DIRECT ENERGY SERVICES, LLC, ET AL. v. PUBLIC UTILITIES REGULATORY AUTHORITY
SC 20643
Supreme Court of Connecticut
July 4, 2023
Rоbinson, C. J., and McDonald, D‘Auria, Mullins, Ecker and Alexander, Js.
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Syllabus
The plaintiff electric suppliers appealed to the trial court from the final decision of the defendant, the Public Utilities Regulatory Authority (PURA), which imposed certain geographic and marketing restrictions on a renewable energy product known as a voluntary renewable offer (VRO). Electric suppliers serving Connecticut must demonstrate that a minimum percentage of the electricity that they supply is generated by specific types of renewable energy sources. To comply with these minimum standards, electric suppliers can purchase renewable energy credits (RECs), which represent renewable energy produced by third-party generators. PURA had previously established a program allowing customers to support the development of renewable energy sources beyond the minimum standards required. Pursuant to that program, electric suppliers began to offer their customers VROs, whereby the supplier would sell electric generation to the customer and promise to obtain more RECs than are needed to meet the minimum standards, thus allowing the supplier to market its product as more environmentally sound and to command higher prices. Thereafter, in 2020, PURA issued a final decision, establishing the geographic and marketing restrictions on VROs at issue in the present case. The geographic restriction prohibited VROs from containing RECs sourced outside of a particular, permitted control area, which was comprised of all or part of twenty states in and to the south and west of New England, as well as the District of Columbia. This restriction was based on PURA‘s finding that air quality in Connecticut is significantly and adversely affected by fossil fuel production to the southwest of the New England airshed and that displacing demand for fossil fuel plants in the permitted control area would provide environmental benefits to Connecticut, whereas displacing such demand outside of that area would not. The marketing restriction required electric suppliers to provide clear language informing consumers that a VRO is backed by RECs but is not itself renewable energy. The trial court upheld PURA‘s final decision. In doing so, it rejected the plaintiffs’ claim that the geographic and marketing restrictions violated the dormant commerce clause of the United States constitution. The trial court relied on a recent case, Allco Finance Ltd. v. Klee (861 F.3d 82), in which the United States Court of Appeals for the Second Circuit rejected a dormant commerce clause challenge to PURA‘s geographic restriction on the RECs used to satisfy the minimum standards, and reasoned that the challenge to that marketing restriction failed because the plaintiffs had not established a common regulatory scheme sufficient to create a dormant commerce clause issue or that the incidental burdens imposed by the restriction clearly exceeded the local gains. The trial court further concluded that the plaintiffs had waived their claims that the marketing restriction violated their constitutional right to free speech and that PURA‘s final decision violated their constitutional right to freely contract, insofar as the restrictions would disrupt the expectations and obligations of Connecticut customers and suppliers who had entered into contracts containing automatic renewal provisions, because the plaintiffs had not raised those claims before PURA during the administrative proceedings. Finally, the court rejected the plaintiffs’ claim that PURA had violated the procedural requirements of the Uniform Administrative Procedure Act (
- The trial court correctly concluded that the challenged geographic and marketing restrictions did not violate the dormant commerce clause:
- The plaintiffs could not prevail on their claim that the geographic restriction impermissibly discriminated against interstate commerce, insofar as the restriction burdened renewable generating facilities located outside of the permitted control area by denying them access to Connecticut‘s voluntary renewable market, while allowing generating facilities located within that area access to that market:
This court concluded that the standard applicable to the plaintiffs’ claim was not strict scrutiny but, rather, the deferential balancing test articulated by the United States Supreme Court in Pike v. Bruce Church, Inc. (397 U.S. 137), for laws that are nondiscriminatory but nonetheless adversely and incidentally affect interstate commerce, and, under that test, a law will be sustained unless the burden imposed on interstate commerce is clearly excessive in relation to the putative local benefits. In concluding that the Pike balancing test applied, this court utilized the framework set forth in the Second Circuit‘s decision in Allco Finance Ltd., and this court determined that the geographic restriction did not facially discriminate against electric generators outside of the permitted control area because those generators and generators within the permitted control area were not similarly situated for purposes of the commerce сlause, and that the Connecticut market should be given controlling significance because Connecticut has an important and legitimate interest in promoting increased production of renewable power generation in the region, which would further the state‘s interest in improving the natural environment and, in turn, would serve to protect the health and safety of Connecticut residents, whereas RECs generated outside of the permitted control area would have little to no effect on Connecticut‘s environment. Moreover, the RECs generated outside of the permitted control area could still be sold to any Connecticut entity wishing to purchase them at whatever price the market would bear, contrary to the plaintiffs’ arguments, RECs for the voluntary renewable program could not be generated anywhere if such credits were to further this state‘s clean energy goals, the voluntary nature of the VRO program did not render the RECs generated in the permitted control area, which helped to advance this state‘s environmental goals, the same as those generated outside of that area, which have little to no environmental benefit to Connecticut, and the determination of whether the geographic restriction actually advanced the state‘s environmental goals was a consideration better suited for PURA or the legislature than for this court.
- The plaintiffs could not prevail on their claim that the marketing restriction imposed a disproportionate burden on interstate commerce by creating marketing requirements that substantially conflicted with a common regulatory scheme:
Under Pike, which, as the parties agreed, governed the plaintiffs’ challenge to the marketing restriction, a nondiscriminatory state regulation might impose a disproportionate burden on interstate commerce, in violation of the dormant commerce clause, if the regulation is in substantial conflict with a common regulatory scheme in place in other states, but there must be an actual conflict between the challenged regulation and those in place in other states, and pointing to a risk of conflicting regulatory regimes in multiple states, or increased compliance costs for firms doing business in more than onе state, is not enough. In the present case, even if it was assumed that there existed a common regulatory scheme comprised of federal and sister state law and that the marketing restriction differed from the marketing requirements in other states, as the plaintiffs argued, such a regulatory scheme was not in substantial conflict with the marketing restriction at issue because, to the extent necessary, the plaintiffs could comply with both PURA‘s marketing restriction and the relevant federal guidelines, and, even if PURA‘s marketing restriction differed from those of other states, it had no impact on, and did not actually conflict with the implementation of, such other marketing restrictions.
- The plaintiffs could not prevail on their claim that the geographic restriction impermissibly discriminated against interstate commerce, insofar as the restriction burdened renewable generating facilities located outside of the permitted control area by denying them access to Connecticut‘s voluntary renewable market, while allowing generating facilities located within that area access to that market:
Moreover, the plaintiffs did not clearly articulate the purported burden that the marketing restriction imposed on interstate commerce, they did not claim that the marketing restriction would prohibit them from doing business in other states, and the only burden that this court could conceive, namely, that there would be increased costs resulting from the need to market VROs differently in Connecticut, was not clearly excessive in relation to the putative local benefits of improving consumer transparency and furthering this state‘s clean energy goals.
