City of New Martinsville, West Virginia v. Public Service Commission of West Virginia

Filing 22

MEMORANDUM OPINION AND ORDER granting party-defendants by Monongahela Power Company and Potomac Edison Companys 12 MOTION to Intervene. Signed by Judge John T. Copenhaver, Jr. on 12/21/2012. (cc: attys; any unrepresented party) (tmr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
CITY OF NEW MARTINSVILLE,
WEST VIRGINIA,
Plaintiff,
v.

Civil Action No. 2:12-cv-1809

THE PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA,
Defendant.

MEMORANDUM OPINION AND ORDER
Pending is the motion to intervene as party-defendants
by Monongahela Power Company (“Mon Power”) and The Potomac Edison
Company (“Potomac Edison” and together with Mon Power, “the
Companies”), filed on September 13, 2012.

The motion is

unopposed, although the plaintiff City of New Martinsville (“the
City”) on September 27, 2012 filed a response disputing certain
factual assertions.

For the reasons set forth below, the court

finds that the Companies meet the requirements for intervention as
a matter of right and grants their motion.

I. Background
This case arises from a dispute over ownership of West
Virginia renewable energy credits.

The City is a municipal

corporation organized under the laws of West Virginia.
¶ 13.

Compl.

It owns and operates both a municipal electrical system

serving approximately 1800 customers and a run-of-river hydropower
facility known as the Hannibal Project.

Id. ¶ 14.

On April 1,

1986 the City and Mon Power entered into a long-term EEPA
(“electric energy purchase agreement”), whereby Mon Power has
purchased the energy and capacity generated at the Hannibal
Project.

Compl. ¶ 16.
The defendant Public Service Commission of West Virginia

(“the Commission”) is an administrative agency of the State of
West Virginia, having the “authority and duty to enforce and
regulate the practices, services and rates of public utilities.”
W. Va. Code ¶ 24-1-1.

In 2009, the West Virginia legislature

passed the Alternative and Renewable Energy Portfolio Act (“the
Portfolio Act”), requiring the Commission to create a system of
tradable renewable energy credits.

W. Va. Code § 24-2F-1-12.

The

Portfolio Act awards credits to electric utilities that generate
or purchase electricity from specified alternative and renewable
energy resource facilities.

Id. § 24-2F-4(b).

It requires

electrical utilities to “own an amount of credits equal to a
certain percentage of electricity . . . sold by the electric
utility in the preceding year to retail customers in West
Virginia.”

Id. § 24-2F-5(a).

Electric utilities must submit
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Portfolio Standard Compliance Plans to the Commission for its
review and approval.

Compl. ¶ 9 (citing 150 C.S.R. § 34-8.1).

The Portfolio Act requires both the City and Mon Power,
as electrical utilities, to own a certain amount of credits.
¶¶ 31-32.

Id.

The City‟s Hannibal Project, which has been certified

as a qualified renewable energy resource facility under the
Portfolio Act, provides one source of credits.

Id. ¶ 26.

The

EEPA and a 2004 Amendment between Mon Power and the City, however,
are silent regarding which entity owns the credits the Hannibal
Project generates.

Id. ¶ 33.

Consequently, Mon Power and the

City, on December 30, 2010 and January 3, 2011, respectively, both
submitted Portfolio Standard Compliance Plans that claimed
ownership of the Hannibal credits.

Id. ¶¶ 34-35.

On February 23, 2011, the Companies filed a petition for
declaratory relief with the Commission.

Id. ¶ 36.

The Commission

granted the petition on November 22, 2011, ruling that the
Companies own credits attributable to the Hannibal Project and two
other non-utility generating projects.1

Id.

In effect, the

Commission created a rule that a utility-purchaser, without
additional compensation, owns credits attributable to an EEPA that
1

One of these projects is the subject of concurrent
litigation pending before this court as Morgantown Energy
Associates v. Public Service Commission of West Virginia, No.
2:12-cv-6327.
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predates the Portfolio Act and is silent respecting the credit‟s
ownership.

Id. ¶ 63.

