Petition for Writ of Certiorari — PacifiCorp, an Oregon Business Corporation, Petitioner v. Casey Sixkiller, Director, Washington State Department of Ecology

APPENDIX

TABLE OF CONTENTS

Page

Appendix A — Court of appeals opinion

(Aug. 7, 2026) ............................................................... 1a

Appendix B — District court order

(July 15, 2024) ............................................................ 47a

Appendix C — Amended complaint

(Jan. 4, 2024) .............................................................. 75a

Appendix D — Constitutional and statutory

provisions involved .................................................. 101a

APPENDIX A

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PACIFICORP, an Oregon business

corporation,

Plaintiff - Appellant,

v.

CASEY SIXKILLER, Director of

the Washington State Department of

Ecology,

No. 24-4803

D.C. No.

3:23-cv-06155TMC

OPINION

Defendant - Appellee.

Appeal from the United States District Court

for the Western District of Washington

Tiffany M. Cartwright, District Judge, Presiding

Argued and Submitted June 2, 2025

Seattle, Washington

Filed August 7, 2026

Before: Johnnie B. Rawlinson, Daniel A. Bress, and

Patrick J. Bumatay, Circuit Judges.

Opinion by Judge Rawlinson;

Dissent by Judge Bress

(1a)

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OPINION

RAWLINSON, Circuit Judge:

PacifiCorp is a utility that supplies electricity to customers in Washington, Utah, Wyoming, Idaho, Oregon,

and California. PacifiCorp appeals the district court’s dismissal with prejudice of its complaint alleging that the

Washington State Department of Ecology (Ecology) violates the Dormant Commerce Clause through enforcement of decarbonization requirements under Washington’s Climate Commitment Act (CCA). See Wash. Rev.

Code § 70A.65. PacifiCorp contends that this enforcement unconstitutionally increases electricity costs for

PacifiCorp’s non-Washington customers. PacifiCorp also

challenges the district court’s dismissal of its motion for

preliminary injunction as moot. We affirm.

I.

BACKGROUND

PacifiCorp is “a multi-state utility that serves approximately two million customers in six states, with approximately 140,000 customers in Washington.”

In its

amended complaint, PacifiCorp alleged that it “owns and

operates the Chehalis Generation Facility (Chehalis), . . .

a gas-fired combined cycle electric generation facility located south of Chehalis, Washington.” In 2021, Washington enacted the CCA which “require[s] certain emitting

entities located in Washington to obtain and retire allowances for their respective annual greenhouse-gas emissions.” “Some entities covered by the CCA will purchase

allowances for their respective emissions at auction, while

others are provided free (no-cost) allowances for emitting

generation that serves Washington utility customers.”

PacifiCorp alleged that “[t]hese no-cost allowances mitigate the costs for Washington utility customers who

would otherwise be required to pay for CCA allowances

at market prices.” In contrast, emitting resources like

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Chehalis, which are located in Washington but serve utility customers in other states in addition to Washington,

do not receive no-cost allowances for the portion of emissions for service for out-of-state residents.” Under the

CCA, “[t]hese no-cost allowances are assigned directly to

electric utilities in an attempt to mitigate the cost burden

of the program on electricity customers.”

PacifiCorp further alleged that “[u]nder the CCA and

its implementing regulations, electric utilities can transfer their no-cost allowances to the power plants that they

own. Because these power plants are responsible for generating the electricity these utilities sell, and the emissions associated with that electricity, these no-cost allowances eliminate some or all of a utility-owned power

plants’ compliance costs caused by the CCA.” PacifiCorp

alleged that “for emitting resources like Chehalis that are

located in Washington but that serve customers both

within Washington and in other states, PacifiCorp will not

receive no-cost allowances for the portion of emissions for

service for out-of-state residents.” “As a result, PacifiCorp’s non-Washington customers bear higher power

costs to ensure Chehalis has sufficient allowances to cover

its emissions for the energy that serves those customers.”

“Alternatively, if utility regulators in those other states

deny recovery of the cost of allowances because of this disparate treatment, PacifiCorp shareholders will bear the

CCA compliance costs simply because it serves customers

in other states.” PacifiCorp asserted that “Washington

customers do not pay for CCA allowance costs for electricity generated at Chehalis, but PacifiCorp and PacifiCorp’s out-of-state customers do. The CCA’s allocation of

no-cost allowances harms PacifiCorp’s non-Washington

customers and PacifiCorp in direct proportion to the

amount of Chehalis generation that crosses Washington’s

border.”

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PacifiCorp alleged that “[t]his harm to PacifiCorp and

its non-Washington customers will continue to increase

because Chehalis incurs a new CCA compliance obligation

for each metric ton of carbon dioxide equivalent that the

plant emits,” and “approximately 77 percent of Chehalis’

emissions do not receive no-cost allowances, and it falls to

PacifiCorp (an out-of-state entity) or its out-of-state customers to pay for Washington’s CCA compliance costs.”

PacifiCorp further alleged that “[a]s applied to PacifiCorp

and its out-of-state customers, [Ecology’s] implementation of the CCA’s allocation of no-cost allowances violates

the Commerce Clause of the United States Constitution

because it impermissibly discriminates against out-ofstate businesses and customers.”

According to PacifiCorp, “Washington utilities that

serve only or predominantly Washington customers do

not have the same CCA compliance cost burden as PacifiCorp, which serves out-of-state customers with electricity

from Chehalis,” and “[t]hese protectionist effects and the

explicit legislative text that the CCA shall be implemented to mitigate the cost burden for customers in

Washington, and only in Washington, confirm that the

CCA’s allocation of no-cost allowances imposes Constitutionally impermissible burdens on interstate commerce.”

PacifiCorp sought a motion for preliminary injunction

to enjoin Ecology “from enforcing the no-cost allowance

provisions of the CCA in a manner that discriminates between in-state and out-of-state customers.”

The district court concluded that dismissal of PacifiCorp’s Dormant Commerce Clause claims was warranted

because “[t]he electricity PacifiCorp generates to send

out of state is not substantially similar to the electricity it

sells in Washington because the exported energy is not

covered by” Washington’s Clean Energy Transformation

Act (CETA). See Wash. Rev. Code § 19.405. The district

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court opined that “[a]ccepting PacifiCorp’s [Dormant

Commerce Clause] argument would elevate the energy it

produces in Washington but then sends out of state above

Washington’s entire regulatory framework for reducing

carbon emissions: it would be exempt from both the decarbonization mandate of CETA and the purchase of allowances under the CCA.” The district court observed

that:

Throughout PacifiCorp’s complaint and description of how no-cost allowances under

the CCA are allocated, there is not one mention of CETA’s existence, despite the CCA

and its implementing regulations making

clear that an electric utility is only eligible

for no-cost allowances to the extent that it

is subject to CETA’s requirements. But the

existence of CETA, and its role in the allocation of no-cost allowances, is not an inconvenient fact that PacifiCorp can avoid by

artful pleading.

The district court concluded that the CCA and CETA operate in tandem to reduce carbon emissions because:

The CCA requires covered entities to buy

allowances for carbon emissions, subject to

a cap on allowances that decreases each

year, so that market pressure will encourage those entities to decarbonize. But electric utilities serving Washington customers

[do not] need that market pressure because

CETA already requires them to decarbonize, and on a faster schedule. In contrast,

the emissions that PacifiCorp generates

within Washington’s borders at its Chehalis

plant, but uses to export electricity to

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customers in other states, are not covered

by CETA at all. This fundamental difference in preexisting regulation means that

the two categories of emissions are not substantially similar for purposes of the

Dormant Commerce Clause.

The district court also rejected PacifiCorp’s reliance on

Dormant Commerce Clause precedent involving the compensatory tax doctrine because “the CCA’s allocation of

no-cost allowances to utilities already subject to CETA’s

requirements is not the equivalent of a facially discriminatory tax.” The district court clarified that the compensatory tax doctrine is “a specific way of justifying a facially

discriminatory tax as achieving a legitimate local purpose

that cannot be achieved through discriminatory means.”

See Oregon Waste Sys. v. Dep’t of Envt’l Qual. Of State of

Or., 511 U.S. 93, 102 (1994). Rather than applying a discriminatory tax analysis, the district court determined

that the relevant inquiry for this case is whether “the competing entities were subject to different regulatory regimes.”

Finally, the district court opined that “the retail electric market in the United States is already the type of Balkanized system that the Dormant Commerce Clause in

competitive markets serves to guard against—a fact

acknowledged by both the Federal Power Act and the Supreme Court’s Commerce Clause cases.” See e.g., Arkansas Elec. Coop. Corp. v. Ark. Pub. Svc. Com’n, 461 U.S.

375, 395 (1983) (“[T]he national fabric does not seem to

have been seriously disturbed by leaving regulation of retail utility rates largely to the States.”); see also Electric

Pwr. Supply Ass’n v. Star, 904 F.3d 518, 525 (7th Cir.

2018) (“Illinois has not engaged in any discrimination beyond what is required by the rule that a state must regulate within its borders. All carbon-emitting plants in

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Illinois need to buy credits.”). The district court explained

that “[u]nder this [balkanized] system, PacifiCorp’s retail

electricity customers in Washington and other states do

not compete in the way that typically triggers dormant

Commerce Clause scrutiny. If PacifiCorp succeeds in

passing the compliance costs of the CCA on to its out-ofstate customers, it will be because each state’s utility commission has approved charging its own residents those

rates.” On the other hand, “if PacifiCorp fails, then its

shareholders will incur those costs not because they serve

out-of-state customers, but because they own and operate

a power plant in Washington state that produces emissions not already covered by CETA’s decarbonization

schedule—just like any other comparable covered entity

under the CCA.”

PacifiCorp did not seek leave to amend its complaint,

and the district court dismissed PacifiCorp’s complaint

with prejudice because its “ruling [was] based on the plain

text of the CCA and CETA and the way the statutes interact, rather than on insufficient factual allegations.”

The district court also denied PacifiCorp’s motion for preliminary injunction as moot.

PacifiCorp filed a timely notice of appeal.

II.

STANDARDS OF REVIEW

“We review de novo a district court’s dismissal under

Fed. R. Civ. P. 12(b)(6), accepting as true all allegations of

fact in a well-pleaded complaint and construing those

facts in the light most favorable to the plaintiff.” DeFrancesco v. Robbins, 136 F.4th 933, 938 (9th Cir. 2025) (citation and internal quotation marks omitted).

“Dismissal with prejudice and without leave to amend

is not appropriate unless it is clear on de novo review that

the complaint could not be saved by amendment. . . .”

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Webb v. Trader Joe’s Co., 999 F.3d 1196, 1204 (9th Cir.

2021) (citation omitted).

“The denial of a motion for preliminary injunction will

be reversed only if the district court abused its discretion

or based its decision on an erroneous legal premise. . . .”

F.T.C. v. Microsoft Corp., 136 F.4th 954, 964 (9th Cir.

2025) (citation omitted).

III.

DISCUSSION

A. Standing and Ripeness of PacifiCorp’s Claims

Ecology does not challenge the district court’s rulings

that PacifiCorp had standing to assert its Dormant Commerce Clause claim, and that the claim was ripe for adjudication. Nevertheless, “[s]tanding is a threshold consideration that must be determined before considering the

merits.” Day v. Henry, 152 F.4th 961, 967 (9th Cir. 2025),

as amended, (citation omitted). For Article III standing,

“a plaintiff must have (1) suffered an injury-in-fact that is

(2) traceable to the defendant’s challenged conduct, and

(3) it must be likely, as opposed to merely speculative, that

the injury will be redressed by a favorable decision.” Id.

(citation omitted). “[A] plaintiff satisfies redressability

when he shows that a favorable decision will relieve a discrete injury to himself, not that a favorable decision will

relieve his every injury. . . .” Id. (citation and internal quotation marks omitted) (emphasis in the original).

The district court held that PacifiCorp had standing

because “[t]he CCA requires PacifiCorp to obtain allowances for its Chehalis emissions, either through purchase

at auction or the award of no-cost allowances,” and “PacifiCorp . . . plausibly alleged that it will have to spend

money to purchase allowances for the emissions generated for exported electricity.” The district court emphasized that, “[e]ven if PacifiCorp might eventually be allowed to pass those costs on to its customers, PacifiCorp

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remains the regulated entity required to obtain the allowances in the first place,” resulting in “a sufficiently concrete and particularized injury for PacifiCorp to challenge

the CCA’s method of deciding when an electric utility

must buy allowances rather than receive them for free.”

We agree with the district court that PacifiCorp’s “alleged injury is caused by the requirements of the challenged statute and it could be redressed by an injunction

requiring Ecology to distribute no-cost allowances for exported electricity or exempting PacifiCorp from the purchase of allowances altogether.” PacifiCorp’s challenge to

the manner in which Washington provided no-cost allowances was a sufficient injury-in-fact, and “the district

court was capable of granting at least some relief” by enjoining “enforcement of the statutory scheme.” Day, 152

F.4th at 968. “This solution would negate the Commerce

Clause issue by eliminating enforcement of the allegedly

discriminatory laws altogether. . . .” Id. (footnote reference omitted).

PacifiCorp’s claims are also ripe. “For a suit to be ripe

within the meaning of Article III, it must present concrete

legal issues, presented in actual cases, not abstractions.”

Planned Parenthood Great Nw. v. Labrador, 122 F.4th

825, 839 (9th Cir. 2024) (citation and internal quotation

marks omitted). “In many cases, the constitutional component of ripeness is synonymous with the injury-in-fact

prong of the standing inquiry. . . .” Id. (citation and internal quotation marks omitted). The district court correctly

held that “PacifiCorp’s obligation to at least front the cost

of allowances is identifiable and imminent,” and that

“PacifiCorp’s responsibility to bear the cost of CCA allowances—regardless of the results of its administrative appeals to pass on those costs to its customers—rebut[ted]

Ecology’s ripeness argument.” See id.

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B. The District Court’s Dismissal of PacifiCorp’s

Complaint

PacifiCorp contends that the district court erred in dismissing its complaint on the basis that PacifiCorp’s respective generation of electricity under the CCA for instate use and its generation of electricity for exportation

were not similarly situated uses under the Dormant Commerce Clause.

The Commerce Clause provides that “[t]he Congress

shall have Power . . . To regulate Commerce with foreign

Nations, and among the several States, and with the Indian Tribes.” U.S. Const. art. 1, § 8, cl. 3. “The negative

reading of this clause—known as the dormant Commerce

Clause—prevents states from adopting protectionist

measures that unduly restrict interstate commerce. . . .”

Day, 152 F.4th at 969 (citation and internal quotation

marks omitted). “The first step in analyzing any law under the dormant Commerce Clause is to determine

whether it regulates evenhandedly with only incidental effects on interstate commerce, or discriminates against interstate commerce.” Id. at 970 (citation and internal quotation marks omitted). “Discrimination means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” Id.

(citation and internal quotation marks omitted). “This differential treatment must be as between persons or entities who are similarly situated.” Id. (citation and internal

quotation marks omitted).

Consistent with “the Supreme Court’s clear instruction . . . that extreme caution is warranted before a court

deploys its implied authority to reject a state law under

the dormant Commerce Clause,” Flynt v. Bonta, 131

F.4th 918, 926 (9th Cir. 2025) (citation and internal quotation marks omitted), we conclude that the district court

correctly dismissed PacifiCorp’s Dormant Commerce

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Clause claims. In this case, the focus of the Dormant

Commerce Clause analysis is not primarily on whether

PacifiCorp produces the same product, specifically electricity, for in-state and out-of-state consumers. See

Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 12728 (1978) (explaining that the Commerce Clause “protects

the interstate market, not particular interstate firms,

from prohibitive or burdensome regulations”). Rather, it

is the regulatory distinctions between the treatment of

entities that produce in-state electricity and exported

electricity under the CCA and CETA that undermine

PacifiCorp’s contention that carbon emissions from its

production of electricity for in-state and out-of-state customers are similarly situated for purposes of the Dormant

Commerce Clause.1

In 2019, the Washington legislature adopted CETA to

“address the impacts of climate change by leading the

transition to a clean energy economy,” and “to eliminate

coal-fired electricity, transition the state’s electricity supply to one hundred percent carbon-neutral by 2030, and

one hundred percent carbon-free by 2045.” Wash. Rev.

Code § 19.405.010(1)-(2). To advance the state’s decarbonization efforts, each electric utility was required to file a

clean energy implementation plan with the Washington

Utilities and Transportation Commission (Commission)

by October 1. 2021, and every four years thereafter. The

clean energy implementation plan was to describe “the

utility’s plan for making progress toward meeting the

clean energy transformation standards [as] informed by

Further complicating the Dormant Commerce Clause analysis in

this case is the fact that PacifiCorp also sells electricity to Washington customers. PacifiCorp acknowledges that “CETA applies to gaspowered facilities like Chehalis,” thus entitling PacifiCorp to receive

no-cost allowances under the CCA for electricity sold to Washington

customers. See Wash. Rev. Code § 70A.65.120(1).

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the utility’s clean energy action plan.” Wash. Admin.

Code 480-100-640(1).2

In 2021, the Washington legislature adopted “a cap on

greenhouse gas emissions from covered entities and a

program to track, verify, and enforce compliance through

the use of compliance instruments,” and imposed

“[a]nnual allowance budgets that limit emissions from

covered entities.” Wash. Rev. Code § 70A.65.060(1)-(2)

(2021). Under the CCA, a covered entity is one that “owns

or operates a facility and the facility’s emissions equal or

exceed 25,000 metric tons of carbon dioxide equivalent.”