2. This court declined to consider the merits of the plaintiffs’ claims involving their constitutional rights to free speech and to freely contract because they were not raised before PURA during the administrative proceedings and, accordingly, were not adequately preserved for review:
The exhaustion of administrative remedies doctrine, which implicates the court‘s subject matter jurisdiction, typically applies when a party has completely bypassed an available administrative process, whereas, when a party has availed itself of the administrative proceeding but seeks to raise new claims for the first time on appeal, this court generally applies the nonjurisdictional, prudential principle that an appellate tribunal is not required to consider a claim unless it was distinctly raised during the administrative proceeding. In the present case, the plaintiffs did not entirely bypass the available administrative proceedings but, rather, failed to raise their free speech and contract clause claims before PURA during those proceedings, and, accordingly, such a failure did not constitute a failure to exhaust administrative remedies. Nevertheless, the plaintiffs’ failure to raise their claims during the administrative proceeding deprived PURA of the opportunity to consider them while PURA was developing its final decision and prevented the parties from developing a record regarding those claims, particularly insofar as the plaintiffs never introduced any of the contracts between energy suppliers and consumers that purportedly were infringed by the restrictions, and, thus, those claims were not adequately preserved for appellate review. Moreover, to the extent the plaintiffs argued that it would have been futile to raise their claims before PURA because they were constitutional in nature and PURA did not have the authority to decide such claims, this court disagreed, concluding that it is not futile to raise a constitutional claim when, as in the present case, the claim challenges the action of the administrative agency, as the agency has the authority to cure any potential constitutional defect with its proposed regulations or may abandon its proposed regulatory changes altogether if those changes cannot be modified in a manner that would address any potential constitutional defect.
3. The plaintiffs could not prevail on their claims that PURA violated their procedural rights under the Uniform Administrative Procedure Act and that their substantial rights were prejudiced:
With respect to the plaintiffs’ contention that PURA violated the Uniform Administrative Procedure Act by relying on nonevidence to support its findings and conclusions, namely, the comments from the Office of Consumer Counsel and the Department of Energy and Environmental Protection, each comment was submitted prior to the hearing, the plaintiffs failed to raise any objection to the comments at the hearing, and the plaintiffs could have asked, but did not ask, that those statements be offered by a witness and could have provided, but did not provide, evidence to rebut the comments. With respect to the plaintiffs’ contention that they were not aware of certain information on which PURA would rely in issuing its final decision, although this court emphasized that PURA should hаve disclosed that it intended to take notice of certain scientific facts within its specialized knowledge, this court could not conclude that the plaintiffs satisfied their burden of demonstrating that PURA had violated their procedural rights under the Uniform Administrative Procedure Act or that any violation prejudiced their substantial rights, insofar as the plaintiffs had the opportunity to respond to the testimony of, and to cross-examine, a witness who testified regarding airflow into Connecticut, and to respond to PURA‘s final decision, which included the challenged factual finding and which referenced PURA‘s earlier decisions in which it reached the same conclusion.
Argued December 15, 2022—officially released July 4, 2023
Appeal from the decision of the defendant establishing a regulatory framework for a certain renewable energy product, brought to the Superior Court in the judicial district of New Britain, where the court, Klau, J., granted the motions to intervene filed by the Office of Consumer Counsel et al.; thereafter, the case was tried to the court, Klau, J.; judgment for the defendant, from which the plaintiffs appealed. Affirmed.
Linda L. Morkan, with whom were Joey Lee Miranda and, on the brief, Benjamin C. Jensen, for the appellants (plaintiffs).
Michael K. Skold, deputy solicitor general, with whom were Seth Hollander, assistant attorney general, and, on the brief, William Tong, attorney general, and Clare Kindall, former solicitor general, for the appellee (defendant).
William E. Dornbos, legal director, with whom, on the brief, were Andrew W. Minikowski, staff attorney, and Claire E. Coleman, consumer counsel, for the appellee (intervenor Office of Consumer Counsel).
Erick M. Sandler, Alexander Judd, Sophia Browning and Hannah Kalichman filed a brief for Vistra Corporation as amicus curiae.
Opinion
MCDONALD, J. This case requires us to decide, among other things, whether certain regulations imposed by the defendant, Public Utilities Regulatory Authority (PURA), on energy suppliers within this state violate the dormant commerce clause of the
The plaintiffs, which are all companies that desire to market and sell VROs to Connecticut electric customers,2 contend that the geographic restriction impermissibly discriminates against RECs created outside of thе permitted geographic regions. The plaintiffs further contend that the marketing restriction impedes commerce in the national marketplace because it imposes a regulatory requirement inconsistent with those of other states. The plaintiffs also raise a number of other constitutional and procedural claims. For its part, PURA contends that the trial court correctly concluded that neither the geographic restriction nor the marketing restriction violates the dormant commerce clause because, among other things, the restrictions help advance this state‘s legitimate environmental policy goals and improve consumer transparency.3 As to the plaintiffs’ remaining claims, PURA contends that the trial court correctly concluded that they are either unreviewable or without merit. We agree with PURA and, accordingly, affirm the judgment of the trial court.
Before we set forth the relevant facts and procedural history of this case, we begin with an overview of this state‘s policies and statutes governing the electric supply industry, which is crucial to our understanding of the plaintiffs’ claims. “Until relatively recently, most state energy markets were vertically integrated monopolies—i.e., one entity, often a state utility, controlled electricity generation, transmission, and sale to retail consumers.... Over the past few decades, however, many states, including Connecticut, have deregulated their energy markets.... In deregulated markets, [load-serving entities] purchase electricity at wholesale from independent power generators.... In order [t]o ensure reliable transmission of electricity from independent generators to
Energy Regulatory Commission (FERC)] has charged nonprofit entities, called Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), with managing certain segments of the electricity grid.... The New England ISO (ISO-NE), [one of] the transmitter[s] involved in this case, manages the grid in most of New England, including all of Connecticut.” (Citations omitted; internal quotation marks omitted.) Allco Finance Ltd. v. Klee, 861 F.3d 82, 88 (2d Cir. 2017) (Allco), cert. denied, ___ U.S. ___, 138 S. Ct. 926, 200 L. Ed. 2d 203 (2018).
In deregulating this state‘s energy market, the legislature created new entities called electric suppliers, which provide electric energy “to end use customers in the state using the transmission or distribution facilities of an electric distribution company....”
