Allco Fin. Ltd. v. Robert J. Klee
861 F.3d 82
| 2d Cir. | 2017Background
- Allco Finance Ltd. (Allco) challenged Connecticut’s renewable procurement programs under Public Acts 13-303 and 15-107 and the state Renewable Portfolio Standard (RPS), alleging federal preemption (FPA/PURPA) and dormant Commerce Clause violations.
- Connecticut statutes authorized the DEEP Commissioner to solicit renewable energy proposals and to “direct” utilities to enter bilateral power purchase agreements; PURA and FERC retain review roles for resulting contracts.
- Allco unsuccessfully bid in a 2013 RFP (Number Nine Wind contract) and challenged a 2015 RFP that excluded smaller QFs (<20 MW), imposed bidder fees, and allowed participation by large non‑QF generators; Allco pursued administrative relief at FERC and filed multiple district-court actions (Allco III and Allco IV).
- The district court dismissed Allco’s Complaints for lack of standing and for failure to state claims; the Second Circuit affirmed in part and here AFFIRMED the district court’s dismissal.
- The court held Allco had Article III standing as to the exclusion/fee injuries but failed to state a preemption claim under the FPA/PURPA and failed to show dormant Commerce Clause discrimination arising from Connecticut’s RPS.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Connecticut’s RFPs are preempted by the Federal Power Act (FPA) / exceed PURPA’s exception | The RFPs “compel” utilities to enter wholesale contracts (including with non‑QFs), fix wholesale terms, exclude QFs, and impose unlawful bidder fees — invading FERC’s exclusive wholesale jurisdiction | The RFPs direct utilities to negotiate bilateral contracts at utilities’ discretion; resulting contracts are traditional bilateral arrangements subject to FERC review; states may regulate utilities | Dismissed: Allco failed to plausibly allege compulsion or a scheme like Hughes; RFPs permit discretionary negotiations and FERC review, so not preempted on pleadings |
| Whether Connecticut’s RFPs are materially indistinguishable from the Maryland scheme in Hughes | Economically equivalent to Hughes because state program affects wholesale prices and guarantees outcomes for out‑of‑auction capacity | Hughes is distinguishable: Maryland’s contract-for-differences tied payments to a FERC‑regulated auction; Connecticut’s RFPs produce traditional bilateral contracts subject to FERC review | Dismissed: Hughes is distinguishable; Connecticut’s process does not condition payments on auction outcomes |
| Whether Allco plausibly alleged a dormant Commerce Clause violation from RPS geographic limits (Georgia RECs) | Connecticut’s RPS discriminates against out‑of‑region RECs (e.g., Georgia) and burdens interstate REC trade | Connecticut’s RPS defines RECs as state property‑law products tied to ISO‑NE/NEPOOL‑GIS regional structure (FERC/RTO framework); in‑region and out‑of‑region RECs are different products and serve different local markets | Dismissed: RECs are different products and the state’s regional limitation is a legitimate local regulation; Pike balancing passes |
| Whether transmission/import fees on adjacent‑area generators violate the Commerce Clause | Fees imposed on imports (e.g., Allco’s NY facility) are protectionist burdens on interstate commerce | Fees are use/transaction fees (analogous to tolls) tied to transmission and grid access; plaintiff pleaded no facts showing excessive burden relative to benefits | Dismissed: Plaintiff pleaded only conclusory allegations; fees treated as permissible use fees absent further factual showing |
Key Cases Cited
- Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288 (2016) (held Maryland program preempted where state guaranteed a rate tied to a FERC‑regulated auction)
- FERC v. Elec. Power Supply Ass'n, 136 S. Ct. 760 (2016) (FERC’s role in ensuring just and reasonable wholesale rates and competitive market regulation)
- Morgan Stanley Capital Grp., Inc. v. Pub. Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527 (2008) (good‑faith bilateral contracts entitled to FERC deference)
- NRG Power Mktg., LLC v. Maine Pub. Utils. Comm'n, 558 U.S. 165 (2009) (deference to arm’s‑length wholesale contracts)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (injury‑in‑fact must be concrete and particularized for Article III standing)
- Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997) (distinguishing products/markets when analyzing alleged facial discrimination under dormant Commerce Clause)
- Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (balancing test for nondiscriminatory laws that incidentally burden interstate commerce)
- PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014) (Third Circuit finding field preemption where state compelled utilities to enter capacity contracts; discussed by the court but distinguished)
- Allco Fin. Ltd. v. Klee, 805 F.3d 89 (2d Cir. 2015) (Allco II) (prior Second Circuit panel decision addressing exhaustion, standing, and scope of available remedies)