Petition for Writ of Certiorari — Invenergy Thermal LLC, et al., Petitioners v. Casey Sixkiller, Director, Washington State Department of Ecology
Supreme Court briefMar 24, 2025
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APPENDIX
APPENDIX A:
Opinion, Ninth Cir. No. 23-3857,
Dec. 24, 2024.................................... 1a
APPENDIX B:
Order, W.D. Wash. No. 3:22-cv05967-BHS, Nov. 3, 2023 ............... 8a
APPENDIX C:
Judgment in a Civil Case, W.D.
Wash. No. 3:22-cv-05967-BHS,
Nov. 3, 2023 ................................... 39a
APPENDIX D:
Complaint for Declaratory and
Injunctive Relief, W.D. Wash.
No. 3:22-cv-5967, Dec. 13, 2022 ... 40a
APPENDIX A
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
INVENERGY
THERMAL LLC;
GRAYS HARBOR
ENERGY, LLC,
Plaintiffs-Appellants,
No. 23-3857
D.C. No. 3:22-cv-05967BHS
MEMORANDUM *
v.
LAURA WATSON, in her
official capacity as
Director of the
Washington State
Department of Ecology,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Washington
Benjamin H. Settle, District Judge, Presiding
Argued and Submitted November 13, 2024
San Francisco, California
Before: S.R. THOMAS and MILLER, Circuit Judges,
and MOLLOY, District Judge. **
This disposition is not appropriate for publication and is not
precedent except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Donald W. Molloy, United States District
Judge for the District of Montana, sitting by designation.
*
(1a)
2a
Plaintiffs-Appellants Invenergy Thermal LLC and
Grays Harbor Energy LLC (collectively “Appellants”)
own an electricity-generating natural gas power plant in
Washington State. In 2022, they sued DefendantAppellee Laura Watson, in her official capacity as
Director of the Washington State Department of Ecology
(the “State”), challenging a provision of Washington’s
Climate Commitment Act that provides no-cost emissions
allowances to electric utilities but requires non-utility
owners, like Appellants, to purchase such allowances for
their power plants. See Wash. Rev. Code § 70A.65.120.
Appellants allege that the Act’s distribution of no-cost
allowances violates the dormant Commerce Clause and
the Fourteenth Amendment’s Equal Protection Clause.
The district court granted the State’s motion for judgment
on the pleadings, Fed. R. Civ. P. 12(c), after sua sponte
finding that Appellants lacked standing. We have
jurisdiction under 28 U.S.C. § 1291 and review the district
court’s decision de novo. See Health Freedom Def. Fund,
Inc. v. Carvalho, 104 F.4th 715, 722 (9th Cir. 2024). We
affirm, but not on standing grounds.
I
While the State does not defend the district court’s
standing decision, standing is jurisdictional and must be
addressed. See B.C. v. Plumas Unified Sch. Dist., 192
F.3d 1260, 1264 (9th Cir. 1999) (“[F]ederal courts are
required sua sponte to examine jurisdictional issues such
as standing.”). Appellants have standing. The conduct at
issue “threatens to cause financial injury” to Invenergy
Thermal LLC, the parent company of Grays Harbor
Energy LLC, “by illegally reducing the return on [its]
investments in [Grays Harbor] and by lowering the value
of [its] stockholdings.” Franchise Tax Bd. of Cal. v. Alcan
3a
Aluminium Ltd., 493 U.S. 331, 336 (1990). Grays Harbor
Energy LLC also has standing because even if it qualifies
as an in-state entity, “cognizable injury from
unconstitutional discrimination against interstate
commerce does not stop at members of the class against
whom a State ultimately discriminates.” Gen. Motors
Corp. v. Tracy, 519 U.S. 278, 286 (1997); see Bacchus
Imports, Ltd. v. Dias, 468 U.S. 263, 265–67 (1984) (holding
that in-state liquor wholesalers had standing to raise a
dormant Commerce Clause challenge to a Hawaii tax
regime exempting certain alcoholic beverages produced
in-state from liquor taxes).
Ultimately, while the district court erred by
addressing standing without giving the parties an
opportunity to be heard, see Jones v. L.A. Cent. Plaza
LLC, 74 F.4th 1053, 1060 (9th Cir. 2023) (“Given the due
process and fairness concerns presented, a district court
generally must provide the parties with adequate notice
that it is contemplating invoking a particular procedural
device sua sponte.”), and by proceeding to the merits
despite its finding of no standing, see Barke v. Banks, 25
F.4th 714, 721 (9th Cir. 2022) (per curiam) (“[A] court that
lacks jurisdiction ‘is powerless to reach the merits.’”
(quoting Fleck & Assocs., Inc. v. Phoenix, City of, an Ariz.
Mun. Corp., 471 F.3d 1100, 1106–07 (9th Cir. 2006))),
standing exists and we affirm on the merits.
II
Appellants fail to plead a viable dormant Commerce
Clause claim because the Climate Commitment Act’s
provision of no-cost allowances to electric utilities neither
discriminates against interstate commerce, see Tracy, 519
U.S. at 310, nor imposes an impermissible burden on such
commerce, see Exxon Corp. v. Governor of Md., 437 U.S.
4a
117, 127 (1978); Pike v. Bruce Church, Inc., 397 U.S. 137,
142 (1970).
First, the Act does not “discriminate[] against out-ofstate entities on its face, in its purpose, or in its practical
effect” because electric utilities and independent power
plant owners like Appellants are not similarly situated.
Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070,
1087 (9th Cir. 2013). “[W]hen the allegedly competing
entities provide different products . . . there is a threshold
question whether the companies are indeed similarly
situated for constitutional purposes.” Tracy, 519 U.S. at
299. If the entities in fact “serve different markets, and
would continue to do so even if the supposedly
discriminatory burden were removed[,] . . . eliminating the
. . . regulatory differential would not serve the dormant
Commerce Clause’s fundamental objective of preserving
a national market for competition undisturbed by
preferential advantages conferred by a State upon its
residents or resident competitors.” Id.
Washington utilities are not similarly situated to
Appellants because they primarily serve a separate,
captive retail market by distributing power to consumers,
even though they also compete with Appellants in the
noncaptive market of wholesale electricity generation.
See id. at 301, 310 (concluding that utilities and natural gas
marketers in Ohio were not similarly situated because the
latter did not serve the core market of captive retail
users). While Washington utilities have the discretion to
apply their no-cost allowances to cover the compliance
obligations of their power plants, see Wash. Admin. Code
§ 173-446-420(2)(a), the amount of no-cost allowances
provided under the Act is tailored to the amount of
electricity that a utility supplies to consumers in the
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captive retail market, see Wash. Rev. Code
§ 70A.65.120(2); Wash. Admin. Code § 173-446-230(2).
Thus, any power generated by a utility-owned plant that
exceeds this amount—power that can then be sold on the
wholesale market in which Appellants operate—does not
increase the number of no-cost allowances awarded to that
utility. To modify this scheme “could subject [utilities] to
economic pressure that in turn could threaten the
preservation of an adequate customer base to support
continued provision of bundled [electricity] services in the
captive market.” Tracy, 519 U.S. at 309. Tracy therefore
dictates the outcome here, distinguishing this case from
NextEra Energy Cap. Holdings, Inc. v. Lake, a Fifth
Circuit case relied on heavily by Appellants that did not
involve the separate service provided by utilities in a
captive market. See 48 F.4th 306, 320 (5th Cir. 2022).
Second, Appellants fail to allege a viable dormant
Commerce Claim under Pike. Even assuming that a
nondiscriminatory Pike claim remains viable, see Nat’l
Pork Producers Council v. Ross, 598 U.S. 356, 379 (2023),
“interstate commerce is not subjected to an impermissible
burden simply because an otherwise valid regulation
causes some business to shift from one interstate supplier
to another,” Exxon, 437 U.S. at 127. Rather, the Supreme
Court has noted that it “has only rarely held that the
Commerce Clause itself pre-empts an entire field from
state regulation, and then only when a lack of national
uniformity would impede the flow of interstate goods.” Id.
at 128. Indeed, contrary to Appellants’ characterization,
the Court has declined to hold that the incidental effect of
mere state regulation on the interstate wholesale energy
market is, on its own, a substantial burden on interstate
commerce. See Ark. Elec. Co-op. Corp. v. Ark. Pub. Serv.
6a
Comm’n, 461 U.S. 375, 395 (1983). Because the Commerce
Clause “protects [neither] the particular structure [n]or
methods of operation in a retail market,” the fact that
Appellants may have to alter their operations to either pay
for allowances to offset their carbon emissions or reduce
their carbon emissions does not “impermissibly burden[]
interstate commerce.” Exxon, 437 U.S. at 127.
III
Appellants’ final claim arises under the Equal
Protection Clause of the Fourteenth Amendment. As
discussed above, Appellants are not similarly situated to
Washington’s electric utilities in this context, which
forecloses their equal protection claim. Additionally,
Appellants fail to plausibly negate “any reasonably
conceivable state of facts that could provide a rational
basis for the classification.” Mont. Med. Ass’n v.
Knudsen, 119 F.4th 618, 630 (9th Cir. 2024) (quoting Olson
v. California, 104 F.4th 66, 77 (9th Cir. 2024)). The
classification and differential treatment rationally reflect
Washington’s interest in balancing the rising cost of
energy against the State’s desire to reduce greenhouse
gases. While the State recognizes that electricity costs
will still go up under its no-cost allowance regime, that
does not undermine the State’s effort to mitigate those
rising costs or fight climate change. Even taking as true
Appellants’ allegation that the Act neither reduces costs
nor greenhouse gases, the no-cost allowances are
explicitly provided to avoid duplicating the carbon
reduction program that separately applies to utilities
under the Clean Energy Transformation Act. See Wash.
Rev. Code § 70A.65.120(1). Accordingly, the district court
correctly concluded that Appellants’ claim fails as a
7a
matter of law because the challenged classification serves
legitimate state interests.
IV
“Denial of leave to amend is reviewed for an abuse of
discretion.” Missouri ex rel. Koster v. Harris, 847 F.3d
646, 655 (9th Cir. 2017) (quoting Dougherty v. City of
Covina, 654 F.3d 892, 897 (9th Cir. 2011)). “Dismissal
without leave to amend is improper unless it is clear, upon
de novo review, that the complaint could not be saved by
any amendment.” Id. (quoting Thinket Ink Info. Res., Inc.
v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir.
2004)). Amendment need not be permitted when it would
be futile—that is, when “no set of facts can be proved
under the amendment to the pleadings that would
constitute a valid and sufficient claim.” Id. (quoting Miller
v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988)).
Because additional facts would not undermine the
conclusions reached above, we find no abuse of discretion
here.
AFFIRMED.
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APPENDIX B
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
INVENERGY THERMAL
LLC, and GRAYS
HARBOR ENERGY LLC,
Plaintiffs,
v.
LAURA WATSON, in her
official capacity as Director
of the Washington State
Department of Ecology,
Defendant.
CASE NO. 3:22-cv05967-BHS
ORDER
This matter is before the Court on Defendant
Washington State Department of Ecology’s 1 Federal Rule
of Civil Procedure 12(c) motion for judgment on the
pleadings, 2 Dkt. 21. Plaintiff Invenergy Thermal LLC
alleges that, through a subsidiary of a subsidiary, it
“wholly owns” Plaintiff Grays Harbor Energy LLC,
The named defendant is Laura Watson, who is sued in her
official capacity as the director of the Department of Ecology. For
clarity, the Court refers to the defendant as the Department of
Ecology.
2
Ecology captioned this motion as a “FRCP 12(c) Motion to
Dismiss.” Dkt. 21 at 1. Because this motion is made pursuant to Fed.
R. Civ. P. 12(c) and Ecology filed an answer, Dkt. 20, the Court refers
to it as a motion for judgment on the pleadings.
Also, each party requests oral argument on this motion. Dkt. 21
at 1, Dkt. 27 at 1. These requests are DENIED.
1
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which, in turn, “wholly owns” the Grays Harbor Energy
Center—an electricity-generating natural gas power
plant located in Washington State. Dkt. 1, ¶¶ 3, 4.
Plaintiffs challenge a provision of Washington’s
Climate Commitment Act (CCA), chapter 70A.65 RCW,
which directs Ecology to allocate to electric utilities—at
no cost—allowances to emit a certain amount of
greenhouse gases per year.
Owners of electricity
generating facilities like the Grays Harbor Energy
Center, by contrast, must purchase such allowances at
auction. Plaintiffs claim that the CCA’s allocation of “nocost allowances” 3 to electric utilities, but not to owners of
electricity generating facilities like the Grays Harbor
Energy Center, violates the dormant Commerce Clause
and the Fourteenth Amendment’s Equal Protection
Clause.
Plaintiffs argue that this statutory scheme
discriminates against them in violation of the dormant
Commerce Clause because Invenergy is an out-of-state
entity and, according to Plaintiffs, the electric utilities that
receive no-cost allowances are all owned by in-state
entities. Plaintiffs assert that the Grays Harbor Energy
Center competes against these utilities insofar as the
utilities operate their own electricity generating facilities.
Plaintiffs similarly claim that the CCA violates the Equal
Protection Clause by treating electricity generating
facilities differently than electric utilities without a
rational basis to do so.
Ecology responds that, far from being discriminatory,
The parties refer to allowances allocated at no cost as “no-cost
allowances.” See Dkt. 1, ¶ 6; Dkt. 21 at 2–3; Dkt. 27 at 6. So does the
Court.
3
10a
the CCA allocates no-cost allowances to in-state entities
and out-of-state entities alike. It also contends that
electricity generating facilities like the Grays Harbor
Energy Center are not substantially similar to electric
utilities. This is so, Ecology asserts, because electric
utilities sell electricity to the public on the retail market
whereas electricity generating facilities sell electricity to
larger entities, including electric utilities, on the wholesale
market. Ecology finally argues that the challenged
statute serves a legitimate governmental interest: to
mitigate the cost of electricity sold to public consumers
while electric utilities make efforts to reduce their
greenhouse gas emissions.
The Court concludes that Invenergy lacks
constitutional standing to advance its claims under both
the dormant Commerce Clause and the Equal Protection
Clause. This is because Invenergy does not own the Grays
Harbor Energy Center; a subsidiary three degrees
separated from itself does. Grays Harbor Energy LLC
also lacks standing to advance its asserted dormant
Commerce Clause claims. Unlike Invenergy, Grays
Harbor Energy LLC is an in-state entity without any outof-state economic interests of its own. Under these
circumstances, it cannot allege a plausible injury in fact
under the dormant Commerce Clause, which, at its core,
serves to prevent discrimination against out-of-state
economic interests.
Even if Invenergy or Grays Harbor Energy LLC had
standing to advance their dormant Commerce Clause
claims, these claims would still fail. Under the CCA, there
is one out-of-state owner of an electric utility in
Washington that is entitled to no-cost allowances, and two
other in-state owners of electricity generating facilities
11a
that are not so entitled. Thus, the CCA does not
discriminate based on an entity’s local contacts. At most,
it discriminates based on an entity’s status as either an
electric utility or an electricity generating facility.
Because these entities primarily serve different markets,
they are not similarly situated and the CCA’s differing
treatment of them does not offend the dormant Commerce
Clause.
Simply put, the CCA treats all owners of electric
utilities the same, regardless of whether those owners are
in-state entities or out-of-state entities. It also treats all
owners of electricity generating facilities the same, again
regardless of an owner’s location. This plainly does not
discriminate against out-of-state economic interests.
For this same reason, the CCA also does not violate
the Equal Protection Clause, which generally requires
similarly situated persons to be treated alike. In any
event, as Ecology asserts, the allocation of no-cost
allowances to electric utilities, but not to electricity
generating facilities like the Grays Harbor Energy
Center, is rationally related to a legitimate governmental
purpose.
I.
BACKGROUND
Invenergy Thermal LLC “is an independent power
producer that owns and operates power plants across the
United States.” Dkt. 1, ¶ 1. It is incorporated in Delaware
and headquartered in Chicago, Illinois. Id.
Invenergy, “through other subsidiaries, wholly owns
Grays Harbor Energy LLC, which wholly owns the Grays
Harbor Energy Center, a power plant located in
Washington.” Dkt. 1, ¶ 3 (emphasis added). Specifically,
12a
“Grays Harbor Energy LLC is a wholly owned subsidiary
of Invenergy Grays Harbor LLC,” which, in turn, “is a
wholly owned subsidiary of Invenergy Grays Harbor
Holdings LLC,” which, again in turn, “is a wholly owned
subsidiary of Invenergy.” Id. ¶ 20 n.2.
The record does not indicate where these two
“intermediate
subsidiaries”
are
incorporated,
headquartered, or otherwise conduct their businesses.
However, Grays Harbor Energy LLC is incorporated in
Delaware and headquartered in Elma, Washington. Dkt.
1, ¶ 20.