The City contends that the Commission‟s

order is invalid because it contradicts the provisions of the
Public Utility Regulatory Policies Act of 1978 (“PURPA”),
regulations adopted by FERC pursuant to PURPA, and FERC and court
decisions interpreting and applying PURPA and the regulation.

Id.

¶ 11.
On December 22, 2011, the City filed an appeal of the
Commission order with the West Virginia Supreme Court of Appeals.
Id. ¶ 43.

On June 11, 2012, subsequent to the City filing this

action, the Supreme Court of Appeals affirmed the Commission‟s
ruling.
On March 15, 2012, the City petitioned the Federal
Energy Regulatory Commission (“FERC”) to bring an enforcement
action against the Commission to require compliance with PURPA.
In an order issued April 24, 2012, FERC found that “certain
statements in the [Public Service Commission of] West Virginia
Order are inconsistent with PURPA.”

FERC Order ¶ 45.

It further

stated that “PURPA does not address the ownership of [credits]”
and that the “avoided cost rates” set by the terms of PURPA are
not meant to compensate facilities for more than capacity and
energy.

Id. ¶ 46-47.

It concluded that “[t]o the extent that the

West Virginia Order finds that avoided-cost rates under PURPA also
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compensate for [credits], the West Virginia Order is inconsistent
with PURPA.”

Id. ¶ 47.

Despite these findings, FERC declined to exercise its
discretionary enforcement authority.

Id. ¶ 44.

Under PURPA, when

FERC declines to bring an enforcement action within 60 days of the
filing of a petition, the petitioner may bring its own enforcement
action against the state regulatory authority in the appropriate
U.S. district court.

16 U.S.C. § 824a-3(h)(2)(B).

Pursuant to

that provision, the City filed the present action for declaratory
and injunctive relief on June 1, 2012.
In the pending motion, the Companies argue that their
putative property interest in the Credits makes them proper and
necessary parties to this litigation and justifies intervention as
of right, pursuant to Federal Rule of Civil Procedure 24(a).
Intervene 1-2.

Mot.

Alternatively, the Companies contend that because

their ownership is the central dispute in this case, permissive
intervention is proper, pursuant to Rule 24(b).

II. Governing Standard
Federal Rule of Civil Procedure 24(a) provides
intervention of right, on a timely motion, to anyone who “claims
an interest relating to the property or transaction that is the
subject of the action, and is so situated that disposing of the
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action may as a practical matter impair or impede the movant‟s
ability to protect its interest, unless existing parties
adequately represent that interest.”

Fed. R. Civ. P. 24(a).

Tracking the language of the Rule, an application to intervene as
of right must satisfy the following four requirements:
(1) the application to intervene must be timely; (2) the
applicant must have an interest in the subject matter of
the underlying action; (3) the denial of the motion to
intervene would impair or impede the applicant‟s ability
to protect its interest; and (4) the applicant‟s
interest is not adequately represented by the existing
parties to the litigation.
Houston Gen. Ins. Co. v. Moore, 193 F.3d 838, 839 (4th Cir. 1999).
“[T]imeliness is a „cardinal consideration‟ of whether
to permit intervention.”

Moore, 193 F.3d at 839 (quoting Brink v.

DaLesio, 667 F.2d 420, 428 (4th Cir. 1981)).

Its determination

depends upon “how far the suit has progressed, the prejudice which
delay might cause other parties, and the reason for the tardiness
in moving to intervene.”
(4th Cir. 1989).

Gould v. Alleco, Inc., 883 F.2d 281, 286

In weighing these elements, “wide discretion

[is] afforded the district courts.”

Id.

Because a would-be

intervener as of right “„may be seriously harmed if he is not
permitted to intervene, courts should be reluctant to dismiss a
request for intervention as untimely, even though they might deny
the request if the intervention were merely permissive.”

Mtn. Top

Condo. Ass‟n v. Dave Stabbert Master Bldg., Inc., 72 F.3d 361 (3d
6

Cir. 1995) (quoting Wright, Miller & Kane, Federal Practice and
Procedure: Civil 2d, § 1916, at 424 (1986)).
Rule 24(a) does not specify the nature of the interest
necessary to satisfy the second requirement, but “the Supreme
Court has recognized that „[w]hat is obviously meant . . . is a
significantly protectable interest.‟”

Teague v. Bakker, 931 F.2d

259, 261 (4th Cir. 1991) (quoting Donaldson v. United States, 400
U.S. 517, 531 (1971)).

The Fourth Circuit has held that an

interest contingent on the outcome of other litigation is a
significantly protectable interest.

Id.

To establish impairment, the third requirement, “a party
need not prove that he would be bound in a res judicata sense by
any judgment in the case.”

Spring Const. Co. v. Harris, 614 F.2d

374, 377 (4th Cir. 1980).

It is sufficient that the “disposition

of a case would, as a practical matter, impair the applicant‟s
ability to protect his interest in the transaction.”

Id.

A movant satisfies the fourth requirement “if it is
shown that representation of its interest „may be‟ inadequate.”
United Guar. Residential Ins. Co. of Iowa v. Philadelphia Sav.
Fund Soc‟y, 819 F.2d 473, 475 (4th Cir. 1987) (citing Trbovich v.
United Mine Workers, 404 U.S. 528, 538 n.10 (1972)).
burden in making this showing is “„minimal.‟”
Trbovich, 404 U.S. at 538 n.10).
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The movant‟s

Id. (citing

Guiding the court‟s analysis is the principle that
“liberal intervention is desirable to dispose of as much of a
controversy „involving as many apparently concerned persons as is
compatible with efficiency and due process.‟”

Feller v. Brock,

802 F.2d 722, 729 (4th Cir. 1986) (quoting Nuesse v. Camp, 385
F.2d 694, 700 (D.C. Cir. 1967)).

III. Discussion
The court finds that the Companies satisfy the
requirements to intervene as a matter of right, pursuant to Rule
24(a).

First, the motion is timely.

The Companies moved to

intervene only two days after the court entered the scheduling
order for this case.

They represent that no discovery has

occurred, Mem. Supp. Mot. Intervene 5, and the absence of
opposition indicates that intervention will not unduly prejudice
either of the existing parties.
Second, the Companies undoubtedly have an interest in
the renewable energy credits which comprise the subject matter of
the litigation.

The Companies have a tenable claim of ownership

rights to the Hannibal credits, as indicated by the Commission‟s
November 22, 2011 determination and the West Virginia Supreme
Court of Appeals June 11, 2012 affirmation.

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Third, the outcome of this action would impair or impede
the Companies‟ ability to protect its interests in the Credits.
Should the City prevail, the Commission determination would be
voided and the Companies would lose their ownership rights to the
Hannibal credits.
Finally, the Commission may not adequately represent the
Companies‟ interest in the litigation.

While the Commission‟s and

Companies‟ interests are generally aligned, their interests
diverge in important ways.

The court finds persuasive the

Companies‟ argument that its approximately $50 to $100 million in
property interests creates an incentive for litigation beyond that
of the Commission.

Cf. Teague v. Bakker, 931 F.2d 259, 262 (4th

Cir. 1991) (finding the „adequate representation‟ prong satisfied
where financial constraints created “a significant chance that
[current parties] might be less vigorous than the . . .
Intervenors in defending their claim”).

Further, the Companies

are likely correct that “[p]olitical realities, the public
interest, the cost of litigation, and the desire to settle are not
the same for the Companies . . . as they are for the
[Commission].”

Mem. Supp. Mot. Intervene 10.

The Companies have

thus made the required minimal showing that representation may be
inadequate.

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The Companies having satisfied each of the requirements
for intervention as of right, it is accordingly ORDERED that the
motion to intervene be, and it hereby is, granted.

Because the

Companies are entitled to intervene as a matter of right, the
court need not address their alternate argument regarding
permissive intervention.
The Clerk is directed to file the Companies‟ proposed
Answer in Intervention this same day.

The Clerk is further

directed to forward copies of this written opinion and order to
all counsel of record and any unrepresented parties.
ENTER: December 21, 2012

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