Wash. Rev. Code § 70A.65.080(1)(a). The CCA provides

for allowances, which authorize the emission of “up to one

metric ton of carbon dioxide equivalent.” Wash. Rev.

Code § 70A.65.010(1). These allowances must be purchased at auction.

The CCA also contains a provision allowing electric

utilities subject to CETA “to be eligible for allowance allocation . . . in order to mitigate the cost burden of the

[CETA] program on electricity customers.” Wash. Rev.

Code § 70A.65.120(1). Most of the covered entities obtain

the required allowances by purchasing them at auctions

conducted by Ecology. However, under the CCA, all electric utilities subject to the requirements of the 2019 CETA

In 2024, the Commission determined that PacifiCorp had not shown

“meaningful progress towards meeting CETA standards,” and ordered an investigation into PacifiCorp’s CETA update. Washington

Utilities & Transp. Comm’n v. PacifiCorp, No. UE-210829, 2024 WL

1364108, at *5 (Wash. U.T.C. Mar. 25, 2024). The enforcement action

against PacifiCorp and CETA’s regulatory mandates undermine

PacifiCorp’s assertion that there are not two categories of emissions

because CETA does not require utilities to be “greenhouse gas neutral” until 2030. CETA does not apply to exported power, thus justifying denial of cost allowances for sale of electricity to out-of-state

customers irrespective of the timing set by the Washington legislature for its decarbonization goals.

2

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are eligible for no-cost allowances. See Wash. Rev. Code

§ 70A.65.120(i); see also Wash. Admin. Code § 173-446530.

PacifiCorp is among the electric utilities eligible to receive no-cost allowances. Utilities such as PacifiCorp,

which are subject to CETA, receive no-cost allowances for

carbon emissions produced by electricity sold to Washington customers, but these utilities do not receive no-cost

allowances for emissions from electricity that is not subjected to CETA’s requirements, i.e., electricity exported

outside the State of Washington, and therefore not subject to CETA. See id. As the district court explained,

“[t]he energy PacifiCorp produces for use in-state is subject to a preexisting, comprehensive regulatory regime—

the Clean Energy Transformation Act—that its exported

energy is not.”

“[A]ny notion of discrimination [in violation of the

Dormant Commerce Clause] assumes a comparison of

substantially similar entities.” General Motors Corp. v.

Tracy, 519 U.S. 278, 298 (1997) (footnote reference omitted). The district court correctly concluded that, due to

the separate emission mandates imposed by CETA and

the CCA, PacifiCorp was unable to plausibly allege that

its carbon emissions resulting from in-state production of

electricity and its carbon emissions emanating from its exported electricity were similarly situated for purposes of

the Dormant Commerce Clause. As the district court explained,

When the Washington legislature enacted

the CCA, it was not writing on a blank slate.

Because CETA already existed, the legislature faced a situation where a certain class

of emitters otherwise subject to the CCA—

electric utilities serving Washington residents—were already regulated by a

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separate and more aggressive decarbonization mandate. Rather than subject those

utilities—including PacifiCorp—to overlapping sets of requirements, and potentially

subject Washington’s electric customers to

unnecessary increased costs beyond what

they already face under CETA, the legislature chose to issue no-cost CCA allowances

to electric utilities to the extent that their

emissions were already covered by CETA’s

decarbonization schedule.

Although one would not learn it from reading PacifiCorp’s complaint—which does not

mention CETA at all, and instead frames

the no-cost allowances as simply a giveaway

to Washington customers—the connection

between no-cost allowances for electric utilities and CETA’s preexisting regulatory regime is in the plain text of the CCA and its

regulations. The CCA’s purpose of working

in tandem with CETA’s requirements, rather than just benefiting in-state customers, is reinforced by the statute phasing out

the no-cost allowances by 2045, the same

year that CETA’s decarbonization mandate

will be in full effect.

See Wash. Rev. Code § 70A.65.120(2)(d) (“Under no circumstances may utilities receive any free allowance after

2045.”).

In sum, CETA requires electric utilities like PacifiCorp, that provide electricity to Washington customers to

decarbonize their power generation, while emissions resulting from electricity produced for export to out-of-state

customers are not covered by CETA. These categories of

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emissions regulated in Washington are not substantially

similar under the Dormant Commerce Clause, particularly as “[g]ranting PacifiCorp its requested relief would

mean that the emissions it generates in Chehalis, but uses

to export electricity, would be exempt from both CETA’s

decarbonization mandate and the CCA’s requirement of

purchasing emissions allowances.” Moreover, elimination

of cost allowances for Washington customers and the allowances that PacifiCorp must purchase for its exported

electricity “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.” General Motors, 519 U.S. at 299. Indeed, PacifiCorp’s exported power is not similarly situated to utilities providing in-state power under CETA “for

the simple reason that . . . the different entities serve different markets, and would continue to do so even if the

supposedly discriminatory burden were removed.” Id.

Thus, Washington’s “categorical distinction between” its

regulatory treatment of emissions from entities providing

instate power under CETA and the lack of no-cost allowances in the CCA for emissions resulting from exported

power produced by entities not providing in-state power

under CETA is not “wholly illusory.” Camps Newfound/

Owatonna, Inc. v. Town of Harrison, Me., 520 U.S. 564,

586 (1997).

Although PacifiCorp purports that it would face higher

costs for its exported power, particularly as other states

impose their own set of carbon emissions requirements,

we have “rejected arguments that state laws treating outof-state and in-state entities similarly, but which prevent

them from structuring or operating their business as they

prefer, reflect improper discrimination in favor of in-state

interests.” Flynt, 131 F.4th at 927 (citations omitted).

The Dormant Commerce Clause does not “protect the

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particular structure or methods of operation in a retail

market.” Id. at 928 (citation and alteration omitted).

Moreover, “the dormant Commerce Clause does not impose a least burdensome requirement for state laws.” Association des Éleveurs de Canards et d’Oies du Québec v.

Bonta, 33 F.4th 1107, 1119 (9th Cir. 2022) (citation and internal quotation marks omitted).

Washington imposes different regulatory mandates

for carbon emissions from electricity that is produced by

PacifiCorp for use within the state, and carbon emissions

from electricity produced for export. PacifiCorp’s reliance on cases involving taxes imposed on out-of-state entities or the denial of tax exemptions for out-of-state entities is misplaced. In Camps Newfound/Owatonna, the

Supreme Court considered “whether an otherwise generally applicable state property tax violate[d] the Commerce Clause . . . because its exemption for property

owned by charitable institutions excludes organizations

operated principally for the benefit of nonresidents.” 520

U.S. at 567. The petitioner in that case “operate[d] a summer camp for the benefit of children of the Christian Science faith,” and “[ab]out 95 percent of the campers [were]

not residents of Maine.” Id. Maine “provide[d] a general

exemption from real estate and personal property taxes

for benevolent and charitable institutions incorporated in

the State.” Id. at 568 (internal quotation marks omitted).

“With respect to institutions that [were] in fact conducted

or operated principally for the benefit of persons who

[were] not residents of Maine, however, a charity [was

able to] qualify for a more limited tax benefit, and then

only if the weekly charge for services provided d[id] not

exceed $30 per person.” Id. (citation, footnote reference,

and internal quotation marks omitted).

The Supreme Court framed the issue as “the disparate

real estate tax treatment of a nonprofit service provider

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based on the residence of the consumers that it serves.”

Id. at 572. No issue was raised regarding whether the instate and out-of-state entities were similarly situated under the Dormant Commerce Clause. See id. at 587. It is

not surprising that there was no question of substantial

similarity raised. The only difference between the entities

being considered for differing taxation treatment was

whether the entity serviced in-state campers or out-ofstate campers. See id. at 575. In contrast, the entities

here are not similarly situated because they are subject to

entirely different statutory schemes. Thus, the Supreme

Court’s decision in Campus Newfound/Owatonna does

not control the outcome of this case.3

Neither does the Supreme Court’s decision in Oregon

Waste Sys., support PacifiCorp’s contentions that emissions from in-state entities regulated by CETA and emissions from exported power that is not regulated by CETA

are similarly situated under the Dormant Commerce

In its letter filed under Federal Rule of Appellate Procedure 28(j),

PacifiCorp raised a potential issue under the Tax Injunction Act

(TIA), 28 U.S.C. §1341. “The TIA precludes suits in federal court

where the requested relief would to some degree stop the assessment

or collection of a state tax. . . .” Online Merchants Guild v. Maduros,

52 F.4th 1048, 1051-52 (9th Cir. 2022) (citation and internal quotation

marks omitted). PacifiCorp has pursued contradictory positions as to

whether the costs imposed under the CCA and CETA qualify as

taxes. For the first time in its reply brief, PacifiCorp asserts that it

could amend its complaint to allege that the CCA’s no-cost allowances

are taxes on electricity that discriminate against out-of-state customers in violation of 15 U.S.C. §391. However, in its 28( j) letter, PacifiCorp maintains that the TIA should not apply “because the purpose

of [the] allowances is to modify behavior (reduce emissions), not to

raise revenue.” Based on PacifiCorp’s concession that the CCA imposes regulatory fees and costs to promote decarbonization efforts,

as opposed to a state tax for revenue collection, the TIA does not apply, and any amendment premised on violation of 15 U.S.C. § 391

would be futile.

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Clause. In that case, the Supreme Court considered

“whether Oregon’s purportedly cost-based surcharge on

the in-state disposal of solid waste generated in other

States violate[d] the Commerce Clause.” 511 U.S. at 95.

The Supreme Court held that “[b]ecause [Oregon] offered

no legitimate reason to subject waste generated in other

States to a discriminatory surcharge approximately three

times as high as that imposed on waste generated in Oregon, the surcharge [was] facially invalid under the negative Commerce Clause.” Id. at 108.

Washington’s decarbonization regime does not tax or

impose a surcharge on electricity generated in other

states and sold to Washington customers. Instead, Washington imposes different regulatory requirements for carbon emissions produced from electricity generated for instate consumption and emissions produced from electricity generated for export. Thus, Washington’s provision of

no-cost allowances for carbon emissions produced by instate entities covered under CETA, and its denial of nocost allowances for entities that export power and are not

subject to regulation under CETA do not involve “substantially similar entities.” General Motors, 519 U.S. at

298.

We are persuaded by the Seventh Circuit’s reasoning

in Electric Power Supply Association, 904 F.3d 518. In

that case, the Seventh Circuit considered a Dormant

Commerce Clause challenge to legislation enacted in the

State of Illinois to subsidize some of the state’s nuclear

generation facilities in the form of “zero emission credits.”

Id. at 521, 524. In affirming the district court’s entry of

summary judgment in favor of the State, the Seventh Circuit recounted the purpose of the Commerce Clause and

its application to regulation of electricity by the several

States. See id. at 524-25. In doing so the Seventh Circuit

observed: “The commerce power belongs to Congress; the

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Supreme Court treats silence by Congress as preventing

discriminatory state legislation.” Id. at 525. The Seventh

Circuit then clarified that Congress has not remained silent when it comes to regulation of electricity by the

States. Rather, Congress specifically provided in the

Federal Power Act, 16 U.S.C. § 824(b)(1) that States “may

regulate local generation” of electric power. Id. Based on

that rationale, the Seventh Circuit concluded that zero

emission credits were not discriminatory under the Commerce Clause. See id. Rather, they were a reflection of

“the rule that a state must regulate within its borders.”

Id.

The same is true in this case. Legislators in the State

of Washington promulgated a comprehensive statutory

scheme to achieve its goal of reducing carbon emissions in

the state. See Wash. Rev. Code §19.405.010. Washington’s no-cost allowances are analogous to the zero emission credits considered by the Seventh Circuit in Electric

Power Supply Association. Similarly to the rationale of

the Seventh Circuit, limiting the no-cost allowances to

providers that are subject to the requirements of the 2019

CETA requirements did not result in a violation of the

Dormant Commerce Clause. See id.4

Reduced to its essence, the dissent is predicated on the notion that

PacifiCorp, which exports power, is similarly situated to Washington

utilities which do not export power. However, as discussed at length,

these entities are subject to different regulatory schemes linked to

the State of Washington’s commitment to the reduction of greenhouse-gas emissions within the state. Non-exporting utilities are subject to the provisions of the CCA, which requires entities emitting

greenhouse-gas within the state to obtain allowances to offset those

emissions. Utilities like PacifiCorp that export power are subject to

a different regulatory provision because the CCA does not apply to

greenhouse-gas emissions outside the State of Washington. We are

not persuaded that discovery is required to establish this obvious dissimilarity.

4

20a

Finally, PacifiCorp’s contention that the district court

erred in dismissing its complaint without leave to amend

is unpersuasive. PacifiCorp maintains that, even though

it did not seek leave to amend in the district court, it could

amend its complaint to allege that “(1) CETA’s portfolio

requirements, of which the Washington-allocated portion

of Chehalis is a part, do not go into effect until 2030, and

(2) other states have laws similar to CETA that apply to

electricity from Chehalis for PacifiCorp customers in

those states.” PacifiCorp “did not request leave to amend

from the district court, so we need not consider that argument on appeal.” Osheske v. Silver Cinemas Acquisition

Co., 132 F.4th 1110, 1114 (9th Cir. 2025). In any event,

“[t]he district court’s dismissal without leave to amend

was proper because it is clear, on de novo review, that the

complaint could not be saved by any amendment.” Id. (citation and internal quotation marks omitted). Because

PacifiCorp failed to plead a plausible and legally tenable

Dormant Commerce Clause claim, any amendment would

be futile irrespective of PacifiCorp’s newly-minted allegations. See id.

C. The District Court’s Denial of PacifiCorp’s Motion For A Preliminary Injunction

PacifiCorp asserts that the district court abused its

discretion in denying its motion for a preliminary injunction because it was likely to succeed on the merits of its

Dormant Commerce Clause claim.

Because dismissal of PacifiCorp’s Dormant Commerce

Clause claim as a matter of law was warranted, the district

court properly denied PacifiCorp’s motion for a preliminary injunction as moot. See Simon v. City & Cnty. of San

Francisco, 135 F.4th 784, 797 (9th Cir. 2025) (explaining

that “[l]ikelihood of success on the merits is a threshold

inquiry and is the most important factor” in determining

whether a plaintiff is entitled to a preliminary injunction)

21a

(citation omitted); see also Bayer v. Neiman Marcus

Grp., 861 F.3d 853, 862 (9th Cir. 2017) (noting that a case

is moot when a court is unable “to grant any effectual relief”).

IV. CONCLUSION

We have acknowledged that “[o]ur federal system recognizes each State’s freedom to serve as a laboratory; and

try novel social and economic experiments.” American

Fuel & Petrochemical Mfrs. v. O’Keeffe, 903 F.3d 903, 913

(9th Cir. 2018) (citation and internal quotation marks

omitted). “This freedom would be meaningless if officials

could not promote the economic benefits of these experiments to their states without running afoul of the Commerce Clause.” Id. “It is well settled that the states have

a legitimate interest in combating the adverse effects of

climate change on their residents.” Id. (citation omitted).

“Air pollution prevention falls under the broad police powers of the states, which include the power to protect the

health of citizens in the state.” Id. (citation omitted). Consistent with these precepts, we hold that the district

court’s dismissal of PacifiCorp’s complaint with prejudice

was warranted because PacifiCorp failed to plausibly allege that Washington’s decarbonization regulations and

its use of no-cost allowances were applied to similarly situated entities as required for violations of the Dormant

Commerce Clause. Because PacifiCorp is unable to plausibly allege a cognizable claim under the Dormant Commerce Clause, the district court did not err in dismissing

PacifiCorp’s complaint without leave to amend, and PacifiCorp’s motion for preliminary injunction was correctly

denied as moot.

AFFIRMED.

22a

BRESS, Circuit Judge, dissenting:

Washington’s Climate Commitment Act (CCA) requires all operators of facilities in Washington State that

emit more than a certain amount of greenhouse gas to purchase allowances for their emissions. Wash. Rev. Code

§§ 70A.65.010(1), 70A.65.060(1)–(2), 70A.65.080(1)(a). To

ease the burden of CCA compliance on electricity customers, retail electric utilities are eligible for “no-cost allowances,” i.e., free credits. Id. § 70A.65.120(1). But utilities

can only receive no-cost allowances in proportion to the

electricity they sell to Washington electricity customers.

Id. § 70A.65.010(21); Wash. Admin. Code § 173-446230(2)(f). In other words, if a utility in Washington sells

90% of its electricity to out-of-state customers, only 10%

of its emissions will be eligible for no-cost allowances under the CCA. On its face, the CCA thus facially discriminates against interstate commerce by imposing greater

costs on interstate electricity sales through the disallowance of associated no-cost allowances. This is a significant

problem for plaintiff PacifiCorp, which must buy expensive CCA allowances—estimated at approximately $48

million in 2024—for all out-of-state electricity sales from

its Chehalis, Washington plant.

Absent anything further, the CCA’s facial discrimination against interstate sales of electricity would violate the

core antidiscrimination principle of the dormant Commerce Clause. But Washington has a response: it says the

CCA provides electric utilities with no-cost allowances to

compensate for the costs that another Washington law,

the Clean Energy Transformation Act (CETA), Wash.

Rev. Code § 19.405.010 et seq., imposes on producers selling electricity into Washington. Because CETA does not

apply to electricity sold to out-of-state customers, Washington argues, the CCA’s no-cost allowances for in-state

electricity sales merely balance out CETA’s burdens and

23a

place in-state and out-of-state electricity sales on equal

footing.

