Justia Utilities Law Opinion Summaries

Several electricity generators challenged a change in how they are compensated for producing reactive power, a component of electricity necessary for grid stability but not directly consumed by end users. For many years, the Midcontinent Independent System Operator (MISO) provided generators with cost-based compensation for reactive power, in addition to market-based payments for real power. In 2022, MISO amended its tariff to eliminate separate compensation for reactive power, meaning neither transmission owners nor independent generators would receive payment for producing it within a standard range. This change was approved by the Federal Energy Regulatory Commission (FERC) and given immediate effect, despite objections from generators who argued they had made investments and entered contracts in reliance on the prior compensation structure.FERC approved MISO’s tariff amendment and denied requests for rehearing, concluding that the comparability standard justified the change and that generators’ reliance interests were either unsupported or outweighed by other considerations. FERC reasoned that generators should not have expected compensation for reactive power to continue indefinitely, especially since prior orders had made such compensation contingent on similar treatment for transmission owners. Generators petitioned the United States Court of Appeals for the District of Columbia Circuit for review, arguing that FERC failed to adequately consider their short-term financial reliance on the previous compensation scheme.The United States Court of Appeals for the District of Columbia Circuit held that FERC acted arbitrarily and capriciously by failing to adequately consider the generators’ short-term reliance interests before allowing the tariff change to take immediate effect. The court did not address the substantive validity of the tariff amendment itself but found that FERC’s explanation was insufficient regarding the abrupt elimination of compensation. The court granted the petitions for review, set aside FERC’s orders, and remanded the matter for further proceedings. View "Capital Power Corp. v. Federal Energy Regulatory Commission" on Justia Law

Several companies that supply electricity generation services in Pennsylvania challenged a billing practice used by a regional electric distribution company (EDC), FirstEnergy. FirstEnergy, which is responsible for delivering electricity to customers, offered its own customers the option to pay for non-commodity goods and services—such as smart thermostats and surge protection—through their regular utility bills, a practice known as “on-bill billing.” However, FirstEnergy did not allow competing electric generation suppliers (EGSs) to use this billing method for their own non-commodity goods and services. The EGSs argued that this practice was unlawfully discriminatory under Section 1502 of the Public Utility Code and Section 2804(6) of the Electricity Generation Customer Choice and Competition Act, which prohibit unreasonable preferences or advantages in utility service.An administrative law judge initially found in favor of the EGSs, concluding that FirstEnergy’s practice gave it a significant competitive advantage and violated the anti-discrimination provisions. However, the Pennsylvania Public Utility Commission (PUC) reversed this decision, reasoning that discrimination only occurs if the EDC provides the billing service to third parties but not to EGSs, which was not the case here. The PUC also determined that the relevant statutes did not require EDCs to offer on-bill billing for non-commodity goods and services to EGSs.The Commonwealth Court of Pennsylvania affirmed the PUC’s decision, holding that the statutory provisions at issue did not obligate EDCs to provide on-bill billing for non-commodity goods and services to EGSs. The Supreme Court of Pennsylvania reviewed the case and agreed with the lower courts. The Court held that EDCs have no statutory duty to provide on-bill billing for non-commodity goods and services to EGSs, and that such billing does not constitute “service,” “electric services,” or “transmission and distribution service” under the relevant statutes. The Court affirmed the order of the Commonwealth Court. View "Interstate Gas Supply, Inc. v. Public Utility Commission" on Justia Law

