Antitrust Law Daily Wrap Up, ANTITRUST—D. Ariz.: Utility could not appeal denial of dismissal of monopolization claims, (Dec 22, 2015)

By Linda O’Brien, J.D., LL.M.

An electric utility failed to show that there was a controlling question of law appropriate for interlocutory appeal following its unsuccessful attempt to dismiss a solar energy system installer’s monopolization claims over the utility’s new pricing plans, which imposed penalties on customers who generated their own electricity using solar energy systems, the federal district court in Phoenix has held. Thus, the utility’s motion for certification of issues for interlocutory appeal was denied (SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District, December 21, 2015, Rayes, D.).

SolarCity Corporation, one of the largest installers of distributed solar energy systems, engages in the design, manufacture, installation, and sale or lease of solar energy systems to residential and commercial customers. The Salt River Project Agricultural Improvement and Power District (SRP), one of the nation’s largest power utilities, provides electricity and water to most of the metropolitan Phoenix area.

In 2014, SRP introduced new pricing plans under which customers who chose to obtain some of their own power from solar energy systems paid an additional charge, while customers who purchased their electricity from SRP retained the normal rate structure. The new rate plans had the effect of eliminating future distributed solar installations.

In March 2015, SolarCity filed suit against SRP, asserting claims for monopolization, attempted monopolization, unreasonable restraint of trade in violation of the Sherman Act, the Clayton Act, and the Arizona Uniform State Antitrust Act. In ruling on SRP’s motion to dismiss in October 2015, the court found that Solar City plausibly alleged that the utility’s new pricing plans had the effect of restricting competition by imposing penalties on customers generating their own electricity. However, SRP was immune from damages under the Local Government Antitrust Act.

Subsequently, SRP moved to certify three issues for interlocutory appeal: whether it was immune from all claims under the state action doctrine; whether it was immune under the filed rate doctrine, and whether it was immune from damages claims under state law.

State action immunity. The court found that there was no controlling question of law appropriate for interlocutory appeal. Since equitable relief under federal antitrust law was the heart of SolarCity’s case, the application of state action immunity was a controlling question of law under 28 U.S.C. §1292(b). However, SRP failed to demonstrate a substantial ground for difference of opinion on the issue. The state does not permit retail electricity rates to be determined on the open market; that is the function of the Arizona Corporation Commission. Nevertheless, SRP was not free to act anti-competitively when setting its own prices for the distribution of electricity. Furthermore, SRP’s anti-competitive conduct was not a foreseeable result of fixed electricity rates. SRP’s state law authority to act was insufficient to establish state action immunity absent a showing that it had been delegated authority to act anti-competitively.

Immunity under state law. The immunity for a public entity’s exercise of a legislative or judicial function applied to damages only and not to equitable relief, the court noted. Since the issue turned on questions of fact and would bar only damages, it was not a controlling question of law. Moreover, there were no substantial grounds for difference of opinion regarding the court’s determination that whether the SRP’s alleged ratemaking ability was a legislative function remained a question of fact.

Filed rate doctrine. The court had concluded in ruling on the motion to dismiss that the filed rate doctrine did not apply, since SolarCity did not challenge SRP’s rates as unreasonable. Even if this issue was a controlling question of law, there were no substantial grounds for a difference of opinion regarding the court’s finding. The purpose of the doctrine is to prevent price discrimination among rate payers and preserve the role of regulatory agencies in deciding reasonable rates for public utilities, the court noted. Here, SolarCity challenged SRP’s discriminatory pricing as restricting competition. The doctrine does not bar suits by competitors claiming that the rates were adopted due to an antitrust violation. Since no regulatory authority approved SRP’s electricity prices and there were no allegations that the prices were unreasonable, the doctrine did not apply, the court concluded.

The case is No. 2:15-cv-00374-DLR.

Attorneys: John F. Cove, Jr. (Boies Schiller & Flexner LLP) for SolarCity Corp. Christopher E. Babbitt (Wilmer Cutler Pickering Hale & Dorr LLP) and Jason M. Porter (Steptoe & Johnson LLP) for Salt River Project Agricultural Improvement and Power District.

Companies: SolarCity Corporation

Cases: Antitrust ArizonaNews