C.A. No. 20-11120

IN THE UNITED STATES COURT OF APPEALS FOR THE TWELFTH CIRCUIT

_________

STATE OF VANDALIA

Appellant

v.

COMMONWEALTH ENERGY (CE)

Appellee

_________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT OF VANDALIA.

_________

BRIEF FOR APPELLEE

_________

Team No. 22

Counsel for Appellee

Team 22

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TABLE OF CONTENTS

TABLE OF CONTENTS………..………..………..………...……………….……....………..…ii

TABLE OF AUTHORITIES………..………..………..…….…..…………………..………..…..ii

JURISDICTIONAL STATEMENT………..…………..……..…………..……..………..………1

ISSUES PRESENTED……..………..………..………….…………………………...………..…1

STATEMENT OF THE CASE………..………..…..……..……..…………………...………..…2

SUMMARY OF ARGUMENT ………..…………..………..……….……..…………..……..…5

ARGUMENT………..………..………..………..………..…………….…………….…..………7

I. CACJA violates the Dormant Commerce Clause of the U.S. Constitution……….….7

A. Standard of Review………..………..………..………..……..………..……….…7

B. CACJA is a facially discriminatory statute, as its objectives could have been

achieved through nondiscriminatory alternatives.…..………..……………….….7

C. CACJA violates the Dormant Commerce Clause under the Extraterritoriality

Doctrine. …..………..………..………..………..………..………..………..……10

II. Vandalia violated the Takings Clause of the Fifth Amendment to the U.S.

Constitution by limiting the rate recovery of the remaining investment for CE Coal

Fired Power Plants.…..………..…………..………..………..………..………..……12

A. Standard of Review………..………..………..………..………..………….…….12

B. CACJA’s failure to meet the “just and reasonable” standard required for

ratesetting results in an unconstitutional taking under the Fifth and Fourteen

Amendments.…..………..………..………..………..………..………..….…..…13

C. In the alternative, it is contrary to the public interest to limit the rate recovery to

no more than fifty percent (50%) of the unamortized investment.…..…….…….15

III. Vandalia violated the Federal Power Act and the Supremacy Clause of the U.S.

Constitution with respect to its net metering program under Title IV of CACJA..…16

A. Standard of Review………..………..………..………..………..………….……17

B. Vandalia’s net metering program in Title IV of CACJA violates the FPA’s grant

of authority to FERC to regulate wholesale transactions in energy marketplaces.

………..………..………..………..………..…………………………..………..17

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C. Because Title IV of CACJA runs afoul of the FPA, it is preempted by federal

law.………..………..………..………..………..………..…………...………..…18

IV. Vandalia’s prohibition on the aggregation of DERs in Title VI, Section 2 of CACJA

runs afoul of the FPA and is thus preempted by federal law……………………..…19

A. Standard of Review………..………..………..………..……...………..….……..19

B. Title VI, Section 2 of CACJA infringes on FERC’s authority over wholesale

markets under the FPA.………..………..………..………..………..…..………..20

i. Order 2222 directly affects wholesale rates.………..……………………21

ii. Order 2222 does not seek to regulate the retail market.………….……...22

iii. Order 2222 does not conflict with the FPA’s core purposes.…...……….23

C. Because Title VI, Section 2 directly conflicts with Order 2222 and FERC’s

authority under the FPA, it should be found unconstitutional under the Supremacy

Clause of the U.S. Constitution.………..………..………………..………..……24

i. Title VI, Section 2 is unconstitutional because it directly conflicts with

federal law under the FPA.………..………..………………..…………..24

ii. Title VI, Section 2 is also unconstitutional because it seeks to regulate a

field occupied exclusively by FERC as intended by Congress in the

FPA.………..………..…………..………..………..……………….....…25

CONCLUSION………..………..………..………..………..………..………..…………………26

Certificate of Service ………..……….……..………..………..…………………………….…..27

TABLE OF AUTHORITIES

Cases

Arizona v. United States, 567 U.S. 387 (2012) ………...………………………………………. 24

Allco Fin. Ltd. v. Klee, 861 F.3d 82, (2d Cir. 2017) ………...…………………………...…… 8, 9

Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935) …………...……………………………… 10

Bluefield Waterworks & Imp. Co. v. Pub. Serv. Comm'n of W. Va., 262 U.S. 679 (1923) ………..

………………………………………………………………………………………. 12, 13, 14, 15

Calpine Corp. v. FERC, 702 F.3d 41 (D.C. Cir. 2012) ……………………………………..…..18

Cotto Waxo Co. v. Williams, 46 F.3d 790 (8th Cir. 1995) …………………………………. 10, 11

Duquesne Light Co. v. Barash, 488 U.S. 299 (1989 …………………………………………… 12

Elgin v. Department of Treasury, 567 U.S. 1 (2012) ……………………………………………. 1

Fed. Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591 (1944) ………………. 6, 13, 14, 16

FERC v. Electric Power Supply Ass'n. (EPSA), 136 S.Ct. 760 (2016) ………………………... 20

Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963) ……………………. 19, 24

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Granholm v. Heald 544 U.S. 460 (2005) ………………………………………………………. 12

Gade v. National Solid Wastes Management Ass'n, 505 U.S. 88 (1992) ……………………… 18

Healy v. Beer Inst., 491 U.S. 324 (1989) ………………………………………………………. 11

Hines v. Davidowitz, 312 U.S. 52 (1941) …………………………………………………...…. 24

Hughes v. Oklahoma, 441 U.S. 322 (1979) …………………………………………………. 7, 10

In re Permian Basin Area Rate Case, 390 U.S. 757 (1968) …………………………………… 15

Jones v. Rath Packing Co., 430 U.S. 519 (1977) …………………………….………………… 18

Kell v. Benzon, 925 F.3d 448 (10th Cir. 2019) ………………………………………………….. 1

Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)….

…………………………….……………………………………………….……………………..20

National Association for Advancement of Colored People v. Fed. Power Comm'n, 425 U.S. 662

(1976) ……………………………………………………………………………………….. 15,16

National Association of Regulatory Utility Commissioners v. FERC (NARUC), 964 F.3d 1177

(D.C. Cir. 2020) ……………………………………………………………………. 20, 21, 22, 23

New Energy Co. of Ind. v. Limbach, 486 U.S. 269, (1988) …………………………………. 8, 12

Northern Natural Gas Co. v. State Corp. Commission of Kan., 372 U.S. 84 (1963) ….………. 24

Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015) ……………………………………...……18, 24

Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality of State of Or., 511 U.S. 93 (1994) ….. 7, 8, 11

Pennsylvania Water & Power Co. v. Federal Power Commission, 343 U.S. 414 (1952) ……... 23

Perry v. Los Angeles Police Dept., 121 F.3d 1365 (9th Cir. 1997) ……………………………. 19

Pike v. Bruce Church, Inc., 387 U.S. 137 (1970) …………………………………...……………9

Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) ………………………………………… 18

Smyth v. Ames, 169 U.S. 466 (1898) …………………………………………………………… 14

Southern Cal. Edison Co. v. FERC, 603 F.3d 996 (D.C. Cir. 2010) ………………………… ...18

Town of Southold v. Town of E. Hampton, 477 F.3d 38 (2d Cir. 2007) ………………………… 8

United Haulers Ass'n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth., 261 F.3d 245 (2d Cir.