Among the governing regulations, electric suppliers must satisfy this state‘s mandatory renewable portfolio standards (RPS). The RPS require electric suppliers to demonstrate that certain percentages of the electricity that they supply have been generated by specific types or classes of renewable energy sources (i.e., solar, wind, hydroelectric, etc.). See
sold separately.” (Internal quotation marks omitted.) Wheelabrator Lisbon, Inc. v. Dept. of Public Utility Control, 531 F.3d 183, 186 (2d Cir. 2008). Each REC represents one megawatt-hour of renewable energy produced by a third-party generator. See, e.g., United States Environmental Protection Agency, Renewable Energy Certificate Monetization (last modified February 15, 2023), available at https://www.epa.gov/greenpower/renewable-energy-certificate-monetization
Electric suppliers must file an annual report with PURA to demonstrate compliance with the RPS obligations. See
Although the RPS are mandatory and set minimum renewable energy standards for most energy sold in this state, in 2005, PURA established the Clean Energy Options Program to enable consumers to support the development of renewable energy sources above and beyond the state‘s mandatory minimum renewable energy requirements. Electric suppliers responded by developing the VRO. A VRO is a bundled product in
which the supplier offers to sell electric generation to a retail end user and promises to obtain additional RECs above and beyond what the supplier needs to meet the state‘s minimum mandatory renewable energy requirements of the RPS. In other words, the difference between the RPS and the VRO products is that the VRO is backed by more RECs than the supplier uses to meet the mandatory RPS, enabling the supplier to market its product to consumers as a more environmentally sound product that often commands higher prices. As with energy sold under the RPS, the energy delivered under a VRO backed by RECs is not necessarily the same renewable energy that created
With this background in mind, we turn to the facts and procedural history specific to this case. In the decade after the launch of the Clean Energy Options Program, the VRO market grew significantly. As a result, in December, 2016, PURA decided to review the Clean Energy Options Program and to develop new options regarding VROs. Specifically, PURA opened Docket No. 16-12-29, “PURA Development of Voluntary Renewable Options Program.” The following month, PURA issued a notice of proceeding, stating that it had initiated the proceeding “to develop options for Connecticut ratepayers to purchase voluntary renewable products and to establish a new program to replace [the Clean Energy Options Program].” (Internal quotation marks omitted.) PURA subsequently clarified that the proceeding “would establish rules that will govern all [VROs], create new rules for [the Clean Energy Options Program], and modify a disclosure label [for all general supply and REC offers].” (Internal quotation marks omitted.) PURA issued formal requests for written comments and then held a virtual hearing in June, 2020, to discuss the billing and other clean energy options issues raised by the electric distribution companies and electric suppliers in their written comments and responses to interrogatories and any other relevant issues. The parties subsequently submitted briefs and reply briefs.
In September, 2020, PURA issued a proposed decision and a notice of written exceptions and oral argument. The plaintiffs and other electric suppliers filed written еxceptions “identifying several serious errors of law and fact in the proposed decision.” (Internal quotation marks omitted.) PURA held oral argument and thereafter issued its final decision in October, 2020. In its decision, PURA, among other things, (1) established a geographic restriction for RECs used in VROs, and (2) imposed a marketing restriction for VROs.6
The geographic restriction prohibits VROs from con-taining RECs sourced outside of particular geographic regions, specifically the NEPOOL GIS, NYGATS, and
PJM-GATS systems (permitted control area). The permitted control area collectively includes all or part of twenty states, namely, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and West Virginia, as well as the District of Columbia. The reason for the geographic restriction lies in the regionalized nature of the adverse environmental concerns. “As the VRO market developed [initially], between 2005 and 2016, companies offering VROs relied on RECs sourced from anywhere in the country and...Canada.” Over time, PURA determined that restricting the geographic regions from which RECs can be sourced would “bring Connecticut‘s VROs in line with Connecticut‘s goals of reducing local greenhouse gas emissions and supporting sustainable local renewable energy sources.” (Internal quotation marks omitted.) This is because “Connecticut air quality is significantly and adversely affected by fossil fuel production to the southwest of the New England airshed.
The marketing restriction imposed by the final decision requires that electric suppliers provide clear language informing consumers that a VRO backed by RECs is not “renewable energy” itself but, rather, is an energy product backed by RECs. A bit of background information is necessary to understand this marketing restriction. “In 2008, acting pursuant to its statutory obligation to provide consumers with certain information“; see
cating a renewable energy content of 121 percent. Customers had also expressed confusion about VROs. As a result, PURA determined that the development of the VRO market required changes to the disclosure label requirements. PURA‘s decision thus prohibits suppliers that market VROs from referring to them as containing renewable energy rather than being backed by RECs. Specifically, PURA explained: “Suppliers may not market [REC-based] VROs to mislead consumers [into] believe[ing] they are purchasing renewable energy rather than RECs. As noted herein, there is a clear distinction between certificates and the ownership interest in, or a [power purchase agreement]7 to provide energy from, a renewable source. It is reasonable to display information as representing a renewable source for an offer if the supplier owns, or has a [power purchase agreement to provide energy from], these resources and is using them to supply the electricity for the offer. It is unreasonable to display this information if the supplier is merely buying the certificates associated with the renewable attributes.” (Emphasis in original; footnote added.)
The plaintiffs timely appealed from PURA‘s final decision to the Superior Court pursuant to
On appeal, the plaintiffs contend that (1) the geographic and marketing restrictions contained in PURA‘s final decision violate the dormant commerce clause,
(2) PURA‘s final decision violates energy suppliers’ right to free speech under the state and federal constitutions, (3) PURA‘s final decision violates their right under the federal constitution to freely contract, and (4) PURA failed to abide by the procedural requirements of the UAPA. We address each claim in turn.
At the outset, we set forth the standard of review applicable to the plaintiffs’ claims. The plaintiffs’ claims regarding violations of their constitutional rights present questions of law. See, e.g., Tele Tech of Connecticut Corp. v. Dept. of Public Utility Control, 270 Conn. 778, 787–88, 855 A.2d 174 (2004). Whether the proceedings before PURA complied with the procedural requirements of the UAPA also presents a question of law. See, e.g., FairwindCT, Inc. v. Connecticut Siting Council, 313 Conn. 669, 711, 99 A.3d 1038 (2014). Thus, our review of each of the plaintiffs’ claims is plenary. See, e.g., Meriden v. Freedom of Information Commission, 338 Conn. 310, 319, 258 A.3d 1 (2021) (“[c]ases that present pure questions of law...invoke a broader standard of review than is...involved in deciding whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally or in abuse of its discretion” (internal quotation marks omitted)).
I
DORMANT COMMERCE CLAUSE CLAIMS
The plaintiffs contend that the geographic restriction impermissibly discriminates against RECs created outside of the permitted control area of the NEPOOL GIS, NYGATS, and PJM-GATS systems. Similarly, the plaintiffs contend that the marketing restriction impedes commerce in the national marketplace because it imposes a regulatory requirement inconsistent with those of other states.8 We
The commerce clause provides that “Congress shall have Power...[t]o regulate Commerce with foreign Nations, and among the several States....”
internal quotation marks omitted.) Southold v. East Hampton, 477 F.3d 38, 47 (2d Cir. 2007). “[T]he negative or dormant implication of the [c]ommerce [c]lause prohibits state taxation or regulation that discriminates against or unduly burdens interstate commerce and thereby impedes free private trade in the national marketplace.” (Internal quotation marks omitted.) Allco Finance Ltd. v. Klee, supra, 861 F.3d 102. Recently, the United States Supreme Court reiterated that, at its “very core,” the dormant commerce clause prohibits “the enforcement of state laws driven by...economic protectionism—that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” (Internal quotation marks omitted.) National Pork Producers Council v. Ross, 598 U.S. 356, 369, 143 S. Ct. 1142, 1153, 215 L. Ed. 2d 336 (2023).
“In аnalyzing a challenged [state or] local law under the dormant [c]ommerce [c]lause, we first determine whether it clearly discriminates against interstate commerce in favor of intrastate commerce, or whether it regulates evenhandedly with only incidental effects on interstate commerce.” Southold v. East Hampton, supra, 477 F.3d 47.
