Solar v. City of Farmington

2 F.4th 1285

Vote SOLAR ; Michael Eisenfeld; James Neidhart; Jeffrey Neidhart; Steven Bair; Neil Tribbett; Jerry Knutson; Vickie Slikkerveer; the Coliseum, Inc., d/b/a the Colosseum Gym ; David Fosdeck; Stephen Ellison; Erin Hourihan, Plaintiffs - Appellants,

v.CITY OF FARMINGTON, d/b/a Farmington Electric Utility System, Defendant - Appellee.

No. 20-2028

United States Court of Appeals, Tenth Circuit.

FILED June 28, 2021

David C. Bender (Sara Gersen and Chinyere Osuala, with him on the briefs), Earthjustice, Madison, Wisconsin, for Plaintiffs - Appellants.

Kristen Connolly McCullough (Sean M. Neal, Duncan, Weinberg, Genzer & Pembroke, PC, and Jennifer Breakell, City Attorney for the City of Farmington, New Mexico, with her on the brief), Duncan, Weinberg, Genzer & Pembroke, PC, Washington, DC, for Defendant - Appellee.

Before McHUGH, Circuit Judge, LUCERO, Senior Circuit Judge, and CARSON, Circuit Judge.

LUCERO, Senior Circuit Judge.

This is a case about the contours of federal versus state jurisdiction under the jurisdictional scheme established by the Public Utility Regulatory Policies Act (PURPA). Pub. L. 95–617, 92 Stat. 3117 (1978). Generally, federal courts are understood to have jurisdiction over facial, or "as-implemented," claims regarding the implementation of federal agency rules by individual utilities or state utility commissions, while state courts hear individual "as-applied" claims regarding the application of those implementations to individual parties. In this case, the district court rejected that established distinction, introducing a particularized and novel interpretation of PURPA's jurisdictional scheme under which federal courts have jurisdiction only if a utility fails to make any reasonable effort to implement a Federal Energy Regulatory Commission (FERC) rule. In light of this interpretation, the district court granted defendant City of Farmington, New Mexico's motion to dismiss a claim brought by Plaintiffs, a number of Farmington residents who have installed solar panels on their homes or businesses and an advocacy group called Vote Solar.

An adoption of the district court's interpretation would create a circuit split on this issue. We see no reason to do so. The statutory text supports the jurisdictional framework as consistently interpreted by other federal courts, and every circuit court to address the issue, as well as the relevant federal agency, has operated under this framework since PURPA's passage. We join them.

We reverse the district court's grant of the motion to dismiss and remand for further proceedings.

I

We proceed in two parts. Part A covers the events that led to the proceedings below and this appeal; Part B discusses the statutory background to this case.

A

In 2017, the City of Farmington (Defendant) adopted an ordinance that imposed additional charges on customers who generate their own electricity. See City of Farmington Res. 2017-1616. Defendant argues this change reflected the true cost imposed by these customers on the electric grid; Plaintiffs argue the charges amounted to price discrimination in violation of FERC rules. See 18 C.F.R. §§ 292.304(a), 292.305(a). This appeal does not require resolution of that substantive dispute.

After FERC declined Plaintiffs’ petition to intervene, Plaintiffs brought suit in federal district court. Defendant moved to dismiss Vote Solar and several of the other plaintiffs for lack of standing. Sua sponte, the district court requested supplemental briefing concerning its statutory subject-matter jurisdiction. The parties, operating under the assumption that the as-implemented versus as-applied framework governed subject-matter jurisdiction, submitted the requested briefing, with Plaintiffs arguing they were lodging an as-implemented claim and Defendant characterizing the claim as as-applied. Due to its interpretation of PURPA's jurisdictional provisions, the district court concluded otherwise, dismissing the case for failure to state a claim under Rule 12(b)(6). This dismissal was based on the court's conclusion that because Plaintiffs did not argue that Defendant had made no effort to implement FERC's price discrimination rules, its claim did not fall within the district court's jurisdiction. It also deemed Defendant's motion regarding standing moot.¹ Plaintiffs now appeal.

B

In 1978, Congress passed PURPA, a law intended to promote the development of small-scale renewable energy generation. See New York v. F.E.R.C., 535 U.S. 1, 9, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002). PURPA prohibited utilities from engaging in price discrimination when they bought or sold supplemental power from or to small energy producers. For example, when a home or business with solar panels needs to buy extra power from or wants to sell surplus power to the local utility, PURPA bars the utility from charging that home or business different rates than it would any other customer or supplier. See 16 U.S.C. § 824a-3-(b) ("Section 210(b)"² ). PURPA directs FERC to promulgate rules that would effectuate this anti-price discrimination scheme. See Section 210(a).