2001) ……………………………………………………………………………………….. 6, 7, 8

Wyoming v. Oklahoma, 502 U.S. 437 (1992) …………………………………………………… 8

Statutes:

16 U.S.C. § 791a et seq …………………………………………………………….. 20, 22, 25, 26

28 U.S.C. § 1291…………………………………………………………………………………. 1

66 Vandalia S.A. § 35.01 (2019) ………………………………………………………………… 1

Agency Decisions:

SunEdison LLC, 129 F.E.R.C. ¶ 61,146 (2009) ……………………………………………… 17

MidAmerican Energy, 94 F.E.R.C. ¶ 61,340 (2001) ……….………………………………… 17

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Agency Orders:

Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional

Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶

61,247 (Sep. 17, 2020) …………………………………………………………………………. 20

Constitutional Provisions:

U.S. Const. Article, VI, Clause 2 ………………………………………………………………... 18

U.S. Const. Article I, Section 8, Clause 3………………………………………………………… 7

U.S. Const. Amend. V ………………………………………………………………………...… 13

U.S. Const. Amend. XIV …………...………………………………………………………...… 13

Other Sources:

Kevin Todd, The Dormant Commerce Clause and State Clean Energy Legislation, 9 Mich. J.

Envtl. & Admin. L. 189 (2020). Available at: https://repository.law.umich.edu/mjeal/vol9/iss1/6.

……………………………………………………………………………………………………10

FERC Order No. 2222 Fact Sheet……….……….……….……….……….……….……………21

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JURISDICTIONAL STATEMENT

The District Court had subject matter jurisdiction over this action pursuant to 28 U.S.C §

1331. Federal district courts “have original jurisdiction of all civil actions arising under the

Constitution, laws, or treaties of the United States.” See Elgin v. Department of Treasury, 567

U.S. 1, 25 (2012). Appellees raised four constitutional challenges to the provisions of

Appellant’s Clean Air Clean Jobs Act in the U.S. District Court of Vandalia.

This Court has appellate jurisdiction pursuant to 28 U.S.C. § 1291. Federal Courts of

Appeals have “jurisdiction of appeals from all final decisions of the district courts of the United

States.” See Kell v. Benzon, 925 F.3d 448, 471 (10th Cir. 2019). The District Court issued its

final order on November 15, 2020. Vandalia filed its timely appeal to this Court on December

15, 2020.

ISSUES PRESENTED

1. Whether Vandalia violated the dormant Commerce Clause of the U.S. Constitution in

Title III of the Clean Air Clean Jobs Act with respect to the exclusion of solar projects

located outside of the state of Vandalia from being eligible for solar renewable energy

credits under Vandalia’s renewable energy standard.

2. Whether Vandalia violated the Takings Clause of the Fifth and Fourteenth Amendments

to the U.S. Constitution in Title V of the Clean Air Clean Jobs Act by limiting the rate

recovery of the remaining investment in coal fired power plants to no more than fifty

percent (50%) of the unamortized investment as of the date of their retirement.

3. Whether Vandalia violated the Federal Power Act and the Supremacy Clause of the U.S.

Constitution in Title IV of the Clean Air Clean Jobs Act, by setting prices under its net

metering program at retail rates and ignoring the FPA’s express jurisdictional division

between FERC and the states.

4. Whether Vandalia violated the Federal Power Act and thus the Supremacy Clause of the

U.S. Constitution with respect to Title VI of the Clean Air Clean Jobs Act, which

prohibits the aggregation of Distributed Energy Resources in direct conflict with FERC’s

Order No. 2222.

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STATEMENT OF THE CASE

The Federal Power Act and Interstate Energy Markets

The Federal Power Act (FPA) and its related legislation grants the Federal Energy

Regulatory Commission (FERC or Commission) authority over “the transmission of electric

energy in interstate commerce” and the “sale of the electric energy at wholesale in interstate

commerce.” R. at 8. States are given authority over what’s left, i.e., retail sales to end-use

customers, such as residents and local businesses. Id.

Wholesale markets are managed regionally, but are always subject to oversight and

regulation by FERC. Id. Management occurs through regional transmission organizations

(RTOs) or independent system operators (ISOs). Id. The region in which Vandalia sits is served

by PJM Interconnection. Id. PJM ensures a competitive wholesale electricity market in the

region and manages the electric grid for 61 million people. Id. PJM’s market is subject to tariffs

approved by FERC. Id.

FERC Order No. 2222

Under its wholesale authority, FERC issued Order No. 2222 (Order 2222) on September

17, 2020, titled Participation of Distributed Energy Resource Aggregations in Markets Operated

by Regional Transmission of Organizations and Independent System Operators, to address unjust

and unreasonable market rules that presented significant barriers to DERs who wished to

participate in RTO and ISO markets. R. at 8-9. DERs are often too small to meet the minimum

size requirements necessary for participation in these markets on their own. R. at 9. Order 2222

allows DERs to aggregate in order to meet the necessary performance and qualification

requirements for participation that each DER could not meet individually. Id.

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Vandalia’s Clean Air Clean Jobs Act

Vandalia’s Clean Air Clean Jobs Act (CACJA) was signed into law on April 3, 2020 to

incentivize “clean energy” jobs and “usher in a new [energy] era” in Vandalia. R. at 4. CACJA,

as amended, has four titles of particular relevance to the case at hand.

Title III of CACJA establishes renewable energy standards for Vandalia. Id. This section

of the Act first requires retail electric utilities in Vandalia “to purchase fifteen percent (15%) of

their electricity supply from renewable energy sources by 2025, increasing by periodic targets to

fifty percent (50%) by 2040.” Id. Title III also includes separate requirements for energy from

solar photovoltaic (PV) resources. Id. Retail electric utilities operating within Vandalia must

“purchase two-tenths of one percent (0.2%) of their electricity supply from solar PV sources

located within the state of Vandalia by December 31, 2024, increasing to one percent (1.0%) by

December 31, 2040.” Id. Notably, Section 11 of Title III explicitly precludes solar projects

located outside the borders of Vandalia from being eligible for solar renewable energy credits

(SRECs). CACJA, Tit. III, § 11.