That sounds sensible in theory, but under Supreme

Court precedent, the key question is whether it is true in

fact. And here, we do not have enough before us to say

one way or the other. This case is only at the pleading

stage, and we lack any record that would allow us to evaluate whether Washington is correct that the costs of the

CCA and CETA merely offset each other, thereby justifying the CCA’s facial discrimination against interstate

commerce. And there are serious reasons to question

Washington’s argument, given the high immediate costs

that the CCA imposes on PacifiCorp and the fact that

CETA creates no immediate decarbonization obligations

on gas-fired power plant operators until 2030. See Wash.

Rev. Code § 19.405.040(1)(a). So the proper course here

was to remand this case for factual development as to

whether CETA’s compliance costs and the CCA allowances are “roughly equivalent” in a way that would justify

Washington’s otherwise discriminatory treatment of interstate electricity sales. See Oregon Waste Sys., Inc. v.

Dep’t of Env’t Quality of State of Or., 511 U.S. 93, 103

(1994).

Like the district court, the majority opinion takes a

very different path. It instead holds that the CCA’s limitation of no-cost allowances to intrastate sales is entirely

exempt from dormant Commerce Clause scrutiny because Washington’s regulatory scheme renders electricity consumed in-state not “substantially similar” to electricity consumed out-of-state. Gen. Motors Corp. v.

Tracy, 519 U.S. 278, 298 (1997). That conclusion is mistaken as a matter of law. Tracy involved unique facts, and

the case has rarely been applied since it was decided

nearly thirty years ago. Nor did it apply here. Unlike

Tracy, which involved different product markets and

24a

dissimilar sellers, the business entities subject to the CCA

and CETA are the same—retail electric utilities, i.e., utilities that sell electricity to residential customers. Those

entities all compete within the same product market—the

retail electricity market. And the underlying commodity

sold within that market is the same—electricity.

By treating this case as outside dormant Commerce

Clause scrutiny, the majority opinion improperly expands

Tracy’s limited exception, which is only meant to permit

differential treatment of entities that do not compete

against each other (and in limited cases, those that do

compete against each other but employ different business

structures). Tracy has never been invoked—as the majority does here—to allow state regulation that increases

the costs of intrastate commerce to justify facial discrimination against interstate commerce, without requiring

any assessment of the degree to which interstate commerce is burdened. Because the majority’s expansion of

Tracy would swallow the dormant Commerce Clause altogether, I respectfully dissent.

I

In 2019, Washington enacted CETA to ensure that “all

retail sales of electricity to Washington retail electric customers be greenhouse gas neutral by January 1, 2030.”

Wash. Rev. Code § 19.405.040(1). However, the statute does

not require utilities to demonstrate compliance with this

neutrality standard until after 2030. Id. § 19.405.040(1)(A).

Instead, in the interim, utilities only need to submit implementation plans with “specific targets for energy efficiency, demand response, and renewable energy,” among

other things. Id. § 19.405.060(1); Wash. Admin. Code

§ 480-100-640(1). CETA further mandates that by 2045,

only electricity from renewable and non-greenhouse gasgenerating sources may be used to supply retail electricity sold in-state. Wash. Rev. Code §§ 19.405.020(27), (33);

25a

19.405.050(1). Because CETA’s decarbonization requirements are tied to in-state retail electricity consumption

(as opposed to in-state production), the statute does not

impose any decarbonization mandates on electricity produced in-state but consumed out-of-state.

In 2021, two years after enacting CETA, Washington

passed the CCA. The CCA requires that by 2030, 2040,

and 2050, respectively, in-state greenhouse gas emissions

should fall below 55%, 30%, and 5%, relative to in-state

greenhouse gas emission levels from 1990.

Id.

§ 70A.45.020(1)(a). To accomplish this goal, the CCA establishes a “cap and invest program” (also known as a capand-trade program) that requires the Washington State

Department of Ecology (Ecology) to “implement a cap on

greenhouse gas emissions from covered entities.” Id.

§ 70A.65.060(1). Covered entities include any owner or

operator of a power plant that emits at least 25,000 metric

tons of carbon dioxide equivalent. Id. § 70A.65.080(1)(a).

The CCA’s emissions cap is accomplished through the

sale of “allowances”—i.e., “authorization[s] to emit up to

one metric ton of carbon dioxide equivalent.” Id.

§ 70A.65.010(1). Specifically, the CCA’s cap-and-invest

program establishes quarterly “auctions” through which

Ecology “distribute[s] allowances” for covered entities to

purchase. Id. § 70A.65.100(1). If a covered entity emits

greenhouse gases beyond the allowances that it has obtained, it must purchase and submit four penalty allowances for every one allowance exceeded.

Id.

§ 70A.65.200(2). If the entity fails to submit penalty allowances, Ecology can issue fines of “up to $10,000 per day

per violation.” Id. § 70A.65.200(3). Ecology is required to

reduce the amount of allowances available for purchase

every year, consistent with the CCA’s emission reduction

mandates. Id.§ 70A.65.070(2).

26a

Notably, however, the CCA also allows certain covered

entities to obtain “no cost allowances” outside of the

CCA’s auction procedures. See id. §§ 70A.65.110–

70A.65.130. Relevant here, the CCA awards no-cost allowances to retail electric utilities based on the amount of

electricity sold subject to CETA. Id. § 70A.65.120(1). The

stated purpose of these no-cost allowances is “to mitigate

the cost burden of the [cap-and-invest] program on electricity customers.” Id. Critically, however, the statute defines “cost burden” as “the impact on rates or charges to

customers of electric utilities in Washington state . . .

caused by the program.” Id. § 70A.65.010(21), (59) (emphasis added). And Ecology’s implementing regulations

for the CCA establish a one-to-one ratio between the

greenhouse gas emissions associated with retail electricity consumed in-state and the award of no-cost allowances

to electric utilities. See Wash. Admin. Code § 173-446230(2)(f). Therefore, the CCA only awards free allowances to electric utilities in direct proportion to how much

electricity they provide to Washington residents. Id.;

Wash. Rev. Code § 70A.65.010(21). As the district court

explained, “[i]n practice, this means that the CCA provides electric utilities with no-cost allowances for the portion of their emissions that they forecast will be used to

generate electricity sold to retail customers within Washington state.”

The plaintiff in this case, PacifiCorp, is an Oregon corporation that provides retail electric utility service to approximately two million customers across six states in the

West. Of PacifiCorp’s two million customers, 140,000 are

located in Washington. PacifiCorp is one of three investor-owned electric utilities that compete in Washington’s

retail electricity market. The other two utilities are

Avista, which, like PacifiCorp, sells electricity to both instate and out-of-state customers, and Puget Sound Energy, which only does business in Washington. PacifiCorp

27a

owns and operates a gas-fired power plant in Chehalis,

Washington, known as the Chehalis Generation Facility,

or “Chehalis.” Chehalis is a covered entity under the

CCA.

About 23% of the electricity generated at Chehalis

goes to Washington retail customers. Therefore, under

the CCA, PacifiCorp receives no-cost allowances for 23%

of the greenhouse gas emissions that it generates at Chehalis. See Wash. Rev. Code § 70A.65.120(2). But for the

remaining 77% of greenhouse gas emissions that Chehalis

produces, PacifiCorp does not receive free allowances. As

a result, PacifiCorp estimates that it has incurred CCA

compliance costs of $47.9 million in 2024 alone. Due to the

costs imposed by the CCA, PacifiCorp represents that the

Chehalis facility will no longer serve the interstate market

starting in 2026.

II

I begin with how I would resolve this appeal. I then

turn to why the majority opinion errs in concluding that

the CCA’s facial discrimination against interstate commerce is not even subject to dormant Commerce Clause

review.

A

The Supreme Court has instructed that “‘extreme caution is warranted before a court deploys’ its ‘implied authority’ to reject a state law under the dormant Commerce Clause.” Flynt v. Bonta, 131 F.4th 918, 926 (9th

Cir. 2025) (quoting Nat’l Pork Producers Council v. Ross,

598 U.S. 356, 390 (2023)). That is particularly true for facially nondiscriminatory laws that merely have some effect on interstate commerce, or dormant Commerce

Clause challenges that otherwise seek to expand this

court-created doctrine. See, e.g., Pork Producers, 598

U.S. at 369; Peridot Tree WA, Inc. v. Wash. State Liquor

28a

& Cannabis Control Bd., 162 F.4th 1179, 1185, 1888–89

(9th Cir. 2026). But here, we are dealing with a state law

that directly discriminates against interstate commerce.

Tennessee Wine & Spirits Retailers Ass’n v. Thomas, 588

U.S. 504, 515 (2019). This case therefore implicates the

central antidiscrimination protections of the dormant

Commerce Clause, which are “deeply rooted” in Supreme

Court case law. Id. As a lower court, we are obligated to

enforce these precedents.

The dormant Commerce Clause’s foundational antidiscrimination principle protects against measures that benefit in-state economic interests over out-of-state competitors (which is not the specific concern here). See Pork

Producers, 598 U.S. at 369. But this overarching principle

also extends to discrimination against interstate commerce itself. For as the Supreme Court has long emphasized, “[s]tate laws discriminating against interstate commerce on their face are virtually per se invalid.” Camps

Newfound/Owatonna, Inc. v. Town of Harrison, Me., 520

U.S. 564, 581 (1997) (quoting Fulton Corp v. Faulkner,

516 U.S. 325, 331 (1996)). Indeed, discrimination against

the enterprise of interstate commerce lies “at the very

core of activities forbidden by the dormant Commerce

Clause.” Id.; see also Comptroller of Treas. of Md. v.

Wynne, 575 U.S. 542, 549 (2015) (explaining that “a State

‘may not tax a transaction or incident more heavily when

it crosses state lines than when it occurs entirely within

the State.’” (quoting Armco Inc. v. Hardesty, 467 U.S.

638, 642 (1984))); Camps Newfound, 520 U.S. at 581 (citing Chemical Waste Mgmt., Inc. v. Hunt, 504 U.S. 334,

342 (1992)).

Here, Washington law plainly “discriminate[s] against

an article of commerce by reason of its origin or destination out of State.” C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 390 (1994). The CCA only awards no-

29a

cost allowances to retail electric utilities in direct proportion to how much electricity they sell to Washington residents. See Wash. Rev. Code § 70A.65.120(2); Wash. Admin. Code § 173-446-230(2)(f). The greater the proportion

of out-of-state residents served by utilities like PacifiCorp, the higher the burdens of CCA compliance become.

This is facial discrimination against interstate commerce.

See Camps Newfound, 520 U.S. at 577–78 (“Economic

protectionism is not limited to attempts to convey advantages on local merchants; it may include attempts to

give local consumers an advantage over consumers in

other States.” (quoting Brown-Forman Distillers Corp.

v. N.Y. State Liquor Auth., 476 U.S. 573, 580 (1986))).

For instance, in Camps Newfound/Owatonna, Inc. v.

Town of Harrison, the Supreme Court held that a state

could not “impos[e] a higher tax on a [business] that

serves principally nonresidents than on one that limits its

services primarily to residents.” 520 U.S. at 575. The statute in question “expressly distinguishe[d] between entities that serve a principally interstate clientele and those

that primarily serve an intrastate market, singling out

[entities] that serve mostly in-staters for beneficial tax

treatment, and penalizing those [entities] that do a principally interstate business.” Id. at 576. As a result, “the

statute encourage[d] affected entities to limit their out-ofstate clientele, and penalize[d] the principally nonresident

customers of businesses catering to a primarily interstate

market.” Id. Such a law violated the dormant Commerce

Clause’s core antidiscrimination principle. Id. at 575–81.

Similarly, in Fulton Corp v. Faulkner, the Supreme

Court rejected as facially discriminatory a statute that

“taxed stock held by in-state shareholders only to the degree that its issuing corporation participates in interstate

commerce,” as the statute imposed taxes in direct proportion to how much of the corporations’ business took place

30a

out of state. Camps Newfound, 520 U.S. at 578 (quoting

Fulton Corp., 516 U.S. at 333) (brackets omitted). As the

Court explained, the law “tend[ed], at least, to discourage

domestic corporations from plying their trades in interstate commerce,” and was therefore presumptively invalid. Fulton Corp., 516 U.S. at 333.

In this case, the CCA “expressly distinguishes between entities that serve a principally interstate clientele

and those that primarily serve an intrastate market.”

Camps Newfound, 520 U.S. at 576. The statute also rewards with no-cost allowances those electric utilities “that

serve mostly in-staters,” while “penalizing” those utilities

“that do a principally interstate business” by foisting the

costs of the CCA upon them. Id. By imposing costs in

direct proportion to an in-state utility’s out-of-state business, the CCA “discourage[s] [retail electric utilities] from

plying their trades in interstate commerce.” Fulton

Corp., 516 U.S. at 333. This type of discrimination against

interstate commerce presumptively violates the dormant

Commerce Clause.1

B

Because the CCA’s award of no-cost allowances facially discriminates against retail electric utilities that

serve out-of-state customers, it faces “a virtually per se

rule of invalidity.” Granholm v. Heald, 544 U.S. 460, 476

(2005) (quoting Philadelphia v. New Jersey, 437 U.S. 617,

The majority cites Elec. Power Supply Ass’n v. Star, 904 F.3d 518

(7th Cir. 2018), for the proposition that states “may regulate local generation” of electric power. Maj. Op. at 22–23 (quoting id. at 525). But

the Seventh Circuit emphasized that its decision did not extend to

“express discrimination” against interstate commerce. Star, 904 F.3d

at 525. Star therefore does not change the result: Washington’s laws

facially discriminate against utilities to the extent that their customers “come principally from other States.” Camps Newfound, 520 U.S.

at 572.

1

31a

624 (1978)). In limited circumstances, however, laws that

discriminate against interstate commerce can be justified

“as achieving a legitimate local purpose that cannot be

achieved through nondiscriminatory means.” Oregon

Waste, 511 U.S. at 102.

Washington, throughout its briefing, attempts to justify its discrimination against interstate commerce by asserting that the purpose of the CCA is to “cover[ ] emissions associated with power that CETA does not reach,

including power produced in Washington but exported

out-of-state.” Answering Br. at 1. In other words, in

Washington’s view, the CCA’s burdens serve as a compensatory offset for the costs of CETA. As Washington tells

us, “[t]he CCA’s no-cost allowances harmonize the statute

with CETA in an evenhanded manner that does not favor

in-state interests at the expense of out-of-state interests.”2 Answering Br. at 14.

The idea that a burden on interstate commerce is justified because it offsets intrastate costs is not a new one.

And when a state defends a discriminatory law on those

This basic argument is repeated throughout Washington’s answering brief. See, e.g., Answering Br. at 26 (the purpose of the no-cost

allowances is “to harmonize the burdens imposed under the CCA and

CETA and to avoid a double-burden on in-state power that is already

required to decarbonize”); Answering Br. at 27 (noting that “no-cost

allowances harmonize two otherwise overlapping regulatory regimes”); Answering Br. at 29 (the “CCA recognizes that Washington

retail power customers have a reduced relative ability to accommodate increased costs from decarbonization compared to out-of-state

customers receiving power exempt from CETA’s requirements”

(quotation marks omitted)); Answering Br. at 34 (“But the CCA does

not grant no-cost allowances to benefit in-state interests. It grants

them to avoid doubly burdening in-state retail power.”); Answering

Br. at 44 (“CETA is the express reason for the CCA’s no-cost allowance system, and the two acts work together to achieve emissions reductions throughout Washington’s power sector.”).

2

32a

grounds, Supreme Court precedent directs us to the

dormant Commerce Clause’s “compensatory tax doctrine.” See Or. Waste Sys., 511 U.S. at 102–03; see also

Fulton, 516 U.S. at 331–32; Associated Indus. of Mo. v.

Lohman, 511 U.S. 641, 647–48 (1994); Maryland v. Louisiana, 451 U.S. 725, 728 (1981); Halliburton Oil Well Cementing Co. v. Reily, 373 U.S. 64, 69–70 (1963). Under

this line of authority, which PacifiCorp invokes, a facially

discriminatory tax on interstate commerce can be justified if it is “the rough equivalent of an identifiable and

‘substantially similar’ tax on intrastate commerce.” Or.

Waste Sys., 511 U.S. at 102–03 (quoting Maryland, 451

U.S. at 758–59). For a discriminatory state law to be upheld under this doctrine, “the tax on interstate commerce

must be shown roughly to approximate—but not exceed—

the amount of the tax on intrastate commerce.” Id. at 103.

In addition, “the events on which the interstate and intrastate taxes are imposed must be substantially equivalent;

that is, they must be sufficiently similar in substance to

serve as mutually exclusive proxies for each other.” Id.

(quotation marks and brackets omitted).

Washington’s argument that the CCA’s denial of nocost allowances for out-of-state electricity sales merely

balances out the burdens that CETA imposes on in-state

consumers is conceivable. But the issue is not the potential plausibility of the theory, but its validity in fact. Given

the current Rule 12(b)(6) posture, whether Washington

can make the required showing under the compensatory

tax doctrine is entirely unclear on the present record.

