Background
PacifiCorp operates a gas-fired generating facility in Chehalis, Washington, and supplies electricity to customers in six states. Washington’s Climate Commitment Act requires covered emitters to obtain allowances for their greenhouse-gas emissions. Electric utilities subject to Washington’s Clean Energy Transformation Act may receive no-cost allowances for emissions associated with electricity sold to Washington customers.
PacifiCorp received no-cost allowances for the portion of Chehalis generation serving Washington customers, but not for the portion exported to other states. It alleged that this distinction increased costs for PacifiCorp or its out-of-state customers and discriminated against interstate commerce. The district court dismissed the Dormant Commerce Clause claim with prejudice and denied PacifiCorp’s preliminary-injunction motion as moot.
The Court’s Holding
The Ninth Circuit affirmed. It agreed that PacifiCorp had Article III standing and that its claim was ripe because PacifiCorp was required to obtain allowances and plausibly alleged that it would incur costs for emissions associated with exported electricity.
On the merits, the majority held that PacifiCorp had not plausibly alleged differential treatment of similarly situated entities. Electricity serving Washington customers is subject to CETA’s decarbonization requirements, while exported electricity is not. The court therefore concluded that emissions associated with those two categories of electricity were not substantially similar for Dormant Commerce Clause purposes and that the no-cost allowances prevented overlapping regulatory burdens rather than unlawfully favoring in-state commerce.
The court also upheld dismissal without leave to amend because amendment would be futile, and it affirmed denial of the preliminary injunction as moot. Judge Bress dissented, reasoning that the allowance system facially discriminated against interstate electricity sales and that factual development was needed to determine whether CETA’s costs and the CCA allowances were roughly equivalent.
Key Takeaways
- A Dormant Commerce Clause discrimination claim requires differential treatment of similarly situated in-state and out-of-state economic interests.
- The majority treated CETA-covered in-state electricity and exported electricity outside CETA as differently situated because they are governed by different decarbonization requirements.
- Because PacifiCorp could not state a legally cognizable Commerce Clause claim, dismissal with prejudice was proper and its preliminary-injunction request was moot.
Why It Matters
The decision permits Washington to continue allocating no-cost CCA allowances according to whether electricity is subject to CETA’s in-state decarbonization regime. It also illustrates how overlapping state regulatory programs can affect the threshold “similarly situated” inquiry in Dormant Commerce Clause litigation.
The dissent highlights a competing approach with potentially broader implications: treating destination-based allowance allocations as facial discrimination and requiring evidence that the in-state regulatory costs and interstate burdens actually offset one another.