In Title IV, Vandalia instituted a net metering program for “Customer-generator[s] that

generate electricity on the Customer-generator side of the meter using Renewable Energy

Resources,” like solar panels.1 When a Customer-generator using these resources produces more

energy than it consumes, its retail meter is “running backwards.” R. at 10. This means the

Customer-generator is delivering energy to the electric utility (EU), rather than receiving energy

from the EU. Id. This excess energy is stored in the EU’s system and later resold to other

customers on the grid. R. at 11-12. The amount of excess energy produced by the customer is

1CACJA defines “net metering” as “measuring the difference between electricity supplied by an Electric Utility and

electricity generated from a Renewable Energy System owned or leased and operated by a Customer Generator

when any portion of the electricity generated by the Renewable Energy System is used to offset part of all of the

Electric Retail Customer’s requirements for electricity. CACJA Tit. I, § 2(j).

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“netted” against the amount of energy the customer consumes. R. at 3, f.1. Under Title IV, the

Customer-generator is credited for the net energy it provides to the grid at “the full retail rate”

typically charged by a utility company. CACJA Tit. IV(2).

Title V of CACJA requires all existing coal plants in Vandalia to be retired by July 1,

2021. CACJA, Tit. V(1)(a). These forcibly retired coal plants will only be able to recover fifty

percent (50%) of the unamortized investment as of the date of their retirement, “unless such rate

treatment is demonstrated to be contrary to the public interest.” R. at 4; CACJA, Tit. V(2).

Lastly, Title VI, Section 2 specifically prohibits distributed energy resources (DERs)

located in Vandalia from being aggregated for purposes of participation in the ISO market

controlling Vandalia, PJM Interconnection. CACJA, Tit. VI, § 2. For purposes of the Act, DERs

“with a nameplate generating capacity of not more than 10,000 kW installed behind the meter on

the premises of a Retail Customer served by an Electric Utility (EU)” are not to be aggregated.

Id. Title VI was added to CACJA on October 1, 2020 in direct response to FERC’s Order No.

2222. R. at 4. The Governor of Vandalia convened a special session of the Vandalia legislature

specifically to address the Order and add the conflicting amendment that is Title VI. Id.

Commonwealth Energy and Its Subsidiaries

CACJA has drastically impacted Commonwealth Energy (CE) and its subsidiaries,

Commonwealth Power & Light Company (CPL) and Commonwealth Energy Solutions (CES).

R. at 5. CPL provides energy to around 750,000 retail customers in Vandalia using electricity

produced from coal, natural gas, and renewable resources. Id. CPL owns three coal-fired

generating plants: (1) the Raven Power Station (Raven), (2) the Hunter Generating Plant

(Hunter), and (3) Fort Duquesne Energy Center (Ft. Duquesne). Id. The net book value of these

three plants taken together, as of July 1, 2021, exceeds $1.5 billion dollars. Id. Title V of CACJA

would force CPL to incur around $780 million in unrecoverable investment costs. R. at 10.

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The Vandalia Public Service Commission (Commission) allowed CPL a return on equity

(ROE) of 9.20%. Stipulation of Facts at 1-2. The Commission approved a capital structure of

fifty percent (50%) equity and fifty percent 50% debt for ratemaking purposes. Id. This resulted

in a weighted average cost of capital of 7.85%. Id. The non-recovery rate under CACJA will also

reduce the ROE for the calendar year beginning July 1, 2021 of 1.80%. Id.

CES develops solar projects for both residential and commercial customers and operates

entirely outside of Vandalia, in the adjacent states of Franklin and West Vandalia. R. at 6. CES

produces solar energy through solar arrays interconnected with the retail electric utilities within

Franklin and West Vandalia. Id. Additionally, CES has three utility-scale solar projects also

located in Franklin and West Vandalia. Id. The output from CES’s solar projects is sold into the

regional wholesale power market operated by PJM. Id. Neither Franklin nor West Vandalia have

enacted standards encouraging the development of renewable energy, or, more specifically,

specific incentives for solar projects. Id. Thus, neither state has a market for solar renewable

energy credits (SRECs). Id.

The District Court Proceeding

On October 12, 2020, CE and its subsidiaries, CPL and CES, filed an action in the U.S.

District Court of Vandalia challenging the constitutionality of CACJA. R. at 9. CE successfully

argued that CACJA violated (1) the dormant Commerce Clause of the U.S. Constitution, (2) the

Takings Clause of the Fifth Amendment to the U.S. Constitution, (3) the Federal Power Act, and

(4) the Supremacy Clause of the U.S. Constitution. R. at 9, 11. The District Court granted

summary judgment for CE on all issues. R. at 11.

SUMMARY OF ARGUMENT

This case is primarily about state overreach. No matter Vandalia’s intentions, CACJA

undoubtedly transcends the boundaries of state authority under the United States Constitution.

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Appellees first urge the court to affirm the District Court’s determination that Title III of

CACJA is an unconstitutional extension of state authority, in violation of Article I, § 8 of the

U.S. Constitution—the dormant Commerce Clause. Title III’s facially discriminatory provisions

place an impermissible burden on interstate commerce and function to control commerce

occurring entirely outside of Vandalia. The state of Vandalia fails to demonstrate that exclusive

provisions in CACJA serve a purpose other than protectionism and that “no nondiscriminatory

alternative exists to effectuate the local goals.” United Haulers Ass'n, Inc. v. Oneida-Herkimer

Solid Waste Mgmt. Auth., 261 F.3d 245, 255–56 (2d Cir. 2001).

Secondly, this Court should affirm the District Court’s finding that CACJA’s forced

retirement of coal-fired power plants and limited rate of recovery under Title V of the Act is

unconstitutional, in violation of the Takings Clause of the Fifth Amendment. The limited rate of

recovery fails to meet the “just and reasonable” standard required. Title V also fails to find the

balance between utilities producer’s right to a return on their investment and consumer

protection. Fed. Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 609 (1944)

Thirdly, appellees argue that the District Court did not err in determining that Vandalia

violated the FPA and the Supremacy Clause of the U.S. Constitution in Title IV in implementing

its net metering program. Vandalia’s net metering program necessitates that an EU provide

credits to Customer-generators for their contributions to the grid at retail rates. But the

transactions occurring between Customer-generators and EU’s are wholesale transactions subject

to FERC’s sole jurisdiction under the FPA. Vandalia’s attempt to regulate a field occupied

exclusively by a federal agency is contrary to the Supremacy Clause and must be preempted.

Lastly, this Court should affirm the District Court’s holding that Section 2 of Title VI is

contrary to the FPA and thus unconstitutional under Supremacy Clause jurisprudence. This

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Section is a violation of the FPA because it purposely contravenes FERC’s Order 2222. Section

2 of Title VI is in direct conflict with federal law and impermissibly invades a field subject to

federal control under the FPA. As a result, it should be invalidated under Supremacy Clause

jurisprudence.

ARGUMENT

I. CACJA violates the Dormant Commerce Clause of the U.S. Constitution.

A. Standard of Review

To evaluate a state law that is facially discriminatory against interstate commerce, the

court should use a strict scrutiny standard. Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality of

State of Or., 511 U.S. 93, 93–94 (1994). “[T]he burden shifts to the state or local government to

demonstrate that the local benefits outweigh the discriminatory effects and that no

nondiscriminatory alternative exists to effectuate the local goals.” United Haulers Ass'n, Inc. v.

