Bankston v. Alabama Public Service Commission

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

JAMES H. BANKSTON, JR., )

et al., )

)

Plaintiffs, )

) CIVIL ACTION NO.

v. ) 2:21cv469-MHT

) (WO)

ALABAMA PUBLIC SERVICE )

COMMISSION, et al., )

)

Defendants, )

)

ALABAMA POWER COMPANY, )

)

Intervenor-Defendant. )

OPINION AND ORDER

This case is about alleged price discrimination

against small-scale solar-power production in Alabama.

But the merits of that issue are not the focus of this

opinion. Instead, this opinion primarily concerns

whether federal courts can hear the case at all under

the jurisdictional scheme established by the Public

Utility Regulatory Policies Act (PURPA), an act that

seeks to promote renewable energy production and

charges the Federal Energy Regulatory Commission (FERC)

with prescribing rules to encourage cogeneration of

energy and small power production. See Pub. L. 95–617,

92 Stat. 3117 (1978).

Plaintiffs James H. Bankston, Jr., Ralph B.

Pfeiffer, Jr., Mark Johnston, Teresa K. Thorne, and

GASP, Inc. filed this enforcement action pursuant to

Section 210(h)(2)(B) of PURPA, 16 U.S.C.

§ 824a-3(h)(2)(B),1 against defendant Alabama Public

Service Commission (APSC).2 The plaintiffs contend that

the APSC failed to implement several PURPA regulations

by requiring customers who generate their own solar

1. PURPA’s provisions are generally referred to in

the caselaw by their location in the original act

rather than their codification in the code. While

PURPA as a whole is codified at 16 U.S.C. § 824a,

Section 210, the primary provision discussed here, is

codified at 16 U.S.C. § 824a-3. The lettering of

Section 210 maps to the code lettering. For example,

Section 210(a) is 16 U.S.C. § 824a-3(a), Section 210(b)

is 16 U.S.C. § 824a-3(b), and so forth.

2. The plaintiffs also name the APSC

commissioners--Twinkle Andress Cavanaugh, Jeremy H.

Oden, and Chris Beeker--as defendants in their official

capacities. For ease of reference, when the court

refers to the APSC, it is referring to both the

Commission and the commissioners in their official

capacities.

power to pay discriminatory, unsupported, and unneeded

charges for backup power. The APSC filed a motion to

dismiss, challenging the court’s subject-matter

jurisdiction and arguing that one of the plaintiffs’

counts fails to state a claim upon which relief may be

granted.3

For the reasons that follow, the court denies this

motion.

I. MOTION-TO-DISMISS STANDARD

The APSC brings a motion to dismiss under Rule

12(b)(1) of the Federal Rules of Civil Procedure for

lack of subject-matter jurisdiction and Rule 12(b)(6)

for failure to state a claim upon which relief can be

granted.

Challenges to subject-matter jurisdiction under

3. After the initial complaint was filed, Alabama

Power Company moved to intervene to defend the APSC’s

actions, and that motion was granted without

opposition. Alabama Power also filed a motion to

dismiss on largely the same grounds as those raised by

the APSC, as explained in more detail in a later

footnote.

Rule 12(b)(1) bifurcate based on whether the challenge

is ‘facial’ or ‘factual.’ See McElmurray v. Consol.

Gov’t of Augusta-Richmond Cnty., 501 F.3d 1244, 1251

(11th Cir. 2007). When the party opposing jurisdiction

brings a ‘facial challenge’ to subject-matter

jurisdiction, the court determines jurisdiction based

only on the allegations in the complaint, which it

assumes are true. See Houston v. Marod Supermarkets,

Inc., 733 F.3d 1323, 1335 (11th Cir. 2013). In

contrast, with “a factual attack on subject matter

jurisdiction, the district court may consider extrinsic

evidence such as deposition testimony and affidavits.”

Carmichael v. Kellogg, Brown & Root Servs., Inc., 572

F.3d 1271, 1279 (11th Cir. 2009) (citation omitted).

The APSC here raises a facial challenge to the

subject-matter jurisdiction of the plaintiffs’ claims;

therefore, the court restricts its review of the facts

to those alleged within the four corners of the

complaint to determine if it has subject-matter

jurisdiction.

To survive a motion to dismiss under Rule 12(b)(6),

a complaint “must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007)). “A claim has facial

plausibility when the plaintiff pleads factual content

that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct

alleged.” Id.