“We then apply the appropriate level of scrutiny. A law that clearly discriminates against interstate commerce in favor of intrastate commerce is virtually invalid per se and will survive only if it is demonstrably justified by a valid factor unrelated to economic protectionism.” (Internal quotation marks omitted.) Id., quoting Wyoming v. Oklahoma, 502 U.S. 437, 454, 112 S. Ct. 789, 117 L. Ed. 2d 1 (1992). In other words, such a law is valid “only if it advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives....” (Citations omitted; internal quotation marks omitted.) Dept. of Revenue v. Davis, 553 U.S. 328, 338, 128 S. Ct. 1801, 170 L. Ed. 2d 685 (2008).
If the law is nondiscriminatory, but nonetheless adversely affects interstate commerce “incidental[ly],” we employ a deferential balancing test known as the Pike balancing test. See Pike v. Bruce Church, Inc., supra, 397 U.S. 142. Such a law will be sustained unless “the burden imposed on [interstate]
In short, relevant to this appeal, the dormant commerce clause prohibits laws that (1) “clearly [discriminate] against interstate commerce in favor of intrastate commerce,” or (2) violate the Pike balancing test by “impos[ing] a burden on interstate commerce incommensurate with the local benefits secured.” (Internal quotation marks omitted.) Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 216 (2d Cir. 2004).
A
Geographic Restriction
The plaintiffs contend that the geographic restriction violates the dormant commerce clause because “VROs will be required to use only RECs sourced from the designated local permitted control [area] and, therefore, will be unable to access the largest and most commonly accessed sources of RECs in North America.”
We must first determine what level of scrutiny applies to the plaintiffs’ claim. The plaintiffs contend that the geographic restriction facially discriminates against interstate commerce because it imposes commercial barriers on renewable generating facilities located outside of the permitted control area and “denies generators located outside [оf the permitted control area] access to Connecticut‘s voluntary renewable market, while allowing access to generating facilities located in those areas, [thus] favoring the local generators.” (Emphasis in original.) PURA contends, among other things, that the trial court correctly concluded that the plaintiffs’ challenge to the geographic restriction should be reviewed under the more permissive Pike balancing test following the framework set forth in the recent decision of the United States Court of Appeals for the Second Circuit in Allco Finance Ltd. v. Klee, supra, 861 F.3d 105–106.9
Allco involved issues similar to those of the present case and arose under similar facts. In Allco, a Georgia energy generator claimed that Connecticut‘s geographic restriction on RECs used to satisfy the mandatory RPS requirements treated in-state and out-of-state generators differently and therefore discriminated against interstate commerce. See id., 102–103. Under this state‘s RPS program, utilities providing electricity in Connecticut can apply only RECs purchased from ISO-NE and directly adjacent control areas to satisfy their RPS requirements. See id., 93; see also
The court in Allco noted that “Connecticut has articulated several reasons for incorporating these geographic limitations into its RPS program. Central among these is the [s]tate‘s interest in encouraging
renewable energy production would improve air quality for its citizens and protect them from price and supply shocks that could result if, for example, there was a natural gas shortage or a nuclear power plant were to go [offline].... The state contends that placing regional limitations on RECs, if they are to satisfy the RPS requirement, is necessary if the [RPS] рrogram is to help increase the development of renewable generation facilities that are capable of effectuating these and similar goals.” (Citations omitted.) Id.
Allco owned a solar power facility in Georgia and could not use RECs associated with that facility to satisfy this state‘s RPS requirements because the facility was not located in ISO-NE or a directly adjacent control area. See id., 93–94. Allco argued that the RPS program‘s geographic restriction violated the dormant commerce clause because the program “facially discriminate[d]...[and] ha[d] the purpose or the effect of discriminating against Allco‘s facility in Georgia....” (Internal quotation marks omitted.) Id., 102. The Second Circuit rejected this claim and noted at the outset of its analysis that “any notion of discrimination assumes a comparison of substantially similar entities” and, “when the allegedly competing entities provide different products...there is a threshold question whether the companies are indeed similarly situated for constitutional purposes.” (Internal quotation marks omitted.) Id., 103.
To resolve this question and to determine the appropriate level of scrutiny to apply—strict scrutiny or the Pike balancing test—the court in Allco applied the three part framework established by the United States Supreme Court in General Motors Corp. v. Tracy, 519 U.S. 278, 117 S. Ct. 811, 136 L. Ed. 2d 761 (1997), to determine whether the entities were similarly situated. See Allco Finance Ltd. v. Klee, supra, 861 F.3d 105–106. Applying that framework, the Second Circuit first asked “whether the allegedly competing entities—Allco‘s Georgia generator, on the one hand, and generators located in ISO-NE and adjacent control areas, on the other—provide different products, i.e., different RECs.” Id., 105. The court concluded that the competing entities did provide different products, reasoning that “RECs are inventions of state property law...and Connecticut has invented a class of RECs that differs from [the] Georgia facility‘s RECs.... The two products can, therefore, be treated as different, even though they—like the unbundled and bundled gas products in Tracy—also have some underlying similarities.” (Citations omitted; internal quotation marks omitted.) Id.
Second, the court in Allco asked “whether there is a market that only one of the two entities serves, and in which competition would not be increased if the differential treatment of the two entities were removed.” Id. The court concluded that there was. Id. The court
noted that “Connecticut consumers’ need for a more diversified and renewable energy supply, accessible to them directly through their regional grid or indirectly through adjacent control areas, would not be served by RECs produced by Allco‘s facility in Georgia—which is unable to transmit its electricity into ISO-NE. Further, this market‘s characteristics—most importantly, the boundaries of the electrical grid to which Connecticut has direct or indirect access—appear to be independent of any effect attributable to the [s]tate‘s RPS program.” (Internal quotation marks omitted.) Id. Thus, the court explained, “there
Finally, the court in Allco asked “whether there is also a separate market in which these two types of producers compete, and in which competition potentially would be served if Connecticut were prohibited from treating them disparately.” Id. The court answered this question in the affirmative. Id. The court explained that PURA conceded that “there is a national market for RECs that does not distinguish between RECs on the basis of their geographic origin. In this market, the respective sellers...apparently do compete and may compete further.... Eliminating Connecticut‘s RPS program‘s differential treatment might well intensify competition...for customers in this [national] market.... This, of course, cuts in favor of treating the products as alike.” (Citations omitted; footnote omitted; internal quotation marks omitted.) Id.
As a result of the dilemma created by the existence of both a market that only one of the two entities serves and also a separate market in which these two types of producers compete, the court in Allco—following the United States Supreme Court‘s analysis in Tracy—asked “whether the opportunity for increased competition between REC producers in the national market necessitates treating [REC producers] in Georgia and New England alike for dormant [c]ommerce [c]lause purposes, or whether the needs of Connecticut‘s local energy market permits treating the two types of REC producers differently.” Id. This inquiry asks whether a court should give “‘controlling significance‘” to the market in which the two types of REC producers compete, or to the market served only by REC producers that can connect to Connecticut‘s power grid. Id. Applying this “controlling significance” principle, the court concluded that “a number of reasons support[ed] a decision to give greater weight” to the generators that satisfy Connecticut‘s RPS requirements for RECs and, therefore, to treat those generators and Allco‘s Georgia gener-
ator as dissimilar for purposes of the dormant commerce clause. (Internal quotation marks omitted.) Id.