Oneida-Herkimer Solid Waste Mgmt. Auth., 261 F.3d 245, 255–56 (2d Cir. 2001).

B. CACJA is a facially discriminatory statute, as its objectives could have been

achieved through nondiscriminatory alternatives.

Article I, § 8 of the United States Constitution gives Congress the power to regulate

interstate commerce.2 From this power, courts have established that there is a restriction on state

power under the “dormant Commerce Clause,” which prevents states from “discriminating

against” or unduly “burdening” interstate commerce. Hughes v. Oklahoma, 441 U.S. 322, 325-26

(1979). Title III of CAJCA violates the dormant Commerce Clause because it imposes an

impermissible burden on interstate commerce. Title III of CACJA precluded solar projects

2 “[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and

with the Indian Tribes.” U.S. Const. Art. I, § 8, Cl. 3.

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located outside of the Vandalia from being eligible for SRECs under Vandalia’s renewable

energy standard. CACJA, Tit. III, § 11.

CACJA places an impermissible burden on interstate commerce and is rooted in

economic protectionism. These restrictions discriminate against solar projects located outside of

Vandalia, including CES’s solar projects located in Franklin and West Vandalia. CACJA, Tit.

III.

To examine a challenged law under the dormant Commerce Clause, it must first be

“determine[d] whether it clearly discriminates against interstate commerce in favor of intrastate

commerce, or whether it regulates evenhandedly with only incidental effects on interstate

commerce.” Town of Southold v. Town of E. Hampton, 477 F.3d 38, 47 (2d Cir. 2007). When a

state law facially discriminates against out-of-state commerce it is per se invalid unless it can be

“demonstrably justified by a valid factor unrelated to economic protectionism.” Wyoming v.

Oklahoma, 502 U.S. 437, 454 (1992).

CACJA is a facially discriminatory law to which the strictest scrutiny should be applied.

Oregon Waste Sys., Inc., 511 U.S. at 93–94. Title III excludes solar energy outside the State of

Vandalia. CACJA will only be found constitutional if Vandalia can “sho[w] that it advances a

legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory

alternatives.” Id. at 101 (quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988)).

When a law “is discriminatory, the burden shifts to the state or local government to demonstrate”

the law has non-protectionist purposes and cannot be achieved through alternative means. United

Haulers Ass'n, Inc., 261 F.3d at 255–56. Vandalia has failed to do so.

There is no reason that the energy could not be produced from areas directly outside of

Vandalia, and still meet CACJA’s clean energy objectives. CES recognizes that Vandalia has a

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legitimate interest in reducing greenhouse gases and mitigating climate change. However,

greenhouse gases are pollutants that respect no state boundaries and move trans-nationally and

globally. There is no support for CACJA’s obviously discriminatory provisions, which could be

achieved through less discriminatory alternatives.

In Allco Fin. Ltd. v. Klee, the court found Connecticut's Renewable Portfolio Standard

(RPS) did not violate the Dormant Commerce Clause. 861 F.3d 82, 87 (2d Cir. 2017). Under this

RPS, there were two types of Renewable Energy Credits (RECs). Id. at 93. RECs could be

obtained by renewable energy sources located within the regional transmission grid,

(Connecticut, Massachusetts, Vermont, New Hampshire, Rhode Island, and part of Maine.) Id. or

RECs could be obtained by sources that were on nearby regional transmission grids and were

imported into Connecticut. Id. Here, the court did not find the legislation to be facially

discriminatory and applied the less burdensome “Pike Test,” which considers less restrictive

alternatives if the burdens on interstate commerce outweigh the benefits, and the degree of the

state’s legitimate interest compared to the extent of the burden that will be tolerated. Id. at 107;

Pike v. Bruce Church, Inc., 387 U.S. 137, 147 (1970).

However, unlike Allco, CACJA is facially discriminatory. It requires retail electric

utilities operating within Vandalia to use energy from solar PV sources located within the state

and explicitly precludes solar projects which are located outside of the borders of Vandalia from

being eligible for SRECs. See CACJA, Tit. III. There are no routes for solar PV sources located

outside of Vandalia to meet the requirements of CACJA and receive the benefits of the Act.

Vandalia has made the claim that the purpose of CACJA’s geographic limitation for solar

facilities is not to capture economic benefits, but rather to stimulate clean energy development to

replace coal-fired generation in Vandalia. Opinion at 2. That is not the case. The legislation is

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entitled “Clean Air Clean Jobs Act,” thus emphasis is focused on jobs and economic growth

within the state. CACJA is designed to capture economic benefits by ensuring that the

development of clean energy occurs within the state, rather than outside the state.

The Dormant Commerce Clause functions “to avoid [any] tendencies toward economic

Balkanization.” Hughes, 441 U.S. at 325. However, CACJA is at odds with this theory. The

motivation for this is for in-state solar projects to have an unfair advantage over out of state

energy producers. This legislation unduly discriminates against out-of-state solar projects and is

unconstitutional under the dormant Commerce Clause. Id.

C. CACJA violates the Dormant Commerce Clause under the

Extraterritoriality Doctrine.

CACJA’s regulatory power extends outside of Vandalia’s state borders and regulates

commerce taking place entirely outside the state. Courts have referred to this as the

“extraterritoriality doctrine” of the Dormant Commerce Clause.3 State laws that control

commerce outside the state are unconstitutional. North Dakota v. Heydinger, 825 F.3d 912, 919

(8th Cir. 2016). The dispositive question to ask is whether the statute has the “practical effect” of

controlling conduct “beyond the boundaries of the state.” Id. (citing Cotto Waxo Co. v. Williams,

46 F.3d 790, 793 (8th Cir. 1995)); see also Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935).

The Dormant Commerce Clause established “the principle that one state in its dealings with

another may not place itself in a position of economic isolation.” Baldwin, 294 U.S. at 527.

Vandalia cannot regulate intrastate energy by prohibiting the importation of goods in interstate

commerce. See Id. “The Constitution was framed . . . upon the theory that the peoples of the

3 Kevin Todd, The Dormant Commerce Clause and State Clean Energy Legislation, 9 Mich. J. Envtl. & Admin. L.

189 (2020). Available at: https://repository.law.umich.edu/mjeal/vol9/iss1/6.

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several states must sink or swim together, and that in the long run prosperity and salvation are in

union and not division.” Id. at 523.