In 2021, the Washington Legislature enacted the
CCA to address certain impacts of climate change on the
State. See RCW 70A.65.005. To aid “covered entities” 4 in
reducing their greenhouse gas emissions, the CCA
requires Ecology to implement a cap and invest program
concerning such emissions. RCW 70A.65.060(1); see RCW
70A.65.010(58) (defining “[p]rogram” as “the greenhouse
gas emissions cap and invest program”). The parties
agree that the Grays Harbor Energy Center is a “covered
entity” and thus subject to the cap and invest program.
Dkt. 1, ¶ 22; Dkt. 21 at 4.
Under this program, Ecology must (1) implement a
cap on greenhouse gas emissions from covered entities,
RCW 70A.65.060(1), and (2) distribute “allowances”—
meaning, “an authorization to emit up to one metric ton of
Under the CCA, “‘[c]overed entity’ means a person that is
designated by the department as subject to RCW 70A.65.060 through
70A.65.210.” RCW 70A.65.010(23). Ecology’s regulations define
covered entities generally as those whose covered emissions exceed
25,000 metric tons of “carbon dioxide equivalent” per year. See WAC
173-446-030; WAC 173-446-060.
4
13a
carbon dioxide equivalent,” RCW 70A.65.010(1)—through
auctions open to “covered entities, opt-in entities, and
general market participants that are registered entities in
good standing.” RCW 70A.65.100(4). The CCA requires
Ecology to “adopt by rule an auction floor price” for these
allowances and prohibits Ecology from “sell[ing]
allowances at bids lower than the auction floor price.”
RCW 70A.65.150(1). Ecology must also “adopt by rule . . .
a schedule for the floor price to increase by a
predetermined amount every year.” Id.
However, the following categories of entities must
receive an allocation of allowances at no cost:
(1) “emissions-intensive and trade-exposed” facilities;5
(2) “consumer-owned and investor-owned electric
utilities”; and (3) “covered entities that are natural gas
utilities.” RCW 70A.65.110–.130. Although the Grays
Harbor Energy Center generates electricity and
participates in an electricity market, Plaintiffs
acknowledge that it is not an electric utility. 6 See Dkt. 1,
¶ 7. Accordingly, the Grays Harbor Energy Center does
not qualify for no-cost allowances under the CCA. See Dkt.
1, ¶ 7; Dkt. 21 at 5; Dkt. 27 at 6.
Concerning electric utilities, the purpose of these nocost allowances is “to mitigate the cost burden of the [cap
and invest] program on electricity customers.” RCW
Emissions-intensive and trade-exposed facilities include
entities that engage in petroleum refining or numerous forms of
manufacturing. RCW 70A.65.110(1)(a)–(m). They do not include
entities that generate, sell, or distribute electricity. See id.
6
Electric utilities sell and distribute electricity to the public on
the retail market. Dkt. 1, ¶ 7. Electricity generating facilities do not.
See id. They instead sell electricity on the wholesale market, which
includes selling electricity to electric utilities. See id.
5
14a
70A.65.120(1). The availability of no-cost allowances to
electric utilities reduces over time and “[u]nder no
circumstances may utilities receive any free allowances
after 2045.” RCW 70A.65.120(2)(d).
In these respects, the CCA works in tandem with
another Washington statute, the Clean Energy
Transformation Act (CETA), chapter 19.405 RCW.
CETA requires all electric utilities in Washington to
become “one hundred percent carbon-neutral by 2030, and
one hundred percent carbon-free by 2045.” RCW
19.405.010(2).
Consistent with the CCA’s goal of
mitigating the cost burden of its cap and invest program
on electricity customers, see RCW 70A.65.120(1), CETA
provides that “the state must,” among other things,
“provide safeguards to ensure that the achievement of this
policy does not . . . impose unreasonable costs on utility
customers.” Id. Because the Grays Harbor Energy
Center is not an electric utility, it is not subject CETA’s
requirements. See generally chapter 19.405 RCW; see
also Dkt. 21 at 5; Dkt. 27 at 21.
Plaintiffs allege that Ecology’s allocation of no-cost
allowances under the CCA to electric utilities, but not to
electricity generating facilities like the Grays Harbor
Energy Center: (1) violates the dormant Commerce
Clause “by discriminating in effect against out-of-state
economic interests to the benefit of in-state economic
interests,” Dkt. 1, ¶ 157, (2) violates the dormant
Commerce Clause by “excessively burden[ing] interstate
commerce without advancing any legitimate local
interest,” id. ¶ 174, and (3) violates the Equal Protection
Clause of the Fourteenth Amendment by “treat[ing]
independent power plant owners differently from other
similarly situated plant owners, namely local utilities,” in
15a
a manner that “is not rationally related to any legitimate
governmental purpose.” Id. ¶ 187.
Plaintiffs seek a judicial determination that the CCA’s
requirement that Ecology allocate no-cost allowances to
electric utilities, but not to electricity generating facilities
like the Grays Harbor Energy Center, is unconstitutional
“as applied.” Dkt. 1, ¶ 194. Plaintiffs also seek an order
“[r]equir[ing] Defendant . . . to provide no-cost allowances
to Plaintiffs, or requir[ing] Defendant . . . to re-allocate nocost allowances or requir[ing] electric utilities to transfer
no-cost allowances to Plaintiffs; or otherwise enjoin[ing]
Defendant . . . from enforcing the CCA to disadvantage
Plaintiffs.” Id. ¶ 195.
Ecology filed an answer, Dkt. 20, and subsequently
moved for judgment on the pleadings under Fed. R. Civ.
P. 12(c), Dkt. 21. Plaintiffs oppose this motion. Dkt. 27.
The parties’ arguments are addressed below.
II.
A.
DISCUSSION
Federal Rule of Civil Procedure 12(c) Standard
Federal Rule of Civil Procedure 12(c) “is ‘functionally
identical’ to Rule 12(b)(6) and . . . ‘the same standard of
review’ applies to motions brought under either rule.”
Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637
F.3d 1047, 1054 n.4 (9th Cir. 2011) (quoting Dworkin v.
Hustler Mag. Inc., 867 F.2d 1188, 1192 (9th Cir. 1989)).
Dismissal under Rule 12(b)(6) may be based on either the
lack of a cognizable legal theory or the absence of
sufficient facts alleged under a cognizable legal theory.
Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th
Cir. 1988). A plaintiff’s complaint must allege facts to
state a claim for relief that is plausible on its face. Ashcroft
16a
v. Iqbal, 556 U.S. 662, 678 (2009). A claim has “facial
plausibility” when the party seeking relief “pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id.
Although courts must accept as true the complaint’s
well-pleaded facts, conclusory allegations of law and
unwarranted inferences will not defeat an otherwise
proper Rule 12(b)(6) motion to dismiss. Vasquez v. Los
Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007);
Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th
Cir. 2001). “[A] plaintiff’s obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do. Factual
allegations must be enough to raise a right to relief above
the speculative level.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (citations omitted). This requires a
plaintiff to plead “more than an unadorned, thedefendant-unlawfully-harmed-me accusation.” Iqbal, 556
U.S. at 678 (citing Twombly, 550 U.S. at 555).
When granting a Rule 12(b)(6) motion to dismiss, “a
district court should grant leave to amend even if no
request to amend the pleading was made, unless it
determines that the pleading could not possibly be cured
by the allegation of other facts.” Cook, Perkiss & Liehe v.
N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990).
Courts may also deny leave to amend when the facts are
not in dispute and the sole issue is whether there is
liability as a matter of substantive law. Albrecht v. Lund,
845 F.2d 193, 195–96 (9th Cir. 1988).
17a
B.
The proper test for determining whether a state
law violates the dormant Commerce Clause.
The Court begins by clarifying the proper test to be
applied when determining whether a particular state law
violates the dormant Commerce Clause.
The Commerce Clause grants Congress the “Power
. . . To regulate Commerce . . . among the several States.”
U.S. CONST. art. I, § 8, cl. 3. “[T]he Commerce Clause not
only vests Congress with the power to regulate interstate
trade; the Clause also ‘contain[s] a further, negative
command,’ one effectively forbidding the enforcement of
‘certain state [economic regulations] even when Congress
has failed to legislate on the subject.’” Nat’l Pork
Producers Council v. Ross, 598 U.S. 356, 368 (2023)
(quoting Oklahoma Tax Comm’n v. Jefferson Lines, Inc.,
514 U.S. 175, 179 (1995)). “This ‘negative’ aspect of the
Commerce Clause” is “generally known as ‘the dormant
Commerce Clause.’” Tenn. Wine & Spirits Retailers
Association v. Thomas, 588 U.S. ___, ___, 139 S. Ct. 2449,
2459 (2019) (some internal quotation marks omitted)
(quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269,
273 (1988)).
Plaintiffs and Ecology assert that courts apply a twotiered test for determining whether a particular state law
violates the dormant Commerce Clause. Dkt. 21 at 7–8;
Dkt. 27 at 14. Under the first tier, they claim, courts
consider whether a state law discriminates against out-ofstate entities on its face, in its purpose, or in its practical
effect. Dkt. 21 at 8 (citing Int’l Franchise Ass’n, Inc. v.
City of Seattle, 97 F. Supp. 3d 1256, 1267 (W.D. Wash.
2015)); Dkt. 27 at 14 (citing Rocky Mountain Farmers
Union v. Corey, 730 F.3d 1070, 1087 (9th Cir. 2013)). If
18a
the state law is discriminatory, “‘it is unconstitutional
unless it serves a legitimate local purpose, and this
purpose could not be served as well by available
nondiscriminatory means.’” Dkt. 27 at 14 (quoting Rocky
Mountain Farmers Union, 730 F.3d at 1087).
Under the second tier, the parties assert, a state law
may violate the dormant Commerce Clause even if it does
not discriminate against out-of-state entities. Dkt. 21 at 8;
Dkt. 27 at 14. They claim that a state law may do so under
the Supreme Court’s decision in Pike v. Bruce Church,
Inc., 397 U.S. 137 (1970). Dkt. 21 at 8; Dkt. 27 at 14.
Indeed, the Ninth Circuit Court of Appeals has
interpreted Pike as holding that a state law violates the
dormant Commerce Clause when it “places a ‘significant’
burden on interstate commerce” such that the law’s
“effect on interstate commerce clearly outweighs [its]
local benefits.” Rosenblatt v. City of Santa Monica, 940
F.3d 439, 452 (9th Cir. 2019).
However, after the parties submitted their briefing on
Ecology’s Rule 12(c) motion, the Supreme Court issued its
decision in National Pork Producers, which criticized the
second tier of this test. In that decision, the Court
rejected an argument that, “[u]nder Pike, . . . a court must
at least assess the burden imposed on interstate
commerce by a state law and prevent its enforcement if
the law’s burdens are clearly excessive in relation to the
putative local benefits.” Nat’l Pork Producers, 598 U.S. at
377 (internal quotation marks omitted). The Court
reasoned that this argument “overstate[s] the extent to
which Pike and its progeny depart from the
antidiscrimination rule that lies at the core of [its]
dormant Commerce Clause jurisprudence.” Id.
19a
The Court clarified that the dormant Commerce
Clause essentially “prohibits the enforcement of state
laws driven by . . . economic protectionism—that is,
regulatory measures designed to benefit in-state
economic
interests
by
burdening
out-of-state
competitors.” Nat’l Pork Producers, 598 U.S. at 369
(internal quotation marks omitted) (quoting Department
of Revenue of Ky. v. Davis, 553 U.S. 328, 337–38 (2008)).
The Court emphasized that “this antidiscrimination
principle lies at the ‘very core’ of [its] dormant Commerce
Clause jurisprudence.” Nat’l Pork Producers, 598 U.S. at
369 (quoting Camps Newfound/Owatonna, Inc. v. Town of
Harrison, 520 U.S. 564, 581 (1997)).
The Court explained that, “if some of [its] cases focus
on whether a state law discriminates on its face, the Pike
line serves as an important reminder that a law’s practical
effects may also disclose the presence of a discriminatory
purpose.” Nat’l Pork Producers, 598 U.S. at 377. Put
differently, “Pike serves to “‘smoke out” a hidden’
protectionism.” Id. at 379 (quoting parenthetically R.
Fallon, The Dynamic Constitution 311 (2d ed. 2013)).
Thus, the dormant Commerce Clause is generally
“concern[ed] with preventing purposeful discrimination
against out-of-state economic interests.” Nat’l Pork
Producers, 598 U.S. at 371.
Nevertheless, the Supreme Court acknowledged it
“has left the ‘courtroom door open’ to challenges premised
on ‘even nondiscriminatory burdens,’” and that “‘a small
number of [its] cases have invalidated state laws . . . that
appear to have been genuinely nondiscriminatory.’” Nat’l
Pork Producers, 598 U.S. at 371 (quoting Davis, 553 U.S.
at 353; Gen. Motors Corp. v. Tracy, 519 U.S. 278, 298 n.12
(1997)). “Often, such cases have addressed state laws that
20a
impose burdens on the arteries of commerce, on trucks,
trains, and the like.” Nat’l Pork Producers, 598 U.S. at
392 (Sotomayor, J., concurring) (internal quotation marks
omitted).
And at least one case invalidated a
nondiscriminatory state law that regulated tender offers
to shareholders. Id. (Sotomayor, J., concurring) (citing
Edgar v. MITE Corp., 457 U.S. 624, 643–46 (1982)).
Therefore, with few exceptions, a state law violates
the dormant Commerce Clause only if it “discriminates
against out-of-state entities on its face, in its purpose, or
in its practical effect, . . . unless it ‘serves a legitimate local
purpose, and this purpose could not be served as well by
available nondiscriminatory means.’” Rocky Mountain
Farmers Union, 730 F.3d at 1087 (quoting Maine v.
Taylor, 447 U.S. 131, 138 (1986)); accord Nat’l Pork
Producers, 598 U.S. at 377–81.
C.
Plaintiffs lack constitutional standing to
advance their asserted dormant Commerce Clause
claims.
Having clarified the applicable test, the Court
considers whether Plaintiffs have constitutional standing
to advance their asserted dormant Commerce Clause
claims. See B.C. v. Plumas Unified Sch. Dist., 192 F.3d
1260, 1265 (9th Cir. 1999) (“[F]ederal courts are required
sua sponte to examine jurisdictional issues such as
standing.”).
“In order to have standing to sue in federal court,
Article III of the Constitution of the United States
requires that a complainant have,” among other things,
“suffered an injury in fact, which the Supreme Court has
defined as the invasion of a concrete, imminent, and
21a
legally cognizable interest.”7 Sargeant v. Dixon, 130 F.3d
1067, 1069 (D.C. Cir. 1997); accord Clark v. City of
Lakewood, 259 F.3d 996, 1011 n.7 (9th Cir. 2001). This
requires the plaintiff to “allege a distinct and palpable
injury to himself.” Warth v. Seldin, 422 U.S. 490, 501
(1975) (emphasis added).
In determining whether Invenergy or Grays Harbor
Energy LLC has constitutional standing to advance the
asserted dormant Commerce Clause claims, the Court
first clarifies which of these entities owns the electricity
generating facility at issue: the Grays Harbor Energy
Center. Plaintiffs wrongly assert that Invenergy owns it.
The core of Plaintiffs’ dormant Commerce Clause claims
is that, “[u]nder the [CCA], local electric utilities receive
free, no-cost allowances, which enables them to run their
plants without regard to the greenhouse-gas emissions
they produce” whereas “Invenergy Thermal LLC
(“Invenergy”)1, an out-of-state owner, on the other hand,
must pay for its carbon.” Dkt. 27 at 6. The footnote in this
sentence states that, because “Invenergy wholly owns
Grays Harbor Energy LLC, . . . both Plaintiffs are
collectively referred to as ‘Invenergy’ for purposes of this
brief.” Id. at 6 n.1.
This is misleading. Grays Harbor Energy LLC—not
Invenergy Thermal LLC—“wholly owns the Grays
Harbor Energy Center.” Dkt. 1, ¶ 3. It is immaterial that
a subsidiary (Invenergy Grays Harbor LLC) of a
A plaintiff must also establish that the injury is fairly traceable
to the challenged action of the defendant, and that it is likely, not
merely speculative, that the alleged injury will be redressed by a
favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561–
62 (1992).
7
22a
subsidiary (Invenergy Grays Harbor Holdings LLC) of
Invenergy owns Grays Harbor Energy LLC. “A basic
tenet of American corporate law is that the corporation
and its shareholders are distinct entities.” Dole Food Co.
v. Patrickson, 538 U.S. 468, 474 (2003). Accordingly, “[a]
corporate parent which owns the shares of a subsidiary
does not, for that reason alone, own or have legal title to
the assets of the subsidiary; and, it follows with even
greater force, the parent does not own or have legal title
to the subsidiaries of the subsidiary.” Id. at 475. It
therefore follows with yet even greater force that a
corporate parent (here, Invenergy) does not own or have
legal title to the assets of a subsidiary that is three degrees
separated from itself (here, Grays Harbor Energy LLC).
The Court rejects Plaintiffs’ implicit contention otherwise.
