NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

PPL ENERGYPLUS, LLC, et al.,

Plaintiffs,

v.

LEE A SOLOMON, et al.,

Defendants.

Civil Action No.: 11-745

MEMORANDUM AND ORDER

SHERIDAN, U.S.D.J.

This matter comes before the Court on a motion by defendants Lee A. Solomon, Jeanne

M. Fox, Joseph L. Fiordaliso, and Nicholas V. Asselta in their official capacities as public

officers of the New Jersey Board of Utilities (collectively, “Defendants”) to dismiss Plaintiffs’

complaint pursuant to Rule 12(b)(1) and Rule 12(b)(6). Plaintiffs, a consortium of utility

companies and electric generator companies, seek declaratory and injunctive relief from a

recently enacted New Jersey law that empowers the New Jersey Board of Utilities to set certain

special guaranteed prices for wholesale electricity transactions in a market governed by the

Federal Energy Regulatory Commission (“FERC”).

For the reasons stated below, Defendants motion to dismiss is denied.

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I. Facts

On January 28, 2011, the New Jersey Legislature enacted a law to foster new electric

generation and provide New Jersey with new generation capacity (the “Act”). N.J.S.A. 48:3-98.2 1

et seq. The law works as follows: First, the New Jersey Board of Public Utilities (“BPU”)

selects a limited number of electric generation companies for entry into a pilot program. The

BPU bases its selections on criteria included in the Act. Second, these electric generation

companies enter into irrevocable, long-term contracts with each of New Jersey’s electric public

utilities. These contracts, or standard offer capacity agreements (“SOCAs”), guarantee the state- 2

selected electric generation companies a fixed price for electric capacity. In exchange for the

price guarantee, the Act requires the state-selected generation companies to sell the rest of their

capacity in interstate electricity auctions. The SOCAs operate to insulate the state-selected

generation companies from losses at auction because the SOCAs exist outside of the auction

process and are regulated by the BPU. Additionally, the utility companies are insulated from

1

In this context, “capacity” is similar to energy “deposits” or “reserves.” Generally,

“capacity” includes commitments by generators to produce electricity when electricity is needed

to meet demand. Complaint, ¶ 32. Capacity is an important concept in the energy market due to

the enormous deviations between maximum energy demand and minimum energy demand. See

U.S. Dept. of Energy, A Primer on Electric Utilities, Deregulation, and Restructuring of U.S.

Electricity Markets, at A.4 (May 2002). Additionally, utilities are required by federal regulation

to maintain a certain amount of capacity. Complaint, ¶ 32.

2

In this context, a “utility” is a company that provides electricity to the general public.

Primer, at A.49. Traditionally, an electric utility performs three functions: (1) the generation of

electricity, (2) the transmission of electricity between substations on the “bulk power system” or

“power grid,” and (3) the distribution of electricity from the bulk power system to retail

customers (i.e., customers who use electricity rather than reselling it). Id. at 2.2-2.3. In the wake

of electric utility deregulation and restructuring, very few utilities own enough generators to meet

the full demands of their retail customers. Id

2

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losses by a provision of the Act that requires the difference between the guaranteed price and the

auction price to be passed to the New Jersey ratepayers. According to Defendants, new in-state

electric generating facilities will not be constructed in the absence of an SOCA between an

electric generating company and utility in accordance with the pilot program.

On February 9, 2011, Plaintiffs, a consortium of utility companies (“Utility Plaintiffs”)

and electric generator companies (“Generator Plaintiffs”), filed a complaint in this Court,

alleging that the Act violates the Supremacy Clause and the Commerce Clause of the United

States Constitution. Plaintiffs’ main contention is that the Act violates Part II of the Federal

Power Act, which provides the Federal Energy Regulatory Commission (“FERC”) with exclusive

jurisdiction to regulate wholesale electricity sales. The Federal Power Act, ch. 285, sec. 201 3

(codified as amended 16 U.S.C. § 824 et seq.); Complaint, ¶¶ 85-97. Plaintiffs also claim that

the Act regulates in favor of in-state companies at the expense of out-of state companies. Id., at

¶¶ 98-112. In lieu of answering the complaint, Defendants filed a motion to dismiss under Rule

12(b)(1) and Rule 12(b)(6).

II. Standard of Review

Defendants seek to dismiss Plaintiffs’ complaint under Federal Rule of Civil Procedure

12(b)(6) for failure to state a claim and Rule 12(b)(1) for lack of Constitutional standing.

In evaluating a 12(b)(6) motion for failure to state a claim, the Court must assume that

“all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Comp v.

3

“Wholesale electricity sales” involve the resale of electricity in quantity for resale

purposes. Primer, at A.50. Likewise, “retail electricity sales” involve the sale of electricity to

customers who use the energy rather than reselling it. Id. at A.42, A.50.

