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Great Divide Wind Farm 2 LLC v. Aguilar

United States District Court, D. New Mexico

November 7, 2019

GREAT DIVIDE WIND FARM 2 LLC, a Delaware corporation, and GREAT DIVIDE WIND FARM 3 LLC, a Delaware corporation, Plaintiffs,
v.
THERESA BECENTI AGUILAR, CYNTHIA HALL, JEFFERSON BYRD, VALERIE ESPINOZA, and STEPHEN FISCHMANN, in their official capacities as the Commissioners of the New Mexico Public Regulation Commission, and EL PASO ELECTRIC COMPANY, Defendants, and SOUTHWESTERN PUBLIC SERVICE COMPANY, Intervenor.

          Adam Wenner, Cory Lankford, Jonathon Guy, Orrick, Herrington & Sutcliff, LLP, Attorneys for the Plaintiffs

          Judith E. Amer Attorney for the Defendants Theresa Becenti Aguilar, Cynthia Hall, Jefferson Byrd, Valerie Espinoza, and Stephen Fischmann

          Ron Moss, Carol A. Clifford, Jerry Todd Wertheim, Jones, Snead, Wertheim & Clifford, P.A. Attorneys for the Defendant El Paso Electric Company

          Will DuBois, Zoe Elizabeth Lees, Xcel Energy Services, Inc.Attorneys for the Intervenor Southwestern Public Service Company

          MEMORANDUM OPINION AND ORDER

         THIS MATTER comes before the Court on Plaintiff's Motion for Summary Judgment and Memorandum in Support of Motion for Summary Judgment, filed June 6, 2019 (Doc. 57)(“MSJ”). The primary issue is whether the current commissioners of the New Mexico Public Regulation Commission (“NMPRC”), Defendants Theresa Becenti Aguilar, Jefferson Byrd, Valeria Espinoza, Stephen Fischmann, and Cynthia Hall (collectively, “the Commissioners”), implemented the Public Regulatory Policies Act of 1978, 1 U.S.C. § 824a-3 (“PURPA”), and its Federal Energy Regulatory Commission (“FERC”) regulations in a manner that violates PURPA and its FERC regulations by requiring qualifying facilities (“QFs”) to be ready to interconnect before they can establish a legally enforceable obligation with a utility. See MSJ at 20. The Court concludes that NMPRC's implementation plan, consisting of rule 570 of the New Mexico Administrative Code (“rule 570”) and NMPRC's case-by-case adjudication interpreting rule 570, does not violate PURPA or the FERC's regulations promulgating PURPA, and denies the motion.

         FACTUAL BACKGROUND

         The Court takes these facts from the parties' undisputed material facts in their summary judgment motion papers. See MSJ; Defendant's Response to Plaintiff's Motion for Summary Judgment, filed August 1, 2019 (Doc. 73)(“Commissioners' Response”); Southwestern Public Service Company's Response to Great Divide Wind Farm 2's Motion for Summary Judgment, filed August 1, 2019 (Doc. 71)(“SPS' Response”)[1]; Defendant El Paso Electric Company's Response to Plaintiff's Motion for Summary Judgment, filed August 1, 2019 (Doc. 72)(“El Paso Electric's Response”); and Plaintiff's Reply to Defendants' and Intervenors' Oppositions to Plaintiffs' Motion for Summary Judgment, filed August 15, 2019 (Doc. 77)(“Great Divide's Reply”). No genuine issue exists as to these facts. The Court provides these facts for background.

         Great Divide Wind Farm 2 LLC and Great Divide Wind Farm 3, LLC, (collectively, “Great Divide”) have two QFs under the Federal Power Act, as amended by PURPA. MSJ ¶ 1, at 1 (asserting this fact); Commissioners' Response ¶ 1, at 1-2 (asserting this fact). Great Divide states that these QFs (“Projects”) will be operational in 2020.[2] See Commissioners' Response ¶ 2, at 2 (asserting this fact).[3] El Paso Electric Company is an investor-owned electric utility. See Commissioners' Response ¶ 4, at 2 (asserting this fact).[4]

         The FERC promulgated rules implementing PURPA at 18 C.F.R. § 292. See MSJ ¶ 3, at 1-2 (asserting this fact); Commissioners' Response ¶ 5, at 32 (asserting this fact). The NMPRC implemented regulations in accordance with the FERC's rules regulating PURPA in New Mexico Administrative Code 17.9.570 (“rule 570”). See MSJ ¶ 4, at 2 (asserting this fact); Commissioners' Response ¶ 6, at 2 (asserting this fact). Western Water and Power Production, Limited, LLC (“WWPP”) filed a complaint with the NMPRC about an alleged legally enforceable obligation created with the Public Service Company of New Mexico (“PNM”).[5]MSJ ¶ 5, at 2 (citing Western Water Power Prod. Ltd., LLC v. Pub. Serv. Co. of N.M., No. 11-00466-UT (NMPRC Aug. 3, 2016)(“WWPP”))(asserting this fact). In the final order, the NMPRC concluded that rule 570.9 establishes a legally enforceable obligation on a utility “only if the QF is ready to interconnect to the utility's system” to deliver energy.[6] MSJ ¶ 5, at 2 (asserting this fact). The NMPRC, accordingly, dismissed the complaint.[7] See MSJ ¶ 5, at 2 (asserting this fact).

