United States: First Circuit Decision Finds No Private Right Of Action Under PURPA Against A Utility

On November 13, 2017, the U.S. Court of Appeals for the 1st Circuit held in Allco Renewable Energy Ltd. v. Mass. Elec. Co.1 that a Qualifying Facility (QF) does not have a private right of action against a utility company under the Public Utility Regulatory Policies Act of 1978 (PURPA). Although the court's finding is no surprise, it helps clarify PURPA's complex enforcement mechanism.

Background

Allco Renewable Energy Limited owns 11 solar QFs in Massachusetts and wanted to sell the output to Massachusetts Electric Company d/b/a National Grid. As implemented by the Federal Energy Regulatory Commission's (FERC) regulations, PURPA generally requires that utilities purchase the output of QFs at the utility's "avoided cost." National Grid offered to purchase Allco's power under its standard contract, which offered to pay Allco the spot market rate for power.2 Allco petitioned the Massachusetts Department of Public Utilities (DPU) to investigate the reasonableness of National Grid's offer, which did not conform to Allco's understanding of PURPA. The DPU denied Allco's petition, finding that National Grid's rate was consistent with its regulations.

Allco then petitioned FERC to bring an enforcement action against the DPU on the grounds that the DPU's regulations conflicted with FERC's regulations implementing PURPA, which FERC declined to do. When FERC declines to bring an enforcement action, the aggrieved QF may file an enforcement action in federal district court. Allco then filed suit against the DPU and National Grid in the District of Massachusetts, seeking a declaration from the district court that National Grid had a "legally enforceable obligation" to purchase the output of Allco's QFs—in addition to damages for lost income. The district court found that the DPU's regulations were inconsistent with PURPA, but dismissed Allco's claims against National Grid on the grounds that Allco did not have a private right of action to enforce National Grid's obligation to purchase its QFs' output.

First Circuit Decision

The 1st Circuit upheld the district court's dismissal of Allco's claims against National Grid and, in so doing, rejected the argument that PURPA implied an enforcement route against a utility outside of the express statutory scheme. The court summarized what it described as PURPA's "intricate enforcement framework," which authorizes three types of enforcement actions: (1) by FERC in federal court challenging the implementation of PURPA by the states, (2) by QFs in state or federal court challenging the implementation of PURPA by the states or (3) by QFs in state court challenging how a utility has applied state-implemented PURPA regulations.3 Focusing on the first two types of actions, PURPA does allow a QF to sue a state regarding its implementation of PURPA in federal court, but only if it first petitions FERC to enforce the statute and FERC declines to do so. However, PURPA's statutory framework does not permit a QF to sue a utility in federal court to enforce the statute's must-buy obligation. Instead, a QF seeking relief under PURPA may only (a) file a complaint against the utility at the state commission and then challenge any adverse decision by the state commission in state court, or (b) petition FERC to bring an implementation challenge against the state and, if FERC declines, then sue the state in federal court.4

In its decision, the 1st Circuit relied on extensive Supreme Court precedent that private rights of action under federal law cannot be "created by mere implication, but must be unambiguously conferred."5 The court also observed that the existence of express provisions of PURPA governing enforcement also "cut against" a private right of action.6 Finally, the Court pointed to FERC's role in enforcing the statute, observing that a provision providing a potential "administrative remedy" also speaks against a private right of action.7

The 1st Circuit's decision clarifies the narrow and specific nature of a QF's rights under PURPA.8 Although a remedy exists for a QF to enforce a utility's obligations, the QF must rely on the mechanisms that the statute provides, rather than take its dispute directly to federal court.

Footnotes

1. Allco Renewable Energy Ltd. v. Mass. Elec. Co., No. 17-1296 (1st Cir. Nov. 13, 2017) ("Nov. 13th Decision").

2. Allco Renewable Energy Ltd. v. Mass. Elec. Co., 208 F. Supp. 3d 390, 395 (D. Mass. 2016).

3. Nov. 13th Decision at 5-6.

4. Id. at 17.

5. Id. at 11 (internal quotations omitted).

6. Id.

7. Id. at 11-12.

8. The 1st Circuit, relying on much of the same reasoning, also concluded that the Federal Power Act does not provide a private right of action against a utility. Id. at 19-20.

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