The Legal Case for a Clean and Competitive Energy Sector — Episode 152 of Local Energy Rules

Date: 16 Mar 2022 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

With Congress at a standstill, the prospect of federal action on climate and clean energy is looking bleak. The Center for Biological Diversity, however, is pursuing two alternatives to federal legislation: executive action and the courts.

For this episode of the Local Energy Rules Podcast, host John Farrell speaks with Jean Su, Attorney and Director of the Energy Justice Program at the Center for Biological Diversity. Farrell and Su discuss how President Biden could foster energy independence, boost the U.S. economy, and curb climate change through the Defense Production Act. Su then shares a landmark court ruling and its implications for antitrust enforcement.

Listen to the full episode and explore more resources below — including a transcript and summary of the conversation.

Jean Su: This is an emergency that has so many different dimensions. If you don’t like it from a climate standpoint, fine. It is a national security issue at the end of the day. And it’s also an issue that has spawned the U.S.’s own aggression abroad to get more oil and resources. So I think for the protection of our own population and for the protection of the world, this is actually a situation that requires a very swift amount of movement to get us on the right track.
John Farrell: Today’s Local Energy Rules Podcast covers two topics with the same guest: Jean Su, director of the Center for Biological Diversity’s Energy Justice Program joined me in March 2022 for an update on the utility antitrust victory for rooftop solar in the ninth circuit originally discussed with her in May, 2021, but we also took 20 minutes to discuss the defense production act and how this federal executive power could be used to address the energy system implications of the Russian invasion of Ukraine, both domestically and internationally by building more American made clean energy equipment. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a biweekly podcast sharing powerful stories about local renewable energy. Jean, welcome back to Local Energy Rules.
Jean Su: Thanks for having me, John.
John Farrell: Oh, it’s so good you’re back. So, as I mentioned in the intro, I really want to talk to you about the antitrust lawsuit against the Salt River Project. There was some success in moving forward with that. I wanna hear about what’s going on because obviously has lots of implications for how anti-monopoly laws could potentially be leveraged to help create more space, some more elbow room for local community owned rooftop and community solar projects, but obviously Russia invaded Ukraine. There’s a lot going on in the world. And everybody’s talking about this as though energy is really important. I mean, partly because of course gas prices have gone up really high and lots of people drive cars and experience that, it’s a very high touch kind of thing. You know, you’ve got lots of people on Twitter talking about like, oh, people should buy EVs, or, we should do renewable energy investments. Some of this stuff maybe can’t happen as fast as we might like. You recently published a report, though, on what the federal government really could do to mobilize a response that would be meaningful. I just wanna let you jump into that. Can you explain, what is it the federal government could do to kind of help in around this issue of energy and how it relates to the Russian invasion of Ukraine?
Jean Su: Yeah, absolutely. So we are in a real turning point for not only the Biden presidency, but really for climate and the globe. Right now we have a situation where there is literally fossil fuel tyranny that is threatening democracy and sovereignty in the Ukraine Russian war right now. And we have the opportunity for president Biden to actually do the remarkable, tremendous transformation of this country if he chooses to do so. So just to give folks a little bit of flavor, we’ve been a little bit stalled in the type of renewable energy transformation we need in this country, primarily because a very slim majority that the Democrats hold in Congress and the Biden administration pursued a very bullish legislative agenda in the Build Back Better act, which many of us were super excited about. But it is indefinite. And so one of the projects that the Center has been working on for many years actually, and it started during the Trump administration, is to outline the very bold executive powers that the president has, that he can take on climate without relying on Congress.

And we are in a situation right now is really like a pinnacle where we have stalled Congress on climate action. We have to face and wean ourselves off of fossil fuels, given the geopolitical security issues that are now very front and center in our Zeist and press on executive powers that the president has. One of the executive powers that we are very bullish about is the defense production act, which we’ve been writing about for many years now. And the way that I was actually introduced to the defense production act, which I think many of us were in a more kind of recent vintage, is through its use towards COVID 19.

So traditionally the act is a war time statute that was passed in the 1970s, but there was a preceding statute that was the same piece of legislation. And it basically is allowing for the president to command private industry to build the weapons needed for the national defense. So when it was first passed in the 1970s, it was for the purpose of manufacturing tanks, manufacturing guns, bombs for the Korean war. But since then we have seen that the DPA can actually be used for peaceful means. And one of the you know, exemplary examples was how the Biden administration itself has actually used it to manufacture on war time footing, the COVID 19 vaccines and the PPE, the personal protective equipment that was needed to combat COVID 19 when he reached office.

Interestingly enough, I was exposed to it during the Trump administration because the Trump administration had also called for the use of the DPA, but actually his secretaries who he delegated it to were not using it for its full power. I ended up representing over 50 million workers and 15 labor unions to sue the Trump administration to force them to use the DPA in all of its power in order to produce the amount of PPE needed to protect our essential workers here on the ground. So having said all of that, we’re in a position now where again, the DPA is a powerful executive tool that president Biden has. He’s actually used it already and that he can use it towards renewable energy manufacturing, which arguably we absolutely need in our national defense right now to wean ourselves off the fossil fuels and really combat the climate crisis.