As an initial matter, for the compensatory tax doctrine

to apply, “the events on which the interstate and intrastate taxes are imposed must be ‘substantially equivalent.’” Or. Waste Sys., 511 U.S. at 103 (quoting Armco,

467 U.S. at 643). Here, CETA imposes costs over time on

in-state electricity through greenhouse gas-emission

33a

compliance requirements, whereas the CCA imposes onetime costs on exported electricity through the failure to

award no-cost allowances. There is therefore a threshold

question as to whether these are “substantially similar

events” that are “mutually exclusive proxies for each

other”—especially considering the Supreme Court’s

warning that courts should not “‘plunge into the morass

of weighing comparative tax burdens’ by comparing taxes

on dissimilar events.” Id. at 104–05 (quoting Am. Trucking Ass’ns, Inc. v. Scheiner, 483 U.S. 266, 289 (1987) (alterations omitted)); see also Fulton Corp., 516 U.S. at 338

(noting that besides the sales and use tax context, “our

more recent cases have shown extreme reluctance to recognize new compensatory categories”). Further factual

development on this issue would be required in order to

assess fully Washington’s defense of the CCA.

But even if we assume that the two events are sufficiently similar, it would be premature to decide this question on a motion to dismiss, as we do not know if Washington’s claimed CCA offset “approximate[s]” the costs of

CETA compliance. Or. Waste Sys., 511 U.S. at 103. The

discriminatory tax system that the Supreme Court struck

down in Oregon Waste Systems imposed a $2.25 per ton

surcharge on out-of-state waste and a $0.85 per ton surcharge on in-state waste. Id. at 99. There is nothing in

the record before us that quantifies and compares the respective costs that have already been imposed by CETA

and the CCA and that will be imposed in the future. It is

therefore unknown at this time whether the costs associated with CETA compliance and the denial of no-cost allowances under the CCA are roughly equivalent.

This is a complicated question that requires fact and

expert discovery. For instance, utilities can satisfy

CETA’s “greenhouse gas neutrality” requirement

through many means, such as switching to non-emitting

34a

generation, obtaining and using renewable energy credits, investing in energy transformation projects, or making compliance payments.

See Wash. Rev. Code

§ 19.405.040. Each of these methods are likely associated

with different costs, which are incurred over several decades and may vary each year as the deadline for compliance approaches. For instance, before 2030, utilities do

not need to demonstrate compliance with CETA’s greenhouse gas neutrality requirement—they only need to submit implementation plans outlining how they plan to

achieve compliance post-2030. Id. § 19.405.060(1). And as

PacifiCorp points out, the costs of complying with and implementing CETA post-2030 are capped at a 2% increase

over the utility’s revenue in the previous year. Id.

§ 19.405.060(3)(a).

Here, at this preliminary stage, Washington has presented nothing that would allow us to evaluate the comparative costs of complying with CETA and the CCA,

other than the state’s repeated representations that the

CCA was meant to compensate for the costs of complying

with CETA. But Supreme Court precedent does not permit us to decide the compensatory offset question on

Washington’s mere say-so. The majority opinion claims,

without analysis, that because “CETA does not apply to

exported power,” this “justif[ies] denial of cost allowances

for sale of electricity to out-of-state customers.” Maj. Op.

at 15 n.2. But there is no basis for this assertion. No factual inquiry has been made on this critical issue (and as

explained next, the majority opinion’s rule of decision

avoids that inquiry by design).

Accordingly, Washington’s motion to dismiss should

have been denied.

35a

III

A

Like the district court, the majority opinion chooses a

very different path. It ignores the Supreme Court’s welltrodden facial discrimination precedents to deploy a novel

theory that allows Washington to avoid dormant Commerce Clause scrutiny entirely. In the majority’s view,

“PacifiCorp’s exported power is not similarly situated to

utilities providing in-state power under CETA ‘for the

simple reason that . . . the different entities serve different

markets, and would continue to do so even if the supposedly discriminatory burden were removed.’” Maj. Op. at

18–19 (quoting Tracy, 519 U.S. at 299). From this premise, the majority opinion effectively blesses any differential treatment against interstate commerce by the CCA,

regardless of the magnitude.

This flawed theory rests on an improper expansion of

Tracy’s similarly-situated-entities test. The point of

Tracy’s rarely invoked exception is to prevent application

of the dormant Commerce Clause to market participants

that do not compete with each other in the same product

market—because in that situation, there is no national

market for competition for the dormant Commerce

Clause to protect. Contrary to the majority’s view, Tracy

has never exempted from dormant Commerce Clause

scrutiny laws that facially discriminate against interstate

commerce as to the same product sold in the same product

market, in transactions between similarly situated buyers

and sellers, based solely on the supposedly greater costs

that state regulation imposes on in-state sales. Indeed, by

treating in-state and out-of-state electricity sales as differently situated based on their export destination, the

majority’s novel extension of Tracy is contrary to the logic

of the dormant Commerce Clause itself.

36a

Examining Tracy in detail demonstrates the majority’s error. In Tracy, the Supreme Court considered an

Ohio law that exempted from the state’s general sales and

use taxes purchases of gas from in-state natural gas utilities—known as local distribution companies, or LDCs.

See Tracy, 519 U.S. at 281–82. The LDCs were all located

in Ohio. Id. at 288. But the state did not exempt “nonLDC gas sellers, such as producers and independent marketers,” from the tax. Id. at 282–83. General Motors,

which purchased “virtually all the natural gas for its Ohio

plants from out-of-state marketers,” was therefore required to pay Ohio’s general use tax for non-LDC gas purchases. Id. at 285. General Motors sued, alleging that the

dormant Commerce Clause invalidated the LDC tax exemption.

The Supreme Court rejected General Motors’ argument and held that the dormant Commerce Clause did not

apply. The Court reasoned that “any notion of discrimination assumes a comparison of substantially similar entities,” and LDCs and non-LDC sellers were “different

entities” that “provide different products” and “serve different markets.” Id. at 298–99. In particular, following a

detailed background discussion of the history of natural

gas consumption and regulation, the Supreme Court

found that there were two distinct classes of natural gas

consumers in Ohio, served by two distinct sets of natural

gas providers. The first class of consumers was “typified

by residential consumers,” who were “small, captive users” of natural gas who did not have “high volume requirements.” Id. at 301–02. These consumers had a need for

“bundled” natural gas services, which included transportation of the gas to their homes and other protections,

such as the steady supply of gas at a stable rate during

winter. Id. at 283, 297, 306; see also id. at 301 (“These are

buyers who live on sufficiently tight budgets to make the

stability of rate important, and who cannot readily bear

37a

the risk of losing a fuel supply in harsh natural or economic weather.”). The second class of consumers was

comprised of “bulk buyers” like General Motors, “large

commercial and industrial users” who had high-volume

needs and financial wherewithal to buy natural gas wholesale from private marketers on a less regulated interstate

market. Id. at 302–03.

The Supreme Court explained how Ohio’s regulatory

decisions were built on—and further deepened—this existing divide in the market. As the Court noted, LDCs, as

public utilities, were subject to extensive state regulation

to ensure that the needs of the residential consumer market were satisfied. See id. at 296–97; see also id. at 310

(describing the state regulation as “Ohio’s regulatory response to the needs of the local natural gas market”). For

instance, LDCs could only charge “just and reasonable

rates,” comprised of “a single average cost of gas . . . together with a limited return on investment.” Id. at 296.

They “could not exact a greater or lesser compensation

for any services rendered than exacted from any other

customer” for similar services. Id. at 297 (citation and alterations omitted). And they were required “to serve all

members of the public, without discrimination,” “to provide a firm backup supply of gas,” and to “administer specific protective schemes” to help low-income customers.

Id. In contrast, natural gas from non-LDC sellers came

with none of those services and protections. See id. at

284–85. In short, LDCs and non-LDC sellers served different types of customers with different needs by providing different services with different regulatory protections for end-users of natural gas.

In light of these differences, Tracy concluded that the

market for natural gas in Ohio was actually comprised of

two separate markets for two “different products”: “a

product consisting of gas bundled with . . . services and

38a

protections,” provided by LDCs, and an “unbundled gas”

product without such protections, provided by non-LDC

independent marketers. Id. at 297–99. This “difference

in products,” in turn, “mean[t] that the different entities”—LDCs and non-LDC marketers—were not “similarly situated” because they “serve[d] different markets,

and would continue to do so even if the supposedly discriminatory [tax] burden were removed.” Id. at 299.

Therefore, given the “absence of actual or prospective

competition between the supposedly favored and disfavored entities in a single market,” the dormant Commerce

Clause—which “serve[s] the . . . fundamental objective of

preserving a national market for competition”—“ha[d] no

job to do.” Id. at 299–300, 303.

As Tracy underscores, the similarly-situated entities

test only comes into play “when the allegedly competing

entities provide different products,” and asks whether

“the difference in products may mean that the different

entities serve different markets.” Tracy, 519 U.S. at 298–

99. Even though the LDCs and non-LDC sellers provided

the same commodity (natural gas), based on the underlying consumer needs and supportive regulatory outgrowth, there were two distinct product markets in Ohio

for bundled and unbundled natural gas distribution services.

It is telling that although the dormant Commerce

Clause is a heavily litigated area, very few cases have applied Tracy’s exception (and none in the way the majority

does here). In fact, in the nearly thirty years since Tracy

was decided, the Supreme Court has mostly cited the case

for other basic propositions of dormant Commerce Clause

doctrine or oil and gas law. The most significant application of Tracy may be found in United Haulers Ass’n, Inc.

v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S.

39a

330 (2007), a decision that only highlights the limits of

Tracy’s exception.

In United Haulers, the Supreme Court examined a

challenge to two New York counties’ “flow control” ordinances, which required that “all solid waste generated

within the Counties be delivered to . . . processing sites”

run by the counties’ public waste disposal authority. Id.

at 336. The Court applied Tracy, holding that there was

no impermissible discrimination against interstate commerce because “[t]he flow control ordinances in this case

benefit a clearly public facility, while treating all private

companies exactly the same.” Id. at 342. As the Supreme

Court explained, “[u]nlike private enterprise, government

is vested with the responsibility of protecting the health,

safety, and welfare of its citizens,” and “[t]hese important

responsibilities set state and local government apart from

a typical private business.” Id. at 342–43. United Haulers

is simply a straightforward application of Tracy, because

it is obvious that states and municipalities are not “substantially similar entities” to “private businesses.” Id. at

342 (quoting Tracy, 519 U.S. at 298); see also Nat’l Ass’n

of Optometrists & Opticians v. Brown (LensCrafters), 567

F.3d 521, 527 (9th Cir. 2009) (explaining that under Tracy,

“competing in the same market is not sufficient to conclude that entities are similarly situated” because “states

may legitimately distinguish between business structures

in a retail market”).

Tracy and its (limited) progeny therefore establish the

following principle: when determining whether two comparator entities are “substantially similar” in dormant

Commerce Clause cases, we must ask whether there is

“actual or prospective competition between the supposedly favored and disfavored entities in a single market”—

meaning a single product market. Tracy, 519 U.S. at 300;

see also id. at 299 (“[T]he difference in products may mean

40a

that the different entities serve different markets.”). If

so, the entities are presumed to be similarly situated, although we must also consider the entity’s “structure” or

“method[ ] of operation” because it is permissible for a

state to discriminate between market participants on

those grounds, LensCrafters, 567 F.3d at 527, including,

most obviously, when the state or local government itself

has taken over the market, see United Haulers, 550 U.S.

at 342–45.

B

Armed with the proper inquiry under Tracy, it becomes apparent why the majority’s “substantial similarity” reasoning cannot stand.

It is undisputed that PacifiCorp competes with Avista,

Puget Sound Energy, and out-of-state utilities in the same

product market: retail electricity. All of the in-state utilities are investor-owned utilities—none are publiclyowned, see United Haulers, 550 U.S. at 342–44, or otherwise differently structured, see Exxon, 437 U.S. at 127;

LensCrafters, 567 F.3d at 527. And unlike in Tracy, where

different regulatory regimes meant that LDC and nonLDC sellers served different product markets, all in-state

utilities serving retail electricity consumers are subject to

the same regulatory frameworks.

The majority nevertheless maintains that “the regulatory distinctions between the treatment of entities that

produce in-state electricity and exported electricity under

the CCA and CETA . . . undermine PacifiCorp’s contention that carbon emissions from its production of electricity for in-state and out-of-state customers are similarly

situated.” Maj. Op. at 14. That is not correct. Under

CETA, if a utility serves instate consumers, “all retail

sales of electricity to Washington retail electric customers

[must] be greenhouse gas neutral by January 1, 2030.”

41a

Wash. Rev. Code § 19.405.040(1). And similarly, Washington represents that “the CCA treats instate and outof-of state utilities identically for both the compliance obligation arising from their emissions at power plants in

Washington and associated with imported power, as well

as their eligibility for no-cost allowances.” See id.

§§ 70A.65.010(19), (21), (23), (27), (38), (42), 70A.65.060–

70A.65.080; Wash. Admin. Code § 173-446- 230. In other

words, all retail electric utilities located in Washington

and serving Washington retail consumers are subject to

both CETA and the CCA. The only difference is the allocation of no-cost CCA allowances based on the proportion

of out-of-state customers served by each utility. Wash.

Admin. Code § 173-446-230; Wash. Rev. Code

§ 70A.65.010(21). That is a difference in the application of

the same regulatory framework depending on the amount

of interstate commerce in which a retail utility engages.

It is not a difference in the regulatory regime itself.

CETA did not eliminate actual, let alone prospective,

competition between PacifiCorp and its competitors in either the Washington or out-of-state retail electricity markets. See Tracy, 519 U.S. at 300. Contra Tracy, there are

not two distinct markets for electricity. Even after CETA

went into effect, electricity from Chehalis competed in the

Washington retail electricity market and out-of-state retail electricity markets with electricity from Puget Sound

Energy, Avista, and importers. Unlike the LDC regulations in Tracy, which reinforced the separate retail and

wholesale markets for natural gas, CETA did not fragment the retail electricity market (either in Washington

or out of state) into two distinct product markets. See

Tracy, 519 U.S. at 301. Therefore, even with CETA,

PacifiCorp and its competitors are similarly situated because “their products compete against each other in a single market”—the retail electricity product market.

Rocky Mt. Farmers Union v. Corey, 730 F.3d 1070, 1088

42a

(9th Cir. 2013) (citing Tracy, 519 U.S. at 299). Washington

is not engaging in the differential treatment of differently

situated entities, but rather the differential treatment of

a product—retail electricity—based on whether it enters

interstate commerce. That takes this case far outside the

scope of Tracy.

The majority’s analysis muddles the Tracy test by

treating the relevant comparator entities in an impossibly

fluid way, shifting from “carbon emissions” to “exported

power” to “utilities providing in-state power.” Maj. Op. at

17–19. The majority opinion apparently compares “exported power” to “utilities providing in-state power,” Maj.

Op. at 18–19—a comparison that does not track Tracy’s

focus on “substantially similar entities.” 519 U.S. at 298

(emphasis added). What I take the majority to mean is

that power exported out of state is differently situated

from power dispatched to and consumed in Washington

because Washington-bound power is regulated by CETA,

while exported power is not. By this logic, the two “serve

different markets, and would continue to do so even if the

supposedly discriminatory burden”—the no-cost allowances—“were removed,” Maj. Op. at 18–19 (quoting

Tracy, 519 U.S. at 299), because Washington customers

can only be served by CETA-compliant power.

But this analysis improperly collapses two different

market concepts into one. Although PacifiCorp and its

competitors serve different geographic markets (i.e., the

in-state and out-of-state markets), they compete in the

same product market for retail electricity. In effect, then,

the majority refashions the Tracy test to apply to the

same product sold across multiple geographic markets,

based on regulations (here, CETA) that increase the cost

of in-state sales. Maj. Op. at 18–19.

But Tracy never concluded that products in the same

product market could be differently situated based on

43a

either the geographic markets in which they are sold and

consumed, the costs of in-state production, or whether the

products are differently regulated in different states. Cf.

Tracy, 519 U.S. at 300. And for good reason: such an expansion of Tracy would contradict the fundamental logic

of the dormant Commerce Clause itself. The premise of

the dormant Commerce Clause is that there should be “a

national market free from local legislation that discriminates in favor of local interests.” C & A Carbone, 511 U.S.

at 393. Even though different states may constitute different geographic markets in the economic sense, the

dormant Commerce Clause forbids discrimination because of those differences. It would be illogical for Tracy’s

similarly-situated entities exception to immunize laws

that regulate the same product differently based on where

it is sold or purchased, when the point of the dormant

Commerce Clause is to prevent discrimination based on

those distinctions. See id. at 390 (underscoring that a

state cannot “impose commercial barriers or discriminate

against an article of commerce by reason of its origin or

destination out of State”).

Extending Tracy to products sold in different geographic markets—instead of using it to determine

whether two entities compete in the same product market—creates untenable results. All a state must do to escape dormant Commerce Clause scrutiny is apply some

sort of regulatory framework to in-state sales of a product, which would in turn make it substantially different

from out-of-state sales, which could then be burdened

without limitation under the logic of the majority opinion.

That contradicts Supreme Court precedent, which has repeatedly found dormant Commerce Clause violations

even in industries characterized by “a patchwork of regional and state systems that lack comprehensive federal

regulations or national uniformity.” See, e.g., C & A Carbone, 511 U.S. at 394 (solid waste disposal); New England

44a

Power Co. v. New Hampshire, 455 U.S. 331, 334 (1982)

(hydroelectricity); Maryland, 451 U.S. at 728 (natural

gas).