A “statute that has the practical effect of exerting extraterritorial control over ‘commerce

that takes place wholly outside of the State's borders is likely to be invalid per se.” Heydinger,

825 F.3d at 919 (quoting Healy v. Beer Inst., 491 U.S. 324, 336 (1989)).

In Heydinger, plaintiffs asserted that the provisions of Minnesota's Next Generation

Energy Act (NGEA), which established energy standards related to carbon dioxide emissions,

violated the Commerce Clause of the Constitution. 825 F.3d at 916. Essentially, the NGEA

prohibited the importation or use of electricity which was produced from new fossil fuel driven

power plants. Id. at 915-16. These provisions functioned to regulate activity and transactions

taking place “wholly outside” of Minnesota. Id. at 921. “A state statute has undue extraterritorial

reach and is per se invalid when it requires people or businesses to conduct their out-of-state

commerce in a certain way.” Id. at 919 (internal quotations omitted) (citing Cotto Waxo Co., 46

F.3d at 793). The state was regulating interstate commerce, which they “may not do without the

approval of Congress.” Heydinger, 825 F.3d at 922.

Similarly, CACJA regulates activity that occurs wholly outside of Vandalia. It is

important to note that both Franklin and West Vandalia have enacted renewable portfolio

standards aimed to encourage the development of renewable energy. However, neither has

incentives like SRECs, but rather only less valuable RECs.4 Vandalia is not incentivizing, but,

rather, cajoling companies like CES to develop clean energy within Vandalia, rather than in

neighboring states. CACJA creates economic pressure for CES and other energy producers to

4 The price for SRECs is much higher than for RECs. “In Maryland, for example, an SREC is valued at $79 per

MWh, while a REC is worth only about $8 per MWh.” CES’s solar projects are precluded from CACJA’s SRECs,

they are only eligible for lower-priced RECs in Franklin and West Vandalia.” R. at 6, footnote 5.

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move their operations from West Vandalia and Franklin to Vandalia. Title III of CACJA

“regulat[es] interstate commerce in such a way as to give those who handle domestic articles of

commerce a cost advantage over their competitor,” thus constituting protectionism. Oregon

Waste Sys., Inc., 511 U.S. at 106; Limbach, 486 U.S. at 275.

Similarly, in Granholm v. Heald, the court took particular note of the liquor law in New

York and stated an “out-of-state winery may ship directly to New York consumers only if it

becomes a licensed New York winery, which requires the establishment of a branch factory,

office or storeroom within the state of New York.” 544 U.S. 460, 470 (2005) (internal quotations

omitted). This provision impacted wineries who typically operated fully outside the state by

cajoling them to establish branches of their company within the borders of the state.

CACJA extends far beyond what a state is allowed to enact. It functions to control

commerce that is occurring wholly outside of the state. Vandalia may not do so without the

approval of Congress, thus Title III of CACJA violates the Dormant Commerce Clause.

Heydinger, 825 F.3d at 922.

II. Vandalia violated the Takings Clause of the Fifth Amendment to the U.S.

Constitution by limiting the rate recovery of the remaining investment for CE Coal

Fired Power Plants.

A. Standard of Review

The Supreme Court has emphasized the importance of granting the State or regulatory

commission discretion to “decide what ratesetting methodology best meets their needs in

balancing the interests of the utility and the public.” Duquesne Light Co. v. Barash, 488 U.S.

299, 319 (1989). Valuation of a public utility corporation property and ratesetting are legislative

acts that are not typically subject to judicial review. Bluefield Waterworks & Imp. Co. v. Pub.

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Serv. Comm'n of W. Va., 262 U.S. 679, 688 (1923). However, judicial review may be “necessary

to determine whether such rates are void on constitutional or other grounds.” Id.

B. CACJA’s failure to meet the “just and reasonable” standard required for

ratesetting results in an unconstitutional taking under the Fifth and Fourteen

Amendments.

The Fifth and Fourteenth Amendments of the United States Constitution prevent the

government from taking private property for public use without just compensation, in what is

commonly referred to as a “taking.” U.S. Const. amend. V; U.S. Const. amend. XIV.

Utility providers do not exist in an entirely free market. Rather, there are ratemaking

restrictions through the Natural Gas Act and the Federal Power Act that protect customers. Fed.

Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 603 (1944) (explaining “[t]he traditional

regulatory notion of the ‘just and reasonable’ rate was aimed at navigating the straits between

gouging utility customers and confiscating utility property.”) The Supreme Court has established

the “just and reasonable standard” to ensure that investor-owned utilities are able to earn a

reasonable return on the assets which serve the public. Hope Natural Gas Co., 320 U.S. at 603.

The just and reasonable standard works to prevent unconstitutional takings.

The question asked in Bluefield, and that must be asked here, is: what are just and

reasonable rates? See generally Bluefield Waterworks, 262 U.S. 679 (1923). In Vandalia, the

ratemaking statute states that “all rules and regulations affecting or pertaining to such rates or

charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable

is hereby declared to be unlawful.” 66 Vandalia S.A. § 35.01 (2019). Title V of CACJA forces

CPL’s coal fired power plants to prematurely retire, and only recover 50% or less of their

unamortized investment. This does not meet the just and reasonable standard and constitutes an

unconstitutional taking.

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In Bluefield, the court adopted three factors for estimating fair value of utility property:

(1) the original cost of construction, (2) the present cost of construction, and (3) other matters

such as expense of permanent improvements, probable earning capacity, and funds needed to

meet operating expenses. Bluefield Waterworks v. Public Service Comm’n, 262 U.S. 679, 691

(1923) (citing Smyth v. Ames, 169 U.S. 466, 546-548 (1898)). The court deviated from this

standard in Hope Natural Gas, where the “end result test” was established. 320 U.S. at 602-03.

Rather than being “bound to the use of any single formula or combination of formulae in

determining rates,” the end result test requires courts to find a balance between the competing

interests of utility investors and consumers. Id. at 609. Under this standard, a rate is reasonable

when it “enable[s] the company to operate successfully, to maintain its financial integrity, to

attract capital, and to compensate its investors for the risks assumed . . . .” Id. at 605. CACJA

neglects to produce a reasonable rate under this precedent.

Title V fails to find a balance between the competing interests of Vandalia and CPL

because Title V does not consider the probable earning capacity of Raven, Hunter, and Ft.

Duquesne. See Bluefield Waterworks 262 U.S. at 691. In Vandalia’s most recent integrated

resource plan, Raven, Hunter, and Ft. Duquesne were all included in CPL’s portfolio of

resources throughout the 10-year planning period from 2020 through 2029. R. at 2. Essentially,

CPL reasonably relied on the fact Vandalia would use their energy for at least the next 10 years.

Stipulation of Facts at 1. CPL has a reasonably backed investment in Raven, Hunter and Ft.

Duquesne based on Vandalia’s integrated resource plan and CPL’s expected ROE of 9.20%. Not

only has the ROE been decreased to 7.40%, CPL will lose all future years of anticipated returns

form Raven, Hunter and Ft. Duquesne. “[T]he investor interest has a legitimate concern with the

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financial integrity of the company whose rates are being regulated.” Hope Natural Gas Co., 320

U.S. at 603.