Because Invenergy does not own the Grays Harbor
Energy Center, see Dole Food, 538 U.S. at 474–75, it fails
to allege an injury to itself by the CCA’s allocation of nocost allowances to electric utilities, but not to electricity
generating facilities like the Grays Harbor Energy
Center. See Warth, 422 U.S. at 501. The Ninth Circuit
has similarly held that a subsidiary that “does not contend
that the rights [at issue] belong to it, but to its parent
company,” “fails to establish standing.” Aschley Creek
Properties, L.L.C. v. Larson, 403 Fed. App’x 273, 274 (9th
Cir. 2010) (citing Dole Food, 538 U.S. at 474–475)). 8 Under
Dole Food, the inverse must also be true: a corporate
parent that does not own the asset at issue because it is
wholly owned by a subsidiary also fails to establish
Although they are not binding precedent, unpublished
dispositions of the Ninth Circuit issued on or after January 1, 2007,
may be cited in accordance with Federal Rule of Appellate Procedure
32.1. Ninth Cir. R. 36-3(a)–(b).
8
23a
standing. See 538 U.S. at 475. Therefore, Invenergy does
not have constitutional standing to advance the asserted
dormant Commerce Clause claims.
Nor does Grays Harbor Energy LLC. The complaint
concedes that Grays Harbor Energy LLC is an in-state
entity, not an out-of-state entity. It is headquartered in
Grays Harbor County, Washington, Dkt. 1, ¶ 20, and
appears to exist primarily, if not solely, to operate the
Grays Harbor Energy Center, which is also located in
Grays Harbor County. Id. ¶ 26. Moreover, “[t]he vast
majority of the electricity that Grays Harbor generates is
sold to entities within Washington.” Id. ¶ 38. There is no
indication that Grays Harbor Energy LLC does anything
but “own and operate the Grays Harbor Energy Center.”
Id.
Given these concessions, Grays Harbor Energy LLC
does not plead a plausible “invasion” of a “legally
cognizable interest” under the dormant Commerce
Clause. Sargeant, 130 F.3d at 1069. Its alleged injury
under both of its dormant Commerce Clause claims is that
“the CCA’s distribution of no-cost allowances deprives [it]
of the rights, privileges, and immunities under the
Commerce Clause.” Dkt. 1, ¶¶ 171, 182. But the dormant
Commerce Clause generally prohibits state “regulatory
measures designed to benefit in-state economic interests
by burdening out-of-state competitors.” Nat’l Pork
Producers, 598 U.S. at 369 (internal quotation marks
omitted and emphasis added) (quoting Davis, 553 U.S. at
337–38).
The Court is mindful that a “cognizable injury from
unconstitutional discrimination against interstate
commerce does not stop at members of the class against
24a
whom a State discriminates.” Tracy, 519 U.S. at 286.
Beyond this, for example, “customers of that class may
also be injured,” such as when a “customer is liable for
payment of [a] tax and as a result presumably pays more
for the gas it gets from out-of-state producers and
marketers.” Id.
No such scenario exists here. Grays Harbor Energy
LLC does not identify any out-of-state economic interest
of its own against which the CCA could discriminate. It
also does not even claim to be burdened as the customer
of any discriminated-against out-of-state entity, or to be
burdened in any similar way. See Tracy, 519 U.S. at 286.
Accordingly, Grays Harbor Energy LLC also fails to
allege a plausible injury in fact under the dormant
Commerce Clause.
For these reasons, both Invenergy and Grays Harbor
Energy LLC lack constitutional standing to advance their
asserted dormant Commerce Clause claims. Because
their deficiencies cannot be cured through the allegation
of other facts, these claims are DISMISSED with
prejudice. See Schmier v. U.S. Court of Appeals for the
Ninth Circuit, 279 F.3d 817, 824 (9th Cir. 2002) (dismissal
with prejudice on standing was appropriate when
appellant “could not have possibly amended his complaint
to allege an [Article III] injury in fact”); accord Fieldturf,
Inc. v. Sw. Recreational Indus., Inc., 357 F.3d 1266, 1269
(Fed. Cir. 2004) (“Ordinarily, dismissal for lack of
standing is without prejudice. On occasion, however, a
dismissal with prejudice is appropriate, especially where
‘it [is] plainly unlikely that the plaintiff [will be] able to
cure the standing problem.’” (internal citation omitted)
(quoting H.R. Tech. v. Astechnologies, Inc., 275 F.3d 1378,
1385 (Fed. Cir. 2002)).
25a
D.
Even if Plaintiffs had standing to advance their
asserted dormant Commerce Clause claims, these
claims would fail on the merits.
Even if either Invenergy or Grays Harbor Energy
LLC had standing to advance the asserted dormant
Commerce Clause claims, these claims would still fail for
numerous reasons.
1. Plaintiffs’ claim that the CCA imposes an
excessive burden on interstate commerce in relation to
the putative local benefits is meritless.
Plaintiffs claim that the CCA’s allocation of no-cost
allowances to electric utilities, but not to electricity
generating facilities, violates the dormant Commerce
Clause by “excessively burden[ing] interstate commerce
without advancing any legitimate local interest.” Dkt. 1,
¶ 174. As explained, however, the Supreme Court recently
rejected a similar argument, explaining that it
“overstate[s] the extent to which Pike and its progeny
depart from the antidiscrimination rule that lies at the
core of [its] dormant Commerce Clause jurisprudence.”
Nat’l Pork Producers, 598 U.S. at 377. This claim
accordingly lacks merit. 9
2. Plaintiffs’ claim that the CCA discriminates
against out-of-state economic interests is not
plausible.
Plaintiffs also claim that the CCA’s allocation of nocost allowances to electric utilities violates the dormant
Plaintiffs do not claim that the CCA burdens the “arteries” of
interstate commerce. Nat’l Pork Producers, 598 U.S. at 392
(Sotomayor, J., concurring). The Court, therefore, does not consider
any such claim.
9
26a
Commerce Clause “by discriminating in effect against outof-state economic interests to the benefit of in-state
economic interests.” Dkt. 1, ¶ 157. To reiterate, a state
statute violates the dormant Commerce Clause if it
“discriminates against out-of-state entities on its face, in
its purpose, or in its practical effect, . . . unless it ‘serves a
legitimate local purpose, and this purpose could not be
served as well by available nondiscriminatory means.’”
Rocky Mountain Farmers Union, 730 F.3d at 1087
(quoting Taylor, 447 U.S. at 138); accord Nat’l Pork
Producers, 598 U.S. at 377–81. The CCA does not
discriminate in any of these respects.
a. The CCA does not discriminate against out-ofstate entities on its face.
The CCA does not discriminate against out-of-state
entities on its face because electric utilities and electricity
generating facilities are not substantially similar entities.
“Conceptually, of course, any notion of discrimination
assumes a comparison of substantially similar entities.”
Tracy, 519 U.S.at 298. When “different entities serve
different markets,” they “would continue to do so even if
the supposedly discriminatory burden were removed.” Id.
at 299. “If in fact that should be the case, eliminating the
. . . regulatory differential would not serve the dormant
Commerce Clause’s fundamental objective of preserving
a national market for competition undisturbed by
preferential advantages conferred by a State upon its
residents or resident competitors.” Id.
Plaintiffs concede that “[e]lectric utilities and
electricity generating facilities occupy distinct positions in
electricity markets.” Dkt. 1, ¶ 7. Whereas “[a]n electric
utility distributes and delivers electricity to the public” on
27a
the retail market, electricity generating facilities like the
Grays Harbor Energy Center do not. Id. They instead
sell electricity on the wholesale market, which includes
selling electricity to electric utilities.
See id.
(“Independent power producers . . . regularly sell the
electricity generated by their facilities to electric utilities
as well as some end-users.”). Electric utilities are also
subject to various statutory and regulatory requirements
that electricity generating facilities are not, such as
CETA. See generally chapter 19.405 RCW.
Plaintiffs contend that, because “many utilities own
and operate power plants and other types of electricity
generating facilities,” Dkt. 1, ¶ 7, electric utilities and
nonutility-operated electricity generating facilities
“compete against each other as powerplant owners.” Dkt.
27 at 10. In this sense, Plaintiffs argue, the CCA
unlawfully discriminates against electricity generating
facilities because electric utilities “will use [their no-cost
allowances] to cover their plants’ compliance obligations.”
Id. at 18.
It is true that electric utilities may request Ecology to
transfer their no-cost allowances to electricity generating
facilities that they operate. WAC 173-446-420(2)(a).
However, the CCA’s allocation of no-cost allowances to
electric utilities must be tailored to the amount of
electricity that a utility supplies to the public on the retail
market—a captive market in which electricity generating
facilities do not participate. See RCW 70A.65.120(2)(b),
(c), (d) (stating that the allocation of no-cost allowances to
electric utilities “must be consistent with a forecast . . . of
each utility’s supply and demand, and the cost burden
resulting from the inclusion of” covered entities for each
compliance period (emphasis added)); WAC 173-446-
28a
230(2)(a) (“Ecology will use utility-specific demand
forecasts that provide estimates of retail electric load.”
(Emphasis added)). 10
As Ecology persuasively asserts: “Because the
supply of no-cost allowances is finite and directly tied to
the power a utility supplies to its retail customers, any
power created by a utility’s generating facilities that does
not serve this load—i.e., bulk power sold on the wholesale
market—does not increase a utility’s allocation of no-cost
allowances.” Dkt. 30 at 5. As a result, the allocation of nocost allowances applies primarily to grant electric utilities
a benefit in the captive market.
To modify this scheme “could subject [utilities] to
economic pressure that in turn could threaten the
preservation of an adequate customer base to support the
continued provision of bundled services to the captive
market.” Tracy, 519 U.S. at 309. This is significant,
particularly because “the States’ interest in protecting the
captive market from the effects of competition for the
largest consumers is underscored by the common sense of
our traditional recognition of the need to accommodate
state health and safety regulation in applying dormant
Commerce Clause principles.” Id. at 306. By comparison,
“[s]tate regulation of natural gas sales to consumers,” for
instance, “serves important interests in health and safety
in fairly obvious ways, in that requirements of dependable
supply and extended credit assure that individual buyers
of gas for domestic purposes are not frozen out of their
The complaint acknowledges this, stating that, under the CCA,
electric utilities “will receive enough no-cost allowances to cover the
emissions associated with the electricity they sell to consumers in
Washington.” Dkt. 1, ¶ 9 (emphasis added).
10
29a
houses in the cold months.” Id. The same is true of state
regulation of electricity sales.
The Court accordingly “give[s] the greater weight to
the captive market and the . . . utilities’ singular role in
serving it,” and, thus, treats electric utilities and
electricity generating facilities “as dissimilar for present
purposes.” Tracy, 519 U.S. at 304; accord NextEra
Energy, 48 F.4th at 320 (“Tracy prevented classifying a
law as textually discriminatory . . . because it applied
primarily to grant utilities a tax preference in a market
where they were monopolies.”). Put differently, because
the CCA does “not discriminate on the basis of a
company’s business contacts with the state, but rather on
the basis of its status” as either an electric utility or
electricity generating facility, “the statute d[oes] not
offend the dormant Commerce Clause.” Allstate Ins. Co.
v. Abbott, 495 F.3d 151, 162 (5th Cir. 2007), cert. denied,
552 U.S. 1184 (2008); accord Exxon Corp. v. Governor of
Maryland, 437 U.S. 117, 127 (1978) (the dormant
Commerce Clause does not “protect[] the particular
structure or methods of operation in a retail market”).
Therefore, the challenged statute does not
discriminate against out-of-state economic interests on its
face.
b. The CCA does not discriminate against out-ofstate entities in its purpose.
The allocation of no-cost allowances to electric
utilities, but not to electricity generating facilities, does
not discriminate against out-of-state entities in its
purpose. The challenged statute states that “[t]he
legislature intends by this section to allow all consumerowned electric utilities and investor-owned electric
30a
utilities subject to the requirements of chapter 19.405
RCW, the Washington clean energy transformation act, to
be eligible for allowance allocation as provided in this
section in order to mitigate the cost burden of the program
on electricity customers.” RCW 70A.65.120(1) (emphasis
added).
This express purpose plainly does not
discriminate against out-of-state economic interests.
c. The CCA does not discriminate against out-ofstate entities in effect.
The CCA also does not discriminate in effect. Most
importantly, Plaintiffs do not articulate how the CCA
discriminates in effect against any legally cognizable outof-state economic interest; again, Grays Harbor Energy
LLC—the sole owner of the Grays Harbor Energy
Center—is an in-state entity that produces and sells its
own electricity in Washington. Separately, because
electricity generating facilities and electric utilities are
not substantially similar entities for Commerce Clause
purposes, the CCA’s differing treatment of them does not
discriminate in effect. For each of these reasons alone, the
CCA’s allocation of no-cost allowances to electric utilities
does not discriminate in effect.
Plaintiffs additionally fail to plausibly allege that
PacifiCorp, the owner of an electric utility in Washington
that is entitled to no-cost allowances under the CCA, is an
in-state entity. Plaintiffs acknowledge that PacifiCorp “is
headquartered in Oregon,” Dkt. 1, ¶ 48 n.8, yet they allege
that it is an in-state entity because it “conduct[s]
significant commercial and political activities in
Washington.” Id. ¶ 48; see also Dkt. 27 at 10–11.
According to Plaintiffs, “extensive practical connections”
to a State, “not corporate formalities, inform whether an
31a
entity is an in-state economic interest.” Dkt. 27 at 16
(citing NextEra Energy, 48 F.4th at 322–24).
The Court is not persuaded that, under these
circumstances, an entity headquartered out-of-state
qualifies as an in-state entity for dormant Commerce
Clause purposes simply because it “conducts significant
commercial and political activities in Washington.” 11 Dkt.
1, ¶ 48. The plaintiffs in National Pork Producers, for
example, were out-of-state entities because they produced
pork outside of California, even though “California
imports almost all the pork it consumes.” 598 U.S. at 367.
In this way, those plaintiffs undoubtedly conducted
significant commercial activities in California. The Court
also fails to see the relevance in this case of an entity’s
political activities in Washington for determining whether
it is an in-state entity.
Plaintiffs rely on NextEra Energy. There, the Fifth
Circuit made several statements that, when read outside
the specific context of that case, may appear to support
Ecology asserts that the Eighth Circuit has “reject[ed] the
argument that an out-of-state company with permanent in-state
operations is an in-state interest for Commerce Clause purposes.”
Dkt. 30 at 8 (citing LSP Transmission Holdings, LLC v. Sieben, 954
F.3d 1018, 1027–29 (8th Cir. 2020), cert. denied, __ U.S. __, 141 S. Ct.
1510 (2021)). In the cited case, however, the Eighth Circuit declined
to address this issue, stating: “[W]e have not squarely addressed the
issue of whether an entity that has an in-state presence but is
headquartered elsewhere is considered an in-state entity for the
purpose of dormant Commerce Clause review. We need not do so
now.”
LSP Transmission Holdings, 954 F.3d at 1029 n.7.
Nevertheless, the court noted “that it would be somewhat awkward to
label a [state] law as discriminatory despite benefitting a company
that has an operation in [the State] but is principally located or
headquartered elsewhere.” Id.
11
32a
Plaintiffs’ proposed standard. For instance, the court
stated that, “[f]or the concern about in-state interests
being able to obtain favorable treatment over out-of-state
interests, local presence, rather than place of
incorporation, should matter.” NextEra Energy, 48 F.4th
at 323. The court also questioned: “Which business is
more likely to have the clout to enact protectionist
measures:
a Delaware corporation that employs
thousands of workers in a state, or a company that paid a
nominal filing fee to be incorporated in state but has its
‘principal operations’ elsewhere?”
Id.
The court
answered:
“[W]here a company is ‘based’ is not
controlling, and the underlying concern about local clout
leading to protectionist legislation, a law can discriminate
against interstate commerce even though most of the”
entities that benefit from the law “are incorporated or
headquartered” elsewhere. Id. at 323–24.
Yet “‘[t]he language of an opinion is not always to be
parsed as though we were dealing with language of a
statute.’” Nat’l Pork Producers, 598 U.S. at 373 (quoting
Reiter v. Sonotone Corp., 442 U.S. 330, 341 (1979)).
“Instead, . . . opinions dispose of discrete cases and
controversies and they must be read with a careful eye to
context.” Nat’l Pork Producers, 598 U.S. at 373–74.
NextEra Energy in inapposite. It concerned a Texas
statute which provided that “the ability to build, own, or
operate new [transmission] lines ‘that directly [connect]
with an existing utility facility . . . may be granted only to
the owner of that existing facility.’” NextEra Energy, 48
F.4th at 310 (second and third alterations in original)
(quoting TEX. UTIL. CODE § 37.056(e)). Under that
statute, “the only way a company without a Texas
presence can build, operate, or own transmission lines is
33a
to buy a utility that already owns a power facility in the
state.” Id. at 314.