Indeed, under the majority’s theory of the case, nothing would stop other states with decarbonization mandates from imposing their own discriminatory taxes on exported electricity without any dormant Commerce Clause

review. As the Supreme Court has emphasized, “[a]voiding this sort of ‘economic Balkanization,’ and the retaliatory acts of other States that may follow, is one of the central purposes of our negative Commerce Clause jurisprudence.” Camps Newfound, 520 U.S. at 577 (quoting

Hughes v. Oklahoma, 441 U.S. 322, 325 (1979)). Tracy has

been on the books for nearly three decades, but it has

never been understood in the far-reaching way the majority opinion deploys it today.

C

But even if we follow the majority opinion’s flawed understanding of Tracy and conclude that the similarly-situated entities test can be directly applied to products

based on whether they are sold in-state or out-of-state,

CETA still does not render retail electricity consumed instate substantially different from electricity consumed

out-of-state. Here, the exact same electricity is dispatched to either Washington consumers or out-of-state

consumers based on demand and the marginal cost of generation. See Kootenai Elec. Co-op., Inc. v. FERC, 192

F.3d 144, 148 (D.C. Cir. 1999) (noting that “[p]ower is fungible”). And unlike in Tracy, the utilities’ customers, as

retail electricity users, all have the same purchasing

needs. Cf. Tracy, 519 U.S. at 301 (non-LDCs “did not

serve the Ohio LDCs’ core market of small, captive users”). There is a facial similarity to Tracy in that both

cases involve an underlying commodity. But the Supreme

Court’s extensive discussion of the natural gas market in

45a

Tracy shows that the similarities stop there, because

Tracy involved two distinct product markets in a way this

case does not.

While the majority opinion maintains that CETA is a

“comprehensive statutory scheme” meant to enforce a

“separate and more aggressive decarbonization mandate,” Maj. Op. at 17, 23, that is immaterial here. The

practical effect of CETA’s mandate is to increase the marginal cost of generating electricity for Washington consumers by imposing additional compliance costs on utilities. In other words, the only difference between electricity dispatched instate and out-of-state is, functionally, the

cost of generating it. As PacifiCorp points out, it is “not

possible to track electrons for purposes of determining

what customers are ultimately served by Chehalis-produced power.”

No precedent suggests that cost-input differences

driven by state regulation can turn one product into two

differently-situated products for dormant Commerce

Clause purposes. Nor does it matter here that the allegedly more costly CETA-compliant energy will be produced through cleaner “green energy” processes. As we

have explained, under Tracy, “[e]ntities are similarly situated for constitutional purposes if their products compete against each other in a single market,” and “[i]f they

do, it is irrelevant whether they are made from different

materials.” Rocky Mt. Farmers Union, 730 F.3d at 1088.

Tracy has never been thought to immunize from dormant

Commerce Clause scrutiny laws that facially discriminate

against interstate commerce based on the supposedly

higher in-state costs of production or distribution of the

same product sold in the same product market.

The majority’s contention that exported electricity

from Chehalis “would continue to [serve separate markets,] even if the supposedly discriminatory burden were

46a

removed,” is therefore untrue. Maj. Op. at 18–19 (quoting

Tracy, 519 U.S. at 299). Again, part of the reason that

Chehalis-generated electricity can serve different markets is due to the marginal cost of distribution to each

state, and CETA and the CCA simply increase those costs

for electricity sent in-state and out-of-state, respectively.

The “discriminatory burden” imposed by the CCA can

and will impact the provision of electricity services to outof-state markets. Indeed, we are told that the increased

compliance costs imposed by the CCA are already poised

to drive Chehalis out of the interstate market.

The majority also asserts that “granting PacifiCorp its

requested relief would mean that the emissions it generates in Chehalis, but uses to export electricity, would be

exempt from both CETA’s decarbonization mandate and

the CCA’s requirement of purchasing emissions allowances.” Maj. Op. at 18 (brackets omitted). That is not correct. PacifiCorp is not entitled to any exemption per se; it

is entitled to nondiscriminatory treatment.

Of course, Washington strenuously argues that PacifiCorp is receiving that very treatment because the CCA’s

no-cost allowances merely balance out the costs of CETA

for in-state electricity sales. But as I have explained, that

is the critical unresolved question in this case—one the

majority avoids by treating this case as falling within

Tracy’s limited exception. In blessing Washington’s

scheme without further inquiry, the majority misapplies

Tracy to create a never-before-seen exception to the

dormant Commerce Clause that not only insulates Washington’s facially discriminatory law from any constitutional scrutiny, but also circumvents the carefully tailored

compensatory tax doctrine that is meant for this type of

situation. Because the majority opinion departs from the

Supreme Court’s dormant Commerce Clause precedent,

I respectfully dissent.

APPENDIX B

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT TACOMA

PACIFICORP, an Oregon

business corporation,

Case No. 3:23-cv-06155TMC

Plaintiff,

ORDER DENYING

v.

PLAINTIFF’S MOTION

FOR PRELIMINARY

LAURA WATSON, in her

official capacity as Director INJUNCTION AND

of the Washington State De- GRANTING

DEFENDANT’S

partment of Ecology,

MOTION TO DISMISS

Defendant.

I. INTRODUCTION

Plaintiff PacifiCorp owns and operates a gas-fired electric power plant in Chehalis, Washington. The emissions

generated by the Chehalis plant make PacifiCorp a “covered entity” under Washington’s Climate Commitment

Act (the “CCA”), which requires covered entities to buy

allowances at auction for each metric ton of carbon dioxide

emissions they generate. The CCA caps overall carbon

emissions in the state, and the number of allowances available for purchase decreases over time, using market pressure to encourage investment in reducing emissions.

PacifiCorp is an electric utility that serves customers

in six states, including Washington. The electricity that

PacifiCorp sells to Washington customers is governed by

an earlier Washington statute, the Clean Energy Transformation Act (“CETA”). Unlike the CCA’s marketbased approach to reducing emissions, CETA imposes a

mandate: it requires all power sold to Washington

(47a)

48a

consumers to be decarbonized by 2045. Because electric

utilities in Washington are already subject to CETA’s decarbonization mandate, the CCA provides them with “nocost” allowances rather than requiring them to buy allowances at auction. The no-cost allowances phase out by

2045 once CETA’s requirements are in full effect.

PacifiCorp receives these no-cost allowances for emissions generated by its Chehalis plant that serve its Washington utility customers. It must buy allowances, however, for emissions generated in Chehalis used to serve

customers in other states—emissions that are not covered

by CETA’s decarbonization schedule. PacifiCorp contends that this difference in treatment of in-state and exported electricity violates the dormant Commerce Clause

of the United States Constitution. It seeks a preliminary

injunction ordering Defendant Laura Watson, who administers the CCA as the Director of the Washington Department of Ecology (“Ecology”), to either issue no-cost

allowances to PacifiCorp for electricity generated for export or exempt PacifiCorp from purchasing allowances at

all.

But the starting point for a successful dormant Commerce Clause challenge is “a comparison of substantially

similar entities.” Gen. Motors Corp. v. Tracy, 519 U.S.

278, 298 (1997). The electricity PacifiCorp generates to

send out of state is not substantially similar to the electricity it sells in Washington because the exported energy

is not covered by CETA. Accepting PacifiCorp’s argument would elevate the energy it produces in Washington

but then sends out of state above Washington’s entire regulatory framework for reducing carbon emissions: it

would be exempt from both the decarbonization mandate

of CETA and the purchase of allowances under the CCA.

The dormant Commerce Clause does not require this result, and PacifiCorp’s arguments fail as a matter of law.

49a

For this reason, and as explained further below, the Court

GRANTS Defendant Watson’s motion to dismiss (Dkt. 23)

and DISMISSES the case. PacifiCorp’s motion for a preliminary injunction (Dkt. 17) is DENIED as moot.

II. BACKGROUND

A. Washington’s 2019 Clean Energy Transformation

Act

In 2019, the Washington Legislature enacted CETA to

“address the impacts of climate change by leading the

transition to a clean energy economy.” RCW 19.405.010.

CETA mandates that all retail electricity sold to Washington customers be greenhouse gas neutral by 2030.

RCW 19.405.040(1). By 2045, utilities must sell electricity

generated entirely by non-emitting and renewable

sources. RCW 19.405.050(1). Utilities are expected to

meet this timeline by investing in greater efficiency, renewable energy infrastructure, and other energy transformation projects. See RCW 19.405.040(1)(a), (b). Because CETA applies only to electricity sold to Washington

customers, it does not cover electricity generated within

Washington but sold out of state.

Even before the decarbonization deadlines occur, the

burden of CETA compliance is not insignificant. For example, beginning in October 2021 and every four years

thereafter, each electric utility must file with the Washington Utilities and Transportation Commission a “clean

energy implementation plan” that “describes the utility’s

plan for making progress toward meeting the clean energy transformation standards.” WAC 480-100-640(1).

The plan must be updated biennially and include detailed

information about how the utility will set targets and

make progress toward meeting CETA’s requirements.

See WAC 480-100-640(2)–(7). PacifiCorp itself has been

involved in several proceedings before the Utilities and

50a

Transportation Commission related to its CETA compliance efforts and the sufficiency of its clean energy implementation plan. See, e.g., In the Matter of the Petition of

PacifiCorp d/b/a Pac. Power & Light Co., Petitioner,

Seeking Exemption from the Provisions of WAC 480-100605, No. 1, 2021 WL 5961519, at *3 (Wash. U.T.C. Dec. 13,

2021); In the Matter of PacifiCorp, d/b/a Pac. Power &

Light Company’s Clean Energy Implementation Plan,

No. UE-210829, 2023 WL 7181840 (Wash. U.T.C. Sept. 22,

2023). While this case has been pending, the Commission

entered an order finding that PacifiCorp’s biennial update

to its clean energy implementation plan “does not at this

time show meaningful progress towards meeting CETA

standards” and setting the matter for adjudication.

Washington Utilities & Transp. Comm’n, Complainant,

v. PacifiCorp d/b/a Pac. Power & Light Co., Respondent,

09, 2024 WL 1364108, at *5 (Wash. U.T.C. Mar. 25, 2024).

The Court takes judicial notice of these administrative

proceedings not for the substance of the decisions or their

underlying facts, but merely as examples of how CETA

compliance is enforced. Fed. R. Evid. 201; United States

v. Ritchie, 342 F.3d 903, 909 (9th Cir. 2003) (“Courts may

take judicial notice of some public records, including the

records and reports of administrative bodies.” (internal

quotation marks and citation omitted)).

B. Washington’s 2021 Climate Commitment Act

Two years after CETA, in 2021, the Legislature enacted the CCA to further reduce greenhouse gas emissions in Washington by establishing a “cap and invest program.” RCW 70A.65.005, .010(58), .060–.080. The CCA

directs Ecology to set an annual cap on greenhouse gas

emissions by Washington’s largest emitters, known as

“covered entities.” RCW 70A.65.060. The cap applies to

most entities that generated or engaged in certain activities associated with at least 25,000 metric tons of “carbon

51a

dioxide equivalent” emissions for any year between 2015

and 2019. RCW 70A.65.080(1). PacifiCorp is a covered

entity because of the emissions generated by its Chehalis

power plant. See Dkt. 11 ¶¶ 2–3, 5, 11.

The CCA requires covered entities such as PacifiCorp

to have “allowances” for each metric ton of greenhouse

gases they emit. RCW 70A.65.010(1) (defining “allowance” as “an authorization to emit up to one metric ton of

carbon dioxide equivalent”). A covered entity may only

emit as much greenhouse gas as it has allowances for and

if it exceeds that amount, it must either submit four allowances for every one allowance missing or face penalties of

up to $10,000 per day for each violation. RCW 70A.65.200.

Each year, Ecology will reduce the total number of allowances available, thereby “capping” the amount of greenhouse gases that covered entities may collectively emit.

RCW 70A.65.070(2).

Most covered entities obtain allowances by purchasing

them at auctions conducted by Ecology.

RCW

70A.65.100. The proceeds from the auctions are used to

invest in climate change mitigation and environmental

justice projects (the “invest” portion of “cap and invest”).

RCW 70A.65.100(7), .230.

Some covered entities receive certain allowances for

free, which the CCA calls “no-cost allowances.” See RCW

70A.65.110–130. This includes electric utilities such as

PacifiCorp.1 See Dkt. 11 ¶¶ 5, 8, 11. In relevant part, the

CCA reads:

The legislature intends by this section to allow all consumer-owned electric utilities

and investor-owned electric utilities subject

Electric utilities in Washington may be either consumer-owned

(such as a municipal electric utility or a public utility district) or investor-owned (such as PacifiCorp). See RCW 19.405.020(10), (24).

1

52a

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). The act defines

“cost burden” as “the impact on rates or charges to customers of electric utilities in Washington state for the incremental cost of electricity service to serve load due to

the compliance cost for greenhouse gas emissions caused

by the program.” RCW 70A.65.010(21). Electric utilities

may transfer their no-cost allowances to power plants that

they own. WAC 173-446-425.

Ecology’s regulations implementing the CCA also explain that “[a]llowances 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. Only electric utilities subject to chapter

19.405 RCW, the Washington Clean Energy Transformation Act, qualify for no cost allowances.” WAC 173446-230(1) (emphasis added). Ecology calculates the allocation of no-cost allowances to electric utilities using supply and demand forecasts provided by the utilities that

“best predict the manner in which each electric utility will

comply with the Clean Energy Transformation Act.”

WAC 173-446-230(2)(a)–(c). No-cost allowances to electric utilities phase out over time and must end by 2045—

the same year that CETA requires all electric utilities to

use “nonemitting electric generation and electricity from

renewable resources” to “supply one hundred percent of

all sales of electricity to Washington retail electric customers.” RCW 19.405.050; see RCW 70A.65.120(2)(d)

(“Under no circumstances may utilities receive any free

allowances after 2045.”); RCW 19.405.010(2) (“It is the

53a

policy of the state to . . . transition the state’s electricity

supply to . . . one hundred percent carbon-free by 2045.”).

In practice, this means that the CCA provides electric

utilities with no-cost allowances for the portion of their

emissions that they forecast will be used to generate electricity sold to retail customers within Washington state.

See Dkt. 11 ¶ 33; WAC 173-446-230. Electric utilities do

not receive no-cost allowances for emissions associated

with exported electricity because that electricity is not

subject to CETA. See Invenergy Thermal LLC v. Watson, No. 3:22-cv-05967-BHS, 2023 WL 8404048, at *3

(W.D. Wash. Nov. 3, 2023) (describing how the CCA and

CETA “work in tandem” by providing no-cost allowances

under the CCA to electric utilities subject to CETA’s decarbonization requirements).

C. PacifiCorp’s Chehalis Facility

PacifiCorp is an Oregon corporation with its principal

place of business in Oregon. Dkt. 11 ¶ 14. It does business

as Rocky Mountain Power in Wyoming, Utah, and Idaho,

and as Pacific Power in Oregon, California, and Washington. Id. In all six states, it is a “regulated public utility.”

Id. In Washington, where it has about 140,000 customers,

PacifiCorp is regulated by Ecology and the Washington

Utilities and Transportation Commission. Dkt. 11 ¶ 2. As

an electric utility in Washington, PacifiCorp is subject to

CETA for the electricity it sells “to Washington retail

electric customers.” RCW 19.405.040(1), .050(1).

PacifiCorp owns and operates the Chehalis Generation

Facility (“Chehalis”), a “gas-fired combined cycle electric

generation facility” in Lewis County, Washington that

“has a nominal generating capacity of 520 megawatts.”

Dkt. 11 ¶¶ 2–3. The amount of emissions generated by

Chehalis means that PacifiCorp must obtain allowances

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for those emissions under the CCA. See Dkt. 11 ¶¶ 5, 8,

11, 35, 39.

PacifiCorp alleges that about 77 percent of its Chehalis

emissions are used to generate power for non-Washington

customers, and that therefore it “will be required to spend

tens of millions of dollars on CCA allowances to account

for greenhouse gas emissions from Chehalis.” Dkt. 11

¶¶ 11, 39. PacifiCorp specifically alleges that it estimates

2024 CCA compliance costs of $47.9 million, although this

does not account for the no-cost allowances PacifiCorp

will receive for its Washington customers, which will reduce the cost. Id. ¶ 35.

PacifiCorp acknowledges in its complaint that while it

intends to pass those costs along to its non-Washington

customers, because PacifiCorp is a regulated public utility

in each state, including those costs within its electric rates

must be approved by each state’s utility commissions. See

Dkt. 11 ¶¶ 8, 10, 14, 40–41. PacifiCorp alleges that so far,

Wyoming and Oregon’s utility commissions have denied

its requests to pass along those costs, meaning they will

“be borne by PacifiCorp and its shareholders.” Id. ¶¶ 10,

40–41.

D. Procedural History

On December 15, 2023, PacifiCorp filed its complaint

for declaratory and injunctive relief, claiming that Ecology’s allocation of no-cost allowances only for Washington

customers unconstitutionally discriminates against PacifiCorp and its non-Washington customers. Dkt. 1. PacifiCorp amended its complaint on January 4, 2024. Dkt. 11.

PacifiCorp alleges that Ecology’s implementation of the

CCA violates the dormant Commerce Clause “by increasing the cost of electricity for PacifiCorp’s out-of-state customers, compared to PacifiCorp’s Washington customers,

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for electricity produced by the same generation facility”

at Chehalis. Id. ¶ 12.

PacifiCorp moved for a preliminary injunction on January 11, and the parties agreed to a combined briefing

schedule on PacifiCorp’s motion and Ecology’s motion to

dismiss. Dkt. 17, 20. On March 8, Ecology opposed PacifiCorp’s motion and moved to dismiss the case. Dkt. 23.