In using the “end result” test, the Supreme Court has established that the Commission

must also consider, “whether the order may reasonably be expected to maintain financial

integrity, attract necessary capital, and fairly compensate investors for the risks they have

assumed, and yet provide appropriate protection to the relevant public interests, both existing and

foreseeable.” In re Permian Basin Area Rate Case, 390 U.S. 757, 792 (1968). Therefore, when

setting recovery, Vandalia must consider the “consequences of its orders for the character and

future development of the industry.” Id. Rates do not need to be simply based on cost and rates

of returns, but can be “just and reasonable within the meaning . . . because it results in

satisfactory programs of exploration, development and production.” Id.

Under this precedent, Vandalia should consider the consequences that CACJA’s recovery

rate will have on the character and future development of the energy industry surrounding

Vandalia. CPL will be deprived of $780 million in non-recoverable rates, which will hinder their

ability to transition their energy production into renewables. The objective of CACJA is to

increase clean energy and job growth within the clean energy sector. If CPL can only recover

“[r]ates which are not sufficient to yield a reasonable return on the property used,” they cannot

continue to support public interests through energy production. Bluefield Waterworks, 262 U.S.

at 690. The rates proposed by CACJA “are unjust, unreasonable and confiscatory, and their

enforcement deprives the [CPL] of its property in violation of the Fourteenth Amendment.” Id.

C. In the alternative, it is contrary to the public interest to limit the rate

recovery to no more than fifty percent (50%) of the unamortized investment.

Even if Title V of CACJA does not violate the Fifth and Fourteenth Amendment it is

against the public interest to limit the rate of recovery to fifty percent of the unamortized

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investment of CPL’s properties. CACJA, Tit. V. CACJA limits the rate recovery of Raven,

Hunter and Ft. Duquesne, unless it is demonstrated to be contrary to the public interest. CACJA,

Tit. V. The term “‘public interest’ in the Gas and Power Acts . . . is a charge to promote the

orderly production of plentiful supplies of electric energy . . . at just and reasonable rates.” Nat'l

Ass'n for Advancement of Colored People v. Fed. Power Comm'n, 425 U.S. 662, 670 (1976).

CACJA burdens CE with $780 million in non-recovery, which impacts their ability to supply

energy to Vandalia residents and invest in renewable energy production. This diminished

financial return is undoubtedly contrary to the public interest.

CPL has been a part of Vandalia for more than 40 years. It has contributed to the

economy, development, and social fabric of the community. CPL serves as a place of

employment for thousands of hard working Vandalians, who will soon be out of a job as a result

of CACJA. The limited recovery rate will irreversibly damage CPL’s financial integrity and

prevent their ability to contribute as a supplier of energy. Title V of CACJA jeopardizes CPL’s

ability to develop and expand new clean energy within Vandalia’s borders and thus thwarts the

“public interest” and the objectives of CACJA. See Hope Natural Gas Co., 320 U.S. at 609

(1944).

III. Vandalia violated the Federal Power Act and the Supremacy Clause of the U.S.

Constitution with respect to its net metering program under Title IV of CACJA.

Vandalia’s net metering program in Title IV of CACJA violates the Federal Power Act

and the Supremacy Clause because Vandalia set the rates for energy credits in the program at

retail in violation of federal law. The rates for generation sources located on the customer side of

the retail meter (Customer-generators) are wholesale transactions subject to FERC’s sole

jurisdiction under the FPA and should therefore be priced in accordance with federal law.

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A. Standard of Review

Constitutional challenges under the Supremacy Clause are reviewed de novo. See U.S. v.

Hawkins, 796 F.3d 843 (8th Cir. 2015).

B. Vandalia’s net metering program in Title IV of CACJA violates the FPA’s

grant of authority to FERC to regulate wholesale transactions in energy

marketplaces.

Vandalia’s net metering program in Title IV of CACJA credits Customer-generators

providing net positive energy output to the electric grid “at the [EU’s] full retail rate.” CACJA,

Tit. IV. Vandalia seeks to regulate these transactions as retail rates, subject to state jurisdiction.

But because the Customer-generator provides these “exports” to the EU for resale to other

customers, this is a wholesale transaction subject to FERC’s jurisdiction under the FPA. The EU

purchases the energy from the Customer-generator (through credits) with the intent to later sell it

to consumers. In endeavoring to regulate what are clearly wholesale rates under the exclusive

jurisdiction of FERC, Vandalia has acted contrary to the FPA.

Notably, Vandalia did not dispute below that this exchange is in fact a wholesale

transaction. R. at 11. Rather, Vandalia urged that FERC has disclaimed its jurisdiction over the

kind of net metering implemented by CACJA, citing FERC’s dated decisions in SunEdison LLC

and MidAmerican Energy. 129 F.E.R.C. ¶ 61,146 (2009); 94 F.E.R.C. ¶ 61,340 (2001). These

FERC decisions stand for the proposition that jurisdiction over energy sales is to be determined

based on the net flow over the retail meter aggregated over a full retail billing cycle. R. at 11.

Essentially, “where there is no net sale over the applicable billing period,” (no excess energy

produced for resale) by the Customer-generator to the EU, the EU is “not making a sale at

wholesale, i.e., a sale for resale.” SunEdison LLC, 129 F.E.R.C. ¶ 61,146, at 61,621 (internal

quotations omitted).

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Vandalia is mistaken that these decisions offer any support for the assertion that FERC

has disclaimed its jurisdiction in this regard. The D.C. Circuit has since implicitly rejected the

Commission’s reasoning in SunEdison LLC and MidAmerican Energy by holding that

jurisdiction cannot reasonably be based on the length of a netting period. See Southern Cal.

Edison Co. v. FERC, 603 F.3d 996 (D.C. Cir. 2010); Calpine Corp. v. FERC, 702 F.3d 41 (D.C.

Cir. 2012). The Court denounced any attempt to determine whether a retail sale has occurred

using the length of a netting period as “arbitrary and unprincipled—certainly as a jurisdictional

standard.” Calpine Corp. v. FERC, 702 F.3d at 46 (quoting So Cal. Edison v. FERC, 603 F.3d at

1000.)

Vandalia’s attempt to wield its authority over retail sales in CACJA’s net metering

program is contrary to the FPA’s grant of authority to FERC and, as will be explained below,

cannot be permitted under the Supremacy Clause.

C. Because Title IV of CACJA runs afoul of the FPA, it is preempted by federal

law.

The Supremacy Clause of the United States Constitution expressly provides that federal

law “shall be the supreme law of the land.” U.S. Const. art. VI, cl. 2. This constitutional

provision allows Congress to preempt, “i.e. invalidate, a state law through federal legislation.”

Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 376 (2015). “The question whether a certain state

action is preempted by federal law is one of congressional intent.” Gade v. National Solid Wastes

Management Ass'n, 505 U.S. 88, 96 (1992). Preemption can be either express or implied, but “is

compelled whether Congress’ command is explicitly stated in the statute’s language or implicitly

contained in its structure and purpose.” Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977).