II. FACTUAL BACKGROUND

The facts, taken in the light most favorable to the

plaintiffs, are as follows. Four of the plaintiffs are

residential customers of Alabama Power who own rooftop

or ground-mounted solar photovoltaic (PV) systems,

ranging from 1.86 to 6 kilowatts (kW). Second Amended

Complaint (Doc. 76) at 5-6. The other plaintiff, GASP,

Inc., is a non-profit organization that “seeks to

improve the environment, economy and public health of

Alabama.” Id. at 7. Two of the individual plaintiffs

are members of GASP, Inc. Id.

The APSC is the Alabama regulatory authority tasked

with regulating “the rates charged and services

provided by public utilities in Alabama, including

Alabama Power Company.” Id. at 8. In 2021, Alabama

Power proposed “Revision Seventh” to Rate Rider RGB and

the APSC approved it. See Rate Rider RGB (Doc. 76-4)

at 36.4 Rate Rider RGB provides the rate schedule,

terms, and conditions for three services--supplementary

power, backup power, and maintenance power--for all

Alabama Power customers with “on-site, non-emergency

electric generating capacity that operates in parallel

with [Alabama Power’s] system”. Id. These terms and

rates apply to the four individual plaintiffs. See

Second Amended Complaint (Doc. 76) at 5-6.

4. “[T]he district court may always consider

exhibits attached to the complaint on a [motion to

dismiss], because exhibits are part of the pleadings.”

Basson v. Mortg. Elec. Registration Sys., Inc., 741 F.

App’x 770, 770-71 (11th Cir. 2018). Rate Rider RGB is

an exhibit attached to the plaintiffs’ second amended

complaint; therefore, the court may consider it.

Rate Rider RGB allows Alabama Power to charge

residential solar customers a backup-power fee called

the “Capacity Reservation Charge”. See Rate Rider RGB

(Doc. 76-4) at 38. The Capacity Reservation Charge is

based on the size of the customer’s self-generation

equipment. See id. It allows Alabama Power to assess

a backup-power charge of $ 5.41 per kW, per month,

against residential customers who generate some of

their own electricity. See id. For example, a

customer with a 5kW solar array is charged an

additional $ 27.05 each month for backup power, or

roughly $ 9,500 over the typical 30-year lifespan of a

5kW solar array. See id. This backup-power charge

creates a disparity between customers who generate some

of their own power and those who do not. While both

sets of customers pay a fee that includes a base charge

plus a volumetric charge based on their energy usage,

customers who generate some energy must also pay the

Capacity Reservation Charge. See Second Amended

Complaint (Doc. 76) at 19-20.

Although the backup-power charges nominally apply

to both customers with solar power and those with other

types of non-emergency energy-generating equipment, the

charges were “developed based upon solar production

data and with the expectation that customer solar

adoption was beginning to take root in Alabama.”

Second Amended Complaint (Doc. 76) at 12. The

backup-power charges have no basis in cost and are

“based purely on [Alabama Power’s anticipated] revenue

decreases ... from solar adoptions, not from any cost

of service increase for providing electric service to

solar customers.” Id. at 19 (emphasis in original).

“Alabama Power’s own evidence showed that solar

customers are less costly to serve than comparable

customers without solar,” and that “to the extent of

[solar customers’] continuing need for electric service

to supplement their system’s production, solar

customers pay fully for the fixed costs associated with

such supplementary service in the same way that

non-solar customers [do].” Id. at 13-14.

The effect of the backup-power charges is that the

plaintiffs and other similarly situated customers “pay

more for the same amount of electric service than

customers who reduce their electricity usage by other

means, such as by installing energy efficient lighting

or appliances.” Second Amended Complaint (Doc. 76) at

4.

Rate Rider RGB added an alternative option, Rate

FD-D, for residential customers with or without

energy-generating capacity. See id. at 15. Although

Rate FD-D does not require payment of the Capacity

Reservation Charge for customers who produce some

energy, it includes a ratcheted demand charge on top of

the base and volumetric charges. See id. The

ratcheted demand charge is a “monthly demand charge

that is based on the greater of (1) the maximum demand

measured during the peak period for the billing month

or (2) 90% of the highest maximum peak period demand

established during the previous eleven months.” Id.

In other words, “if a customer’s peak demand is low in

one particular month, that customer still must pay 90%

of the highest maximum peak period demand from the

previous eleven months.” Id. While this rate scheme

provides another option for residential solar

customers, they still must pay an additional

fee--either a demand charge under Rate FD-D or a

backup-power charge under the standard residential

rate--that residential customers without solar arrays

can opt out of by selecting Rate FD, which does not

charge such customers a fee beyond their actual energy

usage. Id. at 16. Moreover, the complaint alleges,

these extra charges for customers with solar power are

unsupported because solar customers cost less to serve

than customers without solar. Id.