Significantly, the court held that the reasons justifying the differential treatment included the environmental, public health and safety similarities between the claim raised in Allco and the claim raised in Tracy: “Just as the [court in Tracy] recognized the importance of Ohio‘s interest in protecting the captive natural gas market from the effects of competition in order to promote public health and safety...so must we here recognize the importance of Connecticut‘s interest in protecting the market for RECs produced within the ISO-NE or in adjacent areas. Connecticut‘s RPS program serves its legitimate interest in promoting increased production of renewable power generation in the region, thereby protecting its citizens’ health, safety, and reliable access to power.” (Citation omitted.) Id. On this point, the court in Allco reiterated the Supreme Court‘s conclusion in Tracy that “health and safety considerations [may] be weighed in the process of deciding the threshold question whether the conditions entailing application of the dormant [c]ommerce [c]lause are present....” (Citation omitted; internal quotation marks omitted.) Id., 107. The court also noted that “[t]hese means and ends are well within
Moreover, the court in Allco found it significant that the “FERC itself...has instituted a sort of regionalization of the national electricity market [through the geographic lines drawn by ISOs and RTOs]. And neither FERC nor Congress has given any indication that this structure is unduly harmful to interstate commerce.” Id., 107. The court reasoned that FERC and Congress are better equipped to “determine the economic wisdom and the health and safety effects of these geographic boundaries that Connecticut has incorporated into its RPS program. It is they that, in this setting, are best suited to decide which products ought to be treated similarly, and which should not.” Id.
The court in Allco concluded that “Connecticut‘s regulatory response to the needs of the local energy market has resulted in a noncompetitive REC product that is capable of being produced only by in-region generators, and that this distinguishes such generators from Allco‘s Georgia generator to the point that the enterprises should not be considered similarly situated for purposes of a claim of facial discrimination under the [c]ommerce [c]lause.” (Internal quotation marks omitted.) Id. Accordingly, the court applied the Pike balancing test; see Pike v. Bruce Church, Inc., supra, 397 U.S. 142; and concluded, “for the same reasons” discussed in the Tracy analysis, that “Connecticut‘s RPS program is...not clearly excessive in relation to the putative
local benefits, and therefore passes the more permissive Pike test.” (Internal quotation marks omitted.) Allco Finance Ltd. v. Klee, supra, 861 F.3d 107.
We find the Allco analysis and rationale persuasive for purposes of analyzing whether PURA‘s geographic restriction on the RECs eligible to back the VRO program violates the dormant commerce clause.10 Accordingly, to determine what level of scrutiny to apply to the plaintiffs’ claim, we begin our analysis in the present case by asking whether the allegedly competing entities—renewable energy generating facilities located outside of the permitted control area, on the one hand, and renewable energy generating facilities located within the permitted control area, on the other—provide different products.11
Second, we must determine whether there is a market that only one of the two entities serves and in which competition would not be increаsed if the differential treatment of the two entities were removed. We agree with the trial court that eliminating the differential treatment of RECs based on their geographic source would be inadequate to serve this state‘s VRO program goals. This is because “eliminating different treatment of far-flung RECs would do little to improve Connecticut‘s chances of reaching its ambitious environmental and energy goals.”12 (Internal quotation marks omitted.) The geographic restriction “further[s] Connecticut‘s energy policies by reducing local greenhouse gas emissions and [by] supporting local, sustainable, renewable energy sources....” Balancing the various interests at stake, PURA determined that the geographic restriction would “provide environmental benefits to New England, given prevailing wind patterns, and [the permitted control area] is large enough to obtain RECs from affordable clean resources.” (Internal quotation marks omitted.) This militates against treating the different types of REC producers similarly.
Third, we conclude, as the court did in Allco, that there is a national market for RECs that does not distinguish between RECs on the basis of their geographic origin. PURA does not contend otherwise. Eliminating
the VRO program‘s differential treatment may intensify competition between REC generators for customers in the national market. This militates in favor of treating the products alike.
Given that there is both a market that only one of the two entities serves, Connecticut, and also a separate national market in which these two types of producers compete, we must decide which market should have “controlling significance... .” Allco Finance Ltd. v. Klee, supra, 861 F.3d 106. For many of the reasons articulated in Allco, we conclude that controlling significance should be given to the Connecticut market. Specifically, Connecticut has an important and legitimate interest in promoting increased production of renewable power generation in the region. This interest furthers the state‘s interest in improving the natural environment, which, in turn, will help protect the health and safety of this state‘s residents. RECs generated outside of the permitted control area have little to no effect on this state‘s environment. Indeed, the administrative record includes testimony from Robert A. Maddox, Jr., a representative of one of the suppliers under the Clean Energy Options Program, that “the airflow into Connecticut tends tо come...from the west [toward] Connecticut. We know we‘re a tailpipe state, and most of the pollution coming in the state comes from downwind. So, when we can support the development of a renewable energy project in Pennsylvania, that helps clean up Connecticut‘s air. I don‘t necessarily know if the development of a renewable energy project north of Montreal [in Canada] does a lot for Connecticut‘s air.” As both the United States Supreme Court and the Second Circuit have explained, “health and safety considerations [may] be weighed in the process of deciding the threshold question whether the conditions entailing application of the dormant [c]ommerce [c]lause are present.” General Motors Corp. v. Tracy, supra, 519 U.S. 307; accord Allco Finance Ltd. v. Klee, supra, 861 F.3d 107. At least one case has recognized that environmental goals have health and safety implications for purposes of a dormant commerce clause claim. See United Haulers Assn., Inc. v. Oneida-Herkimer Solid Waste Management Authority, 550 U.S. 330, 346–47, 127 S. Ct. 1786, 167 L. Ed. 2d 655 (2007) (plurality opinion) (county “flow control” ordinances benefited public by increasing recycling, which confers “significant health and environmental benefits“); see also Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 442, 80 S. Ct. 813, 4 L. Ed. 2d 852 (1960) (“The ordinance was enacted for the manifest purpose of promoting the health and welfare of the city‘s inhabitants. Legislation designed to free from pollution the very air that people breathe clearly falls within the exercise of even the most traditional concept of what is compendiously known as the police power.“). The commerce clause “does not elevate free trade above all other values“; (internal quota-
tion marks omitted) United Haulers Assn., Inc. v. Oneida-Herkimer Solid Waste Management Authority, supra, 550 U.S. 344; and it is not an “[invitation for courts] to rigorously scrutinize” state regulations designed to protect public health and safety. Id., 347 (plurality opinion).