The jurisdictional scheme established in PURPA's Section 210 is what is at issue in this case. In one respect, it is a simple scheme. Section 210(a) directs FERC to issue the anti-price discrimination rules required by Section 210(b). Section 210(f) requires state public utility commissions and nonregulated independent utilities³ to "implement" the rules issued by FERC under Section 210(a) by incorporating them into their regulations and procedures. What complicates the scheme is the question this case demands we answer: how—or, rather, where—the anti-price discrimination requirement is to be enforced. If a utility fails to meet its Section 210(f) obligations to "implement such rule[s]," there are two jurisdictional subsections that govern enforcement actions. Section 210(g) gives state courts jurisdiction to consider any person's challenge to "any proceeding conducted by a [utility] for purposes of implementing any requirement of a rule under [Section 210(a)]." Alternatively, Section 210(h) permits small power producers to ask FERC to enforce a utility's obligation to implement its rules under Section 210(f), and, if FERC does not do so, the small power producer may bring suit in federal district court against the utility to enforce those Section 210(f) requirements.

Demarcating the precise boundaries of state versus federal jurisdiction under Section 210 was left to the courts. While no single approach has been unanimously adopted, the most prominent paradigm came to center on a distinction between "as-implemented" and "as-applied" claims. As-implemented claims involve a contention that a utility failed to implement a FERC rule, rendering its regulations or procedures facially illegitimate. These claims fall within the jurisdiction of federal courts provided by Section 210(h)(2). In contrast, as-applied claims revolve around allegations that a utility's implementation plan is unlawful as applied to the individual petitioner. State courts have jurisdiction over as-applied claims under Section 210(g). This paradigm emerged from two district court cases⁴ and has been adopted by the First, Fifth, and Eleventh Circuits.⁵ We have never considered the issue, but a separate District of New Mexico court recently employed this framework. See Great Divide Wind Farm 2 LLC v. Becenti Aguilar, 405 F. Supp. 3d 1071, 1091-92 (D.N.M. 2019).

This District of New Mexico court diverged, resolving this case by way of a different and novel interpretation of Section 210's jurisdictional scheme. Rejecting the as-implemented versus as-applied paradigm, the district court concluded that the jurisdiction of federal courts is substantially more limited. It asserted that federal district courts may only address claims concerning whether a utility "outright fail[ed] to implement a FERC rule." Vote Solar v. City of Farmington, 2020 WL 673087, at *8 (D.N.M. Feb. 11, 2020). By this the district court appears to have redefined the question as whether the utility made any reasonable effort at implementation, rather than whether the implementation was successful or consistent with the FERC rule. See id. ("This reading ... focuses on distinguishing compliance with FERC rules versus compliance with PURPA's mandate to make reasonable implementation efforts. Federal jurisdiction ... should not be stretched to cover disputes over how well a regulatory entity implements FERC's rules." (emphasis in original)). Under the district court's interpretation, the task of ensuring that a utility's actions actually "comply with FERC's requirements" is left with state courts alone. Id.

II

"The legal sufficiency of a complaint is a question of law, and a Rule 12(b)(6) dismissal is reviewed de novo." Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009). We also review questions of statutory interpretation de novo. Ausmus v. Perdue, 908 F.3d 1248, 1252 (10th Cir. 2018).

Section 210(h)(2) empowers federal courts to "enforce the requirements of subsection (f)," and subsection (f) states that utilities "shall, after notice and opportunity for public hearing, implement [FERC's] rule[s]." The scope of federal jurisdiction under Section 210 is thus fixed by the word "implement." At bottom, the district court reinterpreted the word ‘implement’ to require only a reasonable effort by the utility to incorporate a FERC rule, while Plaintiffs argue that to ‘implement’ a rule requires the utility to act or regulate consistently with the rule.

Of these two proposed definitions, Plaintiffs’ is the more persuasive. At the level of plain meaning, it seems to us a non sequitur to claim that a utility can "implement" a rule by issuing a regulation that is inconsistent with that rule. For example, if a supervisor establishes guidelines and tells an employee under supervision to implement them (picture here a doctor-nurse, architect-draftsman, judge-clerk situation), and...