Following the approval of Rate Rider RGB, the

plaintiffs petitioned FERC to intervene and enforce

PURPA’s anti-discrimination requirements--a necessary

prerequisite for federal jurisdiction.

After FERC declined the plaintiffs’ supplemental

petition to initiate an enforcement action against the

APSC, Notice of Intent Not to Act (Doc. 76-5),5 the

plaintiffs filed the second amended complaint in this

federal district court.

III. LEGAL BACKGROUND

In 1978, Congress passed PURPA, a law designed in

part to expand the use of renewable energy generation.

See New York v. F.E.R.C., 535 U.S. 1, 9 (2002). To

further that goal, Section 210 of PURPA prohibits

electric utilities from charging unjust, unreasonable,

and discriminatory rates to customers who generate

their own renewable energy. See 16 U.S.C. §§ 824a-3(a)

5. When the plaintiffs first petitioned FERC,

asserting the same arguments as in their supplemental

petition, the Chairman of FERC and a FERC Commissioner

wrote a joint concurrence expressing their concern

“that the [APSC] may be violating [FERC’s] PURPA

regulations, undermining the statute’s purpose of

encouraging” customer-sited renewable-energy

production. Second Amended Complaint, Exhibit C

(Doc. 76-3). The joint concurrence concluded that the

“Petitioners have presented a strong case that the

[APSC] failed to adhere to [Section 210(f)’s]

regulations.” Id. That position was reiterated by a

FERC Commissioner when responding to the supplemental

petition, which was filed after Revision Seventh to

Rate Rider RGB. See Second Amended Complaint, Exhibit

E (Doc. 76-5) at 4.

& (c). Specifically, “PURPA prohibited utilities from

engaging in price discrimination when they bought or

sold supplemental power from or to small energy

producers.” Vote Solar v. City of Farmington, 2 F.4th

1285, 1287 (10th Cir. 2021). For example, “when a home

or business with solar panels needs to buy extra power

from [] the local utility, PURPA bars the utility from

charging that home or business different rates than it

would any other customer or supplier.” Id.

Upon its passage, PURPA directed FERC to promulgate

rules that would effectuate its

anti-price-discrimination scheme. FERC issued such

rules in 1980, largely echoing PURPA’s mandates. Id.

For example, FERC’s rules require that rates for sales

of power (1) “[s]hall be just and reasonable and in the

public interest” and “[s]hall not discriminate against

any qualifying facility in comparison to rates for

sales to other customers,” 18 C.F.R. § 292.305(a)(1)(i)

& (ii) (mirroring Section 210(c)); and (2) “[s]hall not

be based upon an assumption (unless supported by

factual data) that forced outages or other reductions

in electric output by all qualifying facilities on an

electric utility’s system will occur

simultaneously ... .” 18 C.F.R. § 292.305(c)(1).6

‘Rates for sales’ are considered nondiscriminatory if

they are “based on accurate data and consistent

systemwide costing principles” and “apply to the

utility’s other customers with similar load or other

cost-related characteristics.” 18 C.F.R.

§ 292.305(a)(2).

PURPA also provides an enforcement mechanism, and,

with it, a jurisdictional framework. Section 210(a)

directs FERC to issue the anti-price-discrimination

rules required by Section 210(b). See 16 U.S.C.

§§ 824a-3(a) & (b). Section 210(f) mandates that state

regulatory authorities, such as the APSC, “implement”

the rules issued by FERC under Section 210(a).

6. “Qualifying facility means a cogeneration

facility or a small power production facility that is a

qualifying facility under” 18 C.F.R. §§ 292.201 through

292.211. 18 C.F.R. § 292.101(b)(1). See also 16 U.S.C.

§ 824a-3(l); 16 U.S.C. § 796.

16 U.S.C. §§ 824a-3(f). While this scheme is

straightforward, “[w]hat complicates ...[it] is the

question this case demands [the court] answer: how--or,

rather, where--the anti-price-discrimination

requirement is to be enforced.” Vote Solar, 2 F.4th at

1288.

The statutory text provides some guidance. If a

state regulatory authority fails to meet its Section

210(f) obligations to “implement such rule[s] (or

revised rule[s]),” 16 U.S.C. § 824a-3(f), two

jurisdictional subsections govern enforcement actions:

Section 210(g) and Section 210(h).