         On August 27, 2018, Great Divide filed a complaint asking the NMPRC to “declare the terms of a legally enforceable obligation” with El Paso Electric. See Commissioners' Response ¶ 9 at 2 (asserting this fact). The NMPRC dismissed the complaint without prejudice, citing its WWPP decision and rule 570's plain text.[8] See MSJ ¶¶ 10-11, at 3-4 (asserting this fact). In the dismissal, the NMPRC also cited the FERC's decision not to declare the NMPRC's ruling in WWPP “contrary to PURPA and FERC regulations.”[9] See MSJ ¶ 12, at 4 (asserting this fact). On December 6, 2018, Great Divide petitioned the FERC “to bring an enforcement action against the NMPRC for its failure to implement PURPA consistent with PURPA and FERC's regulations, ” but the FERC instead issued a Notice of Intent Not to Act[10] and Declaratory Order in that case on February 4, 2019. See MSJ ¶¶ 13-14, at 4 (asserting this fact).[11]

         PROCEDURAL BACKGROUND

         Great Divide filed its motion for summary judgment after the Court granted in part and denied in part the Commissioner's motion to dismiss. See MSJ at 5. Great Divide states that the issue in the present case is “whether NMPRC's PURPA implementation plan, specifically Rule 570 and NMPRC's interpretation of that Rule, violates PURPA and FERC's PURPA regulations.” MSJ at 15. Great Divide asks the Court to “(i) declare that NMPRC's implementation plan regarding the creation of legally enforceable obligations for QFs is invalid under PURPA and FERC's PURPA regulations, and (ii) enjoin Defendants, in their official capacities as Commissioners of the NMPRC, to adopt an implementation plan consistent with federal law.” MSJ at 19-20.

         1. The Complaint.

         Great Divide filed its Complaint for Declaratory and Injunctive Relief on February 6, 2019 with the FERC's consent to file a claim in federal court. See Complaint for Declaratory and Injunctive Relief, filed February 6, 2019 (Doc. 1)(“Complaint”); First MTD at 4 (citing FERC Order ¶ 18, at 7). Great Divide asks the court to

[d]eclar[e] that the NM Order violates PURPA and FERC regulations insofar as it places improper obligations on Plaintiffs before EPE is obligated to enter into a contract or other legally enforceable obligation to purchase the output of [the Projects] for the specified term, and for injunctive relief requiring that the NMPRC issue an order that complies with federal law.

         Complaint ¶ a, at 13. Great Divide further asks that the Court enjoin

Defendants to issue a new order implementing FERC's rules under PURPA in a manner consistent with federal law, ruling that Plaintiffs need not construct their Projects and obtain signed interconnection agreements as a prerequisite to the creation of a legally enforceable obligation, and implementing a methodology for determining avoided energy costs calculated at the time the obligation is incurred or offering to resolve disputes between Plaintiffs and EPE regarding the calculation of an avoided cost rate.

         Complaint ¶ b, at 13.

         2. The Defendants' First MTD.

         The Commission filed a Motion to Dismiss on March 1, 2019. See Defendants' Joint Motion to Dismiss and Memorandum of Law in Support Thereof, filed March 1, 2019 (Doc. 22)(“First MTD”[12]). The Commissioners state that PURPA provides plaintiffs with two mechanisms for challenging state regulatory actions: “(i) as-applied challenges that ‘involve[] a contention that the agency's implementation plan is unlawful as it applies to or affects an individual petitioner'; and (ii) as-implemented challenges that ‘allege[] that the state agency has failed to comply with its obligation under Section 210(f)(2) of PURPA to devise a plan that implements PURPA and FERC's PURPA-related regulations.'” Great Divide Wind Farm 2 LLC v. Becenti Aguilar, No. CV 19-0099 JB\CG, 2019 WL 2144829, at 10 (D.N.M. May 16, 2019)(“MOO”)(quoting First MTD at 4 (citing 16 U.S.C. § 824a-3(g)-(h); Power Res. Grp. v. Pub. Util. Comm'n of Tex, 422 F.3d 231, 233, 235 (5th Cir. 2005); Mass. Inst. of Tech. v. Mass. Dep't of Pub. Utils., 941 F.Supp. 233, 237 (D. Mass. 1996)(Lindsay, J.); Greensboro Lumber Co. v. Ga. Power Co., 643 F.Supp. 1345, 1374 (N.D.Ga. 1986)(Moye, J.))). The Commissioners contend that Great Divide brings an as-applied challenge because the relief that Great Divide seeks would benefit only itself. See MTD at 5. The Commissioners argue, therefore, that because Great Divide brings an as-applied challenge, and federal courts have jurisdiction over only as-implemented challenges, the Court does not have jurisdiction over Great Divide's Complaint. See First MTD at 4-5.