3

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Twombly, 550 U.S. 544, 555 (2007). The complaint need only “state a claim to relief that is

plausible on its face,” alleging no more than the “factual content” necessary to “allow[] the court

to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft

v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks omitted).

In evaluating a 12(b)(1) motion challenging subject-matter jurisdiction on the basis of

Constitutional standing, the Court must determine whether the challenge is facial or factual. See

Danvers Motor Co., Inc. v. Ford Motor Co., 186 F.Supp.2d 530, 534 (D.N.J. 2002). A facial

challenge is challenge to the contents of the pleading. Gould Electronics v. United States, 220

F.3d 169, 176 (3d Cir. 2000). When reviewing a facial challenge, the Court must review the

allegations of the complaint and the documents referenced therein and attached thereto “in a light

most favorable to the plaintiff,” and a manner essentially the same as a 12(b)(6) motion to

dismiss. Alston v. Countrywide Fin. Corp., 585 F.3d 753, 758 (3d Cir. 2009). A factual

challenge is a challenge outside the scope of the complaint, allowing “a court may consider

evidence outside of the pleadings.” Danvers, 186 F.Supp.2d, at 534 (citing Gould, 220 F.3d at

176). In a factual challenge, plaintiffs’ allegations are not entitled to presumption of

untruthfulness. Id.

Defendants’ Rule 12(b)(1) claim is properly understood as a facial challenge. In their

moving papers, Defendants focus their standing arguments on the allegations in Plaintiffs’

complaint. Defendants’ Motion to Dismiss, at 8-10. Although not parties to this action, Rate

Counsel’s arguments are also based on the allegations in Plaintiffs’ complaint. Rate Counsel’s

Amicus Brief, at 5-12. Additionally, neither Defendants nor Rate Counsel claim that Plaintiffs

should be held to the higher pleading standard of a factual challenge. See Defendants’ Motion to

Dismiss, at 8 (discussing burden of allegation); Rate Counsel’s Amicus Brief, at 6 (same). Since

Defendants are making a facial challenge to Plaintiffs’ complaint, the standard of review for

Defendants’ claim Rule 12(b)(1) is identical to their Rule 12(b)(6) claim.

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III. Analysis

A. Standing4

For Article III constitutional standing, three elements must be met. First, a plaintiff must

establish that he has suffered an “injury in fact.” Lujan v. Defenders of Wildlife, 504 U.S. 555,

560 (1992). An injury in fact is “an invasion of a legally protected interest which is (a) concrete

and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Id. (citations

omitted). Note, however, that the extent of the injury is immaterial; a plaintiff need only show an

“identifiable trifle” of harm. Gen. Instrument Corp. of Del. v. Nu-Tek Elecs. & Mfg., 197 F.3d 83,

87 (3d Cir. 1999). Second, “there must be a casual connection between the injury and the

conduct complained of.” Lujan, 504 U.S. at 560. This requirement mandates that the injury is

fairly traceable to the plaintiffs’ action and not the result of the independent action of a third

party. Id. Finally, it must be “likely” that the injury will be “redressed with a favorable

decision.” Id. at 561.

Plaintiffs’ complaint makes out a sufficient argument for standing. Regarding the injury

requirement, Plaintiffs allege concrete and particularized injuries to both the Generator Plaintiffs

and the Utility Plaintiffs. The Generator Plaintiffs allege that, by artificially depressing

wholesale prices for capacity and energy, the Act will cost Generator Plaintiffs millions of

4

The New Jersey Division of Rate Counsel, as Amicus Curiae, also make an argument that

Plaintiffs’ complaint is not ripe for adjudication. Amicus Brief, at 12-15. The crux of the Rate

Division’s argument is that Plaintiffs’ alleged injuries may not come to pass. Id. When

measuring “whether the litigant has asserted an injury that is real and concrete rather than

speculative and hypothetical, the ripeness inquiry meres almost completely with standing.” Joint

Stock Society v. UDV North America, Inc., 266 F.3d 164, 174 (3d Cir. 2001). Thus, for the sake

of judicial economy, the Rate Divisions’ ripeness contentions have been folded into the standing

discussion.