The U.S. Supreme Court has recognized at least two types of implied preemption for when

express preemptive language is lacking: conflict preemption and field preemption.

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Most relevant to the issue at hand, field preemption occurs when federal regulation “is so

pervasive as to make reasonable the inference that Congress left no room for the States to

supplement it.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). There is a

presumption against preemption when Congress legislates in a field in which States have

traditionally occupied. In such a case, courts assume “the historic police powers of the States

were not to be superseded by the Federal Act unless that was the clear and manifest purpose of

Congress.” Id. Here, Vandalia has entered a field reserved solely for federal governance—the

wholesale energy market.

Title IV of CACJA thus runs afoul of the FPA and the Supremacy Clause of the U.S.

Constitution. This Court should affirm the District Court’s identical conclusion on this issue.

IV. Vandalia’s prohibition on the aggregation of DERs in Title VI, Section 2 of CACJA

runs afoul of the FPA and is thus preempted by federal law.

Title VI, Section 2 of CACJA undermines FERC’s authority under the FPA and directly

conflicts with federal law. When “compliance with both federal and state regulations is a

physical impossibility,” state law yields to federal objectives under the Supremacy Clause.

Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 (1963). CACJA’s

prohibition on DER aggregation in Vandalia cannot be reconciled with Order 2222. FERC has

acted completely within its jurisdictional boundaries in issuing Order 2222, therefore Vandalia’s

blatant attempt to ignore FERC’s Order and further its own agenda is a violation of the FPA and

must be preempted under the Supremacy Clause of the U.S. Constitution.

A. Standard of Review

As stated above, Constitutional challenges under the Supremacy Clause are questions of

law subject to review de novo. See Perry v. Los Angeles Police Dept., 121 F.3d 1365 (9th Cir.

1997).

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FERC’s Order 2222 will be upheld unless its issuance was “arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The scope

of review under the “arbitrary and capricious” standard is narrow and a court is not to substitute

its judgment for that of the agency. Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983). The Court should uphold a rule as long as the agency has

“examined the relevant considerations and articulated a satisfactory explanation for its action,

including a rational connection between the facts found and the choice made.” FERC v. Electric

Power Supply Ass'n. (EPSA), 136 S.Ct. 760, 782 (2016).

B. Title VI, Section 2 of CACJA infringes on FERC’s authority over wholesale

markets under the FPA.

FERC issued Order 2222 pursuant to its wholesale authority under the FPA. See

Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional

Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶

61,247 (Sep. 17, 2020).

The FPA provides FERC with jurisdiction over wholesale energy rates and any “rule,

regulation, [or] practice . . . affecting” such rates. 16 U.S.C. §§ 824(b), 824e(a). FERC also has

“the exclusive authority to determine who may participate in the wholesale markets.” National

Association of Regulatory Utility Commissioners v. FERC (NARUC), 964 F.3d 1177, 1187 (D.C.

Cir. 2020). The Supreme Court has highlighted a three-factor test for determining whether a

particular order falls under FERC’s wholesale jurisdiction or exceeds this jurisdiction. The test is

as follows: (1) whether the practice at issue in the Order “directly affects wholesale rates,” (2)

whether the Commission has regulated retail sales, and (3) whether the practice conflicts with the

“core purposes” of the FPA. EPSA, 136 S.Ct. at 773.

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i. Order 2222 directly affects wholesale rates.

“The FPA delegates responsibility to FERC to regulate the interstate wholesale market

for electricity—both wholesale rates and the panoply of rules and practices affecting them.” Id.

Wholesale rates and “all rules and regulations affecting or pertaining to such rates or charges,”

must be “just and reasonable.” 16 U.S.C. § 824d(a). Under the first factor of the Supreme

Court’s test, FERC’s “affecting” jurisdiction is limited to “rules or practices that directly affect”

wholesale rates. EPSA, 136 S.Ct. at 774 (internal quotations omitted).

Order 2222 directly affects wholesale rates in the manner contemplated by the Supreme

Court. The Order increases competition in wholesale energy markets, which in turn lowers

wholesale rates. The aggregation of DERs under the Order “lower[s] costs for consumers

through enhanced competition, more grid flexibility and resilience, and more innovation within

the electric power industry.”5 The Supreme Court in EPSA found that FERC did not exceed its

jurisdiction under the first factor because the increased participation of demand response

providers would “ratchet down the rates wholesale purchasers pay,” thus affecting wholesale

rates directly. EPSA, 136 S.Ct. at 775. The D.C. Circuit has also accentuated this point in the

context of FERC’s Order No. 841. NARUC, 964 F.3d at 1181. FERC issued Order 841 to

“remove existing barriers to the participation of electric storage resources (ESRs)” in the

RTO/ISO markets, in a similar manner to FERC’s participation goals for DERs in Order 2222.

Id. at 1182. In applying the Supreme Court’s three-factor test, the Court “swiftly concluded” that

FERC did not exceed its authority under the first factor. Id. at 1186. The Order at issue “solely

target[ed] the manner in which an ESR may participate in wholesale markets” and was “designed

5 FERC Order No. 2222: Fact Sheet.

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to increase wholesale competition, thereby reducing wholesale rates.” Id. As such, the

participation of ESR’s in the market directly affected wholesale rates. Id.

Similarly, the aggregation of DERs under Order 2222 directly affects wholesale rates

because the increase in wholesale competition will provide lower prices for consumers.

Therefore, FERC has not exceeded its jurisdictional authority under the first factor of the test.

ii. Order 2222 does not seek to regulate the retail market.

In order to pass muster under the second factor, FERC cannot “unlawfully regulate[]

matters left to the States.” NARUC, 964 F.3d at 1186. The FPA left regulatory authority over

retail sales to the States and FERC “cannot take an action transgressing that limit.” 16 U.S.C. §

824(b); EPSA, 136 S.Ct. at 775.

But of course, “transactions that occur on the wholesale market have natural

consequences at the retail level.” Id. at 776. Effects on the retail market are likely to be a

byproduct of changes in regulation of wholesale rules and practices. When these effects are the

result of FERC exercising its statutory authority over wholesale markets, effects on retail rates

“are of no legal consequence.” NARUC, 964 F.3d at 1187 (quoting EPSA, 136 S.Ct. at 776). The

Court in EPSA held that FERC met the requirements of the second factor as well. The Court

reasoned that “when FERC regulates what takes place on the wholesale market, as part of

carrying out its charge to improve how that market runs, then no matter the effect on retail rates,

§ 824(b) imposes no bar.” EPSA, 136 S.Ct. at 776.