Both parties have since completed their briefing and the

Court heard oral argument. Dkt. 26, 30, 32. The motions

are ripe for consideration.

III. DISCUSSION

A. Legal Standard for Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(6), the

Court may dismiss a complaint for lack of a cognizable legal theory or the “absence of sufficient facts alleged to

support a cognizable legal theory.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir.

2010) (citation omitted). On a Rule 12(b)(6) motion, the

Court “must accept as true all factual allegations in the

complaint and draw all reasonable inferences in favor of

the nonmoving party,” Retail Prop. Tr. v. United Bhd. of

Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir.

2014), but will test the legal sufficiency of the claims made

in the complaint. See Navarro v. Block, 250 F.3d 729, 732

(9th Cir. 2001). When granting a motion to dismiss, a district court should generally provide leave to amend unless

it is clear the complaint could not be saved by any amendment. See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire

& Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

In this case, PacifiCorp alleges that the CCA violates

the dormant Commerce Clause by discriminating between emissions generated to serve Washington and outof-state utility customers. Although both parties submitted evidence on PacifiCorp’s preliminary injunction

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motion, in ruling on Ecology’s motion to dismiss the Court

has considered only the law, the non-conclusory factual allegations in PacifiCorp’s complaint, and administrative

proceedings before the Washington Utilities and Transportation Commission subject to judicial notice. Ritchie,

342 F.3d at 908 (describing what materials may be considered on a motion to dismiss).

As explained further below, PacifiCorp’s complaint

must be dismissed because PacifiCorp cannot make out a

cognizable dormant Commerce Clause theory. Even taking all of PacifiCorp’s alleged facts as true, the CCA’s different treatment of PacifiCorp’s in-state and exported energy does not violate the Commerce Clause because the

two categories are not “substantially similar.” Tracy, 519

U.S. at 298. The energy PacifiCorp produces for use instate is subject to a preexisting, comprehensive regulatory regime—the Clean Energy Transformation Act—

that its exported energy is not. Throughout PacifiCorp’s

complaint and description of how no-cost allowances under the CCA are allocated, there is not one mention of

CETA’s existence, despite the CCA and its implementing

regulations making clear that an electric utility is only eligible for no-cost allowances to the extent that it is subject

to CETA’s requirements. But the existence of CETA, and

its role in the allocation of no-cost allowances, is not an

inconvenient fact that PacifiCorp can avoid by artful

pleading. It is part of the statutory framework that this

Court must analyze when considering PacifiCorp’s theory

of the case. And when that framework is examined as a

whole, PacifiCorp’s theory fails as a matter of law, requiring dismissal with prejudice.

B. PacifiCorp has Article III standing.

The Court has original jurisdiction over PacifiCorp’s

dormant Commerce Clause claim under 28 U.S.C. § 1331.

But Ecology challenges this Court’s jurisdiction by

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arguing that PacifiCorp lacks Article III standing.

Dkt. 23 at 18–23. This argument is unpersuasive and

overcomplicates the standing inquiry.

Article III of the U.S. Constitution limits the Court’s

jurisdiction to “Cases” and “Controversies.” U.S. Const.

art. III, § 2. For a case or controversy to exist, the party

bringing the case must have standing. Perry v. Newsom,

18 F.4th 622, 630 (9th Cir. 2021). The “irreducible constitutional minimum” of Article III standing requires the

plaintiff to show the following three elements: “(1) [The

plaintiff] suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and

(3) that is likely to be redressed by a favorable judicial decision.” Spokeo v. Robins, 578 U.S. 330, 338 (2016). As the

party invoking the Court’s jurisdiction, the plaintiff

“bears the burden of establishing these elements.” Id.

Injury in fact is the “[f]irst and foremost” of the three

elements. Id. “To establish injury in fact, a plaintiff must

show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and

‘actual or imminent, not conjectural or hypothetical.’” Id.

at 339 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555,

560 (1992)). A concrete injury is one that is “real, and not

abstract.” Spokeo, 578 U.S. at 340 (internal quotation

marks omitted). “An injury in fact can be a physical injury, a monetary injury, an injury to one’s property, or an

injury to one’s constitutional rights, to take just a few

common examples.” FDA v. All. for Hippocratic Med.,

602 U.S. 367, 381 (2024). “A ‘particularized injury’ is one

that ‘affect[s] the plaintiff in a personal and individual

way.’” Safer Chems., Healthy Fams. v. U.S. Env’t Prot.

Agency, 943 F.3d 397, 411 (9th Cir. 2019) (quoting Spokeo,

578 U.S. at 339).

Second, to be fairly traceable to the challenged conduct, “there must be a causal connection between the

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injury and the conduct complained of.” Lujan, 504 U.S.

at 560. The connection “must not be too speculative or attenuated.” All. for Hippocratic Med., 602 U.S. at 383.

And third, to be redressable, “it must be likely, as opposed

to merely speculative, that the injury will be redressed by

a favorable decision.” Id. (internal quotation marks omitted).

1.

The CCA’s requirement that PacifiCorp buy

emissions allowances establishes standing for

PacifiCorp’s claims.

Ecology asserts that PacifiCorp lacks standing to

bring its dormant Commerce Clause claim because it has

not presented an injury sufficiently connected to its constitutional claim. Dkt. 23 at 19. Ecology argues that

PacifiCorp only asserts its non-Washington customers

are injured to the benefit of Washington customers. Id.

at 20. Ecology asserts that this injury is not plausibly alleged because PacifiCorp has not been allowed to increase

its rates in other states to account for increased CCA compliance costs (id.; see also Dkt. 18-4 at 1; Dkt. 18-5 ¶ 211)

and its non-Washington customers have therefore not suffered any injury.

Ecology argues that PacifiCorp cannot raise constitutional claims on behalf of “an unharmed group of third

parties” and lacks the close relationship required to assert

third-party standing. Dkt. 23 at 20–21 (citing Coal. of

Clergy, Lawyers, and Professors v. Bush, 310 F.3d 1153,

1163 (9th Cir. 2002)). Ecology also argues that because

PacifiCorp’s regulatory applications to incorporate the

cost of allowances into non-Washington utility rates remain under appeal, it is unclear “who will ultimately bear

the cost of PacifiCorp’s compliance with the CCA,” and

there is not yet a “realistic danger of sustaining a direct

injury.” Dkt. 23 at 22–23 (citing Thomas v. Anchorage

Equal Rts. Comm’n, 220 F.3d 1134, 1149 (9th Cir. 2000)).

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Ecology’s position misstates the nature of PacifiCorp’s

injury and overcomplicates the standing inquiry. “Government regulations that require or forbid some action by

the plaintiff almost invariably satisfy both the injury in

fact and causation requirements. So in those cases, standing is usually easy to establish.” All. for Hippocratic

Med., 602 U.S. at 382. The CCA requires PacifiCorp to

obtain allowances for its Chehalis emissions, either

through purchase at auction or the award of no-cost allowances. RCW 70A.65.060, .100–.130. PacifiCorp has plausibly alleged that it will have to spend money to purchase

allowances for the emissions generated for exported electricity. Dkt. 11 ¶¶ 11, 35, 39.

Even if PacifiCorp might eventually be allowed to pass

those costs on to its customers, PacifiCorp remains the

regulated entity required to obtain the allowances in the

first place. This is a sufficiently concrete and particularized injury for PacifiCorp to challenge the CCA’s method

of deciding when an electric utility must buy allowances

rather than receive them for free. PacifiCorp’s standing

is based on its own injury, not a potential future injury of

its customers. The alleged injury is caused by the requirements of the challenged statute and it could be redressed

by an injunction requiring Ecology to distribute no-cost

allowances for exported electricity or exempting PacifiCorp from the purchase of allowances altogether. Kirola

v. City & County of San Francisco, 860 F.3d 1164, 1176

(9th Cir. 2017) (a claim is redressable if a federal court is

capable of granting relief).

The Supreme Court reached a similar conclusion when

faced with a standing challenge to a dormant Commerce

Clause case in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263

(1984). In Bacchus, the plaintiffs challenged an exemption from Hawaii’s liquor tax granted to certain locally

produced liquors to “encourage development of the

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Hawaiian liquor industry.” Id. at 265. The state’s tax

agency argued that the plaintiffs, who were liquor wholesalers, lacked standing because they passed the tax along

to their retailer customers and thus showed no economic

injury from the tax. Id. at 266–67. The Court rejected

this argument, holding that the wholesalers “plainly have

standing” because they are “liable for the tax,” and “although they may pass it on to their customers . . . they must

return the tax to the State whether or not their customers

pay their bills.” Id. at 267. In PacifiCorp’s case, it must

obtain the emissions allowances to comply with the CCA,

whether it successfully passes the costs along or not, and

it therefore has standing to challenge Ecology’s method

for allocating those allowances.

2.

PacifiCorp’s claim of injury is sufficiently ripe.

Ecology also argues that PacifiCorp’s claims are unripe “because the question of who will ultimately be required to pay for its CCA compliance costs is the subject

of ongoing and future proceedings.” Dkt. 23 at 21. For

the same reasons PacifiCorp has standing, PacifiCorp’s

responsibility to bear the cost of CCA allowances—regardless of the results of its administrative appeals to

pass on those costs to its customers—rebuts Ecology’s

ripeness argument. Dkt. 23 at 22–23. Ripeness is synonymous with the “injury-in-fact prong of the standing inquiry,” Smith v. Health Care Serv. Corp., No. 23-35508,

2024 WL 1927610, at *1 (9th Cir. May 2, 2024), for which

there must be a “realistic danger of sustaining a direct injury,” Thomas, 220 F.3d at 1149. PacifiCorp’s obligation

to at least front the cost of allowances is identifiable and

imminent. Its claims are ripe.

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C. PacifiCorp does not make a cognizable dormant

Commerce Clause claim.

While PacifiCorp has standing to pursue its dormant

Commerce Clause claims, the claims fail on their merits.

1.

Federal courts must exercise caution before using the dormant Commerce Clause to strike

down state laws regulating health and welfare.

The Commerce Clause empowers Congress “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” U.S. Const. art.

I, § 8, cl. 3. “Reading between the Constitution’s lines,”

the Supreme Court has long held that “the Commerce

Clause not only vests Congress with the power to regulate

interstate trade; the Clause also contains a further, negative command” that forbids 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) (cleaned up). Courts refer to “[t]his ‘negative’ aspect of the Commerce Clause”

as the “dormant Commerce Clause.” Tenn. Wine & Spirits Retailers Ass’n v. Thomas, 588 U.S. 504, 515 (2019)

(quoting New Energy Co. of Ind. v. Limbach, 486 U.S.

269, 273 (1988)).

Because the dormant Commerce Clause is a judicially

created doctrine implied from the intent of the Commerce

Clause rather than found in its text, the Supreme Court

has focused on the purpose of the doctrine to interpret its

limits. The “fundamental objective” of the dormant Commerce Clause is to “preserv[e] a national market for competition undisturbed by preferential advantages conferred by a State upon its residents or resident competitors.” Tracy, 519 U.S. at 287. Accordingly, the dormant

Commerce Clause prohibits statutes and regulatory

measures driven by protectionism, “designed to benefit

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in-state economic interests by burdening out-of-state

competitors.” Nat’l Pork Producers, 598 U.S. at 369.

At the same time, dormant Commerce Clause jurisprudence “has had to respect a cross-purpose as well, for

the Framers’ distrust of economic Balkanization was limited by their federalism favoring a degree of local autonomy.” Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338

(2008). “The essence of our federal system is that within

the realm of the authority left open to them under the

Constitution, the States must be equally free to engage in

any activity that their citizens choose for the common

weal.” Id. (quoting Garcia v. San Antonio Metro. Transit

Auth., 469 U.S. 528, 546 (1985)). And “[i]n our interconnected national marketplace, many (maybe most) state

laws have the practical effect of controlling extraterritorial behavior.” Nat’l Pork Producers, 598 U.S. at 374 (internal quotation marks omitted). “State income tax laws

lead some individuals and companies to relocate to other

jurisdictions. Environmental laws often prove decisive

when businesses choose where to manufacture their

goods.” Id. (internal citations omitted).

This respect for federalism and the traditional authority of the States to regulate health and welfare within

their borders means that “‘extreme caution’ is warranted

before a court deploys” the “implied authority” of the

dormant Commerce Clause. Id. at 390 (quoting Tracy,

519 U.S. at 310). “Preventing state officials from enforcing a democratically adopted state law in the name of the

dormant Commerce Clause is a matter of ‘extreme delicacy,’ something courts should do only ‘where the infraction is clear.’” Id. (quoting Conway v. Taylor’s Ex’r, 1

Black 603, 634 (1862)). Courts must not use “the dormant

Commerce Clause as ‘a roving license for federal courts

to decide what activities are appropriate for state and local government to undertake.’” Id. at 380 (quoting United

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Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste

Mgmt. Auth., 550 U.S. 330, 343 (2007)).

2.

The CCA’s differing treatment of in-state and exported electricity does not violate the dormant

Commerce Clause because the two categories are

not similarly situated.

A “threshold” question in considering a dormant Commerce Clause challenge is that “any notion of discrimination assumes a comparison of substantially similar entities.” Tracy, 519 U.S. at 298–99; Black Star Farms LLC

v. Oliver, 600 F.3d 1225, 1230 (9th Cir. 2010) (“Differential

treatment must be as between persons or entities who are

similarly situated.”). Ecology argues that “because of

CETA, Washington retail power is differently situated

than wholesale and out-of-state retail power.” Dkt. 23 at

27. This argument disposes of PacifiCorp’s claims.

As described above, see supra Sections II.A–B, when

the Washington legislature enacted the CCA, it was not

writing on a blank slate. Because CETA already existed,

the legislature faced a situation where a certain class of

emitters otherwise subject to the CCA—electric utilities

serving Washington residents—were already regulated

by a separate and more aggressive decarbonization mandate. Compare RCW 19.405.030(1)(a) (eliminate coal

power by 2025); .040(1) (eliminate natural gas power by

2030); .050(1) (total decarbonization by 2045) with RCW

70A.65.070; RCW 70A.45.020(1)(a) (reduce emissions to

45% of 1990 levels by 2030, 70% by 2040, and 95% by 2050).

Rather than subject those utilities—including PacifiCorp—to overlapping sets of requirements, and potentially subject Washington’s electric customers to unnecessary increased costs beyond what they already face under

CETA, the legislature chose to issue no-cost CCA allowances to electric utilities to the extent that their emissions

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were already covered by CETA’s decarbonization schedule.

Although one would not learn it from reading PacifiCorp’s complaint—which does not mention CETA at all,

and instead frames the no-cost allowances as simply a

giveaway to Washington customers—the connection between no-cost allowances for electric utilities and CETA’s

preexisting regulatory regime is in the plain text of the

CCA and its regulations. See, e.g., RCW 70A.65.120(1)

(granting no-cost allowances to electric utilities “subject

to the requirements of . . . the Washington clean energy

transformation act”); WAC 173-446-230(1) (“Only electric

utilities subject to chapter 19.405 RCW, the Washington

Clean Energy Transformation Act, qualify for no cost allowances.”). The CCA’s purpose of working in tandem

with CETA’s requirements, rather than just benefiting instate customers, is reinforced by the statute phasing out

the no-cost allowances by 2045, the same year that

CETA’s decarbonization mandate will be in full effect.

RCW 70A.65.120(2)(d) (“Under no circumstances may

utilities receive any free allowances after 2045.”).

All of this aligns with a common-sense understanding

of how the statutes work together. The CCA requires covered entities to buy allowances for carbon emissions, subject to a cap on allowances that decreases each year, so

that market pressure will encourage those entities to decarbonize. But electric utilities serving Washington customers don’t need that market pressure because CETA

already requires them to decarbonize, and on a faster

schedule. In contrast, the emissions that PacifiCorp generates within Washington’s borders at its Chehalis plant,

but uses to export electricity to customers in other states,

are not covered by CETA at all. This fundamental difference in preexisting regulation means that the two categories of emissions are not “substantially similar” for

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purposes of the dormant Commerce Clause. Tracy, 519

U.S. at 298.

Chief Judge G. Murray Snow of the U.S. District Court

for the District of Arizona recently reached a similar result in Day v. Henry, 686 F. Supp. 3d 887 (D. Ariz. 2023).

In Day, a group of wine collectors sued state regulators

over Arizona’s three-tiered alcohol regulation system. Id.

at 890. Under that system, licensed liquor retailers could

ship wine directly to consumers who made online orders,

but unlicensed retailers could not. See id. Because obtaining a retail license required a physical presence in Arizona, the plaintiffs argued that the regulatory scheme

discriminated against out-of-state liquor retailers in violation of the dormant Commerce Clause. Id. at 891.

In holding that the retailers were not similarly situated, Chief Judge Snow observed that “[r]etailers with

physical premises in Arizona are subject to Arizona’s specific three-tier system and regulations,” including “on-site

liquor inspections, investigation of complaints, covert underage buyer programs, audits and other financial inspections, and investigation of records to determine compliance with Arizona liquor laws.” Id. at 895. They were also

required, unlike the unlicensed out-of-state retailers, “to

obtain alcohol from Arizona wholesalers or wholesalers

under Arizona’s oversight and regulation.” Id. The court

concluded that “[i]t is doubtful that retailers subject to all

of Arizona’s liquor regulations and retailers subject to

none of them can be seen as similarly situated.” Id. at

895–96.