John Farrell: So I, first of all, just, I love the fact that this sort of bridges two different administrations, both in some ways, trying to fight the same issue when it came to COVID 19. So you have this sort defensive national health, right. Is sort of the justification why we might use it for COVID 19. I think I remember first hearing it in the context of making the machines for breathing…
Jean Su: Ventilators.
John Farrell: Ventilators, thank you Jean, but it’s, you know, awesome to hear that it could be used for these other purposes. There’s a couple things I wanna ask you about in terms of how it could be used around renewable energy obviously is domestic supply, right? So there’s the oil and gas that we use in the United States. The prices of which are rising because these are global commodities. And so even if we weren’t using Russian oil in American gas tanks, the fact that Russian oil is going off the market right now effectively because of our economic sanctions means the prices are going up, but we also have this potential opportunity. I’ve heard people talk about trying to help Europe, who is much more directly using Russian fossil fuels gas in particular. I think I heard somebody talk about like a Marshall Plan for heat pumps. Could we somehow help Europeans wean themselves off of Russian gas to avoid that geopolitical inconvenience? I mean, that’s not make, can get a strong enough return, but, tell us a little bit about how, what we could construct. I mean, could it be electric vehicles? Could it be solar panels? Could it be heat pumps? Could it be all those things? Can we use them here? Could we send them to Europe? I mean, could the justification fit for all of that?
Jean Su: Yes. So the justification fits for all of that. What the DPA does, it has a couple of really interesting powers that the president can use. The most kinda basic way to think about it is it is the ability for the president to command private manufacturers in the U.S. to deliver on products that are needed for the national defense. So that can include, and it should include renewable energy technologies, everything from solar and wind to it should include energy conservation technologies, including heat pumps, but all the other energy efficiency appliances that we have that are taking up so much of our energy demand. So it has, and it absolutely needs to include all the transportation elements given that transportation is our biggest emitting sector in this country. And one of the biggest in the world. So all of those three types of technologies absolutely can be deployed and manufactured in the United States.

One thing that the DPA does is that it first gets the president in a room with private manufacturers and says, Hey, let’s make a game plan. We have a grave need for these types of technologies. We are facing grave threat from them. Let’s figure out how much we need and how much you can make that’s number one, like let’s get this game plan on. Number two, if by declaring a national defense issue, the president can actually release finances. So there are financial instruments that are tied to the PPA. This opens up the ability to create loans, loan guarantees, direct grants to manufacturers to help them expand their manufacturing, reform their manufacturing plants, and build new plants in order to get this supply up need.

And then finally what’s interesting about it is that it allows the president to allocate where these technologies should go. So a lot of this can, first of all, be purchased through government contracts. And this is a place where we’ve heard time and time again, that manufacturers in the United States are reticent to jump into green manufacturing. They have been waiting for clean energy incentives for the Build Back Better act that may not come to pass any time soon. So what the security they need comes in the form of the financial instruments I just talked about, but also guaranteed government contracts where the government will be buying these goods and then deploying them accordingly. And so this is where we have a very interesting opportunity for president Biden to figure out where this makes most sense in the national defense.

On the one hand advocates right now, because the war in Ukraine is, you know, first and foremost on our minds, they believe that, you know, maybe the best thing we can do is export energy conservation materials over to Europe to help our European allies out. That that’s definitely one way to think about it. The other way that I would like to think about it though, is we have a lot of suffering in this country right now from our fossil fuel system. So this is also the opportunity to deploy accordingly in our own country. And in particular, get it to those that are on the front lines of climate and fossil fuel violence. Those are communities that are hit in the Gulf Coast, the heat domes in the Pacific Northwest, the Texas freezes. And they are disproportionately our BIPOC communities. Let’s get it to them first because they are actually going to be suffering the most from a national security standpoint on climate and fossil fuels.