Vandalia argued below that Title VI, Section 2 of CACJA does not violate the FPA

because the participation of DERs in energy markets should be regulated under state law. R. at

11. Vandalia bases its argument on the idea that states have jurisdiction over retail electric

service. R. at 11. Vandalia suggests that because state regulators have authority over the terms

and conditions of interconnection to the distribution system, they also have authority to limit

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DER use of the distribution system. R. at 11. Not so. Granted, states were given some authority

under the FPA. See 16 U.S.C. § 824(b). But Vandalia’s conflicting prohibition in Title VI,

Section 2 of CACJA falls completely outside a state’s regulatory capacity under the FPA.

Incidental effects on the retail market are bound to occur, as wholesale and retail markets “are

not hermetically sealed from each other.” EPSA, 136 S.Ct. at 776. But states cannot dip their

regulatory feet into wholesale markets as Vandalia attempts to do here.

Therefore, there is no support for a conclusion that FERC has exceeded the bounds of its

jurisdiction under the second factor of the test.

iii. Order 2222 does not conflict with the FPA’s core purposes.

Under the final factor, FERC cannot “flout the FPA’s core objects.” EPSA, 136 S.Ct. at

764. The FPA aims to “protect power consumers against excessive prices” and “enhance

reliability in the wholesale electricity market.” Pennsylvania Water & Power Co. v. Federal

Power Commission, 343 U.S. 414, 419 (1952); EPSA, 136 S.Ct. at 773.

FERC did not exceed its authority over the wholesale market by conflicting with the

purposes of the Act. To the contrary, FERC’s issuance of Order 2222 sought to further the

purposes of the FPA by ensuring just and reasonable prices in the marketplace through enhanced

competition. The Court found similarly in EPSA that “bringing down costs” evidences an intent

to further the FPA’s purposes, not conflict with them. 136 S.Ct. at 781. Thus the Court held that

under factor three, “any last flicker of life in EPSA’s argument” was “extinguished.” Id. at 782.

The FPA’s division of authority between FERC and the states clearly binds Vandalia and

all other states to the requirements of Order 2222. Any legislation to the contrary will be

preempted under the Supremacy Clause.

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C. Because Title VI, Section 2 directly conflicts with Order 2222 and FERC’s

authority under the FPA, it should be found unconstitutional under the

Supremacy Clause of the U.S. Constitution.

No matter how legitimate Vandalia’s concerns are regarding DER aggregation, Title VI,

Section 2 of CACJA is undoubtedly preempted by federal law. Vandalia’s prohibition on the

aggregation of DERs in the state is a violation of the Supremacy Clause because (1) there is a

direct conflict with federal law, and (2) the field is reserved solely for federal regulation.

i. Title VI, Section 2 is unconstitutional because it directly conflicts with

federal law under the FPA.

Conflict preemption is found where “compliance with both federal and state regulations

is a physical impossibility,” Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-

143 (1963), or where state law is “an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67 (1941). As the

District Court aptly put it, the case at hand is “a classic case of ‘conflict preemption’ under

Supremacy Clause jurisprudence.” Opinion at 6. Title VI, Section 2 directly conflicts with Order

2222, making it impossible to comply with both Vandalia law and federal law.

The Vandalia Legislature held a special session specifically to amend CACJA in light of

Order 2222 and add Title VI to the statute. R. at 4. Vandalia was aware of the contents of the

Order and nonetheless added a provision to CACJA prohibiting DERs from aggregating in

Vandalia for participation purposes. Vandalia deliberately ignored federal law and amended

CACJA to further its own goals. When there is a conflict between state law and federal law, as

there is here, federal law preempts state law. Paul, 373 U.S. at 142-143.

As such, Vandalia’s conflicting position on the aggregation of DERs in CACJA cannot

be permitted under the Supremacy Clause of the U.S. Constitution.

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ii. Title VI, Section 2 is also unconstitutional because it seeks to regulate

a field occupied exclusively by FERC as intended by Congress in the

FPA.

Courts have invalidated state law where “Congress may have intended to foreclose any

state regulation in the area” through field preemption. Oneok, Inc., 575 U.S. at 377 (quoting

Arizona v. United States, 567 U.S. 387, 401 (2012) (internal quotations omitted)). The rules

governing field preemption apply here to render Title VI, Section 2 of CACJA invalid. “Any

State effort that aims directly at destroying FERC’s jurisdiction by necessarily deal[ing] with

matters which directly affect the ability of the [Commission] to regulate comprehensively and

effectively over that which it has exclusive jurisdiction invalidly invade[s] the federal agency’s

exclusive domain.” NARUC, 964 F.3d at 1188 (quoting Northern Natural Gas Co. v. State Corp.

Commission of Kan., 372 U.S. 84, 91-92 (1963) (internal quotations omitted)).

Vandalia argued below that states should have authority over DER participation because

states would be best able to decide whether to authorize third-party aggregators to transact with

retail customers. R. at 11. But it does not matter what Vandalia thinks is best, as long as FERC

determines there is a problem affecting “just and reasonable” wholesale rates and acts within its

jurisdiction to fix the problem as it did here. 16 U.S.C. § 824d(a).

FERC made a finding prior to issuing Order 2222 that prohibitions on DER aggregations

were causing unjust and unreasonable rates in the wholesale market. If FERC thought states

would be best able to decide whether third-party aggregators should be participants in the energy

market, then Order 2222 would have included an opt-out provision, allowing states to determine

whether DER aggregation would be permitted in their state. In fact, FERC specifically decided

not to include an opt-out provision because equitable DER participation in the RTO/ISO markets

“is essential to the Commission’s ability to fulfill its statutory responsibility to ensure that

wholesale rates are just and reasonable.” Order No. 2222, 172 FERC ¶ 61,247 at P 46. FERC has

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included such opt-out provisions in other orders previously, but decided not to in Order 2222

because the benefits of allowing DER aggregators broader access outweighed any arguments

favoring an opt-out. See EPSA, 136 S.Ct. at 779; R. at 9.

State intervention in matters subject to federal control “cannot be sustained when they

threaten . . . the achievement of the comprehensive scheme of federal regulation.” N. Nat. Gas

Co., 372 U.S. at 94. Vandalia’s direct attack on Order 2222 “threatens” FERC’s duty to ensure

that rules or practices ‘affecting’ wholesale rates are just and reasonable” EPSA, 136 S.Ct. at 774

(citing 16 U.S.C. § 824d(a)). Title VI, Section 2 cannot stand under the Supremacy Clause for

these reasons.

CONCLUSION

For the foregoing reasons, the Court should affirm the U.S. District Court of Vandalia’s

grant of summary judgment in favor of Commonwealth Energy on all constitutional challenges

under consideration.

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Certificate of Service

Certificate of Service Pursuant to Official Rule IV, Team Members representing

COMMONWEALTH ENERGY, certify that our Team emailed the brief (PDF version) to the

West Virginia University Moot Court Board in accordance with the Official Rules of the

National Energy Moot Court Competition at the West Virginia University College of Law. The

brief was emailed before 1:00 p.m. Eastern time, February 3, 2021.

Respectfully submitted,

Team No. 22