8. Commerce Clause Issues

The Commerce Clause states that: "Congress shall have [the] [p]ower ... to regulate Commerce with foreign [n]ations, and among the several [s]tates."²⁴⁷ The negative implication, or dormant aspect, of the Commerce Clause limits the ability of individual states to impede the flow of interstate commerce.²⁴⁸ Dormant Commerce Clause doctrine consists of three analytical frameworks. First, a state rule that facially discriminates against other states in order to protect local economic interests will generally be found invalid.²⁴⁹ Second, when a state rule does not facially discriminate against out-of-state economic interests, the Pike balancing test will be applied. Under Pike, a state enactment "will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits."²⁵⁰ Third, a state rule must not regulate extraterritorially.²⁵¹ The EPS does not run awry of any of these tests and is thus valid under the Commerce Clause.

8.1. The EPS does not Discriminate Against Interstate Commerce

Any party challenging the constitutional validity of a regulation under the dormant Commerce Clause bears the burden of demonstrating discrimination.²⁵² CEED argues that the EPS has a discriminatory effect on interstate commerce that violates the dormant Commerce Clause.²⁵³ Citing City of Philadelphia for the principle that: "[a] state cannot block imports from other states, nor exports from within its boundaries, without offending the Constitution,"²⁵⁴ CEED argues that the proposed EPS is unconstitutional because it would limit the ability of out-of-state coal-fueled generation plants to export their electricity into California.²⁵⁵

The EPS is distinguishable from the statute in City of Philadelphia for two reasons. First, the statute in City of Philadelphia prevented certain products from entering New Jersey. Under the EPS, electricity generated from high-GHG emitters can still be sold to California LSEs under existing contracts, or under new or renewal contracts of less than five years. In addition, coal-fired and other plants that use technology that reduces GHG emissions could meet the EPS.

More importantly, the EPS does not discriminate based on geographic origin. The salience of geographic neutrality in dormant Commerce Clause analysis was aptly stated in Environmental Defense's Reply Comments to the Proposed Decision.²⁵⁶ In City of Philadelphia, the New Jersey statute prohibited the importation of "solid or liquid waste which originated outside the territorial limits of the State."²⁵⁷ The Court explained: "whatever New Jersey's ultimate purpose, it may not be accomplished by discriminating against articles of commerce coming from outside the State unless there is some reason, apart from their origin, to treat them differently."²⁵⁸ In sharp contrast, the geographic locality of a high-GHG emitter is irrelevant under the EPS.²⁵⁹ An LSE is free to enter into long-term contracts with both in-state and out-of-state generators because the EPS makes no distinctions between in-state and out-of-state sources of electricity. Indeed, the Attorney General notes that: "under the [EPS], a substantial amount of electricity generated out-of-state would [meet the EPS and therefore] continue to be available for procurement"²⁶⁰ For these reasons, we find CEED's argument to be without merit.

CEED additionally argues that the EPS discriminates against interstate commerce by treating California firms more favorably than out-of-state firms. CEED states that: "the 60 percent capacity factor exempts the majority of California's in-state generators from the EPS."²⁶¹ This is a comparison between apples and oranges.

The EPS covers the California LSEs' long-term baseload procurement contracts. Most of the parties at the Commission's workshop on June 21-23, 2006, agreed that the EPS should apply to baseload generation plants that are intended to operate year-long at a high-capacity factor, because these plants would provide the bulk of the LSEs' open procurement needs and the most significant amounts of GHG emissions. There was some disagreement as to whether the capacity factor should be at least 50% or 60%. However, most parties agreed with the 60% capacity factor, because the utilities' data showed that a 60% (or greater) capacity factor would capture 78% of the utilities' 2012 open procurement needs and 72% of the associated CO₂ emissions.²⁶²

On the other hand, there was general agreement at the Commission's workshop that the EPS should not apply to generation plants that operate at a low-capacity factor to meet peaking or other reliability needs. Parties agreed that the EPS should not apply to these types of generation plants because it could be detrimental to the reliability and performance of the transmission grid and it would not reduce a significant amount of additional CO₂ emissions.²⁶³ While the California utilities procure electricity from some out-of-state low-capacity factor plants, both the Commission and the California ISO have recognized that many local low-capacity factor plants are required to generate electricity at specific locations for the operational reliability of the electric transmission grid.²⁶⁴