Moreover, the United States Supreme Court has emphasized the significant role that states have in regulating the electric utility industry within its borders. See, e.g., New York v. Federal Energy Regulatory Commission, 535 U.S. 1, 24, 122 S. Ct. 1012, 152 L. Ed. 2d 47 (2002) (“FERC has recognized that the [s]tates retain significant control over local matters even when retail transmissions are unbundled“); Arkansas Electric Cooperative Corp. v. Arkansas Public Service Commission, 461 U.S. 375, 377, 103 S. Ct. 1905, 76 L. Ed. 2d 1 (1983) (“the regulation of utilities is one of the most important of the functions traditionally associаted with the police power of the [s]tates“); see also Entergy Nuclear Vermont Yankee, LLC v. Shumlin, 733 F.3d 393, 417 (2d Cir. 2013) (“[S]tates have broad powers under state law to direct the planning and resource decisions of utilities under their jurisdiction. States may, for example, order utilities
Connecticut‘s VRO program has resulted in a REC product that is capable of being produced only by gener-
ators located in the permitted control area because only RECs produced in this area help advance this state‘s environmental policy goals. This distinguishes such generators from generators located outside of the permitted control area to the point that the entities should not be considered similarly situated for purposes of a claim of facial discrimination under the commerce clause. It bears emphasizing, however, that the geographic restriction in the present case does not entirely ban RECs generated outside of the permitted control area. RECs generated outside of this area can still be sold to any Connecticut entity wishing to buy them, at whatever price the market will bear. Such RECs could, for example, be purchased in this state by a company wishing to “green its image.” Allco Finance Ltd. v. Klee, supra, 861 F.3d 106 n.17. Accordingly, we conclude that the Pike balancing test is the appropriate test to apply to the plaintiffs’ claim. See Pike v. Bruce Church, Inc., supra, 397 U.S. 142. For the same reasons previously discussed, we concluded that Connecticut‘s geographic restriction in the VRO program is not clearly excessive in relation to the putative local benefits and, therefore, passes the more permissive Pike test.
The plaintiffs nevertheless contend that the analysis in Allco is not dispositive in the present case because Allco dealt with a challenge to this state‘s mandatory RPS program and the plaintiffs challenge the voluntary VRO program. As we understand it, the plaintiffs argue that,
We fail to see, and the plaintiffs do not adequately explain, how the voluntary nature of the VRO program renders the RECs generated in the permitted control area the same as RECs generated outside of the permitted control area, which have little to no environmental benefit to this state. PURA‘s geographic restriction is a goal designed to improve the state‘s environment and, in turn, the health and safety of Connecticut residents. Because renewable energy generated from distant southern and western states has little environmental benefits to Connecticut, the legislature chose to rely exclusively on RECs issued by NEPOOL GIS for compliance with the RPS program.
Finally, aside from their argument that the geographic restriction burdens renewable generating facilities outside
B
Marketing Restriction
The plaintiffs next contend that the marketing restriction violates the dormant commerce clause because it imposes a disproportionate
The parties agree that the Pike balancing test is the applicable standard to evaluate the plaintiffs’ challenge to the marketing restriction. As we previously explained, we employ the Pike balancing test if a law is nondiscriminatory but, nonetheless, adversely, “incidental[ly]” affects interstate commerce. Pike v. Bruce Church, Inc., supra, 397 U.S. 142. When “the statute regulates [evenhandedly] to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. . . . If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.” (Citation omitted.) Id. “For a state statute to run afoul of the Pike standard, the statute, at a minimum, must impose a burden on interstate commerce that is qualitatively or quantitatively different from that imposed on intrastate commerce. . . . Under Pike, if no such unequal burden [was] shown, a reviewing court need not proceed further.” (Citations omitted.) National Electrical Manufacturers Assn. v. Sorrell, 272 F.3d 104, 109 (2d Cir. 2001), cert. denied, 536 U.S. 905 (2002).
Although several types of burdens on interstate commerce may qualify as “disparate” so as to trigger the Pike balancing test, the plaintiffs’ dormant commerce clause claim regarding the marketing restriction centers around the fact that, according to the plaintiffs, PURA has imposed regulatory requirements that are inconsistent with those of other states and the federal government. Regulations that fall within this category may be said to create interstate regulatory conflicts. “A state regulation might impose a disproportionate
Here, assuming there is a common regulatory scheme,14 to the extent that the marketing restriction results in disparate treatment, we conclude that the restriction is not in “substantial conflict” with the common regulatory scheme. To establish this common regulatory scheme, the plaintiffs point to a Federal Trade Commission guideline, which provides in relevant part that “[a] marketer should not make unqualified renewable energy claims, directly or by implication, if fossil fuel, or electricity derived from fossil fuel, is used to manufacture any part of the advertised item or is used to power any part of the advertised service, unless the marketer has matched such non-renewable energy use with renewable energy certificates.” (Emphasis added.)
The plaintiffs also rely on Vermont regulatory guidance that provides that RECs are “what make solar a green or renewable energy resource—they are . . . the legal attribute of renewable energy. . . . The system of tracking attributes via RECs is the only legal way of characterizing the renewability of different sources of electricity. . . . Whoever buys the RECs has paid an extra cost to bring renewable energy to the grid and has the only legal claim that their energy is renewable.”15 (Internal quotation marks omitted.) Office of the Attorney General, State of Vermont, Guidance for Third-Party Solar Projects, p. 1, available at https://ago.vermont.gov/sites/ago/files/wp-content/uploads/2018/01/Guidance-on-Solar-Marketing.pdf (last visited June 26, 2023). This guidance, however, applies only to third-party solar project installers. There is nothing to indicate a similar guidance for electric suppliers. See id., pp. 1–5. Indeed, because Vermont is the only New England state that did not restructure its electricity market, it does not allow retail competition. See United States Energy Information Administration, Vermont State Profile and Energy Estimates (last modified October 20, 2022), available at https://www.eia.gov/state/analysis.php?sid=VT (last visited June 26, 2023). As a result, Vermont does not even have a retail energy market or electric suppliers, and the guidance provided to third-party solar proj-ect installers cannot conflict with PURA‘s marketing restriction for electric suppliers. Moreover, even if PURA‘s marketing restriction differs from this guidance, the plaintiffs are still able to conduct business in Connecticut and Vermont. The plaintiffs concede as much. PURA‘s marketing restriction applies only to marketing material within this state; electric suppliers are free to market their REC backed VRO products as “renewable energy” to the extent permitted in Vermont, or any other jurisdiction. Thus, as with the Federal Trade Commission‘s guideline, we conclude that there is no “actual conflict” with this guidance. See National Electrical Manufacturers Assn. v. Sorrell, supra, 272 F.3d 112.
