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Alfalfa Solar I LLC v. Portland General Electric Co.

United States District Court, D. Oregon

May 31, 2018

ALFALFA SOLAR I LLC, a Delaware limited liability company, et al., Plaintiffs,
PORTLAND GENERAL ELECTRIC COMPANY, an Oregon Corporation, Defendant.

          Robert A. Shlachter and Keil M. Mueller, Stoll Stoll Berne Lokting & Shlachter P.C., Of Attorneys for Plaintiffs.

          Dallas S. DeLuca and Anit Jindal, Markowitz Herbold P.C., Of Attorneys for Defendant.


          Michael H. Simon, United States District Judge

         Plaintiffs are ten single-member limited liability companies in the business of generating and selling solar energy, each of which has executed a contract to sell energy to Defendant Portland General Electric (“Defendant” or “PGE”). On January 1, 2018 Plaintiffs commenced this action against Defendant seeking a declaratory judgment interpreting a disputed term that is common to each of their contracts. Before the Court is Defendant's motion to dismiss the complaint for lack of subject matter jurisdiction or, in the alternative, dismiss or stay proceedings. For the following reasons, Defendant's alternative motion is granted, and this case is stayed under the doctrine of primary jurisdiction.


         A. Regulatory Framework

         Under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) and rules promulgated by the Federal Energy Regulatory Commission (“FERC”), utilities must offer to purchase power from certain qualifying energy producers (“qualifying facilities” or “QFs”) at established prices that are calculated in accordance with rules adopted by the FERC. 16 U.S.C. § 824a-3(b). FERC regulations require that the price reflect the utility's “avoided cost”-the cost that the utility would otherwise pay to produce the power itself. 18 C.F.R. § 292.304. FERC rules also require that utilities offer that price to QFs over a “specified term, ” pursuant to a “legally enforceable obligation, ” also referred to here as a contract or purchase price agreement (“PPA”). 18 C.F.R. § 292.304(d)(2). The price is calculated based on the utility's avoided cost at the time that the obligation is incurred, and thus may not reflect the utility's actual avoided cost over the entirety of the fixed term.

         PURPA tasks the states with implementing the FERC regulations. 16 U.S.C. § 824a-3(f). The Oregon Public Utilities Commission (“PUC”) is the state agency responsible for implementing FERC regulations in Oregon, which includes the “power and jurisdiction to supervise and regulate every public utility” in Oregon. ORS. 756.040(2). The PUC has authority to set the rates to be offered by a utility to QFs and establish “the terms and conditions for the purchase of energy” by utilities from QFs. ORS 758.535(2)(a). Pursuant to this authority, the PUC reviews and approves standard PPAs that PGE and other utilities offer to QFs to ensure that such PPAs are in compliance with state and federal statutes, regulations, and policies. PPAs are not enforceable unless and until they have been approved by the PUC.

         On May 13, 2005, the PUC issued an order requiring utilities to offer Standard PPAs to QFs for a term of twenty years. For the first fifteen years of that term, per the PUC order, utilities must offer established prices (referred to as the “Renewable Fixed Price Option”). The PUC permitted utilities to develop their own “Standard PPAs” implementing the requirements of the May 2005 order, subject to PUC approval.

         B. Procedural Background

         Plaintiffs are QFs that have each entered into a PPA with Defendant, which is an Oregon utility. Plaintiffs executed their respective PPAs with Defendant between January 25, 2016 and June 27, 2016. Some provisions of the “Standard PPAs” signed by the Plaintiff QFs vary, but the terms of each PPA signed by the Plaintiff QFs that are relevant to the issues raised in this lawsuit are identical. The PUC approved these Standard PPAs for use by Defendant on September 22, 2015. Each Standard PPA signed by Plaintiffs provides that the Plaintiff QF will develop a solar electric power generation facility and, upon successful construction and achievement of commercial operation, will sell one hundred percent of the net power generated by the facility to PGE. The facility that each Plaintiff QF intends to develop will not be operational until approximately three years after the date on which the Standard PPAs were executed and until then will be unable to transmit power.

         The Standard PPA's Renewable Fixed Price Option provides that Defendant will pay each Plaintiff QF a fixed rate equal to Defendant's “Renewable Avoided Costs in effect at the time the agreement is executed” for all power transmitted and sold to Defendant “for a maximum term of 15 years.” Upon the expiration of the 15-year term, the rate that PGE pays for the remainder of the contract will be based on a daily index price, known as the Mid-C Index Price. Plaintiffs allege that, although the Mid-C Index Price for any given day cannot be known in advance, the Mid-C Index Price will be substantially lower than Defendant's Renewable Avoided Costs at any given time.

         In proceedings before the PUC involving other QFs who have signed versions of the same Standard PPA as Plaintiff QFs, Defendant has taken the position that the 15-year term begins to run on the date that the PPA is executed (“Execution Date”). In this lawsuit, Plaintiffs seek a declaration from the Court that the 15-year fixed rate term does not begin to run until the facilities are commercially operational (“Operational Date”). Because each PPA signed by the Plaintiff QFs anticipates that Plaintiffs' facilities will not be operational under three years after the Execution Date, Defendant's interpretation of the 15-year term start date results in the QFs being guaranteed the fixed Renewable Avoided Cost rate for three years fewer than if the 15-year start date begins on the Operational Date.

         In a separate proceeding before the PUC (referred to here by its PUC docket number, “UM 1805”), three trade associations representing the interests of different QFs filed a complaint against Defendant, arguing that Defendant's Standard PPA violated prior PUC orders by measuring the 15-year term from the Execution Date and not the Operational Date. The PUC ruled that, because the PUC had reviewed and approved Defendant's Standard PPA, that PPA did not violate any commission order. The PUC also ruled, however, that in future Standard PPAs, Defendant should measure the 15-year period from the Operational Date and ordered Defendant to re-write its Standard PPA to comply explicitly with that policy.

         After the PUC issued its order, Plaintiffs attempted to intervene in the UM 1805 proceeding, seeking an order from the PUC that the Standard PPAs actually provided that the 15-year fixed rate term starts on the Operational Date. On October 16, 2017, the PUC ruled that it was barred by statute from granting a petition to intervene after the close of evidence, but noted that Plaintiffs could file a new complaint under ORS 756.500. The original complainants in UM 1805, meanwhile, filed an application for reconsideration or rehearing, seeking a similar order interpreting the existing Standard PPAs. In response to that application, the PUC issued a second order in UM 1805, clarifying that Defendant's Standard PPAs “may have limited the availability of fixed prices to the first fifteen years measured from contract execution, ” and that the PUC had “neither examined nor addressed ...

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