An electric utility company operating both within and outside Oregon was subject to central assessment for property tax purposes. For the 2020-21 tax year, the company and the Oregon Department of Revenue disagreed on the company’s overall value and the portion attributable to Oregon. The dispute centered on the methods used to determine real market value, specifically whether certain deductions and valuation models used by the company’s appraiser were consistent with the Department’s adopted standards. The Department relied on an administrative rule that incorporated the Western States Association of Tax Administrators (WSATA) Handbook, which prescribes valuation methods for centrally assessed properties.The Oregon Tax Court heard the case and considered expert testimony from both parties. The Department argued that the WSATA Handbook, as adopted by administrative rule, was binding and should control the valuation methods used. The company contended that the Tax Court, conducting a de novo review, was not bound by the Handbook. The Tax Court agreed with the company, holding that it was not required to defer to the Department’s rule and could determine real market value using other methods if it found them more accurate. The court ultimately adopted some of the company’s valuation approaches and set a value lower than the Department’s assessment.The Supreme Court of the State of Oregon reviewed the case on appeal. It held that, absent a finding that the Department’s rule is invalid on its face or as applied, the rule has the force of law and must be given legal effect by the Tax Court. The Supreme Court found that the Tax Court erred by not treating the Department’s rule as binding unless its application would conflict with constitutional or statutory definitions of real market value. The Supreme Court reversed the Tax Court’s judgment and remanded the case for further proceedings under the correct legal standard. View "PacifiCorp v. Dept. of Rev." on Justia Law

A condominium association in Southwest Washington, D.C., which owns a large complex of over 200 townhomes, challenged the way the District of Columbia Water and Sewer Authority (D.C. Water) calculates a stormwater runoff fee known as the Clean Rivers Impervious Area Charge (CRIAC). The association is classified as a multi-family customer because its water is supplied through several master-metered service lines, rather than each townhome having an individual meter. This classification results in the CRIAC being calculated based on the total impervious surface area of the property, rather than using a tiered system that applies to individually metered residential properties. The association argued that this method, which ties the fee calculation to how the property is metered, is arbitrary and capricious, as the metering method does not affect the amount of stormwater runoff.The Superior Court of the District of Columbia granted summary judgment to D.C. Water. The court found that D.C. Water’s classification and billing methodology were reasonable and consistent with industry standards, relying on declarations from D.C. Water officials and legislative history. The court also rejected the association’s constitutional and equal protection claims, which were not pursued on appeal.The District of Columbia Court of Appeals reviewed the case. It affirmed the trial court’s summary judgment on the constitutional claims, as those were not contested on appeal. However, the appellate court vacated the summary judgment on the claim that D.C. Water’s use of metering as a factor in CRIAC calculation was arbitrary and capricious. The court held that D.C. Water had not provided an adequate explanation for why metering should affect the fee, and remanded the case for further proceedings on that issue. View "Capitol Park IV Condo. Ass'n, Inc. v. District of Columbia Water and Sewer Authority" on Justia Law

This case involves a challenge to a tariff adopted by the California Public Utilities Commission (Commission) that significantly reduced the compensation utilities pay to customers who generate electricity through rooftop solar panels and export excess energy to the grid. Petitioners, including environmental organizations, argued that the Commission’s tariff was inconsistent with Public Utilities Code section 2827.1, which requires the Commission to ensure that compensation for customer-generators reflects the costs and benefits of renewable generation and supports sustainable growth, particularly among disadvantaged communities.The First Appellate District, Division Three, of the California Court of Appeal granted a writ of review and affirmed the Commission’s decision. In doing so, the Court of Appeal applied a highly deferential standard of review derived from the California Supreme Court’s decision in Greyhound Lines, Inc. v. Public Utilities Com., asking only whether the Commission’s interpretation of the statute bore a reasonable relation to statutory purposes and language. The court concluded that the Commission’s approach satisfied this standard and declined to engage in a more searching review of the statutory interpretation.The Supreme Court of California reviewed the case to determine whether the deferential Greyhound standard remains appropriate following legislative amendments to the Public Utilities Code. The Supreme Court held that, for Commission decisions not pertaining solely to water corporations, the deferential Greyhound standard no longer applies. Instead, courts must independently review the Commission’s statutory interpretations under the standards set forth in Public Utilities Code sections 1757 and 1757.1, which parallel the review of other administrative agencies. The Supreme Court reversed the judgment of the Court of Appeal and remanded the case for further proceedings consistent with this less deferential standard. View "Center for Biological Diversity, Inc. v. Public Utilities Com." on Justia Law