In sum, even if the marketing restriction differs from marketing requirements in other states, it does not violate the Pike balancing test becausе it has no impact on other states’ marketing regulations
We also conclude that any burden imposed by the marketing restriction on interstate commerce is not “clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., supra, 397 U.S. 142. In its final decision, PURA explained the marketing restriction‘s local benefits—namely, to improve consumer transparency and further this state‘s clean energy goals. Specifically, PURA explained: “[PURA] is well aware from its years of customer education and interactions that customers do not understand the concept of a REC. When customers are told they are purchasing renewable energy, they think they are purchasing renewable energy. They are not. They are purchasing a certificate, which purchase provides additional revenue to facilities providing renewable generation, both incentivizing more construction of renewable sources and providing financial assistance to those sources. This is a complex transaction that is being oversimplified by stating that the customer is purchasing renewable energy. . . . It is inconceivable to [PURA] that the [electric suppliers] are arguing that they should continue perpetuating the inaccuracy. The suppliers’ arguments equate to saying, if [PURA] explains the process to customers, then customers will not understand it. [PURA] does not believe this is true. Customers not only can understand what they are purchasing, but they must. If Connecticut is going to meet its clean energy goals, then customers have the right to understand that their purchase[s] of local RECs now subsidize those renewable generation sources and support Connecticut‘s clean energy goals.” These goals are similar to those that animated PURA‘s initial development of the disclosure label in 2008. See
Apart from asserting that the marketing restriction is inconsistent with the aforementioned regulations, the plaintiffs do not clearly articulate the purported burden it imposes on interstate commerce. Rather, they assert that “[t]here is no genuine dispute that the burden is high.” Without explication from the plaintiffs on this point, the only burden this court can conceive of is an increased financial burden to market their VRO products differently in Connecticut.16 This was the plaintiffs’ argument
II
FREE SPEECH AND CONTRACT CLAUSE CLAIMS
The plaintiffs raise two additional constitutional claims. First, they contend that the marketing restriction, which prohibits electric suppliers from marketing REC only VROs as containing “renewable energy,” violates their right to free speech under the United States constitution and the Connecticut constitution. Second, they claim that the final decision violates their right to freely contract as guaranteed by the United States constitution because some of the contracts they have with Connecticut consumers include automatic renewal provisions and the restrictions will disrupt the current expectations and obligations of both customers and suppliers under these contracts. PURA contends that the plaintiffs both waived and failed to exhaust their administrative remedies with respect to their free speech and contract clause claims. Specifically, PURA contends that, because the plaintiffs had every opportunity to participate in the contested case and chose not to raise these claims at that time, the plaintiffs failed to exhaust their administrative remedies, and the trial court thus lacked jurisdiction over the claims. Alternatively, PURA contends that the trial court correctly concluded that the plaintiffs waived their free speech and contract
The trial court correctly noted that the plaintiffs did not raise their free speech or contract clause claims during the administrative proceedings before PURA. The court went on to consider whether the plaintiffs’ failure to raise a particular argument before PURA constituted a failure to exhaust administrative remedies or was more akin to a failure to preserve an issue for appellate review. The former is jurisdictional, whereas the latter is prudential. The trial court surveyed various cases from this court and the Appellate Court and concluded that, although no case squarely addressed the question, the cases “strongly imply that a failure to assert a pаrticular argument before an administrative tribunal implicates the waiver doctrine, not the exhaustion of administrative remedies doctrine.”17 The court next considered whether it would have been futile for the plaintiffs to raise their claims before PURA. If so, it would follow that they did not waive their constitutional claims by failing to assert them during the administrative proceeding. The court ultimately concluded that it would not have been futile for the plaintiffs to raise their free speech and contract clause claims before PURA, and, thus, the plaintiffs waived these claims.
Because the exhaustion of administrative remedies doctrine implicates this court‘s subject matter jurisdiction, we must first decide whether the failure to raise a claim before an administrative agency implicates the exhaustion doctrine. See, e.g., Stepney, LLC v. Fairfield, 263 Conn. 558, 563, 821 A.2d 725 (2003). “The doctrine of exhaustion of administrative remedies is well established in the jurisprudence of administrative law. . . . Under that doctrine, a trial court lacks subject matter jurisdiction over an action that seeks a remedy that could be provided through an administrative proceeding, unless and until that remedy has been sought in the administrative forum. . . . In the absence of exhaustion of that remedy, the action must be dismissed.” (Citation omitted; internal quotation marks omitted.) Piteau v. Board of Education, 300 Conn. 667, 678, 15 A.3d 1067 (2011).
“A primary purpose of the doctrine is to foster an orderly process of administrative adjudication and judicial review, offering a reviewing court the benefit of the agency‘s findings and conclusions. It relieves courts of the burden of prematurely deciding questions that, entrusted to an agency, may receive a satisfactory administrative disposition and avoid the need for judicial review. . . . Moreover, the exhaustion doctrine recognizes the notion, grounded in deference to [the legislature‘s] delegation of authority to coordinate branches of [g]overnment, that agencies, not the courts, ought to have primary responsibility
Typically, courts apply the exhaustion of administrative remedies doctrine when a party has completely bypassed an available administrative process. See, e.g., id., 559, 561–63 (direct action against town challenging enforcement of health ordinance was dismissed because plaintiff failed to exhaust administrative remedy before state board of health). On the other hand, when a party has availed itself of the administrative proceeding but seeks to raise new claims for the first time on appeal, this court generally applies the nonjurisdictional principle that an appellate tribunal is not required to consider a claim unless it was distinctly raised during the administrative proceeding. See, e.g., Ferraro v. Ridgefield European Motors, Inc., 313 Conn. 735, 759, 99 A.3d 1114 (2014); Dragan v. Connecticut Medical Examining Board, 223 Conn. 618, 632, 613 A.2d 739 (1992). We recently explained the distinction between the exhaustion doctrine and the failure to preserve in the context of an administrative appeal. In Board of Education v. Commission on Human Rights & Opportunities, 344 Conn. 603, 280 A.3d 424 (2022), we explained that “there is a difference between bypassing an administrative procedure on the ground that the agency has no jurisdic-tion over the matter, which raises an exhaustion issue, and failing, within the context of an administrative proceeding, to preserve for review a claim that the agency has no jurisdiction. When a party has failed to preserve a claim before an administrative agency, the exhaustion doctrine does not apply; instead, we apply the ordinary rules governing appellate review of unpreserved claims.” (Emphasis added.) Id., 622-23.
Here, the plaintiffs did not entirely bypass the administrative proceedings before PURA; rather, they failed to raise their free speech and contract clause claims before the agency. Accordingly, we conclude that the plaintiffs’ failure to raise these claims during the administrative proceedings before PURA does not constitute a failure to exhaust administrative remedies. Nevertheless, we must determine, as a prudential consideration, whether we should decline to address these claims on the merits because they were not adequately preserved for appellate review.
Practice Book § 60-5 provides in relevant part that “[t]he court shall not be bound to consider a claim unless it was distinctly raised at the trial or arose subsequent to the trial.” “Indeed, it is the appеllant‘s responsibility to present such a claim clearly to the trial court so that the trial court may consider it and, if it is meritorious, take appropriate action. That is the basis for the requirement that ordinarily [the appellant] must raise in the trial court the issues that he intends to raise on appeal. . . . This rule applies to appeals from administrative proceedings as well.” (Citation omitted; internal quotation marks omitted.) Ferraro v. Ridgefield European Motors, Inc., supra, 313 Conn. 759. “A party to an administrative proceeding cannot be allowed to participate fully at hearings and then, on appeal, raise claims that were not asserted before the board [or agency].” Dragan v. Connecticut Medical Examining Board, supra, 223 Conn. 632.
Although the plaintiffs raised their dormant commerce clause claims before PURA, they failed to raise their free speech and contract clause claims before the agency. The plaintiffs’ failure deprived PURA of the opportunity to consider the claims while developing its final decision. PURA is a sophisticated state agency with technical expertise in energy regulations. Had the plaintiffs raised these claims before PURA, the agency may have decided not to adopt the proposed rules or to change the proposed rules to account for any objection it concluded was meritorious. It may not have. But PURA was not afforded the opportunity to consider its proposed final decision in light of these claims. Moreover, because these claims were not raised during the administrative proceedings, the parties were unable to develop a record regarding these claims. In particular, there is no record regarding the contracts between the energy suppliers and customers, which the plaintiffs contend were infringed by the restrictions. No such contracts were entered into the record. Accordingly, we decline to consider the merits of these claims.