         3. The First Response.

         Great Divide responds. See Plaintiffs' Response in Opposition to Defendants' Joint Motion to Dismiss, filed March 15, 2019 (Doc. 29)(“Response”). While Great Divide agrees that PURPA has different routes for as-applied challenges and as-implemented challenges, it contends that its Complaint raises an as-implemented challenge. See Response at 2-3. It states that rule 570 violates PURPA and its FERC regulations with its ready-to-interconnect requirement, and that this rule is the basis of the NMPRC's “rule of general applicability.” Response at 10.

         4. The Defendants' First Reply.

         The Commissioners reply. See Defendants' Reply to Plaintiffs' Response in Opposition to Defendants' Joint Motion to Dismiss, filed April 1, 2019 (Doc. 34)(“First Reply”). The Commissioners argue that Great Divide's challenge is not an as-implemented challenge, because Great Divide asks the Court to overturn the NM Order applying rule 570 rather than overturning rule 570. See First Reply at 2. The Commissioners contend that Great Divide only wants the NMPRC to issue a new order and does not want a new rulemaking for rule 570. See First Reply at 9. The Commissioners contend that Great Divide, which knows that the rulemaking could delay its QFs' financing and construction, argues simultaneously that the Court overturn the NM Order and that its Complaint targets rule 570. See First Reply at 10. The Commissioners argue that Great Divide's argument is duplicitous and that the Court should dismiss its Complaint. See First Reply at 10.

         5. The First Hearing.

         The Court held a hearing on May 2, 2019. See generally Draft Transcript of Hearing at 47:15-21 (taken May 2, 2019)(Amer)(“First Tr.”)[13]. Great Divide acknowledges the Commissioners' contention that a delay in relief would reduce Great Divide's tax credits. See First Tr. at 85:6-87:5 (Marks, Court). Great Divide explains that a production tax credit is applied over a Projects' first ten years of production, but that, if construction does not begin by the deadline, the developer's tax credits are “proportional[ly] reduced.” First Tr. at 87:4 (Guy). According to Great Divide, it is deemed for tax purposes to have begun work on the Projects in 2016 and, therefore, must complete the Projects by 2020 to receive the one hundred percent credit.[14] See First Tr. at 93:21-94:8 (Rucker).

         6. MOO.

         The Court granted the MTD in part and denied it in part. See MOO at 1. The Court stated that “[t]he parties' dispute revolve[s] around the as-applied/as-implemented issue.” MOO at 40. The Court concluded that Great Divide brought the Complaint an as-applied, not an as-implemented, claim for relief and that, therefore, the Court did not have jurisdiction over the case. See MOO at 41. The Court then stated that it would have jurisdiction over the case if Great Divide brought “the theory it articulated at the hearing as an as-implemented challenge.” MOO at 47.

         First, the Court addressed whether Great Divide brought an as-applied or an as-implemented claim. The Court noted that Great Divide's “Complaint does not challenge rule 570's lawfulness or the lawfulness of the NMPRC's interpretation of rule 570, ” but rather “the N.M. Order's application of rule 570 and NMPRC caselaw to it.” MOO at 43. The Court pointed out that, at the hearing, Great Divide “concede[d] that rule 570 on its face does not violate PURPA and the FERC regulations.” MOO at 43. The Court noted that Great Divide's Complaint similarly does not contend that the NMPRC's interpretation of rule 570 is “the regulatory action that violates PURPA and the FERC regulations.” MOO at 43. While the Complaint notes one time that rule 570 does not include the words “legally enforceable obligation, ” it spent most of its words on “the N.M. Order's effects on the Projects.” MOO at 44 (citing Complaint ¶ 31, at 8; id. ¶ 53, at 12). The Court stated that, moreover, Great Divide's argument that the NMPRC did not “provide a methodology after it had concluded that the Projects were not ready for interconnection” focuses on the methodology's application and does not challenge rule 570 or the NMPRC's interpretation of that rule. MOO at 44-45. Citing those portions of the Complaint that “focus on the N.M. Order as it applies to them, ” the Court concluded that Great Divide made only an as-applied challenge and that the Court, therefore, dismissed the claim for lack of subject matter jurisdiction. MOO at 46.