John Farrell: One aside I have about this, I think is fascinating, is I’ve seen some exchanges with folks who work on like the building heating and cooling building electrification stuff. And the thing that fascinated me was that the air conditioner that I buy, the part that’s needed to add to it to make it work two ways to make it do heating and cooling is like really cheap that basically, you know, one thing Biden could do with this that would be incredible both for the near term and the long term is basically tell people you can’t build a one way heat pump anymore. Yes. An air conditioner, you can only build a two way heat pump and that’s the only thing that we’re gonna sell.
Jean Su: Absolutely. And so under this type of plan, the President is able to do that. He is able to actually work with and bring to the table our not only private manufacturers, but our experts, best available science, engineers, environmental justice advocates, energy democracy advocates, everybody to the table to figure out what are the best technologies that we can get right now. And let’s go manufacture that so we can leapfrog any of the in-between not as efficient, not as good technologies out there. Another thing that’s super important about all of this is obviously our economy is ailing significantly right now from COVID. From of the big I word inflation, obviously what this also does is it, it triggers and jumpstarts the economic transformation and revitalization we need right now with new green jobs. And one of the important parts that the DPA can also be used for is tying these, this new manufacturing to paying union jobs and good paying high quality jobs. This is like a tie that the government can use when it grants its government contacts. And that’s the type of reform in the labor movement that we need to see right now as well.
John Farrell: You know, it’s also really interesting because most of the pressure in terms of inflation, as I understand it, is in you either energy prices or like durable goods, which, you know, have supply chain problems still leftover from COVID. So you could potentially address both, right. You could build lots of things that help people reduce their energy costs or reduce, especially reduce their reliance on expensive fossil fuels. And on the other hand, you could also invest in domestic manufacturing of the things in the supply chain that we’ve been in short of like semiconductors, right, that we use in everything.
Jean Su: Absolutely. Absolutely. And it would be not prudent of us to mention that we have severe supply chain issues. The United States is very dependent on supplies, especially from Asia and China, that we need to reform our energy system here. And on top of that, much of the solar panels that we are using and other, you know, supplies of that, for renewable energy, are made with forced slave labor. These are not practices we should really be depending on for our renewable energy future, especially if we want to obtain alternative goals of social wealth and biodiversity protection at the same time. So we really have the opportunity to make a huge transformation in this country, build a new and build correctly back because that’s exactly how we’re going to try to address all of these crises in one go.
John Farrell: So Jean, tell me about what happens next. So you’ve written about how this can happen. You’ve been involved already in a legal battle to compel the Trump administration to use this to its fullest extent. What needs to happen in order for this to actually be implemented? Are there other barriers in terms of Congress, can Biden act alone? And how does this, how does this go from a really good idea that we’re talking about to something that’s actually helping to address these pressing problems?
Jean Su: So the DPA is an existing statute that president Biden can use alone. So the thing that needs to happen is that president Biden actually needs to employ it. One of the fascinating parts about this last week is that president Biden actually did use his emergency powers to address Russia. He actually triggered the national emergency act, declared a national emergency with respect to the geopolitical situation in Ukraine, and then triggered an associated power that allowed him to ban Russian imports. These are a set of powers that we’ve been advocating for Biden to use since he reached office. We actually asked him to use it with respect to all fossil fuel imports and exports. So what last week showed us is that when push comes to shove, the Biden administration can choose to act swiftly when it wants to, we are going to urge, and I urge everybody to advocate for the Biden administration to treat the climate emergency with the same urgency, which it absolutely has. And we need him to use his emergency and ordinary executive powers to wean us off of fossil fuels and to build the clean, renewable energy manufacturing base.
John Farrell: Such a great political moment for him too, because he could doesn’t even really have to talk about it as a climate issue when it’s so clearly something that is affecting people in dollars in cents in a big way right now.
Jean Su: Absolutely. This is an emergency that has so many different dimensions. If you don’t like it from a climate standpoint, fine. It is a national security issue at the end of the day. And it’s also an issue that has spawned the U.S.’s own aggression abroad to get more oil and resources. So I think for the protection of our own population and for the protection of the world, this is actually a situation that requires a very swift amount of movement to get us on the right track.
John Farrell: Do you have any sense, and then I still want to make sure I get to talk to you about solar and anti monopoly, but do you have a sense in terms of the defense production act like how much we could actually accomplish? You know, so just to give an example, so one of the things folks have talked about, you know, back to this idea of like Marshall Plan for heat pumps for Europe would be like, how many could we actually manufacture? How much of a dent could we make in European imports of Russian gas by next fall? Right. We’re lucky to be at the time we are in the year that the heating season is almost over, but come September, October, that’s gonna be a big problem again, can we actually manufacture enough heat pumps and get them over there and get them installed? And, you know, also even manufacture the right kind of them because obviously they use sometimes the different type, the ductless kind that stick on the wall as opposed to like the central air conditioning that we’re more familiar with in the United States.
Jean Su: Yeah. So I think that we obviously have a timeline to ramp up manufacturing. We currently have a solid, but small manufacturing base for different renewable energy products right now. What they need is the help to actually expand their production as well as change production if they need to. So, you know, like during war time, you see car manufacturers suddenly become tank manufacturers, et cetera. So there’s going to be a little bit of a ramp up time. But as in other war times when there’s a will, there’s a way, and we absolutely need to have the will right now to do it. One of the obstacles obviously is funding.

How are we going to get enough funding to do this? And there are different ways to do that. You know, one obvious part is obviously Congress can sit down and come together as they did for the Russia oil ban and basically direct funding again, to new types of manufacturing for this wartime effort, essentially. So that’s one thing, but as we know, we’re not sure what the Republicans are going to do on this. So there’s other streams of funding that the Biden administration has available. One of the pieces that I think is really important is for the Biden administration to actually leverage its federal procurement program. So right now there’s been all this talk about agencies becoming green, but all of budget essentially has been used abroad to try to get supplies from China to get here in terms of our renewable energy. Actually, if you just use that same amount of money, that can create a new set of government contracts that are worth 650 billion a year to our domestic manufacturers to get them going, to expand their manufacturing and to meet our demands. So this is actually a way to pair existing budget that the Biden administration has and pair it with the DPA to meet supply and demand both at once.