In view of the above, long-term baseload generation operating at a capacity factor of 60% or greater performs a totally different function and would be responsible for a much greater amount of GHG emissions than low-capacity factor generation (such as peakers) operating at a capacity factor of less than 60%; including many which are operating only 10% or 20% of the time during the year and are essential for the reliability of the grid. Thus, the generators competing under the EPS for long-term, high-capacity factor baseload contracts are not similarly situated with low-capacity factor generation plants. Consequently, there is no legitimate claim of discrimination under the dormant Commerce Clause based upon the exemption of low-capacity factor generators from the EPS.²⁶⁵

Furthermore, the Attorney General states that: "[t]he CEC currently estimates that more in-state than out-of-state [baseload] generation facilities would fail to meet the [EPS]" and that "more imported electricity than locally generated electricity from facilities to which the [EPS] is to be applied may meet the [EPS]."²⁶⁶ Regardless, any shift towards or away from out-of-state resources is speculative at this point, and could not possibly indicate discriminatory intent. We therefore reject CEED's argument as invalid.

CEED further argues that the EPS (and the GHG cap to be implemented in Phase 2) "places heightened financial burdens on the construction of new coal-fueled powerplants in neighboring states."²⁶⁷ This is based on the practice of using pre-construction contracts to secure financing for powerplant construction.²⁶⁸ CEED further argues that the EPS therefore provides California firms with a "significant competitive advantage" in securing financing.²⁶⁹

The dormant Commerce Clause does not require California to protect the pecuniary interests of out-of-state coal burners.²⁷⁰ Moreover, CEED's argument does not show that California firms will have a significant competitive advantage. As stated above, both California firms and out-of-state firms are covered under the EPS. The Supreme Court has observed that the Commerce Clause "protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations."²⁷¹ We find CEED's argument to be without merit.

CEED further complains that there is currently no cost-effective technology that would allow coal burners to meet the EPS²⁷² and also argues that the EPS would somehow hinder advanced clean coal technology development.²⁷³ As NRDC, TURN, UCS and WRA note, there are already two planned generation facilities that intend to implement CO₂ sequestration, from day one of the plants' operation.²⁷⁴ Thus, clean coal technology is now under development. By setting a GHG emissions limit, the EPS would create an incentive to further the development of clean coal technology, rather than hinder it. Conversely, allowing California to remain reliant on high GHG-emitting energy sources would serve as a disincentive for the advancement of environmentally sound coal technology. Regardless, as stated above, California is not required to protect the interests of "particular interstate firms."²⁷⁵ We reject CEED's argument.

No party has met the burden of demonstrating discrimination. Therefore, we conclude that the EPS is an evenhanded regulation that does not discriminate against interstate commerce.

8.2. Pike Balancing Test

When a state enactment is not facially discriminatory, the Pike balancing test is generally applied. In Pike v. Bruce Church (1970) 397 U.S. 137, the Supreme Court established this test that weighs the local benefits against the burdens on interstate commerce, in order to determine if a particular state regulation violates the dormant Commerce Clause. A regulation's burdens on interstate commerce must be "clearly excessive" in relation to the local benefits in order for a regulation to be struck down under Pike.²⁷⁶ As Environmental Defense points out, the burden of proving "excessiveness" would fall on a party challenging a regulation.²⁷⁷

8.2.1. The EPS has Substantial Local Benefits

Despite the restrictions of the dormant Commerce Clause, a state retains general police powers to regulate legitimate local concerns.²⁷⁸ In SB 1368, the Legislature has made specific legislative findings regarding the local benefits of the EPS.²⁷⁹ SB 1368 reads: "[g]lobal warming will have serious adverse consequences on the economy, health and environment of California."²⁸⁰

Regarding economic benefits, the Legislature found that "federal regulation of emissions of greenhouse gases is likely"²⁸¹ "over the next decade"²⁸² and that SB 1368 serves to "reduce potential exposure of California customers for future pollution-control costs."²⁸³ SB 1368 also reduces "potential exposure of California consumers to future reliability problems in electricity supplies."²⁸⁴ Thus, the EPS serves to protect ratepayers from the costs and risks of complying with future laws and regulations that will further limit the emission of GHG gases in the process of generating electricity. If Californians are reliant on high-GHG emitting sources, whether in-state or out-of-state, future regulations could have a devastating impact on the California economy. Non-compliant energy sources could be forced to refurbish their facilities to meet these new standards, and the costs could be shifted to consumers. Whether or not costs are shifted, plants would likely be unable to continue supplying as much power to California while they are refurbishing. Further, the EPS encourages a wide range of clean energy sources, which protects the reliability of the grid. It is a legitimate local purpose to protect California consumers from financial risks in an evolving regulatory scheme, while ensuring a continuous supply of electricity for California customers.

