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Otter Creek Solar LLC v. Green Mountain Power Corporation

United States District Court, D. Vermont

September 22, 2016

OTTER CREEK SOLAR LLC, Plaintiff,
v.
GREEN MOUNTAIN POWER CORPORATION and VEPP, Inc., Defendants.

          ORDER RULING ON DEFENDANTS' MOTIONS TO DISMISS AND PLAINTIFF'S MOTION TO FILE A SUR-REPLY (DOCS. 4, 6, 10)

          Hon. J. Garvan Murtha, United States District Judge.

         I. Introduction

         Plaintiff Otter Creek Solar LLC (“Otter Creek”) filed suit against Green Mountain Power Corporation (“GMP”) and VEPP, Inc. (“VEPP”) (collectively, “Defendants”) alleging GMP--or in the alternative VEPP--is in violation of the Federal Power (“FPA”) and Public Utilities Regulatory Policies (“PURPA”) Acts. (Doc. 1 (“Compl.”).) Otter Creek seeks declaratory and injunctive relief and damages against GMP for violating Otter Creek's rights under the FPA and PURPA by refusing to agree to purchase energy and capacity from Otter Creek's solar projects at the long-term rate required by PURPA. Id. ¶ 12. Because GMP has asserted VEPP has the obligation to purchase the energy and capacity from Otter Creek, Otter Creek seeks relief against VEPP in the alternative. Id. ¶ 13. GMP and VEPP move to dismiss for lack of subject matter jurisdiction, failure to state a claim, and failure to exhaust administrative remedies under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Docs. 4, 6.) Otter Creek opposes the motions (Doc. 7) and Defendants filed replies (Doc. 8, 9). Otter Creek moves for leave to file a surreply in further response to GMP's motion. (Doc. 10.) GMP opposes the motion. (Doc. 12.) The motion to file a surreply is GRANTED.

         II. Background

         The following facts are assumed to be true for purposes of the pending motions and are gleaned from the complaint. Otter Creek Solar LLC is the owner and developer of small solar facilities in Vermont that it alleges will be “qualified facilities.”[1] Green Mountain Power Corporation is a Vermont retail electric company with a principal place of business in Colchester, Vermont. GMP is regulated by the Vermont Public Service Board (“PSB”). Vt. Stat. Ann. Tit. 30, § 218. VEPP, Inc., a Vermont corporation, is the entity designated by the Vermont PSB as the agent and facilitator for certain energy sales.

         On May 1, 2013, Otter Creek filed a petition for enforcement against the PSB with the Federal Energy Regulatory Commission (“FERC”). On June 27, 2013, FERC issued a notice of intent not to act. Otter Creek Solar LLC, 143 FERC ¶ 61, 282 (2013). Otter Creek had argued the Vermont PSB's “avoided cost rate pricing determination and mechanism in [its] feed-in tariff program, referred to as . . . SPEED, ” violated PURPA and the [FPA]. Id.

         Otter Creek alleges it began discussions with GMP regarding contracts under PURPA in December 2013. On January 15, 2016, Otter Creek made a final offer to GMP by sending complete and executed power purchase agreements (“PPAs”). Otter Creek offered three options for the long-run avoided cost rate to be paid: (1) a fixed level rate of 15.5 cents per kilo-watt-hour (“KWh”); (2) a fixed level rate of 12.8 cents per KWh; and (3) a variable rate generally increasing over time. The first option was based on the 25-year avoided cost rate, including environmental attributes, for similarly situated solar projects as determined by the PSB; the second option was based on the 25-year avoided costs, not including environmental attributes, for similarly situated solar projects as GMP testified to the PSB, and the third option was based on year-by-year projected avoided costs as determined by an energy consulting firm. Otter Creek offered to allow VEPP to be the obligor and purchaser as an alternative to GMP. Neither GMP nor VEPP returned executed copies of the PPAs. Ten days later, on January 25, 2016, this suit was commenced.