John Farrell: It’s extremely disappointing to realize we’ve been sending that much money somewhere else to pay for green technology.
Jean Su: It’s an oversimplification, I mean, we are buying American made, right, where we can, but unfortunately we don’t have enough American made stuff right now to make it happen.
John Farrell: I feel like there’s a whole podcast about industrial policy where we could go down that road about the choices that we’ve made over the past few decades and why it’s led to the problems we’re having right now. But what I, so if people wanna learn more about the defense production act, where can they learn more about the work that Center for Biological Diversity is doing? Where can they learn more about how they might reach out to the Biden administration and advocate for this to be used?
Jean Su: Wonderful. So there is a website www.climatepresident.org/emergency. And that is where all of these elements are written out in a — apologies — very severely dense legal report, 56 pages, 12 of which are dedicated to the DPA and going very deep into the DPA, but on top of that, there is certainly a group of organizations. Now we just released, with 200 organizations, a sign on letter urging the president to use the DPA, not only for heat pumps, but for renewable energy and clean vehicles at large in the United States. So you can visit our website, www.biologicaldiversity.org to find out about that. And it should be also on the climate president website.
John Farrell: I’ll be eagerly awaiting the infographic version of your 50 page DPA report.
Jean Su: Yeah. It may not come.
John Farrell: That’s all right, but thank you so much, Jean, for kind of explaining in this moment why this could be so important and how it could help address so many of the different interconnected issues.
John Farrell: We’re going to take a short break. When we come back, we pivot to discussing the successful litigation against Salt River Project’s anti-competitive solar fees and its implications for broader anti-monopoly scrutiny of electric utilities. You’re listening to a Local Energy Rules Podcast with Jean Su from the Center for Biological Diversity, discussing a powerful federal tool to address the energy system, implications of the Russian invasion of Ukraine, and to discuss the role of antitrust law in the U.S. electricity sector.

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John Farrell: If you’re all right, I’d love to pivot it at this point.
Jean Su: Let’s do it.
John Farrell: I’m gonna ask you about Salt River Project. So I’m gonna refresh myself a little bit here, but basically we talked, I think it was just last year about the work that you’d been doing around this legal case against Salt River Project, a utility, a public utility, although run rather like a private one, in Arizona. It had levied some very high on customers with solar to successfully, unfortunately, discourage more customers for installing solar. The court case went to the ninth circuit court of appeals. What’s happened since then.
Jean Su: The ninth circuit made a bombshell of a ruling. It is the first time that a federal court has found that these types of utility attacks on rooftop solar can be liable under federal antitrust law. So that is a huge finding. It’s a huge finding in particular because we are in probably our, would you say our third generation? of utility attacks on rooftop solar. Now there’s so many, and who can count the generations, but we’re on different versions. And this is a really big finding because this is the only set of facts that actually an antitrust lawsuit has been brought against given these set of facts of utility attacks on rooftop solar. And so it’s, it’s a big finding with respect to these types of patterns that are happening at large across the U.S.
John Farrell: Okay. So from reading about the decision, it seems like there were kind of two factors in whether or not this case could apply more broadly to actions by other government owned utilities, like Salt River Project, and then to utilities more broadly, such as those overseen by state regulatory commissions. So I’d love to ask you about the first one, which lawyers call the State Action Doctrine, which gives me the shivers every time I have to read it. How does this legal precedent typically shield utilities from scrutiny over their anti-competitive behavior and why didn’t it apply in this case?
Jean Su: So I think the thing to emphasize in antitrust law is the significance of this case is that there was a genuine on merits finding that this type of behavior is anti-competitive and it’s in violation of antitrust law. So I think like people have to really soak that in for a second before that is the merits finding before thinking about the defenses that are then lodged to protect utilities from being liable for it. So those two things need to be separated. And I, I think people often forget about the underlying merits piece and how significant that is.

So let, putting, putting that aside, there is a very interesting doctrine called the state action immunity doctrine, which was specifically carved out by the courts for antitrust law and what this, the whole purpose behind this in was that the courts believed that if the state really wanted to do an anti-competitive thing, it thought that it was in the best interest of the public to do that. They should have the right to do that. And so therefore they should be protected. And I think we can see that for instance, in the very early case of the electricity sector itself, that the, you know, different states carved out territorial service territories, so that you wouldn’t have duplicative lines and being built, you know, to serve a certain neighborhood. And so the state, or, you know, whatever local government entity made a call that, Hey, it’s actually okay to be anti-competitive, we’re going to give, you know, these types of monopoly territories solely for the purpose of serving the public interest and not having to with. So I, I think that’s like, you know, one, one lens to view that that’s the whole principle behind state action doctrine.

