10th Circuit Court of Appeals Rejects Challenge to Colorado’s Renewable Energy Standard

A three-judge panel of the United States Court of Appeals for the 10th Circuit unanimously rejected a challenge to Colorado’s renewable-energy mandate today. The case, which was argued before the judges in January, centered around the question of whether Colorado’s Renewable Energy Standard (RES) is unconstitutional under Dormant Commerce Clause of the U.S. Constitution. The Energy & Environmental Legal Institute, which brought the challenge to the law, argued that because the renewable-energy mandate affects the larger electric grid stretching far beyond Colorado, it unfairly discriminates against out-of-state interests. Specifically, the challengers argued, the RES would have a negative impact on out-of-state fossil-fuel producers. Judge Gorsuch, writing for the unanimous panel, rejected that argument, explaining that while the RES might raise electricity prices for Colorado consumers, it could possibly have the opposite effect for electricity consumers in other states:

[A]s far as we know, all fossil fuel producers in the area served by the grid will be hurt equally and all renewable energy producers in the area will be helped equally. If there’s any disproportionate adverse effect felt by out-of-state producers or any disproportionate advantage enjoyed by in-state producers, it hasn’t been explained to this court. And it’s far from clear how the mandate might hurt out-of-state consumers either. The mandate does have the effect of increasing demand for electricity generated using renewable sources and (under the law of demand) you might expect that to lead to higher prices for electricity of that sort for everyone in the market (here, presumably, everyone connected to the grid). But the mandate also reduces demand for and might be expected to reduce the price everyone in the market has to pay for electricity generated using fossil fuels. So the net price impact on out-of-state consumers is far from obviously negative and, for all we know, may tip in favor of those willing to shift usage toward fossil fuel generated electricity.

Energy and Environmental Legal Institute v. Epel, slip op. at 11 (10th Cir. 2015).

The law, Judge Gorsuch wrote, “does not discriminate against out-of-staters,” and is a regulation on the quality of the electricity sold in Colorado, rather than a control on price. Id. at 8-9. This decision—along with a similar 2013 decision from the 9th Circuit upholding that state’s low-carbon fuel standard—is a boon for renewable-energy supporters, and will likely serve as a bellwether for other states where renewable-energy legislation has come under legal challenge.

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