Section 210(g) grants state courts jurisdiction to

hear lawsuits brought (1) to obtain “judicial review

[of] ... any proceeding conducted by a State regulatory

authority or nonregulated electric utility for purposes

of implementing any requirement of a rule under

[Section 210(a)]” or (2) “to enforce any requirement

established by a State regulatory authority or

nonregulated electric utility pursuant to [Section

210(f)].” 16 U.S.C. § 824a-3(g) (citing 16 U.S.C.

§ 2633).

Section 210(h) permits any electric utility,

qualifying cogenerator, or qualifying small power

producer to petition FERC to enforce a state regulatory

authority’s obligation to implement FERC’s rules.

16 U.S.C. § 824a-3(h)(2)(B). If FERC does not initiate

an enforcement action, the petitioner may bring suit in

federal district court against the state regulatory

authority to enforce Section 210(f)’s implementation

requirement. See 16 U.S.C. § 824a-3(h)(2)(B). (It is

undisputed that the individual plaintiffs in this case

are qualifying small power producers.)

In determining when federal jurisdiction is proper

under PURPA, most courts have applied an approach that

relies upon a distinction between “as-implemented” (or

“implementation”) and “as-applied” claims. Under that

approach, federal courts are understood to have

jurisdiction over implementation claims, while state

courts must hear as-applied claims. Generally

speaking, implementation claims contend that a state

regulatory authority failed to implement a FERC rule.

See Vote Solar, 2 F.4th at 1288. In contrast,

as-applied claims usually focus on whether a regulatory

authority or utility “appl[ied] its own rules

improperly to individual customers.” Id. at 1290. The

type of claim brought by the plaintiffs thus determines

whether this court has jurisdiction. See Power

Resource Group, Inc. v. Public Utility Comm’n of Texas,

422 F.3d 231, 234-35 (5th Cir. 2005).

Put differently, federal courts have jurisdiction

over challenges to state regulatory rules that are

unlawful as written, not rules that are lawful but

applied unlawfully to individual customers.

Unfortunately, determining whether a claim is an

implementation claim or an as-applied claim “has long

vexed utilities, qualifying facilities, state utility

commissions, and even FERC itself.” Portland Gen.

Elec. Co. v. F.E.R.C., 854 F.3d 692, 697 (D.C. Cir.

2017).7

PURPA’s jurisdictional question is complicated, but

two things are clear. PURPA mandates that regulatory

7. In making this determination, courts often

consider, for example, whether the challenged

regulation is of broad applicability to an identifiable

class or specific to an individual customer. When an

individual brings a challenge to a rule or action that

applies only to him, courts have viewed the lawsuit as

raising an as-applied claim. See Swecker v. Midland

Power Co-op., 807 F.3d 883, 886 (8th Cir. 2015)

(finding that the calculation of a specific avoided

costs rate in an individual contract was an as-applied

challenge); CED Red Lake Falls Cmty. Hybrid, LLC v.

Minnesota Pub. Utilities Comm’n, No. 19-CV-1468

(NEB/LIB), 2020 WL 780055, at *4 (D. Minn. Feb. 18,

2020) (Brasel, J.) (dismissing the case for lack of

subject-matter jurisdiction because Red Lake Falls’

claim challenges how the Minnesota Public Utilities

Commission set Red Lake Falls’ avoided cost rate).

However, when a “broad scope” of customers, or “class”

of customers, are affected by the challenged state

regulatory authority’s rule, then the challenge is an

implementation claim. See Occidental Chem. Corp. v.

Louisiana Pub. Serv. Comm’n, 494 F. Supp. 2d 401, 410

(M.D. La. 2007) (Brady, J.) (finding a challenge to a

“new methodology for calculating [a rate]” to be an

implementation claim because the methodology impacted a

“broad scope of entities”); ConocoPhillips Co. v. Dep’t

of Water & Power, City of Los Angeles, No.

CV075742ABCJTLX, 2008 WL 11422174, at *4 (C.D. Cal.

June 20, 2008) (Collins, J.) (finding an implementation

claim where a challenged rate schedule discriminated

against all cogeneration customers, not just the

plaintiff).

authorities implement FERC rules, and it empowers

federal courts to evaluate whether the regulatory

authorities’ implementation was successful. But if a

regulator or utility applies a regulation improperly to

individual customers, the customers must bring a claim

in state court.

IV. DISCUSSION

The plaintiffs bring three counts under PURPA,

asserting that the APSC failed to implement FERC’s

rules when it approved Rate Rider RGB’s backup-power

charges because those charges: (1) are based solely on

Alabama Power’s lost revenue and, therefore, are not

just, reasonable, or in the public interest but rather

discriminate against solar customers; (2) are mandatory

for a class of customers, even though those customers

do not in fact want, need, or even use backup power;

and (3) are based on unsupported assumptions about

electric output by solar customers.