What’s happened since then, and what muddies the waters, is when you look at different bodies that are sub state, essentially different bodies that the state has delegated out, you know, certain regulatory duties to and in the electricity sector, we have a few manifestations of these bodies. So one of the bodies obviously is a municipality itself. So we have the state, the state that has local governments and municipalities. And so there there’s a tighter nexus, arguably between municipality making these decisions. And because they’re closer to the state, then on the opposite end of it, you actually have private utilities who have nothing to do with the state. They’re just pure companies, but they are regulated by another sub state body, a public commission, which has its own set of obstacles with this. And then Salt River Project is this funky character in the middle that actually, there are many utilities like the Salt River Project, which have its origins in state statute. For instance, like the, you know, actually the state created this thing. But over time it has become like a private beast in and of itself. The Supreme Court actually found that Salt River Project was a private enterprise and, and it was a business enterprise.

So it’s, it’s helpful to characterize in those three different buckets of the sub state categories that, that we’re looking at. So how does the state action immunity apply to these three different state categories? There’s a test that the courts made up. It’s a, it’s called the Midcal test. And there’s two prongs that need to be essentially meant to accurately put up a good state action immunity defense. The first prong is that the state is required to clearly articulate, a principle that they approve of this type of anti competition. So it has to be like a very straightforward state policy that we are okay with rooftop solar being totally eliminated. And there’s no need for competition against, kind of centralize it in normal utilities. So that, that that’s prong one, specifically applied to these types of pattern. Prong two is active supervision, is the state, is the sub state entity actively supervising or, I’m sorry, is the state actively supervising the sub state body to carry this out? So those are the two prongs, the private utilities, anything they do is subject to the two prong tests. On the other end, the municipalities are actually only subject to the first prong. And then depending on where your middle hybrid character is, depending on whether the state sees that more as muni or more as a private entity will depend on whether the two prongs apply to them. Sorry for that kind of lesson. But that’s, that’s kind of where the case law is.

John Farrell: This is great. I love podcasts where I’m learning right along with the listeners. So there’s okay. I just wanna say, I wanna say it back to you though. So there’s the two prong test about whether or not this immunity from antitrust applies. If it’s a state, if it’s an official government body like a municipality, it’s only subject to this idea that you have to have articulated a principle that anti-competition is okay. So a municipal utility could say we don’t like rooftop solar, but their defense has to be that the state has articulated getting rid of rooftop solar is cool. A private utility, though, has two parts to the test. The same principle of like the state has to articulate it, but also that the state is actively overseeing them. So those state commissions, public regulation commission, public service commission, what have you, they have to be watching the utility as they do this and approving of it as well.
Jean Su: Beautiful. Geez, John. So good.
John Farrell: John gets an A for the day.
Jean Su: Let’s keep diving. So SRP, what happened in this particular case is that SRP is a hybrid beast. The court actually never touched whether it needed to go into the two prong or the one prong. They analyzed the one prong, and then they just stopped there. So that’s, that’s that. And in that one prong alone, they found that Arizona actually laws on the books that are very pro competition. It is like a pro competition, pro electricity retail competition, state. It’s very clearly articulated in its statutes, therefore, any type of SRP actions that are kyboshing rooftop solar competition is against state law. So because of that, they found, okay, first is not gonna pass here. So you do not get to assert the state action immunity defense.
John Farrell: If it, just outta curiosity, let’s just say this was Tucson Electric Power, investor utility had applied the same kind of anti-competitive solar fees. And the corporation commission in Arizona said, yep, go ahead. Would they have gotten a pass or would they still have, because they didn’t pass that first prong because Arizona has these laws, endorsing competition, distributed energy, would they have still failed? I mean, do they, do they have, do they have to clear both hurdles? Do both prongs have to apply?
Jean Su: It’s a muni, it’s just the first prong just has to apply.
John Farrell: Okay.
Jean Su: Yeah. And so, so they would fail it.
John Farrell: But if it’s like, but if it’s a private utility and the commission says, yeah, go ahead and screw the solar customer. Even though the state law says we shouldn’t do it, would they get off the hook then?
Jean Su: No, not necessarily. So if they can’t pass both prongs, then it’s not possible. I think like this is where it gets really sticky with, with utility commissions. So what is a, let’s go on the first prong, very sticky issue competition, how actually do different policies on the books? Do they compete with each other? So for example, how, you know, how can you tell that the state is actually pro competition or like is at the very least, you know, not condoning competition against solar?

There’s a bunch of different stuff on the books right now. And it may be confusing and that’s where the argument can lie. Let’s say they, you know, don’t allow for competition generally. But they do allow for net metering, which allows for some amount of competition. How does that actually, you know, how do those two policies actually come together? I think an advocate can actually make an argument on both sides that, that one actually out competes the other. And there’s certainly arguments on both sides. So that’s where this can get a little pretty complicated, very quickly under those circumstances for the second prong active supervision. Absolutely. If the PUC approves this, yeah. You actually have a pretty, you have a pretty good defense that there is active supervision on this. The question, but the way to argue against that are, are two different ways. One is that the whole premise of the state action immunity doctrine was that was assumed that the state would be like good regulators, like good regulators for the public interest. Let’s say we can make a pretty good argument that actually the commission has a pretty high level of regulatory capture. Are they actually still fulfilling the public interest responsibilities that they have?

