The Ninth Circuit Court of Appeals has upheld the dismissal of a lawsuit brought by PacifiCorp, a multi-state utility, against the Washington State Department of Ecology. The court ruled that Washington's Climate Commitment Act (CCA) does not violate the Dormant Commerce Clause. This decision affects how utilities manage carbon emissions and the costs associated with them, particularly for customers outside Washington.
In its ruling, the court confirmed that PacifiCorp's claims regarding increased electricity costs for its non-Washington customers were unfounded. The court found that the CCA's regulations do not discriminate against out-of-state entities in a way that would violate interstate commerce laws.
Background
PacifiCorp is an Oregon-based utility company that serves approximately two million customers across six states, including around 140,000 customers in Washington. The company operates the Chehalis Generation Facility, a natural gas-fired power plant located in Washington. In 2021, Washington enacted the CCA, which requires certain entities to obtain allowances for their greenhouse gas emissions, aiming to transition to a carbon-neutral electricity supply by 2030.
The CCA allows electric utilities subject to the Clean Energy Transformation Act (CETA) to receive no-cost allowances to mitigate costs for Washington customers. However, PacifiCorp argued that it does not receive these allowances for emissions related to electricity exported to customers in other states. The company claimed this situation unfairly burdens its non-Washington customers with higher electricity costs.
After filing a lawsuit, PacifiCorp sought a preliminary injunction to prevent the enforcement of the CCA's provisions that it argued discriminated against out-of-state customers. The case was initially dismissed by the district court, which stated that PacifiCorp's claims did not meet the necessary legal standards.
The Ruling
The Ninth Circuit affirmed the district court's dismissal of PacifiCorp's complaint, stating that the utility failed to demonstrate that the CCA's regulations were applied in a discriminatory manner against similarly situated entities. The court noted, "PacifiCorp's exported power, which is not subject to CETA, is not similarly situated to utilities providing in-state power under CETA."
The ruling emphasized that the regulatory distinctions between in-state and out-of-state electricity production under the CCA and CETA justified the different treatment of emissions. The court stated, "The CCA and CETA operate in tandem to reduce carbon emissions," indicating that the laws were designed to work together rather than create an unfair advantage for in-state utilities.
Judge Johnnie B. Rawlinson wrote the opinion, with Judge Daniel A. Bress dissenting. Judge Bress argued that the CCA discriminates against interstate commerce by imposing greater costs on electricity sales outside Washington. He suggested that the case should be remanded for further factual development.
Impact
This ruling has significant implications for how utilities across the United States manage carbon emissions and comply with state regulations. By affirming the dismissal, the Ninth Circuit reinforces the ability of states to regulate emissions within their borders without violating the Dormant Commerce Clause, as long as the regulations are not discriminatory against out-of-state entities.
The decision may set a precedent for similar cases involving state environmental regulations and interstate commerce. Utilities operating in multiple states may need to reassess their compliance strategies and cost structures in light of this ruling, particularly if they serve customers in states with different regulatory frameworks.
What's Next
PacifiCorp has the option to appeal the Ninth Circuit's decision to the U.S. Supreme Court, but it remains unclear whether the company will pursue this route. There are no related cases pending at this time.