State of North Dakota v. Beverly Heydinger

825 F.3d 912
CourtCourt of Appeals for the Eighth Circuit
DecidedJune 15, 2016
Docket14-2156, 14-2251
StatusPublished
Cited by15 cases

This text of 825 F.3d 912 (State of North Dakota v. Beverly Heydinger) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State of North Dakota v. Beverly Heydinger, 825 F.3d 912 (8th Cir. 2016).

Opinions

LOKEN, Circuit Judge.

A 2007 Minnesota statute provides that “no person shall ... (2) import or commit to import from outside the state power from a new large energy facility that would contribute to statewide power sector carbon dioxide emissions; or (3) enter into a new long-term power purchase agreement that would increase statewide power sector carbon dioxide emissions.” Minn. Stat. §216H.03, subd. 3(2) and (3). The State of North Dakota, three non-profit cooperative entities that provide electric power to rural and municipal utilities in Minnesota, and others brought this action against the Commissioners of the Minnesota Public Utilities Commission (“MPUC”) and the Minnesota Department of Commerce (“MDOC”) (collectively, “the State”). Plaintiffs claimed, inter alia, that these prohibitions violate the Commerce Clause. After extensive submissions and argument, the district court1 granted plaintiffs summary judgment and a permanent injunction, concluding that the above-quoted provisions are “impermissible extraterritorial legislation” and therefore “a [914]*914per se violation of the dormant Commerce Clause.” North Dakota v. Heydinger, 15 F.Supp.3d 891, 919 (D. Minn. 2014). The State appeals. We affirm.

I. Background.

To light and heat our homes and offices, electric power must be generated from an energy source, such as fossil and nuclear fuels, sun, and wind; transmitted over high voltage transmission lines from generating facilities to distribution stations; and delivered to individual consumers over local, low voltage distribution lines. An electric utility may engage in any or all of these activities.

The Federal Power Act, enacted in 1935, responded to a Supreme Court decision that the Commerce Clause bars the States from regulating certain interstate electricity transactions. Pub. Util. Comm’n of R.I. v. Attleboro Steam & Elec. Co., 273 U.S. 83, 89, 47 S.Ct. 294, 71 L.Ed. 549 (1927). To fill this gap, Congress granted the Federal Power Commission, now the Federal Energy Regulatory Commission (“FERC”), jurisdiction over “the transmission of electric energy in interstate commerce and ... the sale of electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824(b)(1). The Act left to the States most matters they had traditionally regulated, including local electric utility rates and the siting of power plants, see § 824(a) and (b), subject to limits imposed by the Commerce Clause. See New York v. FERC, 535 U.S. 1, 19-23, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002); New Eng. Power Co. v. New Hampshire, 455 U.S. 331, 340-41, 102 S.Ct. 1096, 71 L.Ed.2d 188 (1982).

It proved difficult to bring electricity efficiently and cost effectively to rural areas, and to municipalities that have publicly-owned distribution systems. To address this problem, small local utilities formed large cooperative entities having sufficient capital to build captive generation and transmission facilities and to leverage local members’ buying power in an increasingly integrated electric power market. Three of these cooperative entities are a principal focus in this case, Basin Electric Cooperative (“Basin”); Minnkota Power Cooperative, Inc. (“Minnkota”); and Missouri River Energy Services (“MRES”). Headquartered in North Dakota, Basin has 135 rural electric cooperative members spread across nine States, including twelve in Minnesota. Basin owns its own generation and transmission resources and enters into power purchase agreements with other generation and transmission utilities. Minnkota is a regional generation and transmission utility based in North Dakota that provides electric power to its members, who are distribution cooperatives in North Dakota and Minnesota, including various Indian reservations. Located in South Dakota, MRES provides power to more than sixty municipalities in Minnesota and three other States.

Technology has substantially changed the electric power industry since 1935, reducing the cost of generating and transmitting electricity and enabling new entrants to challenge the generating monopolies of traditional utilities. See Morgan Stanley Capital Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 535-36, 128 S.Ct. 2733, 171 L.Ed.2d 607 (2008). To encourage “robust competition in the wholesale electricity market,” FERC encouraged utilities participating in regional transmission grids to create independent system operators (“ISOs”) and regional transmission organizations (“RTOs”), entities that “would assume operational control — but not ownership — of the transmission facilities owned by its member utilities [and] then provide open access to the regional transmission system to all electricity generators at rates established in a single ... tariff that applies to all eligible users.” Midwest ISO Transmis[915]*915sion Owners v. FERC, 373 F.3d 1361, 1364 (D.C. Cir. 2004) (quotation omitted); see 18 C.F.R. § 35.34(a). Today, these regional organizations control most of the nation’s transmission grid. FERC v. Elec. Power Supply Ass’n, — U.S.-, 136 S.Ct. 760, 768, 193 L.Ed.2d 661 (2016).

Basin, Minnkota, and MRES are members of the Midcontinent Independent Transmission System Operator (“MISO”), an ISO established in 1998 and approved by FERC as the first RTO in 2001. MISO controls over 49,000 miles of transmission lines, a grid that spans fifteen States, including Minnesota, and . parts of Canada. See Midwest ISO, 373 F.3d at 1365. Its thirty transmission-owning members include investor-owned utilities, public power utilities, independent power producers, and rural electric cooperatives. In Minnesota, most retail distribution utilities, now referred to as load-serving entities or “LSEs,” see 16 U.S.C. § 824q(a)(2), are either members of MISO or non-members who participate in its energy markets.

FERC requires that an approved RTO such as MISO has operational authority for all transmission facilities under its control, be the only provider of transmission services over those facilities, and have sole authority to approve or deny all requests for transmission service. “Thus, whatever its structure, once a utility [makes] the decision to surrender operational control of its transmission facilities to [MISO], any transmissions across those facilities [are] subject to the control of [MISO].” Midwest ISO, 373 F.3d at 1365. The Supreme Court recently explained how an RTO such as MISO efficiently allocates the supply and demand for electric power:

[RTOs] obtain (1) orders from LSEs indicating how much electricity they need at various times and (2) bids from generators specifying how much electricity they can produce at those times and how much they will charge for it. [RTOs] accept the generators’ bids in order of cost (least expensive first) until they satisfy the LSEs’ total demand. The price of the last unit of electricity purchased is then paid to every supplier whose bid was accepted, regardless of its actual offer; and the total cost is split among the LSEs in proportion to how much energy they have ordered.

Elec. Power Supply, 136 S.Ct. at 768.

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Bluebook (online)
825 F.3d 912, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-of-north-dakota-v-beverly-heydinger-ca8-2016.