On Wednesday, January 21, the Tenth Circuit Court of Appeals heard arguments in a case challenging the constitutionality of Colorado’s Renewable Energy Standard  The case was originally filed in 2011 and this latest appeal comes after the group challenging the constitutionality of the 30% renewable energy mandate lost on a motion for summary judgment in U.S. District Court for the District of Colorado.

The arguments today focused on whether the negative implications of the Commerce Clause  (the Dormant Commerce Clause) prevent the state of Colorado from requiring utilities to generate 30% of the electricity they sell in Colorado from renewable sources by 2020. The three-judge panel asked questions seeking to understand which formulations of the various Dormant Commerce Clause tests they should apply to reach a decision in this case. Of primary interest was a test from KT&G Corp. v. Attorney Gen. of Okla., 535 F.3d 1114, 1143 (10th Cir. 2008) that says a statute is invalid per se if it has the practical effect of controlling commerce occurring entirely outside the boundaries of the state in question. The panel wanted to know how this practical effect test was different than simply finding that a statute is invalid per se because it is facially discriminatory. All present seemed to agree that the test is unclear at best.

Other questions focused on whether there is a meaningful distinction to be made between regulations regarding the quality of a product and regulations affecting the price of a product. The panel posited hypotheticals of food- and auto-safety statutes and asked counsel whether those statutes would be permissible, even if they had incidental effects on prices in out-of-state markets. Don’t all regulations have some effect on out-of-state markets? Judge Tymkovich asked.

Counsel for the intervenor defendants from various environmental and energy groups argued that price is inseparable from quality in electric power markets because of the long-term investments at stake. When a state PUC approves a particular power source, whether by approving a new facility or by approving a long-term power purchase agreement, that PUC is committing state residents to the vagaries of a particular technology and fuel source. In so doing, the argument went, the PUC must take into account future costs that will be passed through to consumers, and thus they must take into account price.

The District Court rejected the constitutional challenge to the RES on all counts, and the course of today’s arguments was an indication that the Tenth Circuit may be inclined to follow suit.