The Fifth Circuit found it irrelevant that “most of the
in-state incumbents [the statute] protects are
incorporated [or headquartered] outside Texas.” Id. at
322. It explained that “[w]hat matters instead is that the
Texas law prevents those without a presence in the state
from ever entering the portions of the interstate
transmission market that cross into Texas.” Id. at 324.
Because “[a] law that ‘discriminates among affected
business entities according to the extent of their contacts
with the local economy’ may violate the Commerce
Clause,” id. (quoting Lewis v. BT Inv. Managers, Inc., 447
U.S. 27, 42 (1980)), the Fifth Circuit held that the statute
discriminated against out-of-state economic interests. Id.
at 326.
The CCA does nothing of the sort. Plaintiffs do not
claim that the CCA, for example, limits the ownership of
electric utilities or electricity generating facilities to
entities with an existing presence in Washington, or
otherwise imposes a burden on entities without an existing
presence in the State. Therefore, Plaintiffs’ reliance on
NextEra Energy is misplaced.
Aside from failing to plausibly allege that PacifiCorp
is an in-state owner of an electric utility, Plaintiffs also fail
to adequately account for two in-state owners of electricity
generating facilities. Specifically, the University of
Washington (UW) and Washington State University
(WSU) own and operate electricity generating facilities,
Dkt. 22-3, 12 that appear to generate more than 25,000
Pursuant to Federal Rule of Evidence 201, Ecology requests
the Court to take judicial notice of six documents filed with various
12
34a
metric tons of carbon dioxide equivalent per year. See
Dkt. 22-4 at 2 (stating that, in 2021, UW’s total emissions
amounted to 89,624 metric tons of carbon dioxide
equivalent, and WSU’s total emissions amounted to 62,454
metric tons of carbon dioxide equivalent). This would
make these facilities “covered entities” under the CCA.
See RCW 70A.65.010(23); WAC 173-446-030; WAC 173446-060. Because these in-state owners of electricity
generating facilities also appear to be subject to the CCA
and not entitled to no-cost allowances, Plaintiffs’ claim
that the CCA discriminates in effect fails.
Plaintiffs argue that “the data [Ecology] provides do
not identify whether these power plants produced the
recorded emissions.” Dkt. 27 at 8 n.3. But Ecology
convincingly replies that “there is no other conceivable
activity under which either UW or WSU would generate
large quantities of greenhouse gas emissions of the type
covered by the CCA but for these facilities.” Dkt. 31 at 2;
see Vasquez, 487 F.3d at 1249 (on a motion to dismiss,
plaintiffs are not entitled to unwarranted inferences in
their favor). In any event, Plaintiffs bear the burden of
pleading a plausible claim, see Iqbal, 556 U.S. at 678, and
federal and state agencies. Dkt. 22 at 1–3. Plaintiffs do not object to
the Court taking judicial notice of five of these documents. Dkt. 28 at
1. However, they oppose the Court taking judicial notice of one of
these documents—an excerpt of a Washington greenhouse gas
reporting program publication, Dkt. 22-4—“to the extent that
Defendant claims [the emissions data in this publication] provide a
basis for the Court to conclude these universities’ power plants qualify
as covered entities under the [CCA].” Id. at 1–4. This argument
essentially asks the Court to not make an unwarranted inference from
the disputed document. It does not concern whether the Court may
take judicial notice of the document itself. Accordingly, the Court
takes judicial notice of all six documents.
35a
they do not plausibly allege that these in-state electricity
generating facilities are not subject to the CCA.
Plaintiffs also argue that Ecology “has offered no
evidence that these power plants compete against Grays
Harbor and the twelve other power plants identified in
[the] Complaint.” Dkt. 27 at 8 n.3. But again, Plaintiffs
bear the burden of pleading a plausible claim. See Iqbal,
556 U.S. at 678. Their failure to allege any facts indicating
that the Grays Harbor Energy Center does not compete
in any way against these facilities is another deficiency in
their complaint. Although this particular deficiency might
be curable through further amendment, the others are
not.
In sum, regardless of whether an electric utility is
owned by an in-state entity or an out-of-state entity, the
CCA treats that utility the same as any other electric
utility: it is entitled to no-cost allowances. Similarly,
regardless of whether an electricity generating facility is
owned by an in-state entity or an out-of-state entity, the
CCA treats that facility the same as any other electricity
generating facility: it is not entitled to no-cost allowances.
Plaintiffs accordingly fail to plausibly allege that the
CCA’s allocation of no-cost allowances to electric utilities,
but not to electricity generating facilities, discriminates
against out-of-state economic interests.
For these reasons, even if Plaintiffs had standing to
advance their dormant Commerce Clause claims, these
claims would fail on the merits. Because these claims
could not be cured through further amendment, they
would be dismissed with prejudice. See Cook, Perkiss &
Liehe, 911 F.2d at 247.
36a
E.
Plaintiffs’ claim under the Equal Protection
Clause of the Fourteenth Amendment also fails.
Plaintiffs allege that the CCA’s allocation of no-cost
allowances to electric utilities, but not to electricity
generating facilities like the Grays Harbor Energy
Center, violates the Equal Protection Clause of the
Fourteenth Amendment by “treat[ing] independent
power plant owners differently from other similarly
situated plant owners, namely local utilities,” in a manner
that “is not rationally related to any legitimate
governmental purpose.” Dkt. 1, ¶ 187.
Ecology asserts that this “claim fails for the simple
reason that there is no discrimination to begin with.” Dkt.
21 at 21. It also contends that, “even if Plaintiffs were
similarly situated and differently treated, Plaintiffs still
cannot meet their burden to negate the Legislature’s
policy determination.” Id.
Plaintiffs respond that, “[a]s power-plant owners,”
they are “materially the same” as the utilities that benefit
under the CCA—each “own and operate power plants that
generate indistinguishable electricity in more-or-less the
same manner.” Dkt. 27 at 27. Plaintiffs also argue that
the CCA’s allocation of no-cost allowances to electric
utilities does not bear a rational relation to a legitimate
end because it actually “increas[es] both greenhouse-gas
emissions and electricity costs.” Id. at 28.
Under the Equal Protection Clause of the Fourteenth
Amendment, “[n]o State shall . . . deny to any person
within its jurisdiction the equal protection of the laws.”
U.S. CONST. amend. XIV, § 1. In essence, the clause
“mandates that similarly situated persons be treated
alike.” Nw. Grocery Ass’n v. City of Seattle, 526 F. Supp.
37a
3d 884, 893 (W.D. Wash. 2021) (citing Plyler v. Doe, 457
U.S. 202, 216 (1982)). “[I]f a law neither burdens a
fundamental right nor targets a suspect class, [courts] will
uphold the legislative classification so long as it bears a
rational relation to some legitimate end.” Romer v.
Evans, 517 U.S. 620, 631 (1996). A law reviewed under the
rational basis standard bears “a strong presumption of
validity” and the attacking party has “the burden ‘to
negative every conceivable basis which might support it.’”
F.C.C. v. Beach Commc’ns, 508 U.S. 307, 314–15 (1993)
(quoting Lehnhausen v. Lake Shore Auto Parts Co., 410
U.S. 356, 364 (1973)). Furthermore, a “[l]egislative choice
is not subject to courtroom fact-finding and may be based
on rational speculation unsupported by evidence or
empirical data.” Beach Commc’ns, 508 U.S. at 113.
As an initial matter, the Court concludes that
Invenergy lacks constitutional standing to advance this
claim for the same reason that it lacks standing to advance
a claim under the dormant Commerce Clause: it does not
own the Grays Harbor Energy Center and, therefore,
does not allege an injury in fact. Because this standing
deficiency cannot be cured through further amendment,
Invenergy’s claim under the Fourteenth Amendment’s
Equal Protection Clause is DISMISSED with prejudice.
See Schmier, 279 F.3d at 824 (9th Cir. 2002); Fieldturf,
Inc., 357 F.3d at 1269.
Next, Grays Harbor Energy LLC fails to allege a
plausible claim under the Equal Protection Clause.
Because electric utilities and electricity generating
facilities are not similarly situated, the CCA’s allocation of
no-cost allowances to electric utilities does not
discriminate in violation of the Equal Protection Clause.
For this reason alone, Grays Harbor Energy LLC fails to
38a
state a plausible claim.
Grays Harbor Energy LLC also fails to plausibly
allege that the challenged statute does not bear a rational
relation to some legitimate end. Again, the purpose of the
CCA’s allocation of no-cost allowances to electric utilities
is “to mitigate the cost burden of the [cap and invest]
program on electricity customers.” RCW 70A.65.120(1).
There can be no debate that this is a legitimate end. See
Tracy, 519 U.S. at 306. There is also no doubt that the
allocation of no-cost allowances to electric utilities—which
sell electricity directly to the public—bears a rational
relation to this end. Plaintiffs’ complaints that the CCA
does not achieve this goal effectively and in reality are
immaterial. See Beach Commc’ns, 508 U.S. at 113.
Accordingly, Grays Harbor Energy LLC fails to
allege a plausible claim under the Fourteenth
Amendment’s Equal Protection Clause. Because this
claim cannot possibly be cured by the allegation of other
facts, this claim is DISMISSED with prejudice. See
Cook, Perkiss & Liehe, 911 F.2d at 247.
III.
ORDER
Therefore, it is hereby ORDERED that Ecology’s
motion for a judgment on the pleadings, Dkt. 21, is
GRANTED. All of Plaintiffs’ claims are DISMISSED
with prejudice and without leave to amend.
The Clerk shall enter a JUDGMENT and close the
case.
Dated this 3rd day of November, 2023.
Benjamin H. Settle
United States District Judge
39a
APPENDIX C
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
INVENERGY
THERMAL LLC, et al.,
Plaintiff,
v.
LAURA WATSON,
Defendant.
JUDGMENT IN A
CIVIL CASE
CASE NO. 3:22-cv05967-BHS
Jury Verdict. This action came before the Court for
a trial by jury. The issues have been tried and the jury
has rendered its verdict.
Decision by Court. This action came to consideration
before the Court. The issues have been considered
and a decision has been rendered.
The Court does hereby find and ORDER as follows:
This case is DISMISSED with prejudice and without
leave to amend.
Dated this 3rd day of November, 2023.
Ravi Subramanian
Clerk
s/Ann Duke
Deputy Clerk
40a
APPENDIX D
Vanessa Soriano Power (WSBA No. 30777)
vanessa.power@stoel.com
Jason T. Morgan (WSBA No. 38346)
jason.morgan@stoel.com
STOEL RIVES LLP
600 University Street, Suite 3600
Seattle, WA 98101
Telephone: 206.624.0900
Facsimile: 206.386.7500
Stephen D. Andrews (pro hac vice forthcoming)
sandrews@wc.com
Nicholas G. Gamse (pro hac vice forthcoming)
ngamse@wc.com
Michael J. Mestitz (pro hac vice forthcoming)
mestitz@wc.com
Samuel M. Lazerwitz (pro hac vice forthcoming)
slazerwitz@wc.com
WILLIAMS & CONNOLLY LLP
680 Maine Avenue S.W.
Washington, DC 20024
Telephone: 202.434.5000
Facsimile: 202.434.5029
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
41a
INVENERGY
THERMAL LLC, and
GRAYS HARBOR
ENERGY LLC,
Plaintiffs,
v.
LAURA WATSON, in
her official capacity as
Director of the
Washington State
Department of Ecology,
Defendant.
No. 3:22-cv-5967
COMPLAINT FOR
DECLARATORY AND
INJUNCTIVE
RELIEF
Plaintiffs Invenergy Thermal LLC (“Invenergy”) and
Grays Harbor Energy LLC bring this action for
declaratory and injunctive relief against Defendant Laura
Watson, in her official capacity as Director of the
Washington State Department of Ecology.
PRELIMINARY STATEMENT
1. Invenergy is an independent power producer that
owns and operates power plants across the United States.
It is headquartered in Chicago, Illinois and incorporated
in Delaware. Its affiliates include the world’s largest
privately held renewable energy company.
2. For the past two decades, Invenergy and its
affiliates have committed to decarbonizing the United
States’ power grid. They have worked to achieve this goal
by investing in power projects that deploy the bestavailable technologies to provide less carbon-intensive
electricity than pre-existing generating facilities. They
have also made significant investments to ensure the
42a
electricity grid’s resilience as Washington and other
states transition to carbon-neutral generation. With these
investments, Invenergy and its affiliates, again, aim to
ensure that they support these transitions in the cleanest
and most efficient manner possible.
3. As is relevant here, Invenergy, through other
subsidiaries, wholly owns Grays Harbor Energy LLC,
which wholly owns the Grays Harbor Energy Center
(“Grays Harbor”), a power plant located in Washington.
4. Today, Grays Harbor generates more than 650
megawatts of electricity for distribution to customers in
Washington and throughout the Pacific Northwest. In
other words, it creates enough electricity to power more
than 100,000 homes. Grays Harbor is one of the cleanest
and most efficient natural-gas power plants in
Washington. It employs state-of-the-art technology to
produce electricity efficiently and to minimize
greenhouse-gas emissions.
5. In 2021, after several similar attempts to address
greenhouse-gas emissions through carbon-pricing
legislation and administrative actions, Washington
enacted the Climate Commitment Act (“CCA”), Wash.
Rev. Code. §§ 70A.65.005-901.
The CCA and its
implementing regulations require many emissionsproducing entities to obtain “allowances” to cover the
greenhouse-gas emissions they produce, which regulate
the amount of greenhouse gases any single entity can
emit.
6. Some entities covered by the CCA will purchase
their allowances at auction at a variable price based on
market demand. However, the CCA and its implementing
regulations provide free (“no-cost”) allowances to electric
43a
utilities, which will have the effect of reducing those
utilities’ cost of generating power.
7. Electric utilities and electricity generating
facilities occupy distinct positions in electricity markets.
An electric utility distributes and delivers electricity to the
public. Utilities rely on electricity generating facilities,
including power plants, to generate this electricity.
Although many utilities own and operate power plants and
other types of electricity generating facilities, they often
also rely on electricity generating facilities operated by
third parties, including federal Power Marketing
Administrations and independent power producers.
Independent power producers like Invenergy regularly
sell the electricity generated by their facilities to electric
utilities as well as some end-users.
8. The electric utilities that will receive no-cost
allowances under the CCA are all local to Washington.
Almost all of these utilities are headquartered in
Washington, and they all conduct significant commercial
and political activities within the state.
9. In 2023, each local utility will receive enough nocost allowances to cover the emissions associated with the
electricity they sell to consumers in Washington. Wash.
Admin. Code § 173-466-230. These free allowances are
assigned directly to electric utilities in an attempt to
encourage them not to raise electricity prices for
ratepayers. Wash. Rev. Code § 70A.65.120.
10. Under the CCA and its implementing regulations,
electric utilities can transfer their no-cost allowances to
the power plants that they own. Wash. Admin. Code § 173446-425. Because these power plants are responsible for
generating the electricity these utilities sell and the
44a
emissions associated with that electricity, the no-cost
allowances, in practice, will eliminate utility-owned power
plants’ compliance costs. As a result, local utilities will
have lower costs in generating electricity than
independent power plant owners in Washington. At
present, Invenergy is the only independent power plant
owner burdened in this manner by the CCA during its first
compliance period, which will begin on January 1, 2023
and end on December 31, 2026. See Wash. Rev. Code
§§ 70A.65.010(20), 70A.65.070(1)(a), 70A.65.110(3)(a)-(b).
11. Including Grays Harbor, there are thirteen power
plants in Washington imminently affected by the CCA. 1
Local utilities serving customers in Washington own
twelve of these thirteen power plants.
12. Grays Harbor is the only one of these power
plants owned by an entity without a substantial connection
to Washington.
13. More importantly, because the CCA grants nocost allowances only to local utilities and permits those
The Spokane Waste to Energy Facility, the Centralia Generation
Facility, and the Cedar Hills Landfill Gas-to-Energy Facility
generated emissions in 2019 that satisfy the CCA’s coverage
threshold. See GHG Reporting Program Publication, Data.WA.gov
(Jan. 12, 2022), https://data.wa.gov/Natural-Resources-Environment
/GHG-Reporting-Program-Publication/idhm-59de/data.
These
plants, however, are exempted from the CCA’s first compliance
period. As a coal-fired power plant, the Centralia Generation
Facility’s emissions are entirely exempt under the CCA. Wash. Rev.
Code. § 70A.65.080(7)(c). The Cedar Hills Landfill Gas-to-Energy
Facility’s emissions are also entirely exempt under the CCA because
it generates emissions by burning natural gas derived from biomass.
Id. § 70A.65.080(7)(d). Waste-to-energy facilities like the one in
Spokane have no obligations under the CCA until the second
compliance period. Id. § 70A.65.080(2).
1
45a
utilities to transfer these allowances to their power plants,
Grays Harbor is also the only power plant covered during
the CCA’s first compliance period that must purchase
allowances.