Regarding the health and environment of California, we look to the legislative findings of AB 32 and the Final Climate Action Team Report to the Governor and the Legislature (Presented to the Legislature in March, 2006) (CATR).²⁸⁵

In AB 32, the Legislature found that:

"(a) Global warming poses a serious threat to the economic well-being, public health, natural resources, and the environment of California. The potential adverse impacts of global warming include the exacerbation of air quality problems, a reduction in the quality and supply of water to the state from the Sierra snowpack, a rise in sea levels resulting in displacement of thousands of coastal businesses and residences, damage to marine ecosystems and the natural environment, and an increase in the incidences of infectious diseases, asthma, and other human health-related problems."²⁸⁶

GHG emissions contribute to climate change.²⁸⁷ By increasing the number of extremely hot days, and the "frequency, duration, and intensity of conditions conducive to air pollution formation, oppressive heat, and wildfires," the public health of Californians could be dramatically affected.²⁸⁸ Climate change is also likely to increase infectious disease vectors such as mosquitoes, ticks, fleas and rodents, which would effectuate the negative health consequences discussed in AB 32.²⁸⁹ Similarly, climate change can increase asthma triggers such as pollen, dust mites, and molds.²⁹⁰ The decreases to the Sierra Nevada snowpack mentioned in AB 32 would have far-reaching effects on California's water supply.²⁹¹ The snowpack provides a natural water supply to Californians, including agricultural growers.²⁹² Loss of the snowpack would result in decreased runoff, which would reduce the availability of the already overstretched water supply.²⁹³ Electric supply from hydroelectric powerplants is also likely to diminish, while demand continues to rise.²⁹⁴ The rise in sea level described in AB 32 could submerge many of California's beaches and estuaries.²⁹⁵ The occurrences of extreme oceanic events are also expected to rise with sea levels.²⁹⁶

The Attorney General introduced into the record substantial materials that corroborate these findings, and the linkage between anthropogenic climate change and negative health and safety impacts on California.²⁹⁷ For instance, Dr. Reinhard E. Flick states that "all beaches in California will be negatively affected" as the result of climate change.²⁹⁸ Dr. Michael Hanemann notes that climate change would reduce California's water supply while increasing water demand.²⁹⁹ We thus conclude that the EPS has substantial local benefits.

8.2.2. The EPS does not Excessively Burden Interstate Commerce

As noted above, CEED argues that the EPS will burden interstate commerce because it would somehow limit the construction of new coal-fueled plants and because clean coal technology is not commercially feasible. We have already shown how these alleged "burdens" are nondiscriminatory.

CEED also makes the speculative claim that the EPS would decrease the price of electricity sold by some out-of-state generators.³⁰⁰ In its Reply Comments to the Proposed Decision, Environmental Defense notes that: "CEED's focus on this one segment of the interstate market . . . is insufficient to make out a burden on interstate commerce."³⁰¹ Environmental Defense further remarks that CEED is seeking to establish an impermissible burden by "selectively characterizing the affected market."³⁰² We agree that CEED is selectively characterizing the interstate market in order to inflate the purported burden. The EPS would affect electric generators that are high-GHG emitters and seek to enter into new long-term baseload contracts with California LSEs. However, this would only affect those generation companies to the extent they also refuse to refurbish their powerplants, or build new powerplants, with technology that limits GHG emissions such that they comply with the EPS. Beyond this very specific class, out-of-state generators would generally be able to meet the EPS. The overall interstate market is not being overly burdened.