So these, there’s also a way to argue along those lines that actually the principles or the reasons why we have state action immunity don’t necessarily apply anymore in these contexts. The other kind of goal thing that you know, you and I have been talking about for a long time, are actions that are not actively supervised by the PUC, but are still anti-competitive. So these are things like interconnection fees, for example, which the times for instance are sometimes regulated, but they’re actually not enforced. So is that active supervision? No, not necessarily. If the utility commission is not actively saying yes, you can delay this for like X amount of time. And therefore the, the private utility, again, cannot assert at state action immunity. Cause it’s not actually actively being supervised.

John Farrell: I feel like we need some parents to come in and testify about what is meant by active supervision. Kind of like, you know, I want you kids to play together nicely. And then my son like grabs a knife or something. Right. I feel like that’s what happens in some of these cases where the commission’s like, you know, here’s the interconnection process and how it’s supposed to work. And the utilities are like, well, we just created this new rule about how we’re gonna put projects on hold, which doesn’t count toward our timeline. Apparently that’s used in Massachusetts, it’s happened in Minnesota, in other places. So there’s a lot of games that can be played there about that, about what involves, what’s involved in active supervision, I can imagine.
Jean Su: Yeah, absolutely. And, and that’s a great point that should be argued in a brief, let’s just break down what active supervision is. All of us understand.
John Farrell: Very good. I will wanna talk about another, so we’ve, hopefully folks have been able to grasp, I feel like I’ve got at least a rudimentary grasp of the state immunity component here to the antitrust case. There was another law that was mentioned in relation to this case it’s called the federal local government antitrust act. So I think I’ve got that right. According to the Utility Dive story about the case, Salt River Project got a favorable ruling related to this law. Could you explain what that what’s going on there?
Jean Su: Yeah. So this is the law that deals with antitrust damages and it essentially says that some state government bodies or government bodies in general are not going to be liable for antitrust damages. And unfortunately the court did find that SRP did qualify for that. And so therefore there won’t be antitrust damages right now. FYI, like all of this stuff is actually being remanded, the outstanding questions and, and the, the trial issues are going to be remanded to the district court. So the ninth circuit findings, you know, are what they are, but then kinda the, the guts of the merits, et cetera, are going to be litigated at the district court level. But separately, even though there may not be antitrust damages in terms of money, there’s still the ability for alternative relief, like injunctive relief, like declaratory relief. And that’s not great news necessarily for the lawyers on the case, but it is good news for the country and the customers in that, you know, if this case actually finds that this type of behavior is totally unacceptable and it violates antitrust law, then it has injunctive relief to stop this and declaratory relief to prevent this from happening in other places.
John Farrell: All right. I gotta ask you because I’m not a lawyer here. What’s injunctive and declaratory?
Jean Su: Oh, I’m sorry. OK. So injunctive relief is an injunction, which means you have to stop. You have to stop the bad stuff that you’re doing. So that’s good. So that would force SRP to basically take this discriminatory rate off of its books. And then declaratory relief is a finding in law. So it’s like a declaration. So the declaration is attached like this on rooftop solar, this particular discriminatory solar rate violates antitrust law, that’s declaratory relief. And so that has huge implications for these actions across the…
John Farrell: Right, cuz that would apply then presumably not just to SRP but to other utilities as well that you can’t do this kind of thing. Yes. Cool. Okay. Now I am ready for my next law school class.
Jean Su: Exactly. I feel like you’d be A, A plus in all of this.
John Farrell: So, well, I guess this, we’ve kind of touched on this already a little bit, but you know, could this decision before the ninth circuit allow for legal action over other anti-competitive behavior that utilities do. So, you know, we actually talked about this about interconnection, fees for interconnection, maybe really long timelines, putting projects on hold, things that jeopardize a project’s financing, are these now other things that could be litigated and that could refer back to this case?
Jean Su: Yes, absolutely. So again, the merits finding here is really significant. It opens the door for legal challenges to be made against utilities for their anti-competitive practices against renewable energy. So absolutely those doors are open and this case should absolutely be cited for that. The tricky part, you know, that everybody notes is, what are the defenses and the immunities that can be thrown to protect and shield utilities while they do that. So the, those are the open questions that is a school of possibility and it should be explored and it should be pushed.
John Farrell: And I presume also that one of the challenges that we’d have is that, you know, a small solar developer doesn’t necessarily have in-house council, whereas utilities using our money, have a lot of lawyers that would be prepared to stand up and defend their way of doing business.
Jean Su: Absolutely. And so one of the most difficult parts of bringing antitrust claims, which is, you know, why we’ve only seen SRP be the only one that’s been litigated against despite this egregious behavior happening everywhere is that antitrust suits are incredibly time intensive. They’re incredibly complex and they are incredibly expensive. So the first suit that we saw against SRP for this fact pattern was brought by solar city who is then acquired by Tesla. So they did have the monies to do this. The second set though, that is currently in the ninth circuit is somewhat of, it’s individual plaintiffs. And we have lawyers who are willing to make these types investments and litigate. So I, I think this is an area that is like a treasure box and it should be proliferated. And for those antitrust firms out there who have pro bono work or who are interested in really breaking into a new area of law that our climate safety depends on, I would encourage people to put their resources in new these types of cases.

