380 F. Supp. 3d 1102
E.D. Wash.2019Background
- Blocktree (group of cryptocurrency-mining companies) operates in Grant County PUD No. 2 territory and historically paid rates under Rate Schedule 7 (RS-7).
- Grant PUD faced a sudden influx of cryptocurrency-mining interest beginning summer 2017 (hundreds of MW in requests) and adopted an "Evolving Industries" classification and Rate Schedule 17 (RS-17) to manage concentration, business, and regulatory risks.
- RS-17 imposes substantially higher Basic, Energy, and Demand charges than RS-7 and is being phased in from April 2019 to April 2021; Blocktree estimates a 295–400% increase when fully implemented.
- Blocktree participated in public comment but later sued, alleging RS-17 is discriminatory, arbitrary, violates due process, the Federal Power Act, Washington utility law, and the Washington Constitution's Privileges and Immunities Clause; they sought a preliminary injunction to block RS-17 implementation.
- The District adopted RS-17 by Commission resolutions after staff analysis; it justified the rate class based on (1) sudden load/concentration risk, (2) miner mobility and revenue volatility, and (3) projected costs (transmission upgrades, equipment wear, and risk of abandoned load).
- The court denied the preliminary injunction, finding Blocktree failed to show likelihood of success on any claim and failed to demonstrate irreparable harm; the balance of equities and public interest favored the District.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RS-17 violates Washington utility laws (discriminatory/arbitrary ratemaking) | RS-17 discriminates against cryptocurrency miners; staff unlawfully delegated classification; rates are not cost-based or backed by scientific analysis; violates ratemaking principles | Commissioners adopted RS-17 within statutory authority; classification addressed unique sudden influx and industry traits; rates reflect projected direct/indirect costs and were developed with public process | Court: Not likely to succeed; rates presumptively reasonable; procedures and justifications adequate; no arbitrary/discriminatory showing |
| Applicability and claim under the Federal Power Act (16 U.S.C. § 813) | RS-17 is unreasonable and discriminatory under the FPA | FPA sections on nondiscrimination do not apply to Grant PUD (FERC previously found municipal self-regulatory authority); analysis similar to state law | Court: Blocktree unlikely to prevail; FPA provision does not apply and discrimination analysis mirrors state-law conclusion |
| Procedural due process (federal and state) | Blocktree had property interest in investments and existing RS-7 rate and was deprived without adequate process when classified into RS-17 | Ratemaking is legislative; no protected property interest in investments or a particular rate; Washington law treats rate-setting as legislative | Court: Not likely to succeed; investments and RS-7 not protected property interests for due process; Washington due process claims fail because ratemaking is legislative |
| Washington Privileges & Immunities Clause (right to carry on business / nondiscriminatory rates) | RS-17 unfairly discriminates and impairs Blocktree's right to carry on business and to nondiscriminatory rates | Classification addressed public-utility concerns and was rational; law does not show a protected right to a nondiscriminatory rate beyond statutory fair-rate requirements | Court: Not likely to succeed; mere profit harm does not implicate the right to carry on business; reasonable-ground test satisfied; no special-interest favoritism shown |
| Irreparable harm and preliminary-injunction balance | RS-17 will make operations uneconomical and may force bankruptcy or relocation — warrants injunction | Monetary harms are insufficient; public interest and District’s need to protect service and revenues weigh against injunction | Court: Blocktree failed to show likely irreparable harm; balance of equities/public interest favor the District; injunction denied |
Key Cases Cited
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (preliminary injunction standard)
- Mazurek v. Armstrong, 520 U.S. 968 (preliminary injunction is extraordinary remedy)
- Doran v. Salem Inn, Inc., 422 U.S. 922 (bankruptcy threat can constitute irreparable harm)
- Bi-Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441 (distinction between legislative and adjudicative action for due process)
- Lincoln Shiloh Assocs., Ltd. v. Mukilteo Water Dist., 45 Wash.App. 123 (724 P.2d 1083) (presumption of reasonableness for utility rates)
- Teter v. Clark County, 104 Wash.2d 227 (704 P.2d 1171) (rate-classification and reasonableness principles)