A group of single-family residential (SFR) water customers challenged the City of San Diego’s tiered water rate structure, which imposed higher rates for increased water usage, arguing that these rates exceeded the proportional cost of service attributable to their parcels as required by California Constitution article XIII D, section 6(b)(3) (enacted by Proposition 218). The City’s water system serves a large population and divides customers into several classes, but only SFR customers were subject to tiered rates; other classes paid uniform rates. The City’s rates were based on cost-of-service studies using industry-standard methodologies, including “base-extra capacity” and “peaking factors,” but the plaintiffs contended these methods did not accurately reflect the actual cost of providing water at higher usage tiers.The Superior Court of San Diego County certified the case as a class action and held a bifurcated trial. In the first phase, the court found that the City failed to demonstrate, with substantial evidence, that its tiered rates for SFR customers complied with section 6(b)(3), concluding the rates were not based on the actual cost of service at each tier but rather on usage budgets and conservation goals. The court also found the City lacked sufficient data to justify its allocation of costs to higher tiers and that the rate structure discriminated against SFR customers compared to other classes. In the second phase, the court awarded the class a refund for overcharges, offset by undercharges, and ordered the City to implement new, compliant rates.On appeal, the California Court of Appeal, Fourth Appellate District, Division Two, affirmed the trial court’s judgment with directions. The appellate court held that the City bore the burden of proving its rates did not exceed the proportional cost of service and that the applicable standard was not mere reasonableness but actual cost proportionality, subject to independent judicial review. The court found substantial evidence supported the trial court’s findings that the City’s tiered rates were not cost-based and thus violated section 6(b)(3). The court also upheld class certification and the method for calculating the refund, and directed the trial court to amend the judgment to comply with newly enacted Government Code section 53758.5, which affects the manner of refunding overcharges. View "Patz v. City of San Diego" on Justia Law

Aquarion Water Company of Connecticut (Aquarion) filed a rate application with the Public Utilities Regulatory Authority (PURA) in August 2022, seeking to increase its rates to cover approximately $700 million in capital improvements made since 2013. Aquarion also sought to recover $3 million in deferred water conservation expenses and $2.2 million for its employee incentive compensation program. PURA reviewed the application and allowed Aquarion to include $650 million in plant additions completed before August 31, 2022, in its rate base but excluded $48 million in post-application plant additions. PURA also denied Aquarion’s request for the full amount of deferred conservation expenses and employee incentive compensation, reducing the approved revenue requirement to $195 million and the return on equity (ROE) to 8.7%.The trial court dismissed Aquarion’s appeal, finding substantial evidence supporting PURA’s decisions. Aquarion then appealed to the Connecticut Supreme Court, arguing that PURA acted arbitrarily and capriciously in its prudence determinations and that the rate order was confiscatory.The Connecticut Supreme Court upheld PURA’s exclusion of the $42 million in post-application plant additions, finding a discernible difference in the quality of evidence submitted for pre- and post-application additions. The court also upheld the denial of $2.2 million for the employee incentive compensation program, agreeing that PURA did not use hindsight but rather assessed the program’s future efficacy based on historical data.However, the court found that PURA improperly used hindsight to evaluate the prudence of $1.5 million in deferred conservation expenses, focusing on after-the-fact economic savings rather than the prudence of the decision at the time the expenses were incurred. The court reversed this part of the trial court’s judgment and remanded the case for further proceedings.The court also rejected Aquarion’s claim that the rate order was confiscatory, affirming that the approved ROE of 8.7% was not effectively reduced by the disallowance of certain costs and was sufficient to maintain Aquarion’s financial integrity and ability to attract capital. View "Aquarion Water Co. of Connecticut v. Public Utilities Regulatory Authority" on Justia Law