The APSC’s motion to dismiss advances two

overarching arguments. First, it contends that the

federal judiciary lacks subject-matter jurisdiction to

hear the plaintiffs’ claims because they are as-applied

challenges, and thus exclusively within the

jurisdiction of the state courts under PURPA. Second,

it asserts that, even if this court has jurisdiction

over Count Two’s mandatory backup charge, that count

nonetheless fails to state a claim.

The court will take each argument in order and then

address the standing of GASP. For the following

reasons, the court finds that it has subject-matter

jurisdiction at this stage, that Count Two states a

plausible claim, and that GASP may remain in the

litigation at this time.

Because the APSC raises a facial challenge to

subject-matter jurisdiction, the standard of review

limits the court’s review to the four corners of the

complaint. The court will assess jurisdiction based on

the assumption that the well-pleaded facts in the

complaint are true and will construe the facts in the

light most favorable to the plaintiffs.

A. Subject-Matter Jurisdiction

As discussed above, under PURPA’s jurisdictional

framework, federal courts have jurisdiction over claims

that a state regulatory authority failed to implement

FERC’s PURPA rules. See 16 U.S.C. § 824a-3(h). Before

discussing the specifics of each of the plaintiffs’

claims, the court will first address arguments made by

the APSC as to the viability of a challenge to the

approval of rates for sales.

1. Whether the Plaintiffs May Challenge

a Rate Approval in Federal Court Under PURPA

The APSC makes two main arguments against the

plaintiffs’ claims. First, it argues that its approval

of Rate Rider RGB cannot be an implementation act

because only the design of approval processes, not acts

of approval, can be acts of implementation. Second, it

argues that a final retail-rate scheme like Rate Rider

RGB can never be challenged in federal court due to

concerns about federal courts setting rates. The court

finds neither argument persuasive.

The APSC argues that its approval of Rate Rider RGB

is not the type of action that has a PURPA-implementing

effect. As discussed earlier, FERC’s ‘rates for sales’

regulations require that utility rates be just,

reasonable, nondiscriminatory, and in the public

interest. See 18 C.F.R. § 292.305(a)(1). Moreover,

rates specific to qualifying facilities must be “based

on accurate data and consistent systemwide costing

principles” and apply similarly “to the utility’s other

customers with similar load or other cost-related

characteristics” to be nondiscriminatory. 18 C.F.R.

§ 292.305(a)(2). If provisions within Rate Rider RGB

are inconsistent with FERC’s rules, as they are alleged

to be, a challenge to the APSC’s approval of Rate Rider

RGB can qualify as an implementation claim.

According to the APSC, “the State of Alabama

implemented FERC’s rules through enactment of a statute

and employment of a comprehensive rate approval

process.” APSC Reply (Doc. 85) at 11. The APSC argues

that, because Rate Rider RGB was derived from what it

contends was a fair rate-approval process, the approval

of Rate Rider RGB cannot be challenged in federal

court. Thus, the APSC asks the court to “limit its

inquiry to whether the APSC has implemented procedures

to establish a process that supports the development of

fair rates.” APSC Brief (Doc. 82) at 20. In essence,

the APSC argues, as long as the State made a reasonable

attempt on the front end to implement FERC’s rules,

nothing the APSC does later can constitute a failure to

implement those rules.

The APSC’s process-oriented framework does not flow

from the text of PURPA. In Vote Solar, the Tenth

Circuit Court of Appeals reversed a district court for

adopting a reasonable-attempt standard like the one

proposed by the APSC. 2 F.4th at 1288. In that case,

the district court had determined Section 210

jurisdiction by focusing on whether the state

regulatory authority made “any reasonable effort at

implementation, rather than whether the implementation

was successful or consistent with the FERC rule.” Id.

The Tenth Circuit rejected that attempt-based approach

as unsupported by the plain meaning of the statute’s

text. The court reasoned that “[t]he Oxford English

Dictionary defines ‘Implement’ as ‘To complete,

perform, carry into effect (a contract, agreement,

etc.); to fulfill (an engagement or promise).’ ...

Effort, good faith, or reasonable attempt play no role

in the word's common usage or its dictionary

definition. Indeed, the district court's use of

modifiers--‘attempt to implement,’ ‘reasonable

implementation efforts’--reveals the infirmity of its

approach.” Id. at 1289 (internal citation omitted).