Chief Judge Snow also noted, as several other courts

have also recognized, that “when granting plaintiffs’ requested relief would allow the out-of-state entity ‘dramatically greater rights’ than the in-state entity, they are

likely not similarly situated.” Id. at 896 (quoting Wine

Country Gift Baskets.com v. Steen, 612 F.3d 809, 820 (5th

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Cir. 2010)); cf. Lebmoff Enterprises Inc. v. Whitmer, 956

F.3d 863, 873 (6th Cir. 2020) (“[Licensed] retailers all live

with the bitter and sweet of Michigan’s three-tier system

. . . [Plaintiff] seizes the sweet and wants to take a pass on

the bitter.”) PacifiCorp’s argument faces the same problem. Granting PacifiCorp its requested relief would mean

that the emissions it generates in Chehalis, but uses to export electricity, would be exempt from both CETA’s decarbonization mandate and the CCA’s requirement of

purchasing emissions allowances. This would elevate the

energy used to serve the out-of-state interest above

Washington’s entire program of reducing carbon emissions, reinforcing that the two categories are not similarly

situated.

That PacifiCorp’s energy produced at Chehalis for instate versus exported electricity is subject to a different

regulatory scheme also distinguishes this case from the

two Supreme Court cases that PacifiCorp primarily relies

on: Camps Newfound/Owatonna, Inc. v. Town of Harrison, Me., 520 U.S. 564 (1997), and Or. Waste Sys., Inc. v.

Dep’t of Env’t Quality of State of Or., 511 U.S. 93, 100

(1994). In Camps Newfound, in which the Court struck

down a statute that limited property tax exemptions for

charities to those serving mostly in-state residents, the

Supreme Court explained that “there is no question that

the statute at issue here is facially discriminatory because

it disparately treats identically situated Maine nonprofit

camps depending upon whether they favor in-state, as opposed to out-of-state, campers.” 520 U.S. at 583 (emphasis added). PacifiCorp cannot plausibly allege that the energy it produces in Washington subject to CETA is “identically situated” to the energy that is not. In Oregon

Waste Systems, the Supreme Court struck down a statute

that imposed different fees on the disposal of solid waste

generated in- and out-of-state. 511 U.S. at 95. But the

Supreme Court expressly recognized in that case that

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“[n]o claim has been made that the disposal of waste from

other States imposes higher costs on Oregon and its political subdivisions than the disposal of in-state waste.” Id.

at 101. In other words, the state of Oregon had not argued

that the two streams of waste were not similarly situated,

let alone subject to different regulatory regimes.

PacifiCorp also argues that if Ecology wants to rely on

the application of CETA to distinguish in-state and exported electricity, it must do so under the “compensatory

tax” doctrine considered in the Oregon Waste Systems

case, not the threshold question of whether the two categories are substantially similar. See Dkt. 26 at 24–25.

PacifiCorp’s argument is not persuasive. The compensatory tax doctrine is “a specific way of justifying a facially

discriminatory tax as achieving a legitimate local purpose

that cannot be achieved through nondiscriminatory

means.” Oregon Waste Sys., 511 U.S. at 102. “Under that

doctrine, a facially discriminatory tax that imposes on interstate commerce the rough equivalent of an identifiable

and ‘substantially similar’ tax on intrastate commerce

does not offend the negative commerce clause.” Id. at

102–03. “The tax on interstate commerce must be shown

roughly to approximate—but not exceed—the amount of

the tax on intrastate commerce.” Id. at 103. But the

CCA’s allocation of no-cost allowances to utilities already

subject to CETA’s requirements is not the equivalent of a

“facially discriminatory tax.” Instead, the threshold analysis used in Day v. Henry and other cases in which the

competing entities were subject to different regulatory

regimes is the relevant inquiry.

Finally, the conclusion that the CCA’s differing treatment of energy used for in-state versus exported electricity does not violate the dormant Commerce Clause is reinforced by the reality that the provision of electricity to

retail customers is not the type of competitive national

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market that the dormant Commerce Clause traditionally

endeavors to protect. As PacifiCorp acknowledges in its

complaint, it “is a regulated public utility” in all six of the

states that it serves, and the costs that it recovers from

retail customers are determined by each state’s utility

commission. Dkt. 11 ¶¶ 14, 40–42; see also F.E.R.C. v.

Elec. Power Supply Ass’n, 577 U.S. 260, 265 (2016) (explaining that while the Federal Power Act authorizes

FERC to regulate the competitive interstate market for

wholesale electricity, it “leaves to the States alone, the

regulation of ‘any other sale’—most notably, any retail

sale—of electricity” (quoting 16 U.S.C. § 824(b))). In

Washington, for example, the Utilities and Transportation Commission must “[r]egulate in the public interest

. . . the rates, services, facilities, and practices of all persons engaging within this state in the business of supplying any utility service.” RCW 80.01.040(3). In doing so,

the Commission must set “just, fair, reasonable and sufficient” rates, RCW 80.28.010, and “assure that regulated

utilities earn enough to stay in business.” PacifiCorp v.

Wash. Util. & Transp. Comm’n, 194 Wn. App. 571, 588,

376 P.3d 389 (2016) (quotation marks and citations omitted).

What this means in practice is that the CCA’s regulation of the cost of emitting carbon from Chehalis does not

have the type of direct impact on out-of-state customers

that, for example, the Maine statute in Camps Newfound

had on increasing summer camp prices for out-of-state

campers, or the surcharge in Oregon Waste Systems had

on out-of-state waste disposers, because each state’s utility commission regulates the rates charged to its own residents.2 In this sense, the retail electric market in the

For the same reason, Ecology’s argument is also stronger than Arizona’s in Day v. Henry, where the in-state and out-of-state liquor retailers could genuinely compete for online customers.

2

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United States is already the type of “Balkanized” system

that the dormant Commerce Clause in competitive markets serves to guard against—a fact acknowledged by

both the Federal Power Act and the Supreme Court’s

Commerce Clause cases. See, e.g., Ark. Elec. Co-op. Corp.

v. Ark. Pub. Serv. Comm’n, 461 U.S. 375, 395 (1983)

(“[T]he national fabric does not seem to have been seriously disturbed by leaving regulation of retail utility rates

largely to the States.”); Elec. Power Supply Ass’n v. Star,

904 F.3d 518, 525 (7th Cir. 2018) (“The commerce power

belongs to Congress; the Supreme Court treats silence by

Congress as preventing discriminatory state legislation.

Yet Congress has not been silent about electricity: it provided in [the Federal Power Act] that states may regulate

local generation.” (citing 16 U.S.C. § 824(b)).

Under this system, PacifiCorp’s retail electricity customers in Washington and other states do not compete in

the way that typically triggers dormant Commerce

Clause scrutiny. If PacifiCorp succeeds in passing the

compliance costs of the CCA on to its out-of-state customers, it will be because each state’s utility commission has

approved charging its own residents those rates. And if

PacifiCorp fails, then its shareholders will incur those

costs not because they serve out-of-state customers, but

because they own and operate a power plant in Washington state that produces emissions not already covered by

CETA’s decarbonization schedule—just like any other

comparable covered entity under the CCA. Cf. Elec.

Power Supply Ass’n, 904 F.3d at 525 (“Illinois has not engaged in any discrimination beyond what is required by

the rule that a state must regulate within its borders. All

carbon-emitting plants in Illinois need to buy credits.”).

“The dormant Commerce Clause protects markets and

participants in markets, not taxpayers as such.” Tracy,

519 U.S. at 300. The nature of the state-controlled market

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for retail electricity, and “the absence of actual or prospective competition between” in- and out-of-state retail

electric customers, see id., reinforces the conclusion that

the CCA’s differing treatment of energy produced at Chehalis for in-state versus exported electricity does not offend the Commerce Clause.

3.

The CCA does not violate the dormant Commerce Clause under the Pike test.

PacifiCorp’s complaint also alleges that even if the

CCA’s allocation of no-cost allowances is considered nondiscriminatory, it “nonetheless contravenes the Commerce Clause” under the analysis derived from Pike v.

Bruce Church, Inc., 397 U.S. 137 (1970). Dkt. 11 ¶ 60. This

claim also fails as a matter of law.

In National Pork Producers, the Supreme Court clarified the application of Pike, rejecting an argument that

courts 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.” 598 U.S. at 377 (internal

quotation marks omitted). The Court explained that this

reading “overstate[s] the extent to which Pike and its

progeny depart from the antidiscrimination rule that lies

at the core of our dormant Commerce Clause jurisprudence.” Id. Instead, Pike generally stands for the principle that “a law’s practical effects may also disclose the

presence of a discriminatory purpose.” Id.; see also id. at

391 (Sotomayor, J., concurring) (“Pike’s balancing and

tailoring principles are most frequently deployed to detect the presence or absence of latent economic protectionism.”). While the Court “left the courtroom door open

to challenges premised on even nondiscriminatory burdens,” id. at 379 (internal quotation marks and citation

omitted), it observed that such cases often “have addressed state laws that impose burdens on the arteries of

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commerce, on trucks, trains, and the like.” Id. at 392 (Sotomayor, J., concurring) (internal quotation marks omitted). Anything else falls outside of “Pike’s core.” Id.

PacifiCorp’s argument cannot succeed under any application of Pike because it both falls outside of Pike’s core

and, like the failed challenge in National Pork Producers,

PacifiCorp has failed to plausibly “allege a substantial

burden on interstate commerce.” See id. at 393 (Sotomayor, J., concurring). The application of Pike does not

reveal latent economic protectionism because, as discussed extensively above, emissions generated in Washington for in-state retail electricity (which are already

subject to CETA’s decarbonization mandate) are not similarly situated to those generated for exported electricity

(which are not). Tracy, 519 U.S. at 298 (“[A]ny notion of

discrimination assumes a comparison of substantially similar entities.”).

PacifiCorp has not alleged a substantial burden on interstate commerce because retail electric customers do

not compete in a national marketplace, and any increased

costs to PacifiCorp’s out-of-state customers must be approved by their own state’s regulatory commissions. See

id. at 300 (“[I]n the absence of actual or prospective competition between the supposedly favored and disfavored

entities in a single market there can be no local preference, whether by express discrimination against interstate commerce or undue burden upon it, to which the

dormant Commerce Clause may apply.”). If CCA compliance costs are ultimately borne by PacifiCorp’s shareholders and make the use of the Chehalis plant less profitable, that is how carbon pricing works, and is not sufficient on its own to show a substantial burden on interstate

commerce. See Elec. Power Supply Ass’n, 904 F.3d at 524

(“On this view, whenever Illinois, or any other state, takes

some step that will increase or reduce the state’s

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aggregate generation capacity, or affect the price of energy, then the state policy is invalid. That can’t be right;

it would be the end of federalism.”).3 The Pike balancing

test cannot save PacifiCorp’s claims.

4. The CCA does not discriminate between electric

utilities.

Although PacifiCorp agreed at oral argument that its

“primary claim is that [Ecology] is treating in-state and

out-of-state customers differently,” Dkt. 33 at 8:1–2, it has

also suggested that the CCA discriminates against “outof-state companies like PacifiCorp.” See Dkt. 17 at 13, 28–

29. There are no factual allegations in PacifiCorp’s complaint that support this argument, and the plain text of the

CCA treats all utilities equally. The provisions of the CCA

challenged by PacifiCorp apply equally to all utilities operating in Washington, regardless of their state of incorporation or headquarters. See RCW 70A.65.010(38),

.080(1)(b)–(c), .200. And the allocation of no-cost allowances applies to “all consumer-owned and investor-owned

electric utilities subject to” CETA. RCW 70A.65.120(1).

Indeed, this District has previously determined that the

CCA treats all electric utilities the same when allocating

no-cost allowances. Invenergy Thermal LLC v. Watson,

No. 3:22-cv-05967-BHS, 2023 WL 8404048, at *12 (W.D.

Wash. Nov. 3, 2023) (“In sum, regardless of whether an

electric utility is owned by an in-state entity or an out-ofstate entity, the CCA treats that utility the same as any

other electric utility: it is entitled to no-cost allowances.”).

Although unnecessary for resolving this case, the Court notes that

the Seventh Circuit in Electric Power Supply Association suggested

that because Congress has expressly provided in the Federal Power

Act that “states may regulate local generation,” the Pike balancing

test “does not apply to a state’s regulation of electric capacity or a

cross-subsidy between carbon-emitting generation and carbon-free

generation.” 904 F.3d at 525.

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5.

PacifiCorp’s statutory interpretation argument

fails.

“In the alternative” to its claim under 42 U.S.C. § 1983

that the CCA violates the dormant Commerce Clause,

Count Two of PacifiCorp’s complaint alleges that Ecology’s regulations allocating the CCA’s no-cost allowances

based only on Washington retail electricity load have misinterpreted the statute. Dkt. 11 ¶¶ 67–74. Although PacifiCorp appeared to abandon this claim at oral argument, see

Dkt. 33 at 4:7–6:12, Ecology correctly points out that if

PacifiCorp wanted to bring a freestanding challenge to

whether Ecology’s implementing rules are consistent

with the CCA, it needed to do so under Washington’s Administrative Procedure Act. Hillis v. Wash. Dep’t of Ecology, 131 Wn.2d 373, 381, 932 P.2d 139 (1997) (with limited

exceptions “the Administrative Procedure Act (APA) provides the exclusive means of judicial review of agency action”); RCW 34.05.510 (“This chapter establishes the exclusive means of judicial review of agency action”); RCW

34.05.570(2) (setting out procedure for challenging agency

rules under APA). Even if this may be considered under

the doctrine of constitutional avoidance (as PacifiCorp asserted at oral argument, see Dkt. 33 at 5:22–6:4), the plain

text of the CCA ties no-cost allowances for electric utilities to the requirements of CETA, which apply only to

Washington customers. RCW 70A.65.120(1). However

PacifiCorp intended it, this argument fails as a matter of

law.

IV. CONCLUSION

As the Supreme Court cautioned just last year,

“[p]reventing state officials from enforcing a democratically adopted state law in the name of the dormant Commerce Clause is a matter of ‘extreme delicacy,’ something

courts should do only ‘where the infraction is clear.’”

Nat’l Pork Producers, 598 U.S. at 390. PacifiCorp’s

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claims fall far short of that mark. Defendant Watson’s

motion to dismiss is GRANTED and PacifiCorp’s complaint is DISMISSED.

PacifiCorp has not requested leave to amend its complaint. But even if it had, because this Court’s ruling is

based on the plain text of the CCA and CETA and the way

the statutes interact, rather than on insufficient factual allegations, the deficiencies in PacifiCorp’s complaint cannot possibly be cured by the allegation of other facts and

leave to amend would be futile. See Fed. R. Civ. P. 15(a);

Manzarek, 519 F.3d at 1031. The case is therefore DISMISSED WITH PREJUDICE. PacifiCorp’s Motion for

Preliminary Injunction (Dkt. 17) is denied as moot. The

Clerk is directed to enter judgment in favor of Defendant

and close the case.

Dated this 15th day of July, 2024.

Tiffany M. Cartwright

United States District Judge

APPENDIX C

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT TACOMA

PACIFICORP, an Oregon

business corporation,

Plaintiff,

v.

LAURA WATSON, in her official capacity as Director of the

Washington State Department

of Ecology,

Defendant.

Case No. 3:23-cv06155-DWC

AMENDED COMPLAINT FOR DECLARATORY AND

INJUNCTIVE

RELIEF

PRELIMINARY STATEMENT

1. Plaintiff PacifiCorp (“PacifiCorp”), an Oregon corporation, brings this action for declaratory and injunctive

relief against defendant Laura Watson (“Defendant”), in

her official capacity as Director of the Washington State

Department of Ecology (“Ecology”).

2. PacifiCorp is a multi-state utility that serves approximately two million customers in six states, with approximately 140,000 customers in Washington. PacifiCorp is regulated by Ecology and the Washington Utilities and Transportation Commission, and, most relevant

here, PacifiCorp owns and operates the Chehalis Generation Facility (“Chehalis”).

3. Chehalis is a gas-fired combined cycle electric generation facility located south of Chehalis, Washington,

east of Interstate 5 in Lewis County, Washington. It

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began commercial operation in June 2003 and has a nominal generating capacity of 520 megawatts.

4. In 2021, Washington enacted the Climate Commitment Act (“CCA”). RCW 70A.65.005 to .901. The CCA

and its implementing regulations require certain emitting

entities located in Washington to obtain and retire allowances for their respective annual greenhouse-gas emissions. Ecology will then reduce the number of allowances

available each year over seven separate four-year time periods starting in 2023 and running through 2050. Ecology

describes the CCA as “a market-based program—as allowances become more scarce, they become more valuable

due to the powers of supply and demand. Businesses that

do not sufficiently reduce their emissions will be faced

with increasing compliance costs,”1 thus, in the hope of

Ecology, motivating emitters to reduce emissions through

market-based incentives.

5. Some entities covered by the CCA will purchase allowances for their respective emissions at auction, while

others are provided free (“no-cost”) allowances for emitting generation that serves Washington utility customers.

These no-cost allowances mitigate the costs for Washington utility customers who would otherwise be required to

pay for CCA allowances at market prices. Yet emitting

resources like Chehalis, which are located in Washington

but serve utility customers in other states in addition to

Washington, do not receive no-cost allowances for the portion of emissions for service for out-of-state residents.