Snakeroot Solar, LLC, sought a good-cause exemption from the Public Utilities Commission (PUC) to extend the deadline for its photovoltaic generating facility in Pittsfield to reach commercial operation and participate in Maine’s net energy billing (NEB) program. The facility needed to be operational by December 31, 2024, but delays in the interconnection process and the time required for grid upgrades made this deadline unachievable. Snakeroot argued that these delays were outside its control and warranted an exemption.The PUC denied Snakeroot’s petition, finding that the delays were inherent to the interconnection process and not external. The PUC noted that the cluster study process, which took slightly longer than average, and the time required for grid upgrades were typical and did not constitute external delays. Snakeroot appealed, arguing that the PUC misinterpreted the statute and that the delays were indeed external and beyond its control.The Maine Supreme Judicial Court reviewed the case and upheld the PUC’s decision. The Court found that the PUC’s interpretation of the statute was reasonable and aligned with the legislative intent to limit the number of projects eligible for the NEB program to control electricity rates. The Court also determined that the PUC’s findings were supported by substantial evidence, including the typical duration of cluster studies and the standard lead times for equipment procurement. The Court concluded that the PUC did not abuse its discretion in denying the exemption, as the delays experienced by Snakeroot were part of the normal interconnection process and not extraordinary. View "Snakeroot Solar, LLC v. Public Utilities Commission" on Justia Law

Summit Carbon Solutions, LLC plans to build an interstate pipeline through Iowa, passing through Shelby and Story Counties. Both counties enacted ordinances regulating pipelines, including setback, emergency response plan, and local permit requirements. Summit challenged these ordinances, claiming they were preempted by the federal Pipeline Safety Act (PSA) and Iowa law. The district court granted summary judgment in favor of Summit, permanently enjoining the ordinances.The United States District Court for the Southern District of Iowa reviewed the case and ruled in favor of Summit, finding that the PSA preempted the counties' ordinances. The court held that the ordinances imposed safety standards, which are under the exclusive regulatory authority of the federal government. The court also found that the ordinances were inconsistent with Iowa state law, which grants the Iowa Utilities Commission (IUC) the authority to regulate pipeline routes and safety standards.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo and affirmed the district court's decision. The court held that the PSA preempts the Shelby and Story ordinances' setback, emergency response, and abandonment provisions. The court found that the ordinances' primary motivation was safety, which falls under the exclusive regulatory authority of the federal government. The court also held that the ordinances were inconsistent with Iowa state law, as they imposed additional requirements that could prohibit pipeline construction even if the IUC had granted a permit.The Eighth Circuit affirmed the district court's judgment in both cases, but vacated and remanded the judgment in the Story County case to the extent it addressed a repealed ordinance. View "McNair v. Johnson" on Justia Law

A real estate developer, HK Baugh Ranch, LLC, petitioned the Texas Public Utility Commission (PUC) to release its undeveloped land, River Bend Ranch, from the certificate of convenience and necessity (CCN) issued to Crystal Clear Special Utility District (Crystal Clear). Crystal Clear, a federally indebted utility district, sued the PUC’s Chair and Commissioners in federal court, alleging that Texas Water Code § 13.2541, which allows for decertification, was preempted by 7 U.S.C. § 1926(b). This federal statute protects certain federally indebted utilities from curtailment of their service areas while their loans are outstanding.The United States District Court for the Western District of Texas issued a preliminary injunction preventing the PUC from decertifying River Bend Ranch. The district court applied the “physical ability” test from Green Valley Special Utility District v. City of Schertz, determining that Crystal Clear likely made its service available to HK Baugh and was thus entitled to the protections of § 1926(b). The court concluded that § 1926(b) likely expressly preempts Texas Water Code § 13.2541, resolving the remaining preliminary injunction factors in favor of Crystal Clear.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court did not err in concluding that Crystal Clear would likely satisfy the “physical ability” test. However, the appellate court found that the district court erred in holding that § 1926(b) expressly preempts Texas Water Code § 13.2541. The appellate court remanded the case to the district court to determine whether § 1926(b) otherwise preempts Texas Water Code § 13.2541 and to address all preliminary injunction factors as necessary. The preliminary injunction remains in place pending further proceedings. View "Crystal Clear v. HK Baugh Ranch" on Justia Law