Background
PacifiCorp sought judicial review of a final order by the Public Utility Commission of Oregon excluding from Oregon electricity rates certain costs associated with complying with Washington’s Climate Commitment Act. The costs arose from electricity generated at PacifiCorp’s natural-gas plant in Chehalis, Washington, and delivered to Oregon customers.
The PUC treated those costs as associated with a state-specific initiative under section 3.1.2.1 of the 2020 PacifiCorp Inter-Jurisdictional Allocation Protocol and assigned them entirely to Washington. PacifiCorp argued that the Chehalis plant was instead a system resource and that its compliance costs should be allocated among states under the Protocol’s system-resource provisions.
The Court’s Holding
The Court of Appeals held that the PUC’s interpretation of the Protocol was legally erroneous and implausible under its plain text. Section 3.1.2.1 covers costs and benefits associated with resources “acquired in accordance with” a state-specific initiative. Because PacifiCorp acquired the Chehalis plant long before enactment of the Washington law, the plant could not have been acquired in accordance with that initiative.
The court also rejected any view that the climate law or its compliance costs were themselves a “resource,” because neither fit the Protocol’s express definition of that term. The court therefore reversed and remanded for reconsideration without deciding whether deference would ordinarily apply to the PUC’s interpretation.
The court emphasized that the Protocol does not necessarily determine whether a cost may ultimately be reflected in rates. On remand, the PUC may consider under its general ratemaking authority whether departure from the Protocol’s allocation is necessary to establish fair and reasonable rates—an issue the agency had not reached.
Key Takeaways
- The Protocol’s state-specific-initiative provision applies only to resources acquired in accordance with such an initiative, not every cost later caused by state-specific legislation.
- The Washington climate law and PacifiCorp’s compliance expenses are not themselves “resources” under the Protocol’s definition.
- The decision does not require the PUC to include the costs in Oregon rates; the agency may address on remand whether its broader ratemaking authority supports excluding them.
Why It Matters
The decision limits the PUC’s ability to use the Protocol’s state-resource provision to assign new regulatory costs solely to the state that enacted the underlying law when the generating asset predates that law. It reinforces that administrative agencies must follow the text of an approved interstate cost-allocation framework.
At the same time, the ruling leaves the ultimate rate treatment unresolved. Utilities and ratepayer advocates will need to address on remand whether fair-and-reasonable-rate principles independently justify including or excluding Washington climate-compliance costs from Oregon rates.