The federal district court for the Western District of Washington dismissed with prejudice an electric utility’s lawsuit challenging the allocation of “no-cost” allowances under Washington’s Climate Commitment Act to electric utilities that were already subject to the decarbonization mandate of an earlier statute. The utility argued that the requirement that it purchase allowances for emissions generated by its gas-fired power plant in Washington for power serving out-of-state customers while receiving no-cost allowances for power serving Washington consumers violated the dormant Commerce Clause. The court ruled that the utility could not state a cognizable dormant Commerce Clause claim because the categories of in-state and exported energy were not “substantially similar” since the energy produced for use in state was “subject to a preexisting, comprehensive regulatory regime” to which exported energy was not. The court also rejected the utility’s argument that it stated a dormant Commerce Clause claim based on the application of the Pike balancing test, which “generally stands for the principle that ‘a law’s practical effects may also disclose the presence of a discriminatory purpose.’” The court found that a Pike-based claim failed because the utility failed to allege a substantial burden on interstate commerce since “retail electric customers do not compete in a national marketplace, and any increased costs to [the utility’s] out-of-state customers must be approved by their own state’s regulatory commissions.” The court also rejected the utility’s arguments that the Climate Commitment Act discriminated against out-of-state companies or that the state regulations allocating no-cost allowances misinterpreted the statute.

Lawsuit challenging the allocation of “no-cost” allowances under Washington’s Climate Commitment Act to electric utilities that were already subject to the decarbonization mandate of an earlier statute.

PacifiCorp v. Watson

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Washington Federal Court Rejected Utility’s Dormant Commerce Clause Challenge to Allocation of Washington Cap-and-Invest Allowances

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Washington Federal Court Rejected Utility’s Dormant Commerce Clause Challenge to Allocation of Washington Cap-and-Invest Allowances

Target

Policy instrument

Impacted group

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Finance