         Next, the Court explained that Great Divide could bring an as-implemented challenge, over which the Court would have jurisdiction. See MOO at 47. The Court explained that the statute gives jurisdiction to federal district courts over “an action against the State regulatory authority or nonregulated electric utility for failure to comply with the requirements of subsection (f).”[15] MOO at 48 (quoting 16 U.S.C. § 824a-3(h)(2)(A)(i))(internal quotation marks omitted). The Court reasoned that the States' obligation to implement lawfully PURPA and the FERC regulations “implicates the entire body of generally applicable law that implements PURPA and the FERC regulations.” MOO at 49. If the Court concluded that the rule was interpreted invalidly, “a challenge explicitly to the rule and its interpretation effectuates a challenge to the unlawful rule.” MOO at 49. The Court noted that “Great Divide's theories from the Response and the hearing -- respectively, that Rule 570 violates PURPA and the FERC regulations, and that the NMPRC's interpretation of rule 570 violates PURPA and the FERC regulations -- raise as-implemented challenges.” MOO at 50. The Court stated that, if Great Divide were to bring a claim under either theory, [16] the Court could have jurisdiction over that claim. The Court stated that Great Divide must amend its Complaint to say that it challenges rule 570 or the NMPRC's interpretation of rule 570, or the Court will dismiss the case without prejudice.[17] See MOO at 51.

         7. The Amended Complaint.

         Great Divide filed its Amended Complaint for Declaratory and Injunctive Relief, on May 30, 2019 (Doc. 56)(“Amended Complaint”). In its Amended Complaint, Great Divide asserts that the Court has jurisdiction over the case “pursuant to 16 U.S.C. § 824a-3(h)(2)(B), because Great Divide, as qualifying facilities, challenge the implementation of PURPA and FERC's regulations under PURPA by a state regulatory authority, the NMPRC.” Amended Complaint ¶ 18 at 4. Great Divide gives an overview of PURPA and its FERC regulations. See Amended Complaint ¶¶ 24-29, at 5-6. Great Divide then defines the NMPRC's implementation plan as consisting of rule 570 and the NMPRC's interpretation of rule 570. Great Divide points out that the first component of the implementation plan, rule 570, does not “define or use the term ‘legally enforceable obligation.'” Amended Complaint ¶ 32, at 6. Great Divide then describes an NMPRC case that WWPP filed, in which the NMPRC held that rule 570 meant “that a utility has no obligation to accept a QF's offer and that no legally enforceable obligation is created until the generating facility is constructed, capable of operating safely and commencing delivery of power into the utility system and ready to be interconnected.” Amended Complaint ¶ 33 at 7 (citing Western Water and Power Prod., Ltd., LLC v. Pub. Serv. Co. of NM, NMPRC Case No. 11-00466-UT, Final Order Dismissing Complaint ¶ 18 (NM Pub. Regulation Comm'n Aug. 3, 2016)(“WWPP Final Order”)). Great Divide argues that, in both the WWPP case and a 2018 case filed by Great Divide, the NMPRC stated that rule 570's ready-to-interconnect requirement resulted in a utility's purchase obligation beginning at the interconnection date. See Amended Complaint ¶¶ 33-34, at 7 (citing WWPP Final Order; In the Matter of the Formal Complaint of Great Divide Wind Farm 2 and Great Divide Wind Farm 3 Against El Paso Electric Company, NMPRC Case No. 18-00268-UT, Final Order Dismissing Complaint Without Prejudice ¶ 8 (Nov. 7, 2018)(“NM Order”)). Great Divide contends a State regulatory commission that requires more from a QF than a commitment is violating PURPA and its FERC regulations before the creation of a legally enforceable obligation. See Amended Complaint ¶ 35, at 7. Great Divide argues that the NMPRC's ready-to-interconnect requirement therefore violates PURPA and its FERC regulations. See Amended Complaint ¶ 36, at 8.

         8. The Defendants' Response to the Amended Complaint.

         The Commissioners respond. See Defendants' Answer to First Amended Complaint for Declaratory and Injunctive Relief, filed June 13, 2019 (Doc. 58)(“Defendants' Response to Amended Complaint”). The Commissioners assert that the Amended Complaint's jurisdictional statement “appears to contain only assertions of law and does not contain allegations of facts with [sic] require a response from the Defendants.” Defendants' Response to Amended Complaint ¶ 20, at 4. The Commissioners admit that rule 570 does not contain the phrase “legally enforceable obligation.” After responding to each one of Great Divide's allegations, the Commissioners then raise three affirmative defenses: (i) the doctrines of estoppel, waiver, and laches bar Great Divide's claims in whole or in part; (ii) the doctrine of unclean hands bars Great Divide's claims, and (iii)Great Divide did not mitigate harm because it could have either (a) refiled its complaint against El Paso Electric with the NMPRC or (b) met the ready-to-interconnect requirement. See Defendants' Response to Amended Complaint ¶¶ 38-40, at 4.