In sum, under the APSC’s approach, an approved rate

could be inconsistent with PURPA’s anti-discrimination

provisions, but so long as that the approval followed

certain procedures, no implementation claim could

exist. The court is not convinced. As the Tenth

Circuit observed, “[I]f a supervisor establishes

guidelines and tells an employee under supervision to

implement them (picture here a doctor-nurse,

architect-draftsman, judge-clerk situation), and due to

a good-faith misunderstanding the employees fails to

take the designated action despite making a reasonable

attempt to do so, it can hardly be said that the

employee has implemented the guideline action.” Id.

Next, the APSC argues that its approval of Rate

Rider RGB cannot serve as the basis of an

implementation claim because federal courts cannot

review the approval of a final retail rate, since doing

so would devolve into “retail ratemaking.” APSC Brief

(Doc. 82) at 18.

While there is no doubt that federal courts lack

rate-making authority to fix or calculate rates, the

court concludes that PURPA provides federal courts the

authority to hear challenges (and issue appropriate

relief) when a regulator approves a rate scheme that is

inconsistent with PURPA’s ‘rates for sales’ provision.

See Allco Renewable Energy Ltd. v. Mass. Elec. Co., 208

F. Supp. 3d 390, 400 (D. Mass. 2016) (Saris, J.)

(invalidating a state regulatory authority’s rate

program for failing to implement the “plain language of

the FERC regulations,” but explaining that nothing in

PURPA provides federal courts with “rate-making

authority”), aff’d, 875 F.3d 64 (1st Cir. 2017). The

court reaches this conclusion for the following

reasons.

First, Section 210 authorizes federal review of

failures to implement FERC’s ‘rates for sales’ rules.

See 16 U.S.C. § 824a-3(h)(2)(B); 16 U.S.C. § 824a-3(c).

Nowhere in the statute does it say that jurisdiction is

limited to challenges to the rate-setting approval

process. Instead, Section 210(h)(2)(B) is designed to

enforce prior subsections of Section 210, including

210(c), which demands that rates for sales by utilities

be just, reasonable, in the public interest, and

non-discriminatory. See 16 U.S.C. § 824a-3(c).

Second, federal courts have repeatedly found

jurisdiction in cases challenging rate schemes as

inconsistent with FERC regulations and issued decisions

without wading into ratemaking. For instance, on

materially similar facts, a district judge found

federal jurisdiction under PURPA when the plaintiffs

challenged “two rate schedules for the sale of

electricity as contrary to the rate standards set by

FERC in 18 C.F.R. § 292.305,” the same FERC rule

invoked here. ConocoPhillips Co. v. Dep’t of Water &

Power, City of Los Angeles, No. CV075742ABCJTLX, 2008

WL 11422174, at *3 (C.D. Cal. June 20, 2008)

(Collins, J.); see also Allco, 208 F. Supp. 3d at 400

(invalidating a commission’s rule that provided an

unlawful basis for a rate scheme without getting into

the specific rate-value calculations); Winding Creek

Solar LLC v. Peevey, 293 F. Supp. 3d 980, 990 (N.D.

Cal. 2017) (Donato, J.) (finding federal jurisdiction

under PURPA and rejecting a pricing scheme that was

burdened “with arbitrary rules,” lacked a “reasoned

basis,” and “stray[ed] too far from basing prices on a

utility’s but-for cost”), aff’d sub nom. Winding Creek

Solar LLC v. Peterman, 932 F.3d 861 (9th Cir. 2019).

Moreover, in New York State Elec. & Gas Corp. v.

F.E.R.C., the U.S. Court of Appeals for the D.C.

Circuit found: “The failure of a state commission to

ensure that a rate does not exceed a utility’s avoided

cost is a failure to comply with a regulation

implementing [] PURPA” and would therefore “be

challenged through an enforcement action brought in

district court under § 210(h).” 117 F.3d 1473, 1476

(D.C. Cir. 1997). Most recently, in Vote Solar, the

Tenth Circuit reiterated that implementation, in the

context of a backup-power charge like the one in this

case, is not about whether a state regulatory authority

“tried to ensure that the rate was lawful,” but rather

whether the rate “was lawful.” 2 F.4th at 1289

(emphasis in original). All these cases find that

implementation claims can be brought to challenge

retail-sale rates of electricity without courts

participating in setting the specific rates.

While concerns with federal courts setting rates

are well taken, these concerns do not justify departing

from the statute by adopting a blanket rule that no

final ‘rates for sales’ scheme approved by a state

regulatory authority can ever be challenged in federal

court for violating PURPA’s anti-discrimination scheme

and FERC’s implementation mandate. See id. at 1290.