14. The CCA’s allocation of no-cost allowances
uniquely harms Invenergy. Unlike local utilities who may
use their no-cost allowances to reduce, if not eliminate,
their costs to comply with the CCA, it must bear the costs
of ensuring Grays Harbor has sufficient allowances to
cover its emissions during the CCA’s first compliance
period.
15. The CCA’s allocation of no-cost allowances,
therefore, violates the Constitution. It (1) impermissibly
discriminates against out-of-state business in violation of
the dormant Commerce Clause; (2) unlawfully burdens
interstate commerce in violation of the dormant
Commerce Clause; and (3) discriminates against
independent owners of natural gas power plants in
Washington in violation of the Equal Protection Clause.
16. In addition to being unconstitutional, the CCA
undermines its stated purpose of reducing greenhousegas emissions in the state in at least two ways. First,
because the CCA does not fairly require electric utilities
to consider the cost of emissions allowances when making
energy-dispatch decisions (or require utilities to bid their
carbon costs), the law fails to ensure that utilities
prioritize meeting electricity demand with clean power,
resulting in overall power generation in Washington that
is more carbon intensive. Second, the CCA fails to
incentivize further clean-power development by out-ofstate investors like Invenergy, notwithstanding the
substantial role that out-of-state investors play in clean-
46a
power generation in the state. The CCA, then, will not
only imperil Invenergy’s current ability to provide clean
power in the state, but will also deter Invenergy and other
out-of-state companies from investing in clean-power
generation in Washington in the future.
17. What is more, the CCA’s discriminatory allocation
of no-cost allowances will increase electricity costs for
ratepayers. Because the no-cost allowances incentivize
electric utilities to dispatch their own power plants, these
power plants will generate more electricity in the state
even though they do so less efficiently than Grays Harbor.
As a result, the cost of generating the electricity to meet
Washingtonians’ demand will increase, and utilities will
likely seek to pass those additional costs on to consumers
by increasing rates.
18. In short, the CCA’s discrimination against
Invenergy will likely increase both greenhouse-gas
emissions from power plants and consumers’ electricity
costs over what Washington would have experienced in
the coming decades absent the CCA.
PARTIES
19. Plaintiff Invenergy is a Delaware corporation
headquartered in Chicago, Illinois.
20. Plaintiff Grays Harbor Energy LLC is a
Delaware corporation headquartered in Elma,
Washington. It is also a wholly-owned subsidiary of
Invenergy. 2
Invenergy wholly owns Grays Harbor Energy LLC through two
intermediate subsidiaries. Grays Harbor Energy LLC is a wholly
owned subsidiary of Invenergy Grays Harbor LLC. Invenergy Grays
Harbor LLC is a wholly owned subsidiary of Invenergy Grays Harbor
2
47a
21. In Washington, both Invenergy and its subsidiary
Grays Harbor Energy LLC own and operate one energy
generation facility: Grays Harbor. 3
22. Grays Harbor qualifies as a “covered entity”
regulated under the CCA.
23. Defendant Laura Watson is sued in her official
capacity as the Director of the Washington State
Department of Ecology (“Ecology”).
As Ecology’s
Director, she “ha[s] complete charge of and supervisory
powers over the department.”
Wash. Rev. Code.
§ 43.21A.050. The CCA tasks Ecology with implementing,
overseeing, and enforcing the act’s “cap on greenhouse
gas emissions.” Id. § 70A.65.060; see id. § 70A.65.200.
Accordingly, Ecology is responsible for promulgating the
rules to auction allowances for covered entities to
purchase and allocate no-cost allowances to certain types
of entities identified by statute, including electric utilities,
id. §§ 70A.65.100, 70A.65.120. See also id. § 70A.65.220.
JURISDICTION AND VENUE
24. The Court has subject-matter jurisdiction under
28 U.S.C. §§ 1331 and 1343.
25. The Court has the authority to enjoin enforcement
of the CCA under 42 U.S.C. § 1983 and to grant
declaratory relief under 28 U.S.C. §§ 2201 and 2202.
26. This judicial district is the proper venue under 28
U.S.C. § 1391(b)(2) because it is where a substantial part
Holdings LLC. Invenergy Grays Harbor Holdings LLC is a wholly
owned subsidiary of Invenergy.
3
Invenergy’s affiliates own one other energy facility in Washington:
The Vantage Energy Center, a 90-megawatt wind farm in Kittitas
County.
48a
of the events giving rise to the claims occurred and where
the effects of the CCA will be felt, as Invenergy and Grays
Harbor Energy LLC own and operate the Grays Harbor
Energy Center in Grays Harbor County, Washington.
FACTUAL ALLEGATIONS
The Market for Electricity in the Pacific Northwest
27. The United States lacks a single, unified market
for electricity, but it also does not have fifty individual
electricity markets.
28. Rather, the United States principally contains
several regional markets for electricity, each with their
own organization and characteristics. Despite these
markets’ varied character, they fall generally into two
camps: traditional markets dominated by vertically
integrated utilities and markets overseen by regional
transmission organizations and independent system
operators. 4
29. The Pacific Northwest has a more traditional
energy market. In this market, vertically integrated
utilities have generally been responsible for generating,
transmitting, and distributing electricity to serve the
region’s ratepaying customers. By law, these utilities may
set rates so as to recover their costs and a return on capital
investments, but may not set rates to generate further
profits.
30. The Pacific Northwest also lacks a centralized
wholesale market for electricity. Instead, most wholesale
Fed. Energy Regulatory Comm’n, Energy Primer: A Handbook for
Energy Market Basics 61 (2020), https://www.ferc.gov/sites/default/
files/2020-06/energy-primer-2020_Final.pdf.
4
49a
purchases of electricity are conducted in bilateral
transactions. In other words, many power plants or their
brokers negotiate electricity sales directly with electricity
buyers. Many of these transactions are made at electricity
trading hubs. Two of the largest hubs in the region are
the Mid-Columbia and California-Oregon-Border hubs.
31. The Bonneville Power Administration, a federal
Power Marketing Administration, is the largest supplier
of wholesale electricity in the region, largely selling
electricity generated from several hydroelectric dams.
32. Several other entities participate in the region’s
wholesale market, including Invenergy and Grays Harbor
Energy LLC.
33. The electricity supplied by the various power
plants is indistinguishable and is not actually directed to
any particular place on the electrical grid. Instead, each
power plant supplies electricity to the grid, and thousands
of entities across the Western Interconnection draw from
this supply without any regard to which power plant
generated each individual kilowatt of electrical energy.
Power plants sell electricity on the wholesale market to
their customers, including utilities, by agreeing to supply
specific amounts of electricity on specified transmission
lines at a specified time, which entitles the customer to use
that amount of electricity at that time. These transactions
are recorded using North American Electric Reliability
Corporation Tags, or “E-Tags.”
34. Because the Pacific Northwest lacks a centralized
market authority, individual utilities decide when and how
to dispatch—or make use of—the electricity-generation
resources available to them.
50a
35. In making dispatch decisions, utilities consider (1)
their own electricity generating facilities, (2) the
electricity available to them through long-term supply
contracts, and (3) electricity available from third-parties
on a short-term basis, or “spot market” transactions.
36. Although electric utilities should theoretically
dispatch the resources available to them in the most costefficient manner, they often do not do so. Retail demand
for electricity is highly inelastic, so utilities often pass
additional generating costs on to ratepayers. Further,
due to a lack of centralized pricing information, there is
little ability for any actor to monitor the efficiency of
utilities’ dispatch decisions in real time.
Grays Harbor Generates Clean Power in Washington
37. Although natural gas power plants require fossil
fuels, natural gas power plants facilitate the transition to
a decarbonized electricity sector. Natural gas power
plants do so by compensating for the variable output of
wind and solar farms. 5 In addition, natural gas plants
employing modern technology emit significantly fewer
greenhouse gases when generating electricity than typical
coal-fired power plants or older natural gas power plants.
38. A subsidiary of Invenergy purchased Grays
Harbor in 2005. Today, Grays Harbor generates more
than 650 megawatts of electricity for customers
throughout the Pacific Northwest. The vast majority of
the electricity that Grays Harbor generates is sold to
entities within Washington.
39.
Grays
Harbor
employs
state-of-the-art
Natural Gas, Invenergy, https://invenergy.com/what-we-do/
natural-gas (last visited Dec. 12, 2022).
5
51a
technology to produce electricity efficiently and minimize
greenhouse-gas emissions. In 2021, Invenergy invested
millions of dollars to upgrade Grays Harbor with
advanced-gas-path technology to further improve its
efficiency and reduce the plant’s environmental footprint.
Even before this upgrade, Grays Harbor was one of
Washington’s most efficient and cleanest natural gas
power plants, and the upgrade further solidified this
status.
40. Each day, Grays Harbor must decide whether to
run its generators the next day, and, if so, for how long.
41. Although this calculus requires the consideration
of several factors, the bottom line decision is
straightforward: Based on the information available, does
Grays Harbor expect that it will be able to sell electricity
for more than it costs to generate that electricity? If the
answer is yes, Grays Harbor makes the arrangements
needed to run the plant, including purchasing natural gas,
and, through its broker, negotiating energy sales. The
next day, Grays Harbor generates electricity and
dispatches that electricity to its customers. On the other
hand, if the answer is no, Grays Harbor does not turn on
its generators and waits to decide whether to run the plant
the following day.
42. The amount of electricity that Grays Harbor
generates—and therefore sells—depends almost entirely
on its generation costs and the current demand for
electricity.
Grays Harbor Competes Against Locally-Owned
Facilities
43.
Although hydroelectric dams generate the
52a
majority of Washington’s electricity, natural gas power
plants are the state’s second-largest source of electricity. 6
44. In this sector, Grays Harbor competes directly
with twelve other natural gas power plants in Washington
that qualify as covered entities under the CCA during its
first compliance period.
45. These facilities are: (1) the Chehalis Generation
Facility; (2) the Mint Farm Generating Station; (3) the
Goldendale Generating Facility; (4) the River Road
Generating Plant; (5) Frederickson Power L.P.; (6) the
Ferndale Generating Station (7) the Kettle Falls
Generating Station; (8) the Sumas Generating Station; (9)
the Encogen Generating Station; (10) the Fredonia
Generating Station; (11) the Frederickson Generating
Station; and (12) the Boulder Park Generating Station.
46. The following entities own Grays Harbor’s
competitors:
Avista Corp.; Clark Public Utilities;
Frederickson Power L.P. 7; PacifiCorp; and Puget Sound
Energy, Inc.
Washington: State Profile and Energy Estimates, U.S. Energy
Information Admin. (last updated Feb. 17. 2022), https://www.eia.gov/
state/analysis.php?sid=WA.
6
Frederickson Power L.P. is an entity that is jointly owned and
controlled by Atlantic Power Corp and Puget Sound Energy, Inc. See
Frederickson, AtlanticPower & Utilities, https://www.atlanticpower
.com/assets/projects/frederickson (last visited Dec. 12, 2022); Puget
Energy, Inc. & Puget Sound Energy, Inc., Annual Report (Form 10K), 102-03 (Feb. 24, 2022); Atlantic Power Corp., Annual Report
(Form 10-K), F-22 (Mar. 4, 2021).
7
53a
47. The name, location, and owner of the competing
facilities in Washington are set out in the table below:
Name of Facility
Grays Harbor
Energy Center
Chehalis
Generation
Facility
Mint Farm
Generating
Station
Goldendale
Generating
Station
River Road
Generating Plant
Frederickson
Power L.P.
Ferndale
Generating
Station
Kettle Falls
Generating
Station
Sumas
Generating
Station
Encogen
Generating
Station
Fredonia
Generating
Station
Location
Owner
Elma, WA
Invenergy LLC
Chehalis, WA
PacifiCorp
Longview, WA
Puget Sound Energy,
Inc.
Goldendale, WA
Puget Sound Energy,
Inc.
Vancouver, WA
Clark Public Utilities
Tacoma, WA
Frederickson Power
L.P. (Atlantic Power
Corp. and Puget
Sound Energy)
Ferndale, WA
Puget Sound Energy,
Inc.
Kettle Falls,
WA
Avista Corp.
Sumas, WA
Puget Sound Energy,
Inc.
Bellingham,
WA
Puget Sound Energy,
Inc.
Mount Verna,
WA
Puget Sound Energy,
Inc.
54a
Frederickson
Generation
Station
Boulder Park
Generating
Station
Tacoma, WA
Puget Sound Energy,
Inc.
Spokane Valley,
WA
Avista Corp.
48.
The owners of these entities differ from
Invenergy in three significant ways: (1) All are local
utilities or are directly owned by such utilities; (2) all but
one are or are owned by a utility headquartered in
Washington 8; and (3) all these owners or their direct
parents conduct significant commercial and political
activities in Washington.
49. The local utilities’ commercial presence in
Washington dwarfs Invenergy’s. Washington’s investorowned utilities all own several generating facilities in
Washington. 9 They also employ an average of more than
3,200 individuals. 10 By contrast, Invenergy owns only one
facility in the state, Grays Harbor, and this facility has
fewer than 25 employees. 11
PacifiCorp is the exception, as it is headquartered in Oregon.
Berkshire Hathaway Energy Co., Annual Report (Form 10-K), 3
(Feb. 25, 2022).
9
See Avista Corp., Annual Report (Form 10-K), 36 (Feb. 23, 2022) (9
facilities); Berkshire Hathaway Energy Co., Annual Report, supra
note 8, at 5 (4 facilities); Puget Energy, Inc. & Puget Sound Energy,
Inc., Annual Report, supra note 7, at 16 (18 facilities).
8
See Avista Corp., Annual Report, supra note 9, at 6 (1,809
employees); Berkshire Hathaway Energy Co., Annual Report, supra
note 8, at 10 (4,800 employees); Puget Energy, Inc. & Puget Sound
Energy, Inc., Annual Report, supra note 7, at 27 (3,185 full-time
employees)
10
11
Invenergy’s affiliates have fewer than ten additional employees
55a
50. Similarly, although both Washington’s local
utilities and Invenergy participate in Washington’s
politics, local utilities do so on a much larger scale.
Washington’s investor-owned utilities, on average,
dramatically outspent Invenergy’s affiliates in total
political contributions for elections between 2017 and
2022. In 2021, the year the CCA was passed, the same
utilities, on average, spent substantially more on
registered lobbyists for their work in Washington than
Invenergy’s affiliates did.
51. Accordingly, Grays Harbor stands alone as the
sole independent natural gas power plant covered under
the CCA during its first compliance period, and the only
such plant owned by an owner that lacks substantial
business and political operations in Washington.
Washington Seeks To Address Greenhouse-Gas
Emissions
52. Years before the CCA’s enactment, Washington’s
legislators considered proposals to reduce the state’s
greenhouse-gas emissions through carbon-pricing
legislation. In 2009, the legislature considered H.B. 1819,
61st Leg., 2009 Sess. (Wash. 2009), and S.B. 5735, 61st
Leg., 2009 Sess. (Wash. 2009), which would have
established a cap-and-trade program in Washington. That
program was not enacted into law.
53. In 2015, the legislature considered another similar
proposal, the Carbon Pollution Accountability Act. 12 The
Act would have established a cap on greenhouse emissions
within Washington.
See H.B. 1314, 64th Leg., 2015 Sess. (Wash. 2015); S.B. 5283, 64th
Leg., 2015 Sess. (Wash. 2015).
12
56a
for the state’s largest emitters, required every covered
entity to purchase allowances at auction to cover their
emissions, and invested the proceeds from those auctions
in a variety of initiatives. Like the 2009 proposals, the
2015 proposal was not enacted into law.
54. Around the same time, Initiative 732 was
submitted to the legislature. It proposed establishing an
initial $15 tax on every metric ton of carbon dioxide
associated with fossil fuels and the generation of
electricity in the state and a corresponding reduction in
other state taxes. After the Washington legislature
declined to act on the proposal, Washington’s voters
considered it in 2016, but it failed to obtain the support of
the majority of the electorate. 13
55. Washington’s Senate considered another tax on
greenhouse-gas emissions the following year, but S.B.
5127, 65th Leg., 2017 Sess. (Wash. 2017) never gained
significant traction.
56. Voters took up the issue of carbon pricing yet
again in 2018. They considered Initiative 163, which would
have imposed an initial $15 fee (with annual $2 increases)
per metric ton of associated carbon emissions on certain
large emitters’ sale and use of fossil fuels and the
Off. of Program Rsch., Wash. State House of Reps., Summary of
Initiative 732 (2016), https://leg.wa.gov/House/Committees/OPR
General/Documents/2016/Initiative732Summary.pdf; David Roberts,
The Left vs. a Carbon Tax, Vox (Nov. 8, 2016, 11:00 AM EST),
https://www.vox.com/2016/10/18/13012394/i-732-carbon-taxwashington.
13
57a
generation of electricity. 14 This second referendum ended
like Washington’s first. 15
57.