6. For example, in each year during the first period

of the CCA program (from 2023 through 2026), utilities

receive no-cost allowances to cover emissions associated

Wash. State Dep’t of Ecology, “Washington’s cap-and-invest program,” available at https://ecology.wa.gov/Air-Climate/Climate-Commitment-Act/Cap-and-invest.

1

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with emitting generation that serves their Washington

customers. Wash. Admin. Code § 173-466-230. These nocost allowances are assigned directly to electric utilities in

an attempt to “mitigate the cost burden of the program on

electricity customers.” RCW 70A.65.120(1). The CCA defines “cost burden” to mean the “impact on rates or

charges to customers of electric utilities in Washington

state for the incremental cost of electricity service to serve

load due to the compliance cost for greenhouse gas emissions caused by the [CCA] program.”

RCW

70A.65.010(21) (emphasis added); Wash. Admin. Code

§ 173-446-020 (same).

7. 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

§ 173-446-425. Because these power plants are responsible for generating the electricity these utilities sell, and

the emissions associated with that electricity, these nocost allowances eliminate some or all of a utility-owned

power plants’ compliance costs caused by the CCA.

8. But for emitting resources like Chehalis that are

located in Washington but that serve customers both

within Washington and in other states, PacifiCorp will not

receive no-cost allowances for the portion of emissions for

service for out-of-state residents. Defendant’s decision to

deny no-cost allowances for the portion of emissions for

service for out-of-state residents is, apparently, based on

her interpretation of RCW 70A.65.010(21) (defining “Cost

burden” to “mean[] the impact on rates or charges to customers of electric utilities in Washington state for the incremental cost of electricity service to serve load due to

the compliance cost for greenhouse gas emissions caused

by the program.”). As a result, PacifiCorp’s non-Washington customers bear higher power costs to ensure Chehalis has sufficient allowances to cover its emissions for

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the energy that serves those customers. Alternatively, if

utility regulators in those other states deny recovery of

the cost of allowances because of this disparate treatment,

PacifiCorp shareholders will bear the CCA compliance

costs simply because it serves customers in other states.

9. As a result, Washington customers do not pay for

CCA allowance costs for electricity generated at Chehalis,

but PacifiCorp and PacifiCorp’s out-of-state customers

do. The CCA’s allocation of no-cost allowances harms

PacifiCorp’s non-Washington customers and PacifiCorp

in direct proportion to the amount of Chehalis generation

that crosses Washington’s border.

10. Two other states have already rejected PacifiCorp’s attempts to allocate these costs to comply with

Washington’s CCA to out-of-state customers. On October

27, 2023, the Public Utility Commission of Oregon

(“OPUC”) decided that these additional CCA costs cannot

be borne by Oregon customers.2 This amounts to almost

$13 million of these CCA costs that the Commission has

prevented PacifiCorp from recovering from customers in

2024. On January 2, 2024, the Wyoming Public Service

Commission followed suit, and this will amount to an almost $9.9 million disallowance in 2024.3

In the Matter of PacifiCorp, dba Pacific Power, 2024 Transition

Adjustment Mechanism, OPUC Docket No. UE 420, Order No. 23404, available at https://apps.puc.state.or.us/orders/2023ords/23404.pdf.

3

In the Matter of the Application of Rocky Mountain Power for Authority to Increase its Retail Electric Service Rates by Approximately $140.2 Million Per Year or 21.6 Percent and to Revise the Energy Cost Adjustment Mechanism, WPSC Docket No. 20000-633ER-23, Record No. 17252, paragraph 211 (“The Commission concludes [PacifiCorp] shall not recover any costs associated with the

[CCA] in any rates charged to Wyoming customers.”).

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11. This harm to PacifiCorp and its non-Washington

customers will continue to increase because Chehalis incurs a new CCA compliance obligation for each metric ton

of carbon dioxide equivalent that the plant emits. Wash.

Admin. Code § 173-446-040 (generally discussing covered

emissions). Yet approximately 77 percent of Chehalis’

emissions do not receive no-cost allowances, and it falls to

PacifiCorp (an out-of-state entity) or its out-of-state customers to pay for Washington’s CCA compliance costs.

12. In short, Defendant’s implementation of the CCA

discriminates against PacifiCorp by increasing the cost of

electricity for PacifiCorp’s out-of-state customers, compared to PacifiCorp’s Washington customers, for electricity produced by the same generation facility.

13. As applied to PacifiCorp and its out-of-state customers, Defendant’s implementation of the CCA’s allocation of no-cost allowances violates the Commerce Clause

of the United States Constitution because it impermissibly discriminates against out-of-state businesses and customers.

PARTIES

14. PacifiCorp is an Oregon corporation with its principal place of business in Oregon. PacifiCorp, which does

business as Rocky Mountain Power and Pacific Power,

provides electric service to retail customers as Rocky

Mountain Power in Wyoming, Utah, and Idaho, and as Pacific Power in Oregon, California, and Washington. PacifiCorp is a regulated public utility providing electric service to customers in all six of these states.

15. Defendant Laura Watson is the Director of Ecology, and performs all powers, duties and functions within

the authority of the agency. Wash. Admin. Code § 173-06130. Ecology regulates greenhouse gases at the state

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level under the federal Clean Air Act and is tasked with

implementing the CCA. See RCW 70A.15.1005.

JURISDICTION AND VENUE

16. Under 28 U.S.C. § 1391(b)(2), venue is proper in

the Western District of Washington federal district court

because Chehalis is located in Lewis County, Washington,

where a substantial part of the events giving rise to this

claim occurred.

17. The relief requested is authorized pursuant to 42

U.S.C. § 1983, the All Writs Act, 28 U.S.C. § 1651(a), and

the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and

2202.

18. This Court has jurisdiction pursuant to 28 U.S.C.

§§ 1331, 1332, and 1367(a).

FACTUAL ALLEGATIONS

Electricity Dispatch

19. The United States lacks a single, unified market

for electricity, but it also does not have fifty individual

electricity markets. 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 with vertically integrated

utilities, and markets overseen by regional transmission

organizations and independent system operators.4

20. The Pacific Northwest lacks a centralized market

authority, and because of this, individual utilities decide

when and how to dispatch—or make use of—the

Fed. Energy Regulatory Comm’n, Energy Primer: A Handbook for

Energy

Market

Basics

61

(2020),

available

at

https://www.ferc.gov/sites/default/files/2020-06/energy-primer2020_0.pdf.

4

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electricity-generation resources available to them to

serve electric demand (also known as “load”). This decision system is referred to as dispatch.

21. When making dispatch decisions on how to serve

the electric demand (also known as ‘load’) of their customers, 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.

22. Dispatch decisions are made each day, and PacifiCorp must decide whether and how long to run its generators like Chehalis. Relevant here, the amount of electricity that Chehalis generates—and delivers to its customers—depends almost entirely on the marginal generating

cost of that facility, relative to the costs from other generation sources and demand for electricity. Utilities will dispatch the lowest marginal cost electricity resources to

customers first, and as they need more generation to

serve load, will dispatch more expensive electricity.

23. The marginal cost of electricity for generation resources includes the cost from incremental variable taxes.

For emitting resources located in Washington, this includes the cost of allowances required by the CCA.

Hence, the CCA increases the marginal cost for electricity

for Chehalis to reflect the expected cost of CCA allowances, and Chehalis will be less likely to be dispatched

than it would without these compliance costs.

24. For example, if the marginal cost without the CCA

per megawatt from Chehalis is $100, but with the CCA the

marginal cost is $110, and if there is another generating

source not subject to the CCA with a marginal cost of $106

per megawatt, then, because of the CCA, there will be

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instances when the $106 source will be used instead of

Chehalis.5

25. This means that, on any given day, depending on

total demand and generation resources, Chehalis will operate less compared to other generation resources, when

the CCA allowance cost increases the marginal cost of

Chehalis generation above the marginal generation cost

of those other generation resources. The CCA also increases costs for all customers compared to the alternative where PacifiCorp receives no-cost allowances from

Ecology regardless of which state its customers are located in.

Mechanisms of the CCA

26. The CCA aims to achieve dramatic reductions in

greenhouse-gas emissions from emissions sources located

in Washington over the next several decades. See RCW

70A.65.070(2); RCW 70A.45.020. It contributes to these

efforts by empowering Ecology to implement a cap on

greenhouse-gas emissions for Washington’s largest emitters. RCW 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 carbon-dioxide emissions annually for any year between 2015 and 2019, RCW

70A.65.080(1), although waste-to-energy facilities and

railroad companies that have these levels of emissions

need not join the program until the second and third fouryear compliance periods (2027 to 2030 and 2031 to 2034,

respectively). RCW 70A.65.080(2)-(3).

27. To implement the emissions cap, the CCA relies on

“[a]llowance[s],” and each allowance is an “authorization

to emit up to one metric ton of carbon dioxide equivalent.”

These numbers are not the actual marginal costs for Chehalis or actual the increase due to the CCA; these round numbers were chosen

solely for ease of demonstrating the concept.

5

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RCW 70A.65.10(1). Under the CCA, a covered entity may

emit only as many metric tons of greenhouse gases as it

has allowances for, though during the first compliance period it may cover up to eight percent of its annual emissions with credits for greenhouse-gas-emissions offsets,

eventually decreasing to six percent in subsequent compliance periods. RCW 70A.65.170, RCW 70A.65.310. If

an entity does not submit sufficient allowances and offsets

to cover its emissions, it must either submit four allowances for every one allowance missing or face penalties of

up to $10,000 per day for each violation. RCW 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.

RCW

70A.65.070(2).

28. 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. RCW 70A.65.100. To control the cost of obtaining allowances, the CCA directs

Ecology to establish a minimum price, which increases annually, RCW 70A.65.150, and a maximum price, which also

increases annually and is set to ensure covered entities invest in reducing emissions. RCW 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.

RCW 70A.65.140. If the price rises too close to the maximum price, Ecology will hold additional auctions. Washington will then use the proceeds from the auctions to invest in a variety of projects, including climate-change mitigation and environmental justice initiatives. RCW

70A.65.100(7); see RCW 70A.65.230.

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The CCA’s No-Cost Allowances

29. 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, RCW 70A.65.110, electric utilities, RCW 70A.65.120,

and natural gas utilities, id, receive some allowances for

free, known as no-cost allowances.

30. Ecology began considering new rules to implement

the CCA, including the proper allocation of no-cost allocations, on August 4, 2021. See Wash. Admin. Code §§ 173446-010 to -700.6 Over the following ten months, Ecology

developed and drafted rules, and held several public meetings to receive public comment.

31. On May 16, 2022, Ecology proposed initial draft

rules (“Draft Rules”), where the agency would allocate nocost allowances to electric utilities, with the amount based

largely on forecasted Washington retail electricity load

(and forecasted emissions from the electricity to meet

those loads).7

32. In response to the Draft Rules, PacifiCorp requested Ecology amend the proposed rules to provide additional no-cost allowances to multi-jurisdictional utilities

like PacifiCorp for the emissions from resources like Chehalis that serves out-of-state residents. The agency rejected PacifiCorp’s request, concluding that “the plain

Wash. Dep’t of Ecology, Preproposal Statement of Inquiry, WSR

21-16-111 (Aug. 4, 2021), see Rule Making Timeline available at

https://ecology.wa.gov/regulations-permits/laws-rules-rulemaking/closed-rulemaking/wac-173-446.

7

Proposed Language for Chapter 173-446 WAC: Climate Commitment Act Program Rule § 173-446-230(1) (May 16, 2022), https://ecology.wa.gov/getattachment/4ffb375b-2bec-4b66-afb39b613645896e/OTS-3614-4-For-Filing.pdf

(Hereinafter

“Draft

Rule”).

6

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language of the law and legislative intent is clear that the

concept of cost burden relates to how the costs associates

with covered emissions are passed on to the customers in

the State of Washington.”8

33. The final CCA rules reflect this conclusion and confirm that electric utilities will receive no-cost allowances

based on the forecast for each utility’s Washington retail

electricity load, and the forecasted emissions associated

with supplying that load. Wash. Admin. Code § 173-446230(1)-(2).

Discriminatory Effects of the CCA’s No-Cost

Allowance Provisions

34. Although Wash. Admin. Code § 173-446-230(1)

provides that Ecology will distribute no-cost allowances to

mitigate the “cost burden” on customer rates, Wash. Admin. Code § 173-446-020 defines “‘Cost burden’” as “the

impact on rates or charges to customers of electric utilities in Washington for the incremental cost of electricity

service to serve load due to the compliance cost for [greenhouse-gas] emissions caused by the program.” (Emphasis

added.) This is consistent with the CCA that identically

defines “cost burden” using similar text.

RCW

70A.65.010(21).

35. This text in RCW 70.65.010(21) is apparently the

basis for Ecology’s implementing rules, and those implementing rules and decisions by Defendant result in discrimination against the portion of Chehalis generation

that serves out-of-state customers, but that does not receive no-cost allowances. Chehalis is covered by the CCA

during its first compliance period and will need to

Washington, Dep’t. of Ecology, Publication 22-02-046, Concise Explanatory Statement, Chapter 173-446 WAC Climate Commitment

Act Program, at 239 (Sept. 2022), available at: https://apps.ecology.wa.gov/publications/documents/2202046.pdf (emphasis added).

8

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purchase allowances to cover at least some of its future

emissions. See Wash. Admin. Code § 173-446-030(1).

PacifiCorp anticipates these costs will be significant for

Chehalis, and estimates compliance costs of $47.9 million

for 2024 alone (without accounting for the value of no-cost

allowances for Chehalis that serves Washington, which

should partially reduce these CCA allowance costs).

36. PacifiCorp must factor these estimated CCA compliance costs into its dispatch decision to generate electricity from Chehalis for sale within and outside of Washington. And that decision is based on the marginal cost

for Chehalis (which includes estimated CCA allowances

costs), compared to the marginal cost for other generation

sources available to PacifiCorp.

37. However, there will be significant ongoing uncertainty regarding the actual operating costs of Chehalis,

because the price of allowances is likely to change at each

quarterly auction (within administratively determined

floor and ceiling prices).

38. Still, PacifiCorp must factor the cost of allowances

into its Chehalis dispatch decision to generate power from

Chehalis on any given day and for how long. The estimated costs for CCA allowances is included in the marginal cost for Chehalis, thus changing PacifiCorp’s Dispatch decisions. The increased marginal cost for Chehalis

due to CCA allowance costs will result in the use of generation sources with higher marginal costs than Chehalis’s marginal cost without the CCA allowance cost. As

a result, the increase to Chehalis’ marginal cost from the

CCA allowance costs will decrease the amount of electricity that Chehalis will generate to serve PacifiCorp’s customers and sell into regional power markets.

39. Altogether, PacifiCorp will be required to spend

tens of millions of dollars on CCA allowances to account

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for greenhouse gas emissions from Chehalis in 2024, and

likely similar amounts each year going forward. This is

because the majority of Chehalis generation is allocated

for non-Washington customers pursuant to multi-state

regulatory agreements, for which PacifiCorp will have to

purchase CCA allowances (instead of receiving no-cost allowances like it receives for the generation allocated to instate customers).

40. Yet PacifiCorp cannot recover CCA allowance

costs from Washington customers when the generation is

allocated to out-of-state customers. These costs will either be passed along to non-Washington customers, or if

denied for recovery by state utility commissions, will be

borne by PacifiCorp and its shareholders. PacifiCorp has

requested that non-Washington state utility commissions

allow recovery of those expenses from customers; yet Oregon and Wyoming have already denied the Company’s

requests for recovery of these costs. PacifiCorp will have

no way of recouping in its Oregon and Wyoming customer

rates the millions of dollars in compliance costs imposed

by the Washington CCA.

41. PacifiCorp has already purchased CCA allowances

for Chehalis’ 2023 emissions but filed to defer those costs

from rate making in Oregon. PacifiCorp will request that

non-Washington state utility commissions allow recovery

of those expenses from customers; however, subsequent

recovery is subject to review by the OPUC.

42. PacifiCorp therefore will likely have substantial

unrecoverable costs in the coming years as a result of the

CCA’s discriminatory allocation of no-cost allowances.

This discrimination is arbitrary and unreasonable, as

there is no environmental difference between greenhouse

gas emissions from generation of electricity from the

same generation resource for customers that reside inside

Washington, compared to generation for out-of-state

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residents, when emissions are not contained within state

borders. But the CCA nonetheless requires nonresidents

to pay for CCA allowances while Ecology gives them to

Washington customers for free.

There are two costs from the CCA

43. As noted above, PacifiCorp estimates $47.9 million

in costs associated with compliance with the CCA for

emissions from Chehalis in 2024. There are two different

cost categories within that number.

44. First, there are the straightforward costs incurred

from purchasing CCA allowances based on the amount of

emissions generated by Chehalis in a given year. The second is the additional cost to dispatch generation sources

with higher marginal costs than would have been dispatched without the CCA.

45. As described above, PacifiCorp each day dispatches generation sources from lowest to highest costs

of generation. At the point at which demand (i.e. “load”)

is satisfied with lower cost generation sources, generation

sources with higher costs are not used.

46. Under the CCA, because of the cost for CCA allowances, Chehalis’ marginal cost per megawatt increases,

which changes the decision as to when PacifiCorp will dispatch Chehalis.

47. Because the CCA will increase Chehalis’ marginal

cost above the marginal cost of other generation sources

that are not required to purchase allowances under the

CCA,9 those other generation sources will be dispatched

instead of or before Chehalis under the CCA; those same

generation sources would have been dis

This text is long and has been trimmed here. Open the source document for the complete record.