Of course, this court is not a regulatory commission,

and it lacks authority to fix retail rates under its

remedial powers. But a court is not “ratemaking” by

considering whether the approval of a rate scheme

represents a failure to implement PURPA’s ‘rates for

sales’ provisions. See Winding Creek, 293 F. Supp. 3d

at 994 (determining at summary judgment that the basis

and methodology for a price rate failed to implement

FERC’s rules and was therefore invalid).

Accordingly, the court finds that the ASPC’s

approval of Rate Rider RGB is a regulatory action

against which implementation claims can plausibly lie.

2. Whether the Plaintiffs Bring Implementation

Claims

The next question is whether the plaintiffs have

brought implementation claims against the APSC’s Rate

Rider RGB.

Count One asserts that the APSC, by enacting Rate

Rider RGB, failed to implement 18 C.F.R. § 292.305(a),

which requires that rates for sales to qualifying

facilities “[s]hall be just and reasonable and in the

public interest” and “[s]hall not discriminate against

any qualifying facility in comparison to rates for

sales to other customers served by the electric

utility.” 18 C.F.R. § 292.305(a)(1)(i) & (ii); see

Second Amended Complaint (Doc. 76) at 17. (It is

undisputed that the individual plaintiffs’ solar arrays

constitute “qualifying facilities” under the

regulation.)

Rates for sales that are based on “accurate data

and consistent systemwide costing principles shall not

be considered to discriminate against any qualifying

facility to the extent that such rates apply to the

utility’s other customers with similar load or other

cost-related characteristics.” 18 C.F.R.

§ 292.305(a)(2). In other words, rates that are placed

on customers who generate solar power, but not on

regular customers without solar power, are

discriminatory unless the rate is based on “accurate

data and consistent systemwide costing principles.”

Id.

The plaintiffs plead that the backup-power service

charges are “based purely on [anticipated] revenue

decreases ... from solar adoptions, not from any cost

of service increase for providing electric service to

solar customers.” Second Amended Complaint (Doc. 76)

at 19 (emphasis in original). Instead of evaluating

the net usage of customers who adopt solar generation,

the plaintiffs assert, Alabama Power simply assumed a

solar customer would consume less electricity annually;

thus the “difference in revenue to the utility--not any

difference in cost to serve--is the true basis for

charges.” Id. at 18 (emphasis in original).

Accepting the plaintiffs’ allegations as true, the

APSC failed to implement FERC’s ‘rates for sales’ rules

when it approved a discriminatory rate scheme without

any systemwide cost-of-service basis. Because the

plaintiffs have plausibly alleged that the APSC failed

to implement 18 C.F.R. § 292.305(a) by approving the

backup-power charges, this court has subject-matter

jurisdiction over Count One.

Next, Count Two alleges that the APSC failed to

implement 18 C.F.R. § 292.305(b) when it approved a

rule that allows solar customers to be assessed a

mandatory charge for backup power even when those

customers do not need, want, use, or request backup

power. Based on the factual allegations in the

complaint, Rate Rider RGB requires all customers who

adopt solar power to pay an arbitrary charge for a

service that those customers do not actually need,

want, use, nor receive, and this charge discourages the

adoption of solar power. As such, Rate Rider RGB is

inconsistent with PURPA’s anti-discrimination scheme

and FERC’s rules. See 18 C.F.R. § 292.305(b). The

court has jurisdiction over Count Two.

Finally, Count Three asserts that the APSC failed

to implement FERC’s rules when it approved the

backup-power charges because those charges are based

upon “factually unsupported assumptions about

simultaneous forced outages of customer-sited solar

equipment.” Second Amended Complaint (Doc. 76) at 24

(citing 18 C.F.R. § 292.305(c)). According to the

facts in the complaint, Rate Rider RGB was based on an

assumption, lacking empirical support, that solar-panel

systems would face simultaneous forced outages (mainly,

from cloud cover) 65 % of the time, requiring Alabama

Power to hold 6.5 kWs for every 10kW solar system in

capacity reserve. See id.

FERC’s ‘rates for sales’ regulations demand that

backup or maintenance power rates “[s]hall not be based

upon an assumption (unless supported by factual data)

that forced outages or other reductions in electric

output by all qualifying facilities ... will occur

simultaneously, or during the system peak, or both.”

18 C.F.R. § 292.305(c)(1). If the discriminatory rate

is not supported by factual data, then the rate scheme

fails to implement a FERC rule. See id. The

plaintiffs plausibly allege that the APSC approved a

class-based rate of broad applicability without

supportive data, the effect of which is to discriminate

and discourage small-scale renewable energy in direct

contravention to PURPA’s purpose. Therefore, the court

has jurisdiction under PURPA over Count Three’s claim

of a failure to implement 18 C.F.R. § 292.305(c).

