District Court Order Provides PURPA Guidance – On “As Applied” Versus Implementation Claims

Several months ago FERC issued an Intent Not to Act on New Mexico Public Regulation Commission’s (NMPRC) LEO standard, which (seemingly) was challenged by a QF’s (Great Divide) Petition for Enforcement under PURPA. The NMPRC had adopted a very strict LEO standard, that required that QFs must be ready to interconnect and deliver energy before any legally enforceable obligation may be created to purchase the power at avoided cost rates. Great Divide turned to federal district court for relief, as one might expect. There was an expectation that this case could provide some important guidance as to the current chasm between many purchasing utilities and the QF industry as to at what point of time a LEO should be found to have been established. Instead, what the industry received was a lengthy order dissecting whether Great Divide had truly brought an implementation claim as opposed to an “as applied” claim. The court (2019 WL 2144829) found that Great Divide brought an “as applied” claim largely because Great Divide was challenging an NMPRC order finding it had no LEO rather than the rule (Rule 570) on which such order was based and/or the NMPRC’s interpretation of that rule. The bases for concluding that the claim brought was “as-applied” included the following

• Great Divide introduced its Complaint by explaining generally that it was seeking an order of this court declaring that the NMPRC order, violated federal law.
• Great Divide argued the order imposed improper obligations on it.
• Great Divide sought a declaration that the NMPRC Order violated PURPA and FERC regulations insofar as it placed improper obligations on Plaintiffs.
• The Great Divide complaint to the NMPRC did not challenge Rule 570’s lawfulness or the lawfulness of the NMPRC’s interpretation of Rule 570.

In sum, the court found:

Great Divide could have stated – but did not state – an as-implemented challenge. It might have alleged that rule 570 violated PURPA and the FERC regulations, or that the NMPRC’s interpretation, beginning with the Western Water and Power case, violated the federal laws. It could have asked for relief declaring rule 570 invalid or declaring the NMPRC’s interpretation of rule 570 invalid. It might have asked for an order “[d]eclaring that the NM Order violates PURPA and FERC regulations insofar as it” interprets rule 570 not to impose a legally enforceable obligation on electric utilities before a qualifying facility is ready to interconnect, and enjoining the NMPRC to reach an interpretation consistent with PURPA and the FERC regulations.

But, Great Divide did none of those things. Yet. The court found “Great Divide could file an amended complaint that adequately alleges an as-implemented challenge.” Indeed, the court found Great Divide could amend its Complaint as a matter of right to bring an implementation claim. That said, if the same court deems the NMPRC’s interpretation unlawful, implementing the court’s declaration might nevertheless require an NMPRC rulemaking. An amended complaint by Great Divide may place it in the very same position as the Plaintiffs discussed in today’s concurrent blog post addressing the limits on federal courts in fashioning remedies. That is, Great Divide could obtain an order that the NMPRC’s Rule 570 was unlawful, but that does not mean the federal court would find Great Divide had a LEO. Rather, what Great Divide would have is an NMPRC with no lawful LEO standard and presumably no legal ability to set one retroactively.