         Contrary to its 2013 petition to FERC, Otter Creek here alleges GMP violated the FPA and PURPA because GMP has an obligation to purchase any and all energy and capacity offered to it by Otter Creek's qualified facilities and it refused to purchase the energy and capacity offered. Compl. ¶¶ 33-35 (Count I). Otter Creek alleges, in the alternative, if the Court finds GMP has no obligation to purchase the energy and capacity of Otter Creek's qualified facilities because VEPP has the obligation, VEPP violated the FPA and PURPA. Id. ¶¶ 37-38 (Count II). As a result, Otter Creek has been unable to obtain financing to construct its qualified facilities.

         III. Discussion

         A motion to dismiss tests the legal rather than the factual sufficiency of a complaint. See, e.g., Sims v. Ortiz, 230 F.3d 14, 20 (2d Cir. 2000). The Court will grant a motion to dismiss only if the pleader fails to show a “plausible entitlement to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court must accept all facts alleged in the pleading as true and draw all reasonable inferences in favor of the pleader. Natural Res. Def. Council v. Johnson, 461 F.3d 164, 171 (2d Cir. 2006). When resolving a jurisdictional question, the Court may consider materials outside the pleadings. Hamm v. United States, 483 F.3d 135, 137 (2d Cir. 2007). The plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence. Id.

         Under the Federal Power Act, 16 U.S.C. § 791, et seq., Congress granted FERC exclusive authority to regulate sales of electricity at wholesale in interstate commerce. See 16 U.S.C. § 824(b)(1). States may not act in this area unless Congress creates an exception. Id. § 824(b). In 1978, Congress amended the FPA to create one such exception by enacting PURPA, 16 U.S.C. § 824a-3. Prior to the enactment of PURPA, traditional electric utilities hesitated from purchasing power from small power producers. To overcome this obstacle, Congress enacted PURPA, which directed FERC to promulgate rules to encourage cogeneration and small power production, including rules requiring electric utilities to purchase electricity from and sell electricity to producers deemed “qualifying” facilities. See id. § 824a-3(a).

         Section (a) of PURPA requires FERC to prescribe rules as it determines necessary to encourage small power production, including rules requiring electric utilities to offer to purchase energy from qualifying facilities. Id. § 824a-3(a). Section (f) then requires state regulatory authorities and nonregulated electric utilities to implement the rules prescribed by FERC. Id. § 824a-3(f). Accordingly, a state may regulate wholesale sales by qualifying facilities, i.e., power production facilities that have no more than 80 megawatts of capacity and use renewable generation technology. Id. § 824a-3(f)(1); see also id. § 796(17)(A). Those facilities must receive a price for their electricity that is just and reasonable to consumers and non-discriminatory to QFs, generally determined to be equal to the buying utility's “avoided costs, ” i.e., the costs the utility would have otherwise incurred in procuring the same quantity of electricity from another source. Id. § 824a-3(b); 18 C.F.R. § 292.304(b)(2).

         To emphasize, PURPA imposes obligations on each state regulatory authority to implement FERC's PURPA regulations. See 16 U.S.C. § 824a-3(f)(1) (“[E]ach State regulatory authority shall, after notice and opportunity for public hearing, implement [a new FERC] rule (or revised rule) for each electric utility for which it has ratemaking authority.”).

         PURPA also provides FERC and certain private parties with the ability to enforce the requirement that states implement PURPA. Section (h) provides that, if a state regulatory authority or a nonregulated electric utility fails to implement FERC's rules, FERC may institute an enforcement action. 16 U.S.C. § 824a-3(h). Section (h) also permits a QF to petition FERC to initiate an enforcement action and, if FERC fails to do so within sixty days of the filing of the petition, the QF may bring an action in a federal district court to require the state authority or nonregulated utility to comply with section (f)'s requirement that FERC's rules be implemented. Id. § 824a-3(h)(2)(B). Importantly, “PURPA provides a private right ...


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