More generally, CEED argues that: "the reality of California's energy market dictates that the [EPS] will primarily preclude out-of-state suppliers from competing in California markets"³⁰³ and that the EPS burdens the economies of other states more than California.³⁰⁴ CEED further argues that through coal displacement, various interstate geographic regions of the United States would be negatively impacted in the future.³⁰⁵

CEED presents a report by "Energy Ventures Analysis, Inc." (EVA)³⁰⁶ which states that: "[b]aseload power imported from the Southwest would be far harder hit than generation from the Pacific Northwest. Both major importing areas would be hit much harder than in-state California plants."³⁰⁷ The report speculates that 8-52 % of the existing Pacific Northwest imports would not meet the EPS, and that 54-86 % of the existing Southwest imports would not meet the EPS.³⁰⁸ However, assuming arguendo these numbers were accurate, as much as 92% of the existing Pacific Northwest imports would meet the EPS, and as much as 46% of the existing Southwest imports would meet the EPS. Moreover, generators may make changes to existing generation plants or construct new out-of-state generation plants, in order to meet the EPS.

We find the EVA report unpersuasive. Indeed, reducing reliance on high-GHG emitting resources is a major goal of the EPS. Whether one out-of-state geographic region may be impacted more than another is not relevant here because the concern underlying the dormant Commerce Clause is economic protectionism of in-state interests.

CEED also attaches a study purporting to show various costs that will be incurred as coal is displaced by other fuels. However, the authors of the study cautioned that their analysis "is not intended to measure the impacts of any specific policy that could result in decreased coal production or utilization."³⁰⁹ Environmental externalities such as pollution and GHG emissions were not considered in the study.³¹⁰ In any event, the fact that national displacement of coal may have some economic effects does not establish an impermissible burden on interstate commerce.³¹¹

Overall, the argument CEED raises is analogous to a failed argument in Minnesota v. Clover Leaf Creamery (1981) 449 U.S. 456. In Clover Leaf Creamery, the Court upheld a Minnesota statute that banned the retail sale of milk in plastic nonreturnable, nonrefillable containers, but allowed such sale in other types of nonreturnable, nonrefillable containers.³¹² The opponents of the statute argued that the "plastic resin . . . used for making plastic nonreturnable milk jugs, is produced entirely by non-Minnesota firms, while pulpwood, used for making paperboard, is a major Minnesota product."³¹³ The Supreme Court responded: "[e]ven granting that the out-of-state plastics industry is burdened relatively more heavily than the Minnesota pulpwood industry, we find that this burden is not `clearly excessive' in light of the substantial state interest in promoting conservation of energy and other natural resources."³¹⁴

As in Clover Leaf Creamery, the burdens cited by CEED cannot be deemed "clearly excessive" in light of the substantial local benefits of the EPS. Citing an October 30, 2006 Data Request Response from PG&E, SDG&E, and SCE, DRA points out that: "[a]s a practical matter, it appears that the duration of many energy contracts is less than five years."³¹⁵ As stated above, coal-based and other high-GHG emitting power sources, can still sell to California LSEs under these short-term contracts, as well as existing contracts.³¹⁶ Thus, the speculative costs of the EPS cannot be deemed "clearly excessive" when weighed against the important local benefits of protecting ratepayers and the California environment.³¹⁷

For all the reasons stated above, we conclude that the alleged burdens are incidental and not clearly excessive in relation to the substantial local benefits of the EPS.

8.3. The EPS is not an "Extraterritorial" Regulation

Like facially discriminatory regulations, an "extraterritorial" regulation is generally considered to be invalid per se.³¹⁸ In this context, extraterritorial regulation means regulation that impacts commerce that occurs "wholly" outside the state.³¹⁹

CEED argues that the EPS will have an impermissible extraterritorial effect on interstate commerce. More specifically, CEED argues that the EPS will have the effect "of regulating the GHG emissions of out-of-state generators selling into the California market, thus unlawfully controlling commercial conduct beyond the borders of California."³²⁰ In support of this argument, CEED cites Healy v. Beer Institute (1989) 491 U.S. 324, 336, for the proposition that: "[t]he critical inquiry is whether the practical effect of the regulation is to control conduct beyond the boundaries of the State." However, the practical effect of the Connecticut law challenged in Healy was that brewers could not offer volume discounts in Massachusetts, New York and Rhode Island, where they were legal. If they did so, the volume discount would have become the ceiling price for all sales in Connecticut, which did not allow volume discounts.³²¹ The EPS, however, does not have the practical effect of setting the price, or any other conditions, of sales in other states.

Further, the EPS does not directly regulate commerