Morgantown Energy Associates v. Public Service Commission of West Virginia

Filing 24

MEMORANDUM OPINION AND ORDER granting Monongahela Power Company and The Potomac Edison Company's 19 MOTION to Intervene as party-defendants; based on the alignment of claims as currently constituted, the Companies join the case as party defendants; the Clerk is directed to file the Companies' proposed Answer in Intervention this same day. Signed by Judge John T. Copenhaver, Jr. on 1/10/2013. (cc: attys; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
MORGANTOWN ENERGY ASSOCIATES,
Plaintiff,
v.

Civil Action No. 2:12-cv-6327

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA and
MICHAEL A. ALBERT, in his official capacity as
Chairman of the Public Service Commission, and
JON W. MCKINNEY, in his official capacity as
Commissioner of the Public Service Commission, and
RYAN B. PALMER, in his official capacity as
Commissioner of the Public Service Commission,
Defendants.

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 December 27, 2012.

The existing parties

have communicated to the court‟s law clerk that they do not oppose
the motion.

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
renewable energy credits.

MEA is a general partnership with a

principal place of business in Morgantown, West Virginia.
¶ 7.

Compl.

It owns and operates a 60.8 mw co-generation facility in

Morgantown (the “Morgantown facility”) that utilizes circulated
fluidized bed combustion technology to burn bituminous coal refuse
as its primary energy source.

Id.

On March 1, 1989 MEA and Mon

Power entered into a long-term electric energy purchase agreement
(“EEPA”), whereby Mon Power has purchased the energy and capacity
generated by MEA.

Id. ¶ 19.

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.

At all times relevant to this action,

defendant Michael A. Albert served as the Chairman of the
Commission, and defendants Jon W. McKinney and Ryan B. Palmer
served as Commissioners.

Compl. ¶¶ 9-11

In 2009, the West Virginia legislature passed the
Alternative and Renewable Energy Portfolio Act (the “W.V.
Portfolio Act”), requiring the Commission to create a system of
tradable renewable energy credits (“W.V. Credits”).
2

W. Va. Code

§ 24-2F-1-12.

The W.V. Portfolio Act awards credits to electric

utilities that generate or purchase electricity from specified
alternative and renewable energy resource facilities.
2F-4(b).

Id. § 24-

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).

Four years earlier, in 2005, Pennsylvania enacted the
Alternative Energy Portfolio Standards Act (the “Pa. Portfolio
Act”), 73 P.S. §§ 1648.1-1648.8.

Like the W.V. Portfolio Act, the

Pa. Portfolio Act requires electric utilities to create or
purchase alternative energy credits (“Pa. credits”).

Compl. ¶ 29.

The Pa. Portfolio Act provides that “[u]nless a contractual
provision explicitly assigns alternative energy credits in a
different manner, the owner of the alternative energy system . . .
owns any and all alternative energy credits associated with or
created by the production of the electric energy by such
facility.”

73 P.S. § 1648.3(e)(12).
MEA‟s Morgantown facility qualifies as an alternate

energy source under the Pa. Portfolio Act, and it began generating
Pa. credits in 2006.

Compl. ¶ 28.

MEA has banked the Pa. credits

with a FERC-regulated, interstate regional transmission
organization responsible for tracking credits in both West
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Virginia and Pennsylvania.

Id. ¶ 25.

MES has also engaged in

transactions in which it has sold the Pa. credits to electric
utilities.

Id. ¶¶ 32-33.
The Morgantown facility likewise meets the definition of

an alternate energy resource under the W.V. Portfolio Act.
¶ 41.

Id.

MEA, however, has not filed and currently has not made a

determination to file an application to become certified under the
W.V. Portfolio Act to generate W.V. Credits.

Id. ¶ 41.

It

asserts that it has no legal obligation to pursue certification,
and it points out that although a facility may be capable of
generating credits recognized by two different states, the credits
can be transferred only once to a utility.

Id. ¶¶ 27, 41.

The EEPA between Mon Power and MEA, predating both
states‟ portfolio acts, is silent regarding ownership of any
potential credits generated by the Morgantown facility.

Id. ¶ 42.

On February 23, 2011, the Companies filed a petition for
declaratory relief with the Commission, requesting a ruling that
the Companies were entitled to W.V. credits attributable to the
Morgantown facility and two other non-utility generating
projects.1

Id. ¶ 44.

November 22, 2011.

1

The Commission granted the petition on

Id. ¶ 48.

One of these projects is the subject of concurrent litigation
pending before this court as City of New Martinsville v. Public
4

MEA contends that the Commission‟s order fails to
address that the same credits are already owned by MEA pursuant to
the Pa. Portfolio Act.

Id. ¶ 49.

Additionally, MEA believes that

the Commission‟s order violates the Public Utility Regulatory
Policies Act of 1978 (“PURPA”) in three respects: (1) by
concluding that Mon Power‟s existing payment warranted giving Mon
Power the credits, (2) by concluding that the Commission has the
authority to deem MEA‟s facility certified under the W.V.
Portfolio Act to generate W.V. credits, and (3) by discriminating
against the MEA compared to other non-utility generators simply
because MEA is a “qualifying facility” under PURPA.

Id. ¶ 55.

In December 2011, the MEA filed an appeal of the
Commission order with the West Virginia Supreme Court of Appeals.
Id. ¶ 53.

The Supreme Court of Appeals affirmed the Commission‟s

ruling on June 11, 2012.
On February 24, 2012, MEA petitioned the Federal Energy
Regulatory Commission (“FERC”) to bring an enforcement action
against the Commission to require compliance with PURPA.
¶ 54.

Id.

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.

Service Commission of West Virginia, No. 2:12-cv-1809.
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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 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, MEA filed the present action on October 8, 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).

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Id. at 2-3.

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
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.”
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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
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 the third requirement, impairment, “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.”
8

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.‟”

The movant‟s

Id. (citing

Trbovich, 404 U.S. at 538 n.10).
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 prior to the court‟s entry of a scheduling order.

They

represent that no discovery has occurred, Mem. Supp. Mot.
Intervene 6, 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
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the litigation.

The Companies have a tenable claim of ownership

rights to the Morgantown facility credits, as indicated by the
Commission‟s November 22, 2011 determination and the West Virginia
Supreme Court of Appeals‟ June 11, 2012 affirmation.
Third, the outcome of this action would impair or impede
the Companies‟ ability to protect its interests in the Credits.
Should MEA prevail, the Commission determination would be voided
and the Companies would lose their ownership rights to the
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 their 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 costs of litigation, and the desire to settle
are not the same for the Companies . . . as they are for the
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[Commission].”

Mem. Supp. Mot. Intervene 11.

The Companies have

thus made the required minimal showing that representation may be
inadequate.
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.
Based on the alignment of claims as currently
constituted, the Companies join the case as party defendants.

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: January 10, 2013
John T. Copenhaver, Jr.
United States District Judge

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