5

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dollars. Complaint, ¶¶ 75-76, 81. Generator Plaintiffs base this claim on their interpretation of

the energy market, that Generator-Plaintiffs’ revenues depend on auction prices and the objective

of the Act is to artificially lower wholesale capacity prices. Id. at ¶¶ 71-82. The Utility Plaintiffs

allege that the Act forces New Jersey utility companies to enter into binding, long-term contracts

with state-selected generators to purchase capacity at a fixed price. Id. at ¶ 67. Utility Plaintiffs

further allege that these contracts, the SOCAs, force utilities to make payments to state-selected

electric generating companies in an amount equal to the difference between the SOCA price and

the auction clearing price. Id. at ¶ 67. According to Utility Plaintiffs, even if the price difference

is recouped from New Jersey ratepayers, by entering into the SOCAs, the Utility Plaintiffs must

pay more to service their debt while their available credit is reduced. Id. at ¶ 72. Additionally,

Utility Plaintiffs’ claim that the additional cost to New Jersey ratepayers will place the Utility

Plaintiffs at a competitive disadvantage to energy suppliers that do not bear the cost of the

subsidies. Id. Regarding the traceability and redressability requirements, Plaintiffs collectively

allege that the Act negatively affects capacity and energy prices by damping the competitive

market, thereby causing injury, and that the requested prospective remedy will remove the harm.

Id. at ¶¶ 6, 71-78, 85-112.

In their motion to dismiss Plaintiffs’ complaint for lack of standing, Defendants contend

that, since the Act has yet to be implemented, Plaintiffs have yet to be injured. Defendants’

Motion to Dismiss, at 9. Further, Defendants argue that the Act advances the ultimate goals of

the FERC and that Plaintiffs’ claims of future injury are inherently speculative. Id.. However, 5

5

The Rate Counsel agrees with this contention. Amicus Brief, at 5-15.

6

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the accuracy of Plaintiffs’ injury claims are not at issue, and as Plaintiffs correctly note, the

doctrine of standing does not require a plaintiff to wait until after they are harmed to challenge an

act. See Pacific Gas & Elec. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190,

201 (1983); Danvers Motor Co., Inc v. Ford Motor Co., 186 F.Supp.2d 530, 535-36 (D.N.J.

2002). Admittedly, some anticipatory injuries are too uncertain to provide standing. See e.g.,

City of Los Angeles v. Lyons, 461 U.S. 95, 113 (1983) (denying standing in the context of

anticipatory prosecution); Danvers, 186 F.Supp.2d at 537-38 (denying standing where complaint

equivocated on the issue of injuries). Here, however, Plaintiffs have alleged their anticipated

injury with particularity, and the consequential injuries they anticipate are more than uncertain

possibilities.

Defendants also content that, even assuming that Plaintiffs will be injured by the Act,

Plaintiffs have failed to allege facts sufficient to satisfy the traceability requirement of

Constitutional standing. Reply Brief, at 6-7. According to Defendants, the wholesale and

capacity markets are affected by myriad factors, including FERC decisions, economic conditions,

politics, and regulations. Id. Additionally, Defendants claim that the complexity of the wholesale

and capacity markets prevent any party, including Plaintiffs, from pinpointing the precise effects

of a given cause. Id. at 7. Defendants conclude that, since Plaintiffs are unable to pinpoint the

precise injuries resulting from the Act as opposed to, for example, a market downturn,

Defendants claim that Plaintiffs can not trace such injuries to the Act. Id.

The traceability element of standing requires “a casual connection between the injury and

the conduct complained of” and not “the independent action of some third party not before the

court.” Lujan, 504 U.S. at 560 (internal quotation marks omitted). There is no requirement that

7

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the conduct complained of be the only cause of a given injury. See e.g., Pub. Interest Research

Grp. of N.J., Inc. v. Powell Duffryn Terminals, 913 F.2d 64, 72 n.8 (3d Cir. 1990). To establish

standing, Plaintiffs need not show that the Act is the sole cause, or even a direct cause, of the

threatened injury. See Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131, 142 (3d Cir. 2009). 

Plaintiffs must show an “indirect casual relationship” between the Act and their alleged injuries,

and they have done so. Complaint, ¶¶ 6, 71-78, 85-112.

B. Preemption Claims

The preemption doctrine is rooted in the Supremacy Clause of the United States

Constitution. See Gade v. Nat’l Solid Waste Mgmt. Ass’n, 505 U.S. 88, 108 (1992). “Under the

Supremacy Clause, federal law may supersede state law in several different ways.” Hillsborough

County, Fla. v. Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985).

Plaintiffs allege that the Act is preempted because it (1) intrudes on FERC’s exclusive

jurisdiction to regulate wholesale electricity transactions, and (2) erects obstacles to the FERC’s

achievement of its regulatory goals in the wholesale electricity markets. Complaint, ¶¶ 88-89. 

These allegations correspond to the preemption doctrines of field preemption and preemption

based on state law that impedes achievement of federal objectives. See e.g., Chamber of

Commerce v. Brown, 554 U.S. 60 (2008) (field preemption); Nash v. Florida Indus. Comm’n,

389 U.S. 235 (1967) (preemption based on state law that impedes achievement of federal

objectives).