         9. El Paso Electric's Response.

         El Paso Electric responds. See Intervenor-Defendant El Paso Electric Company's Original Answer to Amended Complaint, filed August 1, 2019 (Doc. 74)(“El Paso Electric's Response to Amended Complaint”). In response to the Amended Complaint's jurisdiction statement, El Paso Electric “refer[red] the Court to the language of 16 U.S.C. § 824a-3(h)(2)(B), which “speaks for itself regarding subject matter jurisdiction.” El Paso Electric's Answer to Amended Complaint, ¶ 18, at 3. El Paso Electric denies all of Great Divide's allegations “inconsistent with the language of statute.” El Paso Electric's Answer to Amended Complaint ¶ 18, at 3. While El Paso Electric admits that Great Divide is challenging the Commissioners' implementation of PURPA and its FERC regulations, El Paso Electric denies that the Commissioners' implementation plan has violated PURPA or its FERC regulations. See El Paso Electric Answer to Amended Complaint ¶¶ 18, 20, at 3-4.

         10. The MSJ.

         Great Divide asks the Court to grant summary judgment on its claim that the NMPRC's implementation of PURPA is unlawful under PURPA and the FERC's PURPA regulations. See MSJ at 1. Great Divide argues that both the NMPRC's implementation of PURPA, and the NMPRC's interpretation of rule 570, violate PURPA and the FERC's regulations.

         Great Divide begins its argument by noting that rule 570 states that “‘[e]ach utility shall purchase power from a qualifying facility from the date of interconnection at the utility's avoided cost.'” MSJ at 15 (quoting N.M. Code R. § 17.9.570.9(A))(emphasis added in MSJ). Great Divide argues that the NMPRC's inclusion of the phrase “date of interconnection” means that the NMPRC interprets PURPA and the FERC's regulations as requiring a utility to enter into legally enforceable obligation with “a QF only when that energy is available and the QF is interconnected or ready to be interconnected, i.e., at the beginning of that obligations specified term.” MSJ at 15. Great Divide argues that this interpretation conflicts with 18 C.F.R. § 292.304(d)(2)'s plain language, because the NMPRC's interpretation does not grant a QF two rights: (i) the right to enter into a legally enforceable obligation with a utility before the specified time period begins; and (ii) the right to enter into a legally enforceable obligation with a utility at the long-term avoided cost rates, calculated at “the time the obligation is incurred.” 18 C.F.R. § 292.304(d)(2).

         Great Divide cites the FERC order and corresponding regulations implementing PURPA to support its contention that rule 570 conflicts with PURPA and the FERCA's regulations. See MSJ at 16-17. First, Great Divide argues that rule 570 conflicts with the FERC regulation that “state[s] that the certainty regarding the future sale of . . . a QF's power output is needed ‘before [the] construction of a facility' so that investors can estimate the expected return on a potential investment.” Great Divide's MSJ at 16 (quoting FERC Order No. 69, Small Power Production and Cogeneration Facilities; Regulations Implementing Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12, 214 12, 218 (Feb. 25, 1980)(“FERC Order No. 69)). Second, Great Divide argues that rule 570 conflicts with the FERC regulation that states that Congress wrote PURPA with the QFs' need to enter into “contractual commitments based, by necessity, on estimates of future avoided costs” in mind. Great Divide's MSJ at 16 (quoting Order No. 69, 45 Fed. Reg. at 12, 224). Great Divide cites these regulations to underscore the FERC's belief in the importance of certainty for QFs, which Great Divide believes that rule 570 ignored. See MSJ at 16.

         Great Divide cites a Supreme Court of New Hampshire opinion, which states that “‘the FERC has recognized that investors must be able to estimate the expected return on their investment with reasonable certainty before the development of a qualifying facility'” and, therefore, argues a statute like New Mexico's rule 570 that “guts the certainty provided by Section 292.304(d)(2) . . . impedes the development of QFs in violation of the very purpose of PURPA.” MSJ at 17 (quoting Pub. Serv. Co. of N.H., 539 A.2d 275, 280 (N.H. 1988)).

         Great Divide then argues that the FERC's rulings show that the legally enforceable obligation begins when a QF commits to sell power in the future, and not only when it sells power immediately. See MSJ at 17. In support of this argument, Great Divide cites several FERC cases. See MSJ at 17-18 (citing Grouse Creek Wind Park, LLC, 142 FERC ¶ 61, 148 (2009), rehearing denied, 130 FERC ¶ 6, 127 (2010)(stating that a legally enforceable obligation under PURPA can predate a contract's signing); FLS Energy, Inc., et al., 157 FERC ¶ 61, 211 at 20, 23-26 (concluding that Montana Public Service Commission's requirement that a QF obtain a facilities study or an interconnection agreement before a legally enforceable obligation can exist is inconsistent with PURPA and its regulations); JD Wind 1, LLC, et al., 129 FERC ¶ 61, 148 at 25 (2009), rehearing denied, 130 FERC ¶ 61, 127 (2010)).

         Great Divide next concedes that the FERC has given States the freedom to implement the FERC's regulations as they see fit, but Great Divide cautions that the State's implementation must adhere to the regulation's requirements. See MSJ at 19. Great Divide points out that, if “a state PURPA implementation plan directly conflicts with the requirements of the FERC, as NMPRC's [plan] does, the state commission's interpretation is not entitled to deference.” MSJ at 19.

         11. The Commissioners' Response.

         The Commissioners respond. See Commissioners' Response at 1. The Commissioners make two arguments: (i) “PURPA and caselaw have granted states great latitude in implementation rulemaking”; and (ii) “Rule 570 is a proper implementation of PURPA and FERC rules.” Defendants' MSJ Response at 3, 9. The Commissioners address each argument in turn.

         First, the Commissioners argue that the FERC gave the NMPRC great latitude in implementing PURPA's regulations. The Commissioners cite as support the FERC's statement that it would “‘afford the state regulatory authorities. . . . great latitude in determining the manner of implementation of the [FERC's] rules, provided that the manner chosen is reasonably designed to implement the requirements of FERC's regulations.'” Commissioners' Response at 5 (quoting 45 Fed. Reg. at 12230-31)(emphasis added in Commissioners' Response). The Commissioners also cite FERC cases concluding that the States can determine “'the specific parameters of individual QF power purchase agreements, including the date at which a legally enforceable obligation is incurred under State law.'” Commissioners' Response at 5 (quoting West Penn Power Co., 71 FERC ¶ 61, 153, at 16, 295 (1995))(emphasis added in Commissioners' Response)(internal quotation marks omitted)(and citing Metro. Edison C. and Penn Elec. Co., 72 FERC ¶ 61, 015, at 61, 050 (1995); Order on Clarification, 72 FERC ¶ 61, 269 (1995)).

         The Commissioners then lay out the “history behind rule 570” and Great Divide vs. EPE, EL17-17-000 (FERC Aug. 27, 2018). Commissioners' Response at 5. First, the Commissioners provide rule 570's text that defines a utility's obligation to purchase from a QF. See Commissioners' Response at 5. Next, the Commissioners give WWPP's procedural history. See Commissioners' Response to MSJ at 6. In that case, WWPP argued that a legally enforceable agreement began at the time of offer, even though the facility was not yet built, while PNM argued that the legally enforceable obligation would begin only when WWPP's facility was ready to be interconnected. See Commissioners' Response to MSJ at 6. The NMPRC ruled in PNM's favor and dismissed the case, concluding that rule 570's legally enforceable agreement has a ready-to-interconnect prerequisite. See Commissioners' Response to MSJ at 6. The Commission notes that the FERC declined to act in the case and that WWPP did not appeal in federal court, and therefore, the Commissioners argue, the NMPRC's final order in the case is ”precedent.” Commissioners' Response to MSJ at 7.

         The Commissioners next examine Great Divide vs. EPE, 18-00268-UT (NMPRC 2018). In that case, Great Divide asked for a declaratory order stating that: (i) a legally enforceable obligation existed, because it had committed to sell all of its output to El Paso Electric even though its facility was not yet built; and (ii) that El Paso Electric was violating PURPA and the FERC regulations by not recognizing the legally enforceable obligation. See Commissioners' Response to MSJ at 9. The Commissioners argue that the NMPRC dismissed the complaint without prejudice, concluding that rule 570.9's “plain language” states that a legally enforceable obligation begins when a QF is ready to be interconnected. Commissioners' Response to MSJ at 8. According to the Commissioners, when dismissing the complaint, “the NMPRC relied on its own precedent, the 2016 decision in WWPP v. PNM described above.” Commissioners' Response to MSJ at 9. The Commissioners emphasize that, in both cases, the FERC concluded that a legally enforceable obligation was created before a facility was built and ready for interconnection. See Commissioners' Response at 9.

         The Commissioners' second argument is that “[r]ule 570 is a proper implementation of PURPA and FERCA rules.” Commissioners' Response to MSJ at 9. The Commissioners argue that their rule “is consistent with rules in other states that have been upheld by federal court.” Commissioners' Response at 9. The Commissioners argue that Great Divide is equating the ready-to-interconnect requirement with the signed-interconnection-agreement requirement struck down in other States. See Commissioners' Response at 10. The Commissioners dispute that analogy, stating that rule 570 requires only readiness to interconnect. See Commissioners' Response at 10. The Commissioners note that rule 570 does not use the term “legally enforceable obligation, ” but they argue that omission is not determinative, because “legally enforceable obligation” means “when a utility's obligation to purchase a qualifying facility's output begins.” Commissioners' Response at 10.

         The Commissioners then cite cases from other federal district courts to support their argument that States have sufficiently broad authority to implement the regulations “with respect to the approval of purchase contracts between utilities and qualifying facilities.” Commissioners' Response at 11 (citing Exelon Wind v. Nelson, 766 F.3d 380 (5th Cir. 2014)). The Commissioners support their conclusion with Exelon Wind v. Nelson, a case in which the United States Court of Appeals for the Fifth Circuit determined that: (i) the FERC regulations did not give an automatic right to all QFs to legally enforceable obligations; and (ii) the State requirement that QFs produce “firm power” before a legally enforceable obligation was established was not a violation of PURPA and the FERC regulations. Commissioners' Response at 11-12.