B. Whether Count Two States a Claim

As stated, Count Two alleges that the APSC failed

to implement FERC’s rules when it approved a mandatory

backup-power charge against a class of customers who do

not want, need, request, or even use such power. In

large part this claim turns on the definition of backup

power. See APSC Reply (Doc. 85) at 10 (“Plaintiffs’

claim falls apart with the application of the correct

definition of backup power rather than Plaintiffs’

misinterpretation of backup power.”). The parties

dispute (1) how to define backup power, and (2) whether

the plaintiffs and others like them actually take that

service, when properly interpreted.

The plaintiffs essentially contend that the term

‘backup power’ is the manufactured banner under which

an arbitrary and discriminatory charge flies, while the

defendants maintain that the plaintiffs are in fact

receiving backup power, that they do in fact need it,

and that the plaintiffs would essentially be getting a

free, necessary service if Alabama Power were not able

to charge them for backup power.

As the court has questions about the meaning of

backup power that could be elucidated by factual

development or expert testimony, the court exercises

its discretion to carry this issue with the case. The

motion to dismiss Count Two for failure to state claim

will be denied with leave to renew the attack on this

claim at the summary-judgment stage.

C. Whether GASP Has Standing

It is clear that the individual plaintiffs have

standing to sue under PURPA because, as mentioned

earlier, they are small power producers who can sue

under the statute, and the rule they challenge directly

impacts them. Plaintiff GASP, in contrast, is not a

small power producer who can sue under PURPA, but

asserts that it has associational standing.

GASP is a nonprofit organization that “seeks to

improve the environment, economy and public health of

Alabama.” Second Amended Complaint (Doc. 76) at 7.

“GASP has over 1,400 members in Alabama, including

members adversely affected by the charges that Alabama

Power levies against on-site solar generating systems

for back-up service.” Id. Importantly, two of the

residential plaintiffs, Johnston and Thorne, are

members of GASP. See id.

Because it is undisputed that the individual

plaintiffs, two of whom are members of GASP, have

standing to bring this PURPA enforcement action, the

court need not decide whether GASP has associational

standing to bring identical claims requesting identical

relief. See Arlington Heights v. Metro. Hous. Dev.

Corp., 429 U.S. 252, 263-64 (1977) (explaining that the

court need not determine whether a real-estate company

had standing to bring claims on behalf of its

prospective tenants because one of those tenants was a

party to the suit with Article III standing to lodge an

identical claim). “Nothing is gained or lost by the

presence or absence” of GASP in this litigation.

Doe v. Bolton, 410 U.S. 179, 189 (1973), abrogated on

other grounds by Dobbs v. Jackson Women’s Health Org.,

597 U.S. 215 (2022).

Accordingly, the court finds that GASP should not

be dismissed from the case for lack of standing at this

time.

V. CONCLUSION

Based on the well-pleaded allegations in the

complaint, the court currently finds that it has

jurisdiction over the plaintiffs’ three claims under

PURPA.8

***

Accordingly, it is ORDERED that defendants Alabama

Public Service Commission, Twinkle Andress Cavanaugh,

Jeremy H. Oden, and Chris Beeker’s motion to dismiss

(Doc. 80) is denied.

8. Alabama Power also filed a motion to dismiss

raising essentially the same grounds as the APSC,

except Alabama Power sought to raise a factual

challenge to the subject-matter jurisdiction over the

plaintiffs’ claims. Because the original parties agree

that the APSC raises a facial challenge, the court

analyzes the subject-matter jurisdictional attack as

such. However, even if the court chose to address

Alabama Power’s factual challenge, the analysis would

be identical. The court should not entertain a factual

challenge at the motion-to-dismiss stage when the facts

necessary to determine jurisdiction and the merits

intertwine. See Morrison v. Amway Corp., 323 F.3d 920,

925 (11th Cir. 2003). Instead, under such

circumstances, the court should “limit its

jurisdictional inquiry to facial scrutiny and reserve

factual scrutiny for the merits.” Occidental Chem.

Corp., 494 F. Supp. 2d at 405. In this case, the court

finds the facts necessary to determine jurisdiction

intertwine with the merits; thus, the court will delve

into factual scrutiny once the facts have been further

developed. Therefore, Alabama Power’s motion to

dismiss will be denied.

It is further ORDERED that intervenor-defendant

Alabama Power Company’s motion to dismiss (Doc. 81) is

denied.

DONE, this the 30th day of September, 2024.

/s/ Myron H. Thompson

UNITED STATES DISTRICT JUDGE