Field preemption and preemption based on state law that impedes the achievement of

federal objectives involve similar, but not identical, inquiries. Field preemption exists when

either “the nature of the regulated subject matter permits no other conclusion,” or when

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“Congress has unmistakably so ordained.” Florida Lime & Avocado Growers, Inc. v. Paul, 373

U.S. 132, 142 (1963). Preemption based on state law that impedes the achievement of federal

objectives exists when the state law “stands as an obstacle to the accomplishment and execution

of the full purposes or objectives of Congress.” Lines v. Deviates, 312 U.S. 52, 67 (1941). Either

finding requires a determination of the record and context of the challenged state and federal

laws. See e.g., Pacific Gas & Elec. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S.

190, 203-23 (1983); Perez v. Campbell, 402 U.S. 637, 644-48 (1971).

Here, Plaintiffs successfully plead both that the Act intrudes on a field that Congress

intended to be the sole province of the FERC, and that the Act erects an obstacle to FERC’s

achievement of its regulatory goals. See Complaint, ¶¶ 88-89. Regarding field preemption, both

Plaintiffs and Defendants agree that Congress, by enacting the F.P.A., has delegated exclusive

authority to regulate the transmission and sale at wholesale of electric energy in interstate

commerce. See Defendants’ Motion to Dismiss, at 12-13; Plaintiffs’ Opposition Brief, at 13. The

open question is whether the Act intrudes on FERC’s exclusive authority. See Defendants’

Motion to Dismiss, at 13. In their complaint, Plaintiffs make numerous, particularized claims

that the Act does intrude on FERC’s exclusive authority. Complaint, ¶¶ 53, 67-71, 88 (arguing

that the Act impermissibly guarantees a wholesale capacity price). Additionally, Plaintiffs

successfully claim that, even if the Act does not intrude on FERC’s exclusive authority, the Act

impedes the FERC’s policy of establishing a market-based approach to setting wholesale energy

rates in the mid-Atlantic market. Id. at ¶¶ 31-36, 40. Thus, Plaintiffs’ claims are sufficient to

withstand Defendants’ Rule 12(b)(6) motion to dismiss and the claims should go forward to

determine the scope, context, and record of the challenged state and federal laws.

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C. Dormant Commerce Clause Claim

The Commerce Clause grants Congress the power to “regulate Commerce with foreign

Nations, and among the several states . . . .” U.S. Const., Art. I, § 8, cl. 3. The Supreme Court

has long “recognized that this affirmative grant of authority to Congress also encompasses an

implicit or ‘dormant’ limitation on the authority of the States to enact legislation affecting

interstate commerce.” Healy v. Beer Institute, 491 U.S. 324, 326 n.1 (1989). In the Third Circuit,

“[t]he party challenging the statute has the burden of proving that the statute is discriminatory.”

Freeman v. Corzine, 629 F.3d 146, 158 (3d Cir.2010) (internal quotations omitted). In this

context, discrimination “simply means differential treatment of in-state and out-of-state

economic interests that benefits the former and burdens the latter.” United Haulers Ass'n, Inc. v.

Oneida–Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 338 (2007) (internal quotations

omitted).

Plaintiffs advance a credible case that the intent and effect of the Act are to discriminate

in favor of in-state generation at the expense of out-of-state generation. Plaintiffs claim the stateselected electric generators disproportionately benefit from said agreements. Complaint, ¶ 103. 

According to Plaintiffs, the eligibility requirements for the selection process are weighted

towards in-state generators. Complaint, ¶ 102 (claiming that a commercial operation deadline

favors in-state generators that are sufficiently advanced in planning and permitting), ¶ 104

(identifying pre-qualification requirements that favor in-state generators, including providing

environmental, economic, and community benefits to New Jersey). According to Plaintiffs, the

eligibility preferences for in-state generators is belied by the fact that all three of the generation

10

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facilities selected by the BPU are from New Jersey. See Plaintiffs’ Opposition Brief, at 26 n.9. 

Furthermore, Plaintiffs identify portions of the legislative record that Plaintiffs claim illustrates

that the intent of the Act is to favor in-state generation over out-of-state. Complaint, ¶ 101.

While Defendants dispute the discriminatory affect of the Act, Defendants are unable to

identify any claims that are implausible on their face. See Defendants’ Brief in Support, at 20-24. 

Thus, Defendants’ Rule 12(b)(6) motion to dismiss for failure to state a claim fails as to

Plaintiffs’ Commerce Clause claim.

IV

This Court has reviewed all submissions. For the reasons set forth in the above

Memorandum;

IT IS on this 19 day of October 2011, th

ORDERED that Defendants’ First Motion to Dismiss Complaint in Lieu of Filing an Answer

(Docket Entry #22) is DENIED;

s/Peter G. Sheridan 

PETER G. SHERIDAN, U.S.D.J. 

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