The next year, Washington’s legislature
considered another cap-and-trade program that, like
earlier proposals, did not garner enough support to
become law. 16
58. Unable to enact a carbon-pricing program,
Washington legislators pivoted to other forms of
emissions-reducing
legislation—chiefly
proposals
focusing on addressing emissions in specific sectors of the
economy. 17
59. One such measure was the Clean Energy
Transformation Act (“CETA”), Wash. Rev. Code.
§§ 19.405.010–901, enacted in May 2019, which exclusively
regulates Washington’s utilities.
60. Rather than regulating greenhouse-gas emissions
across Washington’s economy, CETA seeks to ensure that
the state’s electric utilities rely on clean sources of
electricity. It does so by setting three milestones for
utilities’ supply portfolios.
61. First, by the end of 2025, all utilities must stop
Off. of Program Rsch., Wash. State House of Reps., Summary of
Initiative 1631 (2018), https://leg.wa.gov/House/Committees/OPR
General/Documents/2018/ Initiative1631Summary.pdf.
14
Hal Bernton, Washington State Voters Reject Carbon-Fee
Initiative,
Seattle Times (Nov. 7, 2018, 5:48 PM),
https://www.seattletimes.com/seattle-news/politics/voters-rejectingcarbon-fee-in-first-day-returns/.
15
16
See S.B. 5981, 66th Leg., 2019 Sess. (Wash. 2019).
Kevin Tempest, Jonah Kurman-Faber & Ruby Wincele, Building
Back Better: Investing in a Resilient Recovery for Washington State,
11 Wash. J. Env’t L. & Pol’y 195, 208-09 (2021).
17
58a
providing Washingtonians with electricity generated by
coal-fired power plants. Id. § 19.405.030. Second, every
utility’s supply portfolio must be greenhouse-gas neutral
by 2030. A utility achieves this standard by supplying at
least 80% of its electricity from “nonemitting electric
generation and renewable resources,” and it may achieve
the remainder through other measures. Id. § 19.405.040.
Third, by 2045, utilities may sell to Washingtonians only
electricity generated from nonemitting or renewable
sources. Id. § 19.405.050.
62. To assuage utilities’ concerns about the costs of
meeting these milestones, CETA provides that a utility
will be deemed to comply with the second and third
milestones if, during the four-year compliance period, the
average annual incremental cost of meeting these
milestones exceeds two percent of its revenues. Id.
§ 19.405.060(3)-(4). 18 In other words, CETA protects
utilities’ bottom lines by capping their compliance costs.
However, analyses of CETA’s effects demonstrated that
utilities’ compliance costs are unlikely to exceed this twopercent cap anyway. 19
63. In 2020, a year after Washington enacted CETA,
the legislature enacted new state-wide emissionsreduction targets. 2020 Wash. Sess. Laws 738 (codified as
amended at Wash. Rev. Code. §§ 70A.045.005-900).
Washington committed to dramatically reducing the
See also David Roberts, A Closer Look at Washington’s Superb New
100% Clean Electricity Bill, Vox (Apr. 18, 2019, 9:30 AM EDT),
https://www.vox.com/energy-and-environment/2019/4/18/18363292
/washington-clean-energy-bill.
19
Roberts, A Closer Look at Washington’s Superb New 100% Clean
Electricity Bill, supra note 18.
18
59a
state’s total greenhouse-gas emissions, aiming to limit
them to 5 million metric tons by 2050. Wash. Rev. Code.
§ 70A.045.020(1). To review the state’s progress, Ecology
tracks and reports emissions from entities across the
state, including power plants. Id. § 70A.045.020(1)(d).
64.
Against this backdrop, Washington’s
policymakers developed their agenda for climate
legislation in 2021.
Washington Passes the CCA, a Promising Measure
Marred by Local Favoritism
65. In 2021, many in Washington remained committed
to establishing a carbon-pricing program, and they
created such a program when, that year, Washington
enacted the CCA. 2021 Wash. Sess. Laws 2606 (codified
at Wash. Rev. Code. §§ 70A.65.005-901).
66. Even though many had long considered such
programs in general terms, Washington’s House and
Senate hurriedly enacted the bill at the end of the 2021
legislative session. The initial bill did not receive a vote in
the Senate until April 8th, seventeen days before end of the
legislative session. Representatives then pushed the bill
through
two
committees,
adopted
significant
amendments, and approved the amended bill in the space
of twelve days. The Senate voted to approve the House’s
amendments on the penultimate day of the legislative
session. 20
67. Unlike past efforts, the CCA received the support
of a broad coalition that included environmental groups
SB 5126 – 2021-22, Wash. State Legislature, https://app.leg.wa.gov
/billsummary?BillNumber=5126&Initiative=false&Year=2021 (last
visited Dec. 12, 2022).
20
60a
and some of the largest corporations in Washington,
including local electric utilities. 21
68. The CCA aims to help Washington achieve
dramatic reductions in greenhouse-gas emissions over the
next several decades.
See Wash. Rev. Code.
§ 70A.65.070(2); id. § 70A.45.020. It contributes to these
efforts by empowering Ecology to implement a cap on
greenhouse-gas emissions for Washington’s largest
emitters. Id. § 70A.65.060. This cap applies to most
entities that generated or engaged in certain activities
associated with at least 25,000 metric tons of carbondioxide emissions annually for any year between 2015 and
2019, id. § 70A.65.080(1), though waste-to-energy facilities
and railroad companies that have these levels of emissions
need not join the program until the second and third
compliance periods, respectively, id. § 70A.65.080(2)-(3).
69. To implement the emissions cap, the CCA relies
on “[a]llowance[s],” or “authorization[s] to emit up to one
metric ton of carbon dioxide equivalent.”
Id.
§ 70A.65.10(1). Under the CCA, a covered entity may emit
only as many metric tons of greenhouse gases as it has
allowances, though it may cover up to eight percent
(eventually decreasing to six percent) of its annual
emissions with credits for greenhouse-gas-emissions
offsets during the first compliance period.
Id.
§§ 70A.65.170, 70A.65.310. If an entity does not submit
sufficient allowances and offsets to cover its emissions, it
Hal Bernton, Washington State’s Carbon Pricing Bill Could Be
Most Far-Reaching in Nation. How Will It Work?, Seattle Times
(May 1, 2021, 9:49 AM), https://www.seattletimes.com/seattlenews/washington-states-carbon-pricing-bill-could-be-most-farreaching-in-nation-so-how-will-it-work/.
21
61a
must either submit four allowances for every one
allowance missing or face penalties of up to $10,000 per
day for each violation. Id. § 70A.65.200. In each successive
year, Ecology will reduce the total number of allowances
available, which, in turn, will limit the total number of
metric tons of greenhouse gases that the covered entities
may collectively emit. Id. § 70A.65.070(2).
70. The “invest” portion of the CCA’s structure
derives from how Ecology allocates these allowances to
covered entities. Most covered entities will purchase their
allowances at auctions that Ecology holds.
Id.
§ 70A.65.100. To control the cost of obtaining allowances,
the CCA directs Ecology to establish a minimum price,
which increases annually, id. § 70A.65.150, and a
maximum price, which also increases annually and is set
to ensure covered entities invest in reducing emissions, id.
§ 70A.65.160. However, if the price for allowances falls too
close to the minimum price, Ecology will automatically
withhold and reserve allowances, keeping them in the
containment reserve. Id. § 70A.65.140. Washington will
then use the proceeds to invest in a variety of projects,
including climate-change mitigation and environmental
justice initiatives. Id. § 70A.65.100(7); see § 70A.65.230.
71. Not all covered entities, however, must pay for
their allowances. The CCA provides that facilities in socalled “emissions-intensive, trade-exposed industries,”
such as the aerospace and computer manufacturing
industries, id. § 70A.65.110, electric utilities, id.
§ 70A.65.120, and natural gas utilities, id. § 70A.65.120,
receive allowances for free.
72. With respect to electric utilities, 22 the CCA directs
22
The CCA does not define utilities, but they are identified as the
62a
Ecology to create schedules for the number of allowances
allocated to them in the forthcoming compliance periods.
Id. § 70A.65.120(2).
73. By providing no-cost allowances to electric
utilities, the CCA extends a boon to natural-gas-burning
power plants owned by local utilities, even though it
purports to provide this benefit “to mitigate the cost
burden” of the cap-and-invest program “on electricity
customers,” id. § 70A.65.120(1).
74. Local utilities own twelve of the thirteen natural
gas power plants which are imminently regulated under
the CCA. All these utilities have substantial presences in
Washington.
75. Grays Harbor is the sole exception. It is the only
power plant which is imminently regulated under the CCA
that does not benefit from the statute’s allocation of nocost allowances. Its owner, Invenergy, unlike the local
utilities allocated no-cost allowances, lacks a substantial
presence in Washington.
Ecology Doubles Down on the CCA’s Flaws,
Ignoring Alternatives for Implementing the Cap-AndInvest Program
76. Ecology began considering promulgating a new
rule to implement the CCA, Wash. Admin. Code §§ 173446-010 to -700, on August 4, 2021. 23 Over the following
ten months, Ecology developed and drafted the rule,
customer- and investor-owned utilities subject to CETA. Wash. Rev.
Code § 70A.65.120(1).
23
Wash. Dep’t of Ecology, Preproposal Statement of Inquiry, WSR
21-16-111 (Aug. 4, 2021), https://ecology.wa.gov/DOE/files/88/88755
dce-3e17-4c1d-b734-42a35a5f400c.pdf.
63a
holding public meetings and taking comments. 24
77. On May 16, 2022, it proposed a draft rule (the
“Draft Rule”), opening up a new period for hearings and
comments. 25 The Draft Rule provided that Ecology would
allocate no-cost allowances to electric utilities, with the
amount based largely on forecasts for their retail
electricity loads and forecasts of emissions associated with
supplying enough electricity to meet those loads.26
Electric utilities would also begin to receive additional nocost allowances to cover their administrative costs
associated with complying with the CCA during the CCA’s
second compliance period. 27
78. The Draft Rule also contained new regulations
governing when and how utilities could transfer their
allowances to power plants. Under the proposal, Ecology
would permit such a transfer only if (1) the utility operates
the power plant or (2) the utility “has an agreement to
purchase imported electricity or a power purchase
agreement” with that plant. 28
Wash. State Dep’t of Ecology, Chapter 173-446 WAC,
https://ecology.wa.gov/Regulations-Permits/Laws-rules-rulemaking
/Rulemaking/WAC-173-446#:~:text=On%20September%2029%2C
%202022%2C%20Ecology,greenhouse%20gas%20emissions%20by%
202050.
25
Wash. State Dep’t of Ecology, Proposed Rulemaking, WSR 22-11067 (May 16, 2022), https://ecology.wa.gov/DOE/files/9e/9efa9889b72c-4448-8444-6a576e8d1377.pdf.
26
Proposed Language for Chapter 173-446 WAC: Climate
Commitment Act Program Rule § 173-446-230(1) (May 16, 2022),
https://ecology.wa.gov/DOE/files/4f/4ffb375b-2bec-4b66-afb39b613645896e.pdf [Hereinafter “Draft Rule”].
24
27
Id. § 173-446-230(1)(f).
28
Id. § 173-446-425.
64a
79. During the following sixty-day comment period,
Ecology received 1,401 comments. 29 Several comments
addressed the CCA’s allocation of no-cost allowances to
electric utilities as implemented by the Draft Rule. 30
Invenergy, through Grays Harbor Energy LLC, was one
such commenter. Because Grays Harbor was the only
power plant covered during the CCA’s first compliance
period that was not owned by or affiliated with an entity
that received no-cost allowances, Invenergy urged
Ecology to consider several alternatives.
80. First, Invenergy recommended that Ecology
“level the playing field” by allocating no-cost allowances to
all covered power plants. 31
81. Second, Invenergy proposed that Ecology require
utilities to price the cost of allowances into their dispatch
decisions. This solution would ensure that the most costeffective and emissions-reducing facilities would be
dispatched first, as no utility could rely on their free
allowances to ignore the compliance costs associated with
dispatching their own, less efficient generating facilities.32
82. Third, Invenergy asked Ecology to reconsider its
Wash. Dep’t of Ecology, No. 22-02-046, Concise Explanatory
Statement: Chapter 173-446, Climate Commitment Act 1 (2022),
https://apps.ecology.wa.gov/publications/documents/2202046.pdf.
[Hereinafter “Concise Explanatory Statement”].
29
Id. at 227-34.
Grays Harbor Energy, LLC, Comment Letter on Chapter 173-446
WAC – Climate Commitment Act Program Rulemaking 1 (July 15,
2022),
https://scs-public.s3-us-gov-west-1.amazonaws.com
/env_production/oid100/did1008/pid_202884/assets/merged/5y03ih2_
document.pdf?v=N8TSJVMGQ.
30
31
32
Id. at 1-2.
65a
provisions regarding the transfers of no-cost allowances.
Rather than simply permit such transfers, Invenergy
recommended that Ecology require utilities to transfer
these allowances whenever they purchased electricity to
serve their retail loads, as their allowance allocations were
meant to cover the electricity they used to meet their
customers’ demand, regardless of that electricity’s
source. 33 This solution would not only remedy the Draft
Rule’s discrimination against Grays Harbor but also
incentivize utilities to dispatch the most cost- and carbonefficient generators rather than the ones they owned.
83. Moreover, the Draft Rule as written appeared to
prohibit transfers in a variety of common electricity
purchase arrangements. Notably, it appeared to leave out
the possibility of transferring allowances in transactions
brokered by third parties and cast doubt on electric
utilities’ ability to transfer allowances when they
purchased electricity on the spot market. Invenergy
suggested revisions to address these concerns as well. 34
84. Although Invenergy noted that adopting these
measures would also benefit Grays Harbor by removing
or mitigating utility-owned generators’ unfair advantage,
it explained that a revised rule would better serve the ends
of the CCA. Under the Draft Rule, the CCA incentivized
utilities to rely on their own power plants “regardless of
whether other, lower-emitting resources [were]
available.” 35 Indeed, even though Grays Harbor “has
lower emissions per [megawatt-hour] produced” than
covered utility-owned power plants, the allocation of
33
Id. at 5-7.
34
Id.
35
Id. at 5.
66a
allowances encouraged utilities to get electricity from
their own plants instead. 36 For that reason, Invenergy
warned that the CCA would result in more greenhousegas emissions than what would be expected if there were
no free allowances at all. 37
85. Moreover, Invenergy explained that the incentive
structure created by the CCA as implemented by the
Draft Rule harmed consumers. Even though Ecology
aimed to prevent increases in retail electricity rates
through the provision of no-cost allowances, giving these
allowances to utilities alone enabled the utilities to choose
to dispatch electricity with less sensitivity to cost. As a
result, consumers would face higher rates. 38
86. Ecology brushed aside Invenergy’s concerns
about unfair treatment. It insisted that the CCA “treat[s]
[all covered power plants] identically” because no power
plant directly “receive[s] free (‘no cost’) allowances under
the CCA cap and invest program.” 39 But Ecology
admitted that “there is a potential pathway by which the
utility recipients of [the CCA’s] no cost allowances could
use those allowances to cover some or all of the emissions
from an electrical generation facility that [the] utility owns
or operates . . . .” 40 While Ecology insisted that utilities
could choose to transfer these allowances to Grays
Harbor, 41 it failed to acknowledge that the Draft Rule
provided that a utility could transfer an allowance to a
36
Id. at 4-5.
37
Id. at 5.
38
Id. at 1-2.
39
Concise Explanatory Statement, supra note 29, at 227-28.
40
Id.
41
Id.
67a
plant that it does not own only when the utility and that
plant “ha[ve] an agreement to purchase imported
electricity or a power purchase agreement[.]” 42 Finally, it
suggested that utilities and Grays Harbor were treated
the same insofar as they would both need allowances to
cover any electricity they exported outside of
Washington. 43
87. Ecology similarly rejected Invenergy’s proposed
solutions. It maintained that the CCA provided no basis
for Grays Harbor to receive no-cost allowances. 44 It also
balked at requiring utilities to transfer allowances when
purchasing electricity. Even though the CCA expressly
tasked Ecology with overseeing allowances, Ecology
insisted that this role was too unfamiliar and too far
beyond its ken for it to take on. 45
88. Ecology did little to revise the provisions
governing the allocation of no-cost allowances in the final
version of Chapter 173-446 of the Washington
Administrative Code (the “Final Rule”).
89. Section 173-446-230(1) of the Final Rule confirms
that only electric utilities regulated under CETA, not
independent power producers, will receive no-cost
allowances. It provides that Ecology will allocate each
utility a certain number of allowances based on the
forecast for each utility’s retail electricity load and the
forecasted emissions associated with supplying that load.
Id. § 173-446-230(2). Moreover, under the Final Rule,
42
Draft Rule, supra note 26, § 173-446-425(2)(b).
43
Concise Explanatory Statement, supra note 29, at 227-28.
44
Id.
45
Id. at 229.
68a
Ecology will provide additional no-cost allowances to
utilities “to account for the administrative costs of the
program.” Id. § 173-446-230(2)(h).
