rebutting these authorities or otherwise supporting
the district court’s interpretation.
FERC’s understanding of Section 210 jurisdiction is the same. It considers its
enforcement authority, which is coterminous with that of private parties when it
declines to enforce 210(h) obligations, as extending “to situations where State
regulatory authorities or nonregulated electric utilities are alleged to have completed
the implementation process, but have promulgated regulations which are inconsistent
with or contrary to the Commission’s regulations.” Policy Statement Regarding the
Commission’s Enf’t Role Under Section 210 of the Public Util. Regul. Policies Act
of 1978, 23 FERC 61304, 61644 (1983) (emphasis added).
Against these considerations of ordinary meaning, dictionary definitions, and
an abundance of conflicting caselaw, Defendant and the district court offer little to
9
motivate their interpretation. Instead, both focus on the broader jurisdictional
scheme of Section 210, highlighting the emphasis placed on state court review of
local utility disputes. For example, the district court opinion characterized the role of
state courts in judicial review under PURPA as broad, remarking that Plaintiffs’
interpretation would give federal courts enough jurisdiction for “the exception
(federal jurisdiction) to swallow the rule (state jurisdiction).” Vote Solar, 2020 WL
673087, at *10; see also Portland Gen. Elec. Co., 854 F.3d at 698 (“State-based
adjudication serves as the mainstay for enforcing PURPA rights.”). The court
reasoned that a broad grant of federal jurisdiction would also contradict Congress’
historical approach to utility regulation, which was never supposed to “displace state
and local regulatory authority over electrical utilities.” Vote Solar, 2020 WL
673087, at *10.
These concerns are misplaced. While the scope of state court jurisdiction
under Section 210(g) may be broad, that is of course not a reason to overlook the
statutory text of Section 210(h), which defines federal jurisdiction. That text gives
federal courts jurisdiction over utilities’ failure to implement rules; we cannot read
into that text a relaxed standard demanding only a good-faith effort at
implementation for the sake of general principles of federalism. Even if leaving
judicial review under PURPA primarily in the hands of state courts was Congress’
intention, that does not give us license to ignore the plain meaning of the statute.
We conclude that the majority approach is better: the implementation required
by Section 210(f) and challenged by Plaintiffs under Section 210(h)(2) demands
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facial consistency with FERC rules. PURPA requires that utilities implement FERC
rules, and it empowers federal courts to review whether the utilities’ implementation
was successful on its face. If so, the utility has satisfied its federal obligation. But
the utility may apply its own rules improperly to individual customers, in which case
the customers may bring a claim in state court. 6
III
The judgment of the district court is REVERSED. We REMAND to the
district court for further proceedings to implement our restated scope of federal
jurisdiction under Section 210.
6
We do not circumscribe the scope of state court jurisdiction under Section
210(g) with this decision. Although other circuit courts that have adopted the as-
implemented versus as-applied approach have often done so by confining
implementation claims exclusively to federal courts, we do not today follow suit.
See Allco, 875 F.3d at 68 (“[F]ederal courts have exclusive jurisdiction over
implementation challenges.”); Exelon Wind, 776 F.3d at 388 (same). While
implementation challenges that are brought under Section 210(h)(2) are exclusively
federal, state court review under Section 210(g) covers “any proceeding . . . for
purposes of implementing any requirement of a rule under [Section 210(a)]” or “any
requirement established . . . pursuant to [Section 210(f)].” Whether challenges
brought in state court under this capacious jurisdiction could have characteristics of
an implementation challenge is a question not before us and one we do not resolve.
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