         The Commissioners then cite another case from the Fifth Circuit, Power Resource Group Inc. v. Public Utility Commission of Texas, 422 F.3d 231 (5th Cir. 2005)(“Power Resource Group”), to support its proposition that its rule 570 comports with PURPA and the FERC regulations, see Commissioners' Response at 12. The Commissioners note, that in Power Resource Group, the Fifth Circuit stated that a Texas regulation that requires a facility to be within ninety days of producing power in order to establish a legally enforceable obligation was a “meaningful” implementation of PURPA. Commissioners' Response at 12-13 (quoting Power Res. Grp. v. Pub. Util. Comm'n of Tex., 422 F.3d at 238. The Commissioners adopt the Fifth Circuit's reasoning that other States' lack of prerequisites does not obligate New Mexico to have the same lack of prerequisites. See Commissioners' Response at 13 (citing Power Res. Grp. v. Pub. Util. Comm'n of Tex., 422 F.3d at 238).

         The Commissioners next undermine Great Divide's reliance on its cited cases, Grouse Creek Wind and JD Wind. See Commissioners' Response at 15. The Commissioners first note that Great Divide's cited case, JD Wind, later became the Exelon Wind case that the Commissioners use as support. See Commissioners' Response at 15. The Commissioners argue that appeals supersede both of Great Divide's cited FERC decisions. See Commissioners' Response at 15. The Commissioners then factually distinguish Great Divide's cases. See Commissioners' Response at 15. The Commissioners differentiate Grouse Creek Wind from the case by noting that Idaho's prerequisite for the creation of a legally enforceable obligation was a fully executed contract. See Commissioners' Response at 15. The Commissioners further note that an appeal to the Idaho Supreme Court, Idaho Power v. Idaho PUC, 155 Idaho 780, 316 P.3d 1276 (2013), superseded Grouse Creek Wind. See Commissioners' Response at 15-16. The Commissioners observed the Idaho Supreme Court concluded that the IPUC could require that a signed contract, or a mature project and a failure to negotiate with the utility, exist before the establishment of a legally enforceable obligation. See Commissioners' Response at 16. The Commissioners then note that the phrase “legally enforceable obligation” is only in the FERC regulations, not in PURPA, and that the Idaho Supreme Court found that the term is meant to “prevent a utility from circumventing the requirement that provide capacity credit for a QF merely by refusing to enter into a contract with the QF.” Commissioners' Response at 16.

         The Commissioners then distinguish FLS Energy from the case at issue. The Commissioners state that FLS Energy “cannot be support for [the] Great Divide's claims” because the Montana rule in FLS Energy is not analogous to rule 570. See Commissioners' Response at 16. The Montana rule required that a QF obtain an executed paper interconnection agreement before the legally enforceable obligation's establishment. See Commissioners' Response at 16. The Commissioners note that, even though the FERC did not strike down rule 570 when the case appeared before it, the FERC concluded that the Montana rule was inconsistent with PURPA and the FERC regulations only a month before Great Divide's case came before FERC. See Commissioners' Response at 17.

         12. El Paso Electric Company's Response.

         El Paso Electric Company responds. See El Paso Electric's Response at 1. El Paso Electric begins its response with a summary of PURPA's legislative history and its related rules and regulations. See El Paso Electric's Response at 2-7. El Paso Electric then makes five arguments. See El Paso Electric's Response at 7-18.

         First, El Paso Electric begins by disputing Great Divide's interpretation of the controlling law, 18 C.F.R. § 292.304(d). See El Paso Electric's Response at 8. El Paso Electric lays out its interpretation of 18 C.F.R. § 292.304(d). See El Paso Electric's Response at 8. It reads 18 C.F.R. § 292.304(d) as a statute that provides a QF with two choices. See El Paso Electric's Response at 8. El Paso Electric first argues that, under 18 C.F.R. § 292.304(d)(1), the QF can elect to “sell its energy on an ‘as available' basis, meaning that it has a right to sell its output to the utility, but the [QF] is under no obligation to sell its output to the utility if it can find a better price elsewhere.” El Paso Electric's Response at 8 (quoting 18 C.F.R. § 292.304(d)(1)). Second, under 18 C.F.R. § 292.304(d)(2), the QF can

impose a purchase obligation on the utility for a “specified term, ” and in return the qualifying facility has an obligation to sell its output to the utility for that “specified term.” But contrary to the implication in Great Divide's Motion for Summary Judgment, nothing in that language requires a state regulatory authority to promulgate a rule allowing the [QF] to impose the legally enforceable obligation on the utility at any time the [QF] chooses.

         El Paso Electric's Response at 8.