The plaintiffs argue, however, that we should review their claims because they are constitutional in nature and PURA did not have the authority to decide the claims.18 We are not persuaded. Although, as we previously explained, the plaintiffs’ failure to raise these claims before PURA does not implicate the exhaustion of administrative remedies doctrine, we find the case law surrounding an exception to the exhaustion doctrine instructive in this context. Relevant to this case, there is an exception to the requirement that a party exhaust its administrative remedies when “recourse to the administrative remedy would be futile or inadequate.” (Internal quotation marks omitted.) Stepney, LLC v. Fairfield, supra, 263 Conn. 565. The plaintiffs essentially argue that it would have been futile to raise these claims before PURA because they are constitutional in nature. We have explained that “[t]he mere allegation of a constitutional violation” is not enough to excuse a plaintiff from raising the alleged constitutional violation before an administrative agency. (Internal quotation marks omitted.) Id., 570. Litigants are excused from raising constitutional claims when it “would be futile because the administrative agency . . . lacks the authority to grant adequate relief.” Id.; see also, e.g., Payne v. Fairfield Hills Hospital, 215 Conn. 675, 680 n.3, 578 A.2d 1025 (1990). If the agency can afford adequate relief, “constitutional and statutory rights . . . can be waived if not asserted in a timely fashion” before the agency in the administrative proceeding. Dragan v. Connecticut Medical Examining Board, supra, 223 Conn. 629. The futility exception is typically satisfied when the case “involves a challenge to the constitutionality of the statute or regulation under which an agency operates,” because administrative agencies do not have the authority to declare statutes unconstitutional. (Internal quotation marks omitted.) Stepney, LLC v. Fairfield, supra, 263 Conn. 570.
III
UAPA CLAIM
Finally, we turn to the plaintiffs’ contention that PURA failed to satisfy the procedural requirements of the UAPA. More specifically, the plaintiffs contend that PURA violated the UAPA by (1) relying on “nonevidence” to support its findings and conclusions, and (2) failing to make the parties aware of the information on which it would rely to support its final decision. As to the first asserted violation, the plaintiffs argue that PURA improperly relied on comments from the Office of Consumer Counsel, which stated that its “past interaction with consumers reveals that many have expressed confusion about the VRO program,” and on comments submitted by the Department of Energy and Environmental Protection (DEEP), which stated that “the majority of VRO RECs offered in Connecticut are sourced from outside New England, and their purchase by Connecticut customers does not effectively further Connecticut‘s public policy goals and may not align with customers’ intent when choosing electric supply options beyond the RPS.” (Internal quotation marks omitted.) The plaintiffs argue that it was improper for PURA to have relied on these comments because no witness testified in support of these comments, and, therefore, the electric suppliers had no opportunity to cross-examine their veracity and accuracy, as required by the UAPA. As to the second asserted violation, the plaintiffs argue that PURA based its geographic restriction on information about prevailing wind patterns and a University of Connecticut climate overview. The plaintiffs argue that this information was not admitted into the evidentiary record and, as with the unsworn comments, therefore was not subject to challenge.
PURA disagrees and contends that the plaintiffs received full due process under the UAPA. Specifically, PURA emphasizes that it issued three notices requesting written comment, admitted sixty-five entities as parties to the proceeding, gathered data by way of interrogatories to the electric distribution companies and electric suppliers, held both a technical meeting and an evidentiary hearing that the plaintiffs did not attend, received written exceptions, and conducted oral argument. As to the plaintiffs’ specific claims, PURA contends that the geographic restriction did not arise from DEEP‘s comments or the University of Connecticut climate overview. Rather, it was initially proposed by three parties to the contested case in response to PURA‘s first request for written comments. PURA thereafter incorporated the joint proposal into a straw man proposal in its second notice of request for written comments. At a subsequent hearing, a witness on behalf of two of the entities who proposed the restriction testified in support of the proposal. The witness testified that Connecticut is a tailpipe state, that Connecticut is sub-ject to pollution coming downwind from the west, and that supporting renewable projects in Pennsylvania does more to clean up Connecticut‘s air than far-flung renewable projects such as those in Canada. As a result, PURA contends
Relevant to this appeal, the UAPA provides: “(a) In a contested case, each party and the agency conducting the proceeding shall be afforded the opportunity (1) to inspect and copy relevant and material records, papers and documents not in the possession of the party or such agency, except as otherwise provided by federal law or any other provision of the general statutes, and (2) at a hearing, to respond, to cross-examine other parties, intervenors, and witnesses, and to present evidence and argument on all issues involved.
“(b) Persons not named as рarties or intervenors may, in the discretion of the presiding officer, be given an opportunity to present oral or written statements. The presiding officer may require any such statement to be given under oath or affirmation.”
Additionally, we have explained that the conduct of an administrative hearing “shall not violate the fundamentals of natural justice. . . . Fundamentals of natural justice require that there . . . be due notice of the hearing, and at the hearing no one may be deprived of the right to produce relevant evidence or to cross-examine witnesses produced by his adversary . . . . Put differently, [d]ue process of law requires that the parties involved have an opportunity to know the facts on which the commission is asked to act . . . and to offer rebuttal evidence. . . . The purpose of administrative notice requirements is to allow parties to prepare intelligently for the hearing.” (Citations omitted; internal quotation marks omitted.) Grimes v. Conservation Commission, 243 Conn. 266, 273-74, 703 A.2d 101 (1997). “[Section 4-183 (j)] permits modification or reversal of an agency‘s decision if substantial rights of the appellant have been prejudiced because the admin-istrative findings, inferences, conclusions, or decisions are: (1) [i]n violation of constitutional or statutory provisions; (2) in excess of the statutory authority of the agency; (3) made upon unlawful procedure; (4) affected by other error or law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.” (Internal quotation marks omitted.) Tele Tech of Connecticut Corp. v. Dept. of Public Utility Control, supra, 270 Conn. 787; accord
On the basis of our examination of the record and the briefs, and our consideration of the arguments of the parties, we conclude that the plaintiffs cannot prevail on their procedural claims. Specificаlly, as to the comments from the Office of Consumer Counsel and DEEP, we agree with the trial court that, given that each statement was submitted prior to the hearing, the plaintiffs could have asked, but did not ask, that those statements be offered by a witness at the hearing. The plaintiffs also failed to raise any objection regarding these comments at the hearing. Additionally, the plaintiffs could have provided evidence to rebut these statements at the hearing but did not do so. As to the plaintiffs’ contention that they were not aware of certain information on which PURA would rely, we emphasize that PURA should have disclosed that it intended to take notice of scientific facts within the agency‘s specialized knowledge. See
CONCLUSION
The trial court correctly determined that the geographic and marketing restrictions do not violate the dormant commerce clause. Specifically, as to the geographic restriction, analyzed under the framework set forth in the Second Circuit‘s Allco decision, we conclude that the Connecticut market should be given controlling significance. We also conclude that any burden imposed by either the geographic restriction or the marketing restriction is not “clearly excessive in relation to the putative local benefits” and, therefore, passes the more permissive Pike test. See Pike v. Bruce Church, Inc., supra, 397 U.S. 142. We also decline to consider the plaintiffs’ free speech and contract clause claims because they were not raised before PURA during the administrative proceedings. Finally, we conclude that the plaintiffs failed to satisfy their burden of showing that PURA violated their procedural rights under the UAPA or that any violation caused prejudice to their substantial rights.
The judgment is affirmed.
In this opinion the other justices concurred.