Allco Finance Ltd. v. Klee

On August 17, 2017, the Second Circuit Court of Appeals denied a petition for panel rehearing or rehearing en banc of its opinion upholding Connecticut renewable energy programs over claims that they violated the dormant Commerce Clause or were preempted by federal law.

The Second Circuit Court of Appeals affirmed the dismissal of claims by Allco Finance Limited (Allco) that federal law preempted Connecticut’s renewable energy solicitations and that Connecticut’s Renewable Portfolio Standard (RPS) program violated the dormant Commerce Clause. Allco is an owner, operator, and developer of solar energy projects throughout the country, including in Georgia and New York. The Second Circuit rejected the claim that the renewable energy solicitations exceeded the limited authority granted to states with respect to wholesale sales of electricity under the Federal Power Act and the Public Utility Regulatory Policies Act. The Second Circuit said the Connecticut statutes authorizing the solicitations did not compel utilities to enter into contracts with specific bidders. The Second Circuit also distinguished the Connecticut program from a Maryland regulatory scheme that the U.S. Supreme Court determined was preempted in Hughes v. Talen Energy Marketing, LLC, and found that the renewable energy solicitation process was a permissible exercise of state power under the Federal Power Act. The Second Circuit also rejected Allco’s claims that Connecticut’s RPS discriminated against its facilities in Georgia (by barring the facility’s renewable energy certificates from counting towards utilities’ RPS requirements) and New York (by requiring payment of transmission fees) in violation of the dormant Commerce Clause. The Second Circuit agreed with Connecticut that the RECs produced by the Georgia facility were different products from RECs produced by facilities in the Northeast and that the RPS merely treated different products differently. The court further concluded that the burden imposed by Connecticut’s RPS program was not excessive in relation to the putative local benefits. The Second Circuit found that Allco had not sufficiently pled an excessive burden stemming from the transmission fees its New York facility had to pay to qualify for the RPS program.