90. The Final Rule also restricts utilities’ ability to
transfer their allowances to independent power plants. A
utility cannot transfer a no-cost allowance to an
independent power plant unless it “has an agreement to
purchase imported electricity or a power purchase
agreement.” Id. § 173-446-425(2)(b). Accordingly, a
Washington independent power plant’s eligibility to
receive a no-cost allowance turns on whether a utility
elects to enter “a power purchase agreement”—a term
neither the CCA nor the Final Rule defines—with that
power plant. By contrast, a utility may transfer no-cost
allowances to the power plants it owns without any sort of
formal agreement under the Final Rule.
91. What is more, even if a utility and an independent
power plant conclude a power purchase agreement, the
utility has no obligation to transfer no-cost allowances to
that power plant. Rather, a utility may choose whether or
not to transfer a no-cost allowance to its counterparty. See
Wash. Admin. Code. § 173-446-230(6).
92. Ecology does not justify its preferential treatment
for electric utilities in terms of environmental benefits.
Instead, it offers utilities no-cost allowances to
“mitigat[e]” the CCA’s potential effects on consumers’
electricity rates. Id. § 173-446-230(1) (“Allowances will be
allocated to qualifying electric utilities for the purposes of
mitigating the cost burden of the program based on the
cost burden effect of the program.”); see id. § 173-446-020
(defining “Cost burden” as “the impact on rates or charges
to customers of electric utilities in Washington for the
69a
incremental cost of electricity service to serve load due to
the compliance cost for [greenhouse-gas] emissions
caused by the program”).
93. Despite these measures, Ecology still expects the
CCA to raise electricity prices in the following decades. 46
94. At the same time, Ecology anticipates that other
covered entities, including independent power plants, will
spend hundreds of millions of dollars each year to
purchase allowances, generating significant revenue for
Washington. 47 In 2023, covered entities will spend
between $22.20 and $81.47 to purchase each allowance at
auction. 48
The CCA Maintains No Meaningful Distinction
Between Electric Utilities and Their Power Plants
for the Purpose of Allocating and Using Allowances
95. On its face, the CCA appears to provide the same
treatment for power plants regardless of whether a local
Kasia Patora, Wash. State Dep’t of Ecology, No. 22-02-047, Final
Regulatory Analyses: Chapter 173-446 WAC, Climate Commitment
Act Program 177 tbls. 41 & 42 (2022), https://apps.ecology.wa.gov
/publications/documents/2202047.pdf.
46
David Kroman, Carbon Auctions Will Bring WA More Money than
Predicted. Transportation Could Benefit, Seattle Times (Oct. 18,
2022,
6:38
AM),
https://www.seattletimes.com/seattlenews/
transportation/carbon-auctions-will-bring-wa-more-money-thanpredicted-transportationcould-benefit/.
48
Wash. State Dep’t Ecology, Washington Cap-and-Invest Program
2023 Annual Auction Floor Price Notice (Dec. 1, 2022),
https://apps.ecology.wa.gov/publications/documents/2202060.pdf;
Wash. Dep’t Ecology, Washington Cap-and-Invest Program 2023
Annual Allowance Price Containment Reserve and Price Ceiling
Notice (Dec. 1, 2022), https://apps.ecology.wa.gov/publications
/documents/2202059.pdf.
47
70a
utility or an independent power company owns them.
96.
As a matter of statutory text, the CCA
distinguishes between electric utilities and power plants:
It offers no-cost allowances to the former and requires the
latter to purchase allowances unless they qualify for nocost allowances under a different provision. See Wash.
Rev. Code § 70A.65.120.
97. This distinction proves illusory for three reasons.
98. First, the CCA’s text collapses the distinction
between power plants and the utilities that own them. The
CCA provides that a “first jurisdictional deliverer” that
“generates electricity” associated with emissions that
meet the coverage threshold qualifies as a covered entity.
Id. § 70A.65.080(1)(b). Because a “first jurisdictional
deliverer” is “the owner or operator of an electric
generating facility in Washington,” id. § 70A.65.010(38),
any electric utility is responsible for the emissions of its
power plants.
99. Second, as implemented by the Final Rule, the
CCA does not necessarily require electric utilities and
their power plants to seek distinct allowances. To satisfy
their compliance obligations, every entity must hold
sufficient allowances in registered accounts to cover their
emissions for a given compliance period. See Wash.
Admin. Code. §§ 173-446-150, -600. When a single entity
owns several covered entities this group of entities may
maintain a single, joint account. Id. § 173-446-100(2).
Critically, the Final Rule provides that “[a]n electric
utility that is the operator of an electricity generating
facility in Washington has a direct corporate association
with the operator of another electricity generating facility
in Washington if the same party operates both generating
71a
facilities,” which means a utility and its fleet of power
plants may maintain such a joint account. Id. § 173-446105(5). As a result, Ecology will, in effect, allocate no-cost
allowances to utilities and their power plants even though
the CCA, in name, allocates these allowances to utilities
alone.
100. Third, the CCA, as implemented by the Final
Rule, permits utilities to transfer their no-cost allowances
to their own power plants without any limitations. Id.
§ 173-446-425(2). By contrast, an in-state independent
power plant may not receive a no-cost allowance from an
electric utility unless it and the utility have concluded a
power purchase agreement. Id.
The CCA’s Allocation of Allowances Singles Out
Grays Harbor, Favoring Facilities Owned by Local
Utilities
101. Grays Harbor, Washington’s sole independent
power plant covered by the CCA during its first
compliance period, will be subject to the CCA as
implemented by the Final Rule beginning on January 1,
2023. Wash. Admin. Code. § 173-446-030(1).
102. As a result, in the coming year, Grays Harbor
must purchase allowances to cover at least some of its 2023
emissions. Id. § 173-446-600(3). Its first opportunity to do
so will be Ecology’s first auction in February 2023,
followed by three other auctions later that year. 49
103. Invenergy already anticipates that these costs
Climate Commitment Act (CCA) Auctions and Trading, Wash.
State Dep’t of Ecology, https://ecology.wa.gov/Air-Climate/ClimateCommitment-Act/Cap-and-invest/Auctions-andtrading (last visited
Dec. 12, 2022).
49
72a
will be significant for Grays Harbor. It expects to spend
tens of millions of dollars to obtain allowances for Grays
Harbor in 2023.
104. On January 1, 2023 and every day thereafter,
Grays Harbor must factor the estimated cost of these
allowances into its decisions on whether to generate
electricity for sale within and outside of Washington. As
of that date, it will generate electricity only if the
prevailing price for electricity is greater than its costs for
generating electricity and the estimated costs of the
allowances required to cover the emissions created by that
generation.
105. In fact, Grays Harbor will not know its true
operating costs—its generation costs and the cost of the
allowances it must obtain—when it decides whether to run
on January 1, 2023. Because Ecology will not hold the first
auction until February 2023, Grays Harbor will not know
the price of an allowance until then. As a result, it will be
unable to accurately and optimally generate and dispatch
electricity in the coming weeks.
106. Even after the February Auction, Grays Harbor
will face this same uncertainty on a recurring basis
because the costs for allowances will likely change with
each new auction.
107. No other power plant imminently regulated by
the CCA must weigh the cost of allowances when deciding
to generate electricity and therefore grapple with this
same uncertainty. Local utilities own Grays Harbor’s
competitors. And these utilities need not consider the cost
of allowances when choosing when to run their generating
facilities in 2023, because Washington has covered their
power plants’ costs for complying with the CCA and has
73a
not required utilities to consider such costs when
dispatching these plants.
108. Under the CCA, electric utilities will likely use
their no-cost allowances to cover their power plants’
compliance obligations. Indeed, the CCA provides almost
no reason for them not to do so.
109. Grays Harbor, by contrast, will not similarly
benefit from utilities’ no-cost allowances. Because Grays
Harbor operates independently of Washington’s utilities,
under the Final Rule, Grays Harbor cannot receive a local
utility’s no-cost allowance unless that utility chooses to
enter a power purchase agreement with Grays Harbor.
Wash. Admin. Code § 173-446-425(2). Even if Grays
Harbor entered such an agreement with a local utility, the
Final Rule does not require that utility to transfer any
allowances to Grays Harbor. See id. Moreover, the Final
Rule does not prohibit the utility from charging Grays
Harbor for the allowance or negotiating a reduced
contract price for electricity to account for any allowances.
See id.
110. Washington’s utility-owned power plants, by
contrast, will benefit from the CCA’s no-cost allowances.
They will need to expend very little money, if any at all to
fulfill their obligations under the CCA because they have
ready access to their owners’ no-cost allowances.
111. These power plants, then, will choose to generate
electricity without considering the cost of their
greenhouse-gas emissions. As long as the prevailing price
for electricity exceeds the cost of their inputs, such as
natural gas, these power plants will generate electricity
regardless of the carbon costs of such generation.
74a
112. Moreover, the CCA’s allocation of no-cost
allowances erases the competitive advantages that Grays
Harbor has developed. Even though Grays Harbor can
generate electricity more efficiently and with fewer
emissions than utility-owned power plants, it cannot
benefit from this advantage because the CCA’s
compliance costs make any electricity it generates more
expensive. Utility-owned power plants, on the other hand,
will be able to sell electricity at comparatively larger
margins because they benefit from the no-cost allowances
given to their local owners, not because they compete
more effectively than Grays Harbor.
113.
Rather than regulate the generation of
electricity evenhandedly, the CCA distorts Washington’s
electricity markets. During the CCA’s first compliance
period, only Grays Harbor, not its competitors, will need
to purchase the allowances it needs at auction. This means
that after January 1, 2023, Grays Harbor will face costs
that its competitors will not, and, due to these increased
costs, Grays Harbor will generate less electricity than it
would have absent the CCA. Its competitors in turn, will
generate more. In short, the CCA will cause one of
Washington’s cleanest and most efficient natural gas
power plants to supply less electricity in the state and
encourage its less-efficient and dirtier competitors to
supply more electricity. Thus, the CCA’s allocation of nocost allowances will produce an outcome at odds with the
CCA’s fundamental goals of reducing greenhouse-gas
emissions and preventing increases in electricity rates.
75a
The CCA Discriminates Against Power Plants with
Out-of-State Owners by Imposing Costs Upon Them
that Utility-Owned Power Plants May Avoid
114.
The CCA singles out Grays Harbor for
unfavorable treatment because an out-of-state
independent power producer, Invenergy, owns and
operates it rather than a local utility.
115. The CCA provides favorable treatment to the
twelve utility-owned power plants in Washington
regulated during the CCA’s first compliance period
because it benefits a group composed of in-state interests.
All four utilities that own these power plants operate
across Washington.
Three of them, in fact, call
50
Washington home. Moreover, unlike Invenergy, these
utilities conduct substantial commercial and political
activities in the state.
116. Invenergy simply lacks a comparable presence
in Washington.
117. Put differently, the CCA’s allocation of no-cost
allowances benefits a class in which 100% of its members
are owned by businesses with substantial presences in
Washington and 92% of its members are owned by
businesses headquartered in the state. At the same time,
the CCA denies this same beneficial treatment to Grays
Harbor, the only imminently regulated power plant owned
by an entity that lacks a significant presence in and
connection to Washington.
118. Under the CCA, Invenergy cannot compete on
equal terms with these in-state competitors because the
PacifiCorp is the outlier, as it is based in neighboring Oregon. It
owns only one power plant, the Chehalis Generation Facility.
50
76a
CCA raises its costs to generate electricity alone.
119. Invenergy, unlike its competitors, lacks no-cost
allowances to share with Grays Harbor, so Invenergy
must bear the CCA’s compliance costs to continue to sell
electricity generated in Washington.
120. The CCA imposes no such additional costs on
local electric utilities’ efforts to sell the electricity they
generate in the state.
121. Washington, therefore, has tailored the CCA to
benefit Washington economic interests at the expense of
their only out-of-state competitor.
The CCA’s Local Favoritism Imposes Significant
Costs on Invenergy and Also Increases Emissions and
Electricity Costs for Washingtonians
122. Invenergy will face significant costs because of
the CCA’s local favoritism.
123. Because Invenergy must factor the cost of
allowances into its decisions to sell electricity generated in
Washington, the CCA will decrease the amount of
electricity that Grays Harbor will sell and the profits it
generates from those sales. Thus, Invenergy stands to
lose substantial amounts in revenue in the coming years
as a result of the CCA’s discriminatory allocation of nocost allowances.
124. Washington and its citizens will suffer as well.
125. The CCA’s allocation of no-cost allowances will
increase greenhouse-gas emissions because of the
incentives this allocation creates. With the ability to freely
transfer no-cost allowances to their power plants, utilities
can avoid factoring the cost of greenhouse-gas emissions
77a
into their dispatch decisions. Put differently, the utilities
face no additional cost when dispatching their own power
plants, regardless of the emissions those plants produce.
Dirtier utility-owned power plants will generate more
electricity than they would have absent the CCA. As a
result, as a whole, Washington’s power plants will produce
more greenhouse-gas emissions than they would have
absent the CCA.
126. Ratepayers will be similarly harmed by the
incentives that the CCA’s allocation of no-cost allowances
produces. Because the no-cost allowances incentivize
utilities to dispatch their own power plants regardless of
their efficiency in terms of cost, the cost of generating
electricity to fulfill Washington’s retail demand for
electricity will increase. When compared to the pre-CCA
regime, modeling shows that the CCA as implemented is
expected to increase these costs by billions of dollars
between 2023 and 2041.
127. Utilities will have little difficulty passing those
increased costs to consumers through rate increases. In
fact, Washington’s utilities have already requested
multimillion-dollar rate increases over the next few years
despite their favorable treatment under the CCA. 51
128. Washington could avoid significant costs by
providing Invenergy with no-cost allowances. This simple
solution would prevent the CCA from distorting the
market, which, in turn, would allow power plants to
compete for business based on their efficiency and carbon
Press Release, Wash. State. Off. of Att’y Gen., Attorney General
Opposes Rate Increase Requests by Puget Sound Energy, Avista
(Aug. 1, 2022), https://www.atg.wa.gov/news/newsreleases/attorneygeneral-opposes-rate-increase-requests-puget-sound-energy-avista.
51
78a
footprint.
129. Thus, placing Invenergy and its competitors on
an even footing as the Constitution demands would also
better serve the ends of the CCA.
The CCA’s Allocation of No-Cost Allowances Will
Obstruct the Flow of Investment in Energy
Development to Washington
130. In addition to discriminating against out-of-state
economic interests, the CCA will, in effect, shut off
Washington from interstate investment in independent
natural gas power plants like Grays Harbor.
131. Any out-of-state power company that develops
or buys an existing power plant in Washington will find
that it must compete against utility power plant owners on
an unequal playing field. Just like Invenergy, any
independent newcomer must bear the costs of complying
with the CCA, and, for that reason, it will have to account
for costs that its competitors, local utilities, do not.
132. No rational power company will enter such a
market where, no matter how much it strives to improve
efficiency and reduce costs, it will have a competitive
disadvantage in the form of millions of dollars of increased
costs each year due to the CCA’s local favoritism.
133. As a result of the CCA’s protectionist allocation
of no-cost allowances, Washington will likely shut out
millions of dollars in interstate energy investment over
the coming decades.
79a
Obstructing the Flow of Investment in Energy
Development Yields No Benefits Other Than
Economic Protectionism
134. The CCA substantially burdens interstate
commerce by obstructing the flow of interstate
investment to Washington without producing any
legitimate benefits for the state.
135. Although the CCA may justify its allocation of
no-cost allowances by claiming it helps to reduce
greenhouse-gas emissions and keep electricity rates from
rising rapidly, these benefits are illusory. As explained
above, the CCA’s allocation of no-cost allowances will
result in more greenhouse-gas emissions and higher
electricity rates over the next several decades than
Washington would have experienced absent the CCA.
136. Rather than benefiting the public, the CCA
benefits local economic interests. It provides local utilities
with significant advantages over Invenergy and any other
would-be independent power plant owners.
137. Local utilities can both generate more electricity
and sell their electricity with higher margins than
Invenergy because their plants in Washington will bear no
additional costs due to the CCA. This advantage insulates
local utilities from future competition from independent
power plant owners as well.
138. These protectionist effects confirm that the
CCA’s allocation of no-cost allowances imposes burdens
on interstate commerce that exceed its local benefits.
80a
The CCA’s Disparate Treatment of Independent and
Utility Power Plant Owners Is Not Tethered to
Legitimate State Interests
139. The CCA provides no-cost allowances to local
utilities that own power plants in Washington but does not
extend this same benefit to independent power plant
owners. Distinguishing between these two similarlysituated classes of power plant owners is not rationally
related to any legitimate state interest.
140. For the purposes of the CCA, independent power
companies like Invenergy and local utilities are similarly
situated as power plant owners in Washington even
though local utilities engage in commercial activities
besides operating power plants.
141. The CCA regulates all power plant owners in the
same manner except with respect to the allocation of nocost allowances.
