932 F.3d 861
9th Cir.2019Background
- PURPA requires utilities to purchase all energy a Qualifying Facility (QF) offers (must-take) and to pay an avoided-cost rate, with QFs able to choose avoided cost calculated at contract or delivery. 18 C.F.R. §§ 292.303(a)(1), 292.304(d)(2).
- California Public Utilities Commission (CPUC) created Re‑MAT: a two‑month auction-like program with a statewide cap (750 MW) allocated among utilities and per‑utility, per‑category two‑month limits (e.g., PG&E capped at 5 MW per category per period).
- Re‑MAT sets market‑adjusted prices that move every two months based on QFs’ acceptance behavior rather than on utilities’ avoided costs; initial peaking price was $89.23/MWh and adjusted thereafter.
- CPUC also offered a Standard Contract that purportedly pays avoided‑cost rates via a six‑variable formula, but three variables cannot be determined at contract time, so it does not permit a contract‑time avoided‑cost calculation.
- Winding Creek Solar participated in Re‑MAT, received lower offers than the initial price, rejected them, challenged the program at FERC, then sued in district court; the district court granted summary judgment for Winding Creek but declined to order a contract at the initial price.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Re‑MAT’s purchase caps violate PURPA must‑take requirement | Re‑MAT’s caps allow utilities to decline available QF output, violating 18 C.F.R. § 292.303(a)(1) | Re‑MAT is an alternative state program and acceptable if the state provides other PURPA‑compliant options | Re‑MAT’s caps violate PURPA and are preempted because they permit utilities to purchase less than QFs offer |
| Whether Re‑MAT pricing complies with PURPA avoided‑cost requirement | Re‑MAT’s market‑adjusted auction price is not tied to a utility’s but‑for avoided costs and thus is noncompliant | CPUC contends market rates and state methodologies are permissible; FERC suggested alternatives may be acceptable | Re‑MAT pricing is not an avoided‑cost rate under PURPA and therefore violates PURPA |
| Whether the Standard Contract supplies a PURPA‑compliant alternative | Winding Creek: Standard Contract fails to allow avoided‑cost calculation at contract time because key variables are unknowable then | CPUC/FERC: Standard Contract provides an avoided‑cost mechanism and thus cures Re‑MAT’s defects | Standard Contract is noncompliant because it does not give QFs the option to fix avoided cost at contracting time as required by 18 C.F.R. § 292.304(d)(2) |
| Appropriate remedy (order for specific contract at initial Re‑MAT price) | Winding Creek sought a contract at the initial $89.23/MWh price | CPUC/PG&E opposed court‑ordered specific contract and argued equitable relief should be limited | Court affirmed district court’s refusal to order a contract at the initial price; courts should not force a nonparty to enter a modified version of a preempted regulatory program |
Key Cases Cited
- Indep. Energy Producers Ass’n, Inc. v. Cal. Pub. Utils. Comm’n, 36 F.3d 848 (9th Cir. 1994) (describing PURPA’s purpose and FERC’s QF framework)
- La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355 (U.S. 1986) (state regulations conflicting with federal regulations are preempted)
- Kisor v. Wilkie, 139 S. Ct. 2400 (U.S. 2019) (limits and conditions for deference to agency interpretations of their own rules)
- Allco Renewable Energy Ltd. v. Mass. Elec. Co., 875 F.3d 64 (1st Cir. 2017) (federal courts are not authorized or well‑suited to set avoided‑cost rates)
- Husain v. Olympic Airways, 316 F.3d 829 (9th Cir. 2002) (standard of review for bench trial findings)