         El Paso Electric acknowledges that there is a temporal element in 18 C.F.R. § 292.304(d)(2) -- “prior to the beginning of the specified term” -- but states that this phrase refers to the time when the QF makes the decision as to how the utility will pay the QF for the energy and not the time when the legally enforceable obligation is created. See El Paso Electric's Response at 8-9. El Paso Electric states this requirement is meant to ensure that a QF does not change payment methods to whichever method is most advantageous at the time at the expense of the utility. See El Paso Electric's Response at 9. El Paso Electric further concludes that the rule is “silent” when a legally enforceable obligation is created because the FERC “left that decision up to the states.” El Paso Electric's Response at 10.

         Second, El Paso Electric argues that caselaw construing 18 C.F.R. § 292.304(d) controverts Great Divide's argument. El Paso Electric notes that the Fifth Circuit has construed 18 C.F.R. § 292.304(d)'s language, and that in construing the language, it rejected arguments similar to Great Divide's arguments in the present case. See El Paso Electric's Response at 10-11 (stating that Power Resource Group's rejected argument that requiring a QF to be within ninety days of operation before a legally enforceable obligation is established violates PURPA is “essentially identical” to Great Divide's argument that requiring interconnectedness before a legally enforceable obligation is established violates PURPA). El Paso Electric then notes that the Fifth Circuit discussed cases from several jurisdictions with differing outcomes to demonstrate that the “'FERC has given each state the authority to decide when [a legally enforceable obligation] arises in that state.'” El Paso Electric's Response at 11 (quoting Power Res. Grp. v. Pub. Util. Comm'n of Tex., 422 F.3d at 239). Finally, El Paso Electric reiterates the Fifth Circuit's conclusion that, if the FERC wanted to delineate more specific requirements for the creation of a legally enforceable obligation, it would have done so. See El Paso Electric's Response at 11 (citing Power Res. Grp. v. Pub. Util. Comm'n of Tex., 422 F.3d at 239). El Paso Electric then cites Exelon Wind, another Fifth Circuit case, for the proposition that the States have broad discretion to determine requirements for a legally enforceable obligation. See El Paso Electric's Response at 12. El Paso Electric notes that, while these Fifth Circuit cases are not authoritative, the cases are persuasive and that Great Divide neglects to distinguish them. See El Paso Electric's Response at 12.

         Third, El Paso Electric argues that, because the FERC gives States broad discretion in deciding the requirements for a legally enforceable obligation, States can weigh competing interests when deciding these requirements. See El Paso Electric's Response at 13. El Paso Electric supports its argument with policy reasons: (i) a legally enforceable obligation's establishment before a QF's facility is constructed may lead to the utility committing to purchase energy from a facility that is never built; and (ii) a utility and its customers may have to pay higher costs to recoup losses or to file a lawsuit against a reneging QF. See El Paso Electric's Response at 13. El Paso Electric concedes Great Divide's counterpoint that policy dictates a QF have certainty from utilities in order to obtain funding for their construction, but El Paso Electric states that this policy is one consideration that States are permitted, but not obligated, to weigh when deciding the legally enforceable obligation prerequisites. See El Paso Electric's Response at 14.

         Fourth, El Paso Electric argues that “Great Divide's reliance on FERC Declaratory Orders is misplaced.” El Paso Electric's Response at 14. El Paso Electric notes that Great Divide has relied upon the FERC's rulings that a legally enforceable obligation arises when a QF commits to sell power in the future, and not when the QF is ready to sell power. See El Paso Electric's Response at 14 (citing Great Divide MSJ at 17.) El Paso Electric argues that Great Divide cannot rely upon these FERC rulings because: (i) declaratory orders are “nothing more than [] informal guidance document[s]”; (ii) the FERC declaratory orders rely on the reasoning from JD Wind 1, reasoning the Fifth Circuit later rejected in Exelon Wind; and (iii) FERC declaratory orders are not notice-and-comment rulemaking procedures and, therefore, do not replace existing FERC rules. El Paso Electric's Response at 14-16.

         Fifth, El Paso Electric argues that, for Great Divide's argument that a QF can establish a legally created obligation at any time, Great Divide took sections of Order No. 69 out of context. See El Paso Electric's Response at 17. El Paso Electric argues that Great Divide mistakes the certainty that QFs are entitled to regarding future sales as the financial certainty needed to construct a facility, but the FERC meant for certainty to “refer to the utility's obligation to file its avoided cost estimates with the state regulatory agency under 18 C.F.R. 292.302.” El Paso Electric's Response at 17. El Paso Electric also argues that Great Divide misinterprets the part of Order No. 69 that mentions “contractual commitments based, by necessity, on estimates of future avoided costs, ” and El Paso Electric states that the provision “means that FERC does not consider it a violation of PURPA if the [QF] is able to lock in estimated avoided costs that may ultimately differ from the utility's actual avoided costs.” El Paso Electric's Response at 17 (quoting Order No. 69, at 45 Fed. Reg. 12, 224). El Paso Electric last argues that Great Divide ...


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