142. The CCA regulates independent and utility
power plant owners largely indirectly, as they do not
produce substantial greenhouse-gas emissions on their
own. 52 Their power plants produce emissions in their
operations, and the CCA requires that power plants
obtain a sufficient number of allowances to cover these
emissions.
143. All power plants covered under the CCA are
Utilities would have compliance obligations that were not associated
with their plants’ generation in two instances. First, the utility would
be responsible for emissions associated with operating a fleet of
service vehicles. Second, it would be responsible for the emission
generated with any electricity that it imports from out-of-state
generators. See Wash. Rev. Code. § 70A.65.080.
52
81a
materially the same. The thirteen power plants regulated
by the CCA during its first compliance period produce
indistinguishable electricity in essentially the same
manner, namely by operating natural-gas-fired
generators. The specific amount of greenhouse-gas
emissions and therefore the particular number of
allowances any plant requires varies from plant to plant.
But every power plant faces the same treatment under the
CCA for their substantially identical operations except
that utility-owned power plants will likely benefit from the
no-cost allowances allocated to their owners.
144.
The CCA does not regulate utilities
independently from the indirect regulation of the power
plants they own except that utilities receive no-cost
allowances.
As utilities generally do not produce
substantial emissions in their commercial activities
outside of electricity generation, these no-cost allowances
benefit them as the owners of power plants directly
regulated under the CCA.
145. Under the CCA, then, all power plant owners are
similarly situated except that utility power plant owners
receive benefits that independent power plant owners do
not.
146. This differential treatment does not advance any
legitimate state interest.
147. Washington may have legitimate interests in
reducing greenhouse-gas emissions and preventing
electricity rates from rising rapidly. But the CCA’s
disparate treatment of local utilities and independent
power plant owners does not serve either of those
interests.
82a
148. The CCA’s allocation of no-cost allowances bears
no rational relationship to reducing greenhouse-gas
emissions because it allows utilities to dispatch electricity
without considering the cost of greenhouse-gas emissions.
With no-cost allowances, a utility can elect to obtain
electricity from a particular plant and cover that plant’s
emissions even though that plant produces more
emissions and generates less efficiently than its
competitors. Without no-cost allowances, utilities would
need to consider the added costs of emissions whenever
making dispatch decisions, and, as a result, they would
have incentives to obtain electricity from cleaner and more
efficient power plants. Similarly, if all power plant owners
had no-cost allowances and could transfer them to their
power plants, all power plants would compete on an even
playing field. If these plants were to compete fairly,
utilities would dispatch the more carbon-efficient power
plants more often and the less carbon-efficient plants less
often. Either scenario would likely reduce greenhousegas emissions in the electricity sector.
149. The CCA’s allocation of no-cost allowances
purports to benefit ratepayers by reducing local utilities’
compliance costs, which limits any additional costs they
might pass on to ratepayers. The no-cost allowances,
however, incentivize utilities to dispatch their own power
plants regardless of whether doing so is the most costeffective means of obtaining electricity. By effectively
eliminating utility-owned power plants’ carbon costs, the
no-cost allowances allow these power plants to appear to
be more cost-effective generators than they in fact are.
Utilities, therefore, are likely to dispatch their less
efficient plants, which benefit from no-cost allowances,
rather than dispatch a more efficient plant that must
83a
consider carbon costs when generating, such as Grays
Harbor. The costs of fulfilling Washingtonians’ demand
for electricity will therefore increase. Rather than bear
these additional costs, local utilities will likely pass these
costs on to Washington’s consumers through rate
increases. If the CCA enabled all power plants to benefit
from no-cost allowances, it would incentivize utilities to
make more efficient dispatch decisions, which would
minimize the costs that utilities would pass on to
ratepayers.
150. Washington may also have a legitimate interest
in ensuring utilities comply with their obligations under
CETA. CETA, however, regulates utilities in terms of the
electricity they supply to ratepayers, while the CCA
regulates utilities insofar as they own power plants that
produce emissions. These regulatory regimes exist
independently from each other even though both
ultimately aim to reduce greenhouse-gas emissions.
There is no indication that the CCA’s provision of no-cost
allowances affects utilities’ ability to comply with CETA’s
regulatory scheme.
151. The CCA contemplates that Washington may
link its cap-and-invest program with other similar
programs, such as California’s. Wash. Rev. Code.
§ 70A.65.210. Washington may have a legitimate interest
in facilitating these linking efforts, but the CCA’s
allocation of no-cost allowances has no logical connection
to this interest. Failing to provide utilities with no-cost
allowances or offering these no-cost allowances to
independent power plant owners would not prevent
Washington from linking its program with those of its
peers. For example, under California’s cap-and-trade
program, investor-owned utilities receive an allocation of
84a
allowances, but they must consign these allowances for
sale at auction and purchase allowances for their own
use. 53 Quebec’s program generally requires electric
utilities to purchase allowances to cover their emissions,
and it provides no-cost allowances to cover emissions
associated with only limited types of electricity sales. 54
152. At bottom, the CCA’s allocation of no-cost
allowances logically serves none of these interests.
CLAIMS FOR RELIEF
COUNT I
Violation of the Commerce Clause: Discrimination
Against Interstate Commerce
153. Plaintiffs re-allege and incorporate by reference
all of the preceding paragraphs.
154. The Commerce Clause of the U.S. Constitution
empowers Congress to “regulate Commerce . . . among
the several states.” U.S. Const. art. I, § 8, cl. 3.
155. This grant of power, by implication, also
prohibits states from unduly restricting and burdening
interstate commerce.
156. Accordingly, the Commerce Clause proscribes
Cal. Code Regs. tit. 17, §§ 95890(b), 95892. Publicly owned utilities
may use a portion of their allowances to satisfy compliance obligations
and offer the rest for sale at auction. Id. § 95892(b)(2), (c).
53
See Regulation Respecting a Cap-and-Trade System for Green
House Gas Emissions Allowances, Q-2, r.46.1 § 39; see also Québec
Ministère de l’Environnement, de la Lutte Contre les Changements
Climatiques, de la Faune et des Parcs, A Brief Look at the Québec
Cap-And-Trade-System
for
Emission
Allowances,
https://www.environnement.gouv.qc.ca/changements/carbone/docum
ents-spede/in-brief.pdf (last visited Dec. 12, 2022).
54
85a
any state law that discriminates against out-of-state
economic actors unless that law is “narrowly tailored to
advanc[e] a legitimate local purpose.” Tenn. Wine &
Spirits Retailers Ass’n v. Thomas, 139 S. Ct. 2449, 2462
(2019) (alteration in original) (internal quotation marks
omitted).
157. The CCA’s distribution of no-cost allowances
violates the Commerce Clause by discriminating in effect
against out-of-state economic interests to the benefit of instate economic interests.
158. Under the CCA, local utilities receive allowances
at no cost. These utilities constitute in-state economic
interests. Not only are they overwhelmingly resident
corporations, but they also operate throughout
Washington and have significant commercial and political
presences in the state.
159. The CCA’s allocation of no-cost allowances
benefits local utilities as local entities that own and
operate power plants in Washington. Although utilities
receive the allowances, the CCA regulates emissions of
the power plants they own. Because local utilities largely
lack emissions of their own, the CCA’s allocation of no-cost
allowances has the practical effect of enabling power
plants owned by local utilities to satisfy most if not all of
their CCA obligations for free. Simply put, the CCA
provides a significant benefit to these local power plant
owners and operators.
160. At the same time, the CCA denies this benefit to
Invenergy, Washington’s only non-utility owner of a
power plant that is regulated during the CCA’s first
compliance period. Unlike local utilities, Invenergy
conducts limited business and political activities in
86a
Washington. The CCA does not provide any no-cost
allowances to Invenergy, so its power plant, Grays Harbor
must purchase allowances at auction to satisfy its CCA
obligations.
161. The CCA’s discrimination against Invenergy as
an out-of-state independent power plant owner engaged in
interstate commerce produces a competitive advantage
for its in-state competitors, Washington’s local utilities.
Invenergy owns and operates the only power plant in
Washington that must consider the cost of carbon in its
decisions to generate and sell electricity during the CCA’s
first compliance period. With these added costs, it will, in
all likelihood, choose to generate and sell less electricity
than it would have without the CCA.
162. Washington’s local utilities, by contrast, will
likely generate and sell more electricity because the CCA
reduces their power plants’ generating costs relative to
those of their independently owned competitor, Grays
Harbor.
163. By distorting the market in this way, the CCA’s
allocation of no-cost allowances has forced Washington’s
only out-of-state owner of a power plant regulated during
the CCA’s first compliance period to compete on an
uneven playing field against in-state power plant owners
even though it has recently invested millions of dollars to
solidify Grays Harbor’s position as one of Washington’s
cleanest and most efficient natural gas power plants.
164. The dormant Commerce Clause prohibits such
economic
protectionism
achieved
through
the
discrimination against interstate commerce unless a
legitimate state interest apart from economic protection
justifies that discrimination.
87a
165. No such interest justifies the CCA’s protectionist
allocation of no-cost allowances.
166. The CCA’s allocation of no-cost allowances
purports to advance two interests: (1) protecting
ratepayers from undue increase in electricity rates and (2)
reducing greenhouse-gas emissions.
167. The CCA’s allocation of no-cost serves neither of
these ends. Instead, it will increase electricity costs and
greenhouse-gas emissions from power plants in the
coming decades.
168.
Because the CCA’s allocation of no-cost
allowances discriminates against interstate commerce and
advances no legitimate state interest in doing so, this
provision violates the dormant Commerce Clause.
169. Defendant purports to act within the scope of her
authority under Washington law in enforcing and
implementing the CCA.
170. Defendant is liable to Plaintiffs for proper
redress under 42 U.S.C. § 1983 because the CCA’s
distribution of no-cost allowances deprives Plaintiffs of the
rights, privileges, and immunities secured by the
Commerce Clause.
171. Plaintiffs have no adequate remedy at law and
will be irreparably harmed by the continued enforcement
of the CCA.
COUNT II
Violation of the Commerce Clause: Excessive Burden
on Interstate Commerce in Relation to Putative
Local Benefits
172. Plaintiffs re-allege and incorporate by reference
88a
all of the preceding paragraphs.
173. The Commerce Clause also prohibits any state
law that burdens interstate commerce when the law’s
burdens clearly outweigh any putative local benefits it
confers.
174. The CCA’s distribution of no-cost allowances to
locally owned electricity generators excessively burdens
interstate commerce without advancing any legitimate
local interest.
175. The CCA’s allocation of no-cost allowances
substantially burdens interstate commerce by obstructing
the flow of interstate investment in natural gas power
plants to Washington. Because the CCA provides no-cost
allowances to local utilities but not independent power
plant owners, any independent power company would find
itself in the same position as Invenergy if it sought to
invest in or develop a natural gas power plant in
Washington. Like Grays Harbor, any power plant that
they were to purchase would bear the costs of complying
with the CCA, while the competing plants owned by local
utilities would not. In other words, new investors would
enter the same distorted market that benefits local
utilities and burdens their independent competitors.
176. Because it distorts the market in this way, the
CCA’s allocation of no-cost allowances, in effect, blocks
further interstate investment in natural gas power plants.
As a result of the CCA, Washington will likely lose many
millions of dollars in investment in natural gas power
plants in the coming decades.
177. The CCA’s distribution of no-cost allowances is
not justified by any consumer protection interest, any
89a
environmental interest, any pro-competitive interest, nor
any public welfare interest.
178. In fact, the CCA’s purported local benefits prove
illusory. As mentioned above, the CCA is projected to
increase electricity rates and greenhouse-gas emissions
from power plants. It therefore fails to produce the local
benefits that Washington claims will flow from providing
no-cost allowances to local utilities.
179. Rather than serve legitimate local interests, the
CCA’s allocation of no-cost allowances enables local
protectionism. By disadvantaging independent power
plant owners and thwarting any future investment, the
CCA insulates local utilities and their power plants from
competition. This protectionist effect only adds to the
CCA’s burden on interstate commerce.
180. As the CCA’s allocation of no-cost allowances
substantially burdens interstate commerce without
producing local benefits, it violates the dormant
Commerce Clause.
181. Defendant purports to act within the scope of her
authority under Washington law in enforcing and
implementing the CCA.
182. Defendant is liable to Plaintiffs for proper
redress under 42 U.S.C. § 1983 because the CCA’s
distribution of no-cost allowances deprives Plaintiffs of the
rights, privileges, and immunities secured by the
Commerce Clause.
183. Plaintiffs have no adequate remedy at law and
will be irreparably harmed by the continued enforcement
of the CCA.
90a
COUNT III
Violation of the Equal Protection Clause: Unlawful
Discrimination
184. Plaintiffs re-allege and incorporate by reference
all of the preceding paragraphs.
185. The Equal Protection Clause of the Fourteenth
Amendment guarantees all persons “the equal protection
of the laws.” U.S. Const. amend. XIV, § 1.
186. Consistent with this guarantee, any classification
which treats groups differently “must bear a rational
relationship to a legitimate governmental purpose.”
Romer v. Evans, 517 U.S. 620, 635 (1996).
187. The CCA treats independent power plant owners
differently from other similarly situated power plant
owners, namely local utilities. The CCA allocates no-cost
allowances to utilities but not to Invenergy, Washington’s
sole independent owner of a power plant regulated under
the CCA.
188. The CCA’s distinction between independent
power plant owners and utilities is not rationally related
to any legitimate governmental purpose. There is no
logical relationship between the CCA’s allocation of nocost allowances and reducing greenhouse gas emissions
because these allowances incentivize utilities to dispatch
their power plants rather than their cleaner competitors.
Similarly, allocating no-cost allowances to utilities but not
to other power plant owners does not logically serve the
CCA’s goal of limiting the statute’s impact on ratepayers.
The CCA’s no-cost allowances incentivize utilities to
dispatch their own power plants rather than their more
efficient competitors, raising the electricity costs for
91a
fulfilling Washington’s retail demand for electricity. If all
power plant owners, utilities and independent companies
alike, received no-cost allowances, the CCA would more
effectively incentivize utilities to dispatch power plants
based on their efficiency and carbon footprint.
189. Moreover, the CCA’s allocation of no-cost
allowances is not logically related to Washington’s
interests in ensuring local utilities meet their independent
obligations under CETA or facilitating linkages among
Washington’s cap-and-trade programs and other similar
North American programs.
190. Because the CCA’s disparate treatment of the
owners of electricity generating facilities in Washington
lacks a rational relationship to a legitimate state interest,
the CCA’s allocation of no-cost allowances to local utilities
but not to independent power plant owners violates the
Equal Protection Clause.
191. Defendant purports to act within the scope of her
authority under Washington law in enforcing and
implementing the CCA.
192. Defendant is liable to Plaintiffs for proper
redress under 42 U.S.C. § 1983 because the CCA deprives
Plaintiffs of the rights, privileges, and immunities secured
by the Equal Protection Clause.
193. Plaintiffs have no adequate remedy at law and
will be irreparably harmed by the continued enforcement
of the CCA.
REQUEST FOR RELIEF
Plaintiffs request that this Court grant the following
relief:
92a
194. Pursuant to 28 U.S.C. § 2201, declare that the
CCA as applied is invalid and unenforceable under the
Commerce Clause of the United States Constitution; and
declare that the CCA as applied is invalid and
unenforceable under the Equal Protection Clause of the
Fourteenth Amendment of the United States
Constitution;
195. Require Defendant and her agents to provide nocost allowances to Plaintiffs, or require Defendant and her
agent to re-allocate no-cost allowances or require electric
utilities to transfer no-cost allowances to Plaintiffs; or
otherwise enjoin Defendant and her agents from
enforcing the CCA to disadvantage Plaintiffs;
196. Award Plaintiffs their costs and disbursements
associated with this litigation under 28 U.S.C. § 2412, 42
U.S.C. § 1988, and other applicable authority; and
197. Provide such other relief as the Court deems just
and proper.
DATED: December 13, 2022
STOEL RIVES LLP
/s/ Vanessa Soriano Power
Vanessa Soriano Power (WSBA No.
30777)
/s/ Jason T. Morgan
Jason T. Morgan (WSBA No. 38346)
STOEL RIVES LLP
600 University Street, Suite 3600
Seattle, WA 98101
93a
Telephone: 206.624.0900
Facsimile: 206.386.7500
vanessa.power@stoel.com
jason.morgan@stoel.com
Stephen D. Andrews (pro hac vice
forthcoming)
sandrews@wc.com
Nicholas G. Gamse (pro hac vice
forthcoming)
ngamse@wc.com
Michael J. Mestitz (pro hac vice
forthcoming)
mestitz@wc.com
Samuel M. Lazerwitz (pro hac vice
forthcoming)
slazerwitz@wc.com
WILLIAMS & CONNOLLY LLP
680 Maine Avenue S.W.
Washington, DC 20024
Telephone: 202.434.5000
Facsimile: 202.434.5029
Attorneys for Plaintiffs
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.