U.S. District Court upholds award of RECs from QF to utility in West Virginia

U.S. District Court, West Virginia, recently dismissed a complaint from PURPA qualifying facility (“QF”) in one of the ongoing disputes regarding ownership of renewable energy credits (“RECs”) between QFs and utilities. The West Virginia QF, Morgantown Energy Associates, was registered under Pennsylvania’s Portfolio Act and transacting RECs created by it generation under the Pennsylvania Act. But after West Virginia enacted its own portfolio act, the West Virginia Public Service Commission ruled that under the act and the QF’s preexisting power purchase agreement with a West Virginia utility, the RECs created by the QF passed to the West Virginia utility without additional payment. This result precluded the QF from continuing to sell the RECs in Pennsylvania (or elsewhere). The combined value of the QF’s RECs along with two other similarly situated QFs was estimated at over $50 million through 2025.

On the petition of the QF, FERC was critical of portions of the West Virginia PSC’s ruling but declined to initiate an enforcement action under PURPA, discussed here. After FERC declined, the QF brought this action alleging that the West Virginia PSC violated PURPA and that the award of Pennsylvania RECs violated the Takings Clause of the Fifth Amendment. In an unreported decision in late September, the district court ruled against the QF, dismissing the case. The court held that res judicata barred the QF’s claims because the West Virginia Supreme Court of Appeals had previously resolved the issues when the QF appealed the West Virginia PSC’s ruling through state court. The district court also ruled that, on the merits, the West Virginia PSC’s ruling did not violate PURPA or the Takings Clause. In explaining how the ruling was consistent with FERC’s interpretation of PURPA, the court reasoned that the West Virginia PSC’s “finding that PURPA [energy purchase agreements] are generous and require no additional consideration is merely an assessment of policy concerns. It does not signify a belief that the [energy purchase agreements] ‘inherently’ convey RECs.”

The district court opinion may be found at Morgantown Energy Assocs. v. Albert, 2013 U.S. Dist. LEXIS 140220 (September 30, 2013).

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