Obviously another body that can bring these types of cases is the federal government, John, and I and some other folks are looking into this alternative as well and urging the department of justice and the FTC who is now headed by Kahn to investigate this, absolutely investigate these utilities and their anti behavior. They have the resources to bring these cases. They have the investigatory, you know, duty to do it. So let’s make that also happen on a federal level.

John Farrell: I’m glad you kind of brought this up to what’s happening or the opportunities at the federal level, cuz there’s a renewed interest nationally in antitrust policy that, you know, the U.S. House Judiciary Committee already passed six major antitrust bills in 2021. There are some partner bills that are under consideration in the U.S. Senate. I’m kind of curious, how do you feel like this case will lead to more attention around this idea of utility monopoly in the same way that we’re seeing that scrutiny apply to tech companies and to other big industries?
Jean Su: Yeah. I hope that the antitrust is the renewed cool kid on the block. It’s always been there. It just hasn’t been, you know, I think we have new faces on it that are really interesting. And new villains that are embodied in the tech world, that type of scrutiny on the tech world has to absolutely shift or expand to utilities. And in particular, the utility crisis that we see and the monopoly system that we have there is so incredibly unique in this country. It is not the free market that we see in the other airline, telecom, tech industries. They’re kind of hot and have always been the center of antitrust scrutiny. Utilities are something else.

And, and within that, it requires a real, almost soul searching for the country in terms of asking whether this system still works, which is something that John and I talk a lot about, does this private utility monopoly system work for electricity, if it is putting obstacles to climate progress, if it is really stifling people’s ability to have energy freedom, to have more affordable energy, to not be choked to death by the natural gas plant in their backyard anymore. Like these are fundamental energy questions that are at the center right now of our geopolitical, that we’re seeing as well as the climate emergency. So utility industry raises a lot of these super complex questions. I don’t think we should shy away from it. I think we should use antitrust to actually break it open and figure out the new types of systems that this country needs to survive.

John Farrell: Thanks. I’m still noodling like and processing that conversation, it was only a 30 minute call, so there wasn’t enough time to like really dive into it. And I think what you said about the issue of regulation, like how regulation happens and the influence the utility has over it and the way in which they can push back against public interest, right? Like the degree to which they lobby to stop laws. I was thinking, I was just thinking about the utility in question here, which is fairly well organized by labor in the state that this person works in is probably the exception as well. There aren’t, I think there are a lot of utilities that don’t have a unionized workforce or that might contract out for non-union labor, for example. Yes. And so I think it’s a rather unique situation that air, but I was thinking about that same utility is out there using customer dollars to lobby against electrification legislation that would help to deploy more building electrification and whatever, ironically, because they’re an electric utility. And so it’s sort of this fascinating thing I think about the perception that people have about the utilities be being able to be regulated that maybe is at the crux of this, of, and whether it’s, and this it’s interesting, it ties into the antitrust, right? So one of the key things is public supervision are these utilities actually being regulated and overseen. And the same thing goes to, I think to this person’s belief in the utility system is it’s only as democratic as it is overseen appropriately and, and in alignment with the public interest.
Jean Su: Right? And, and as we’re seeing, you know, antitrust was developed as a policing force against those that cannot be regulated for those that are not appropriately regulated. And I’m sorry to say, that is where we are right now in the state of utilities.
John Farrell: Yeah. That’s really interesting. So in some ways it’s actually really compatible with this idea. Well, more to say there, I’m sure at some point. Jean, thank you so much for coming and educating me about both the defense production act and giving me a little legal lesson on state action immunity. This is really terrific to understand all these different tools that we have at our disposal to accelerate clean energy development and to, and to do it in a way that would be more equitable than the kind of development we’ve seen in the past.
Jean Su: Absolutely. And you know, this is our moment to actually take back our democracy and really build back not just better, but you know, justly. So please let’s just do it together and get the Biden administration, all of us to use all the tools at our disposal because we have that. We just need the will.
John Farrell: Thank you so much for listening to this episode of Local Energy Rules with the Director of the Center for Biological Diversity’s Energy Justice Program, Jean Su. On the show page, look for links to the Center for Biological Diversity’s report on the defense production act and its sign on letter asking the president to invoke it in response to the Russian invasion of Ukraine and the climate crisis. We’ll also have links to my May, 2021 conversation with Jean about the antitrust case and additional resources about the case’s legal underpinnings, like the state action immunity doctrine. On ILSR’s website, you can also find several other interviews touching on utility monopoly power, including an interview about utility mergers with Scott Hempling in the summer of 2020, a discussion of power plant securitization policies with Leslie Glustrom in January 2021, and a discussion about competition as a tool to modernize the U.S. electricity system with Chris Villarreal in December 2021. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.

 


How Can the U.S. Take Immediate Action on Climate and Clean Energy?

With Build Back Better stalled in Congress, federal climate action feels out of reach. Still, Jean Su and the Center for Biological Diversity want President Biden to take action now through one of his executive powers.

The Defense Production Act is a presidential power that compels manufacturers to build ‘weapons’ for national defense. In war times, these weapons have been tanks and bombs, but more recently, Presidents Biden and Trump used the power to ramp up production of COVID-19 vaccines and personal protection equipment.

Now, the Defense Production Act could be used to spur the economy, reduce fossil fuel dependence, and curb climate change.

The Defense Production Act is a powerful executive tool that president Biden has… he can use it towards renewable energy manufacturing, which arguably we absolutely need in our national defense right now, to wean ourselves off the fossil fuels and really combat the climate crisis.

The Defense Production Act Delivers on Climate, the Economy, and National Security

Through the Defense Production Act, President Biden could demand that manufacturers produce renewable energy generation components, electric heat pumps, and electrified transportation equipment. Through government contracts, the President can also ensure that green jobs pay well and are represented by unions. Bolstering domestic production would not only create jobs, it would solve supply chain slowdowns and reduce prices for domestic customers.

We really have the opportunity to make a huge transformation in this country, build anew and build correctly back because that’s exactly how we’re going to try to address all of these crises in one go.

The United States could also export electrification and energy-saving materials to allies abroad. While the U.S. produces most of its own gas and fuel, Europe is dependent on Russian fuels — so most European nations are unable to ban Russian fuel imports as the U.S. has done.

Right now we have a situation where there is literally fossil fuel tyranny that is threatening democracy and sovereignty, in the Ukraine Russian war.

A Big Win for Solar Customers in Arizona

After their robust discussion of the Defense Production Act, Farrell and Su revisit their recent discussion of an Arizona legal case. In 2015, The Center for Biological Diversity and others took Arizona utility Salt River Project to court for its 65 percent rate increase on solar customers. SolarCity, the plaintiff in this first suit, settled with Salt River Project before the case made it to the Supreme Court.


Listen to a 2021 episode of Local Energy Rules featuring Jean Su and further discussion of the Salt River Project legal case.


Not to be discouraged, the Center for Biological Diversity started a second lawsuit against the Salt River Project with individual plaintiffs — to a bigger result. The Ninth Circuit Court of Appeals has found that Salt River Project’s attacks on rooftop solar may be liable under federal antitrust law. This case could set a new precedent for antitrust enforcement of competition in the electricity sector, says Su.

If this case actually finds that this type of behavior is totally unacceptable and it violates antitrust law, then it has injunctive relief to stop this and declaratory relief to prevent this from happening in other places.

Su Explains State Action Immunity

Utility companies have often been impervious to antitrust lawsuits through “state action immunity.” Su explains the two qualifiers for this immunity. First, a company must demonstrate that state law supports their anti-competitive behaviors. Second, the utility’s supervisory body must have actively allowed for them to engage in their behavior. Publicly-owned companies, like municipal utilities, must only pass the first test.

Since Arizona state law supports competition, says Su, Salt River Project failed to earn state action immunity.

Broader Implications of the Salt River Project Case

Although the Ninth Circuit Court of Appeals confirmed that Salt River Project would not be liable for damages, plaintiffs may receive relief in the form of an injunction (forcing Salt River Project to stop its anti-competitive practices) or a declaration (statement that Salt River Project’s policy violates antitrust law).

The Ninth Circuit Court of Appeals decision opens the doors to more lawsuits like this one, says Su. Although the lawsuits are expensive, and each will have its own complications, attacks on rooftop solar are mounting all over the country. Su hopes that the Federal government will investigate the issue, as it is investigating anti-competitive behavior in the technology and telecom sectors.

Does this private utility monopoly system work for electricity if it is putting obstacles to climate progress, if it is stifling people’s ability to have energy freedom, to have more affordable energy, to not be choked to death by the natural gas plant in their backyard?

Episode Notes

See these resources for more behind the story:

For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.

Explore local and state policies and programs that help advance clean energy goals across the country, using ILSR’s interactive Community Power Map.


This is the 152nd episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion.

Local Energy Rules is Produced by ILSR’s John Farrell and Maria McCoy. Audio engineering by Drew Birschbach.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update

Featured Photo Credit: iStock

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Maria McCoy is a research associate with the Energy Democracy Initiative. In this role, she contributes to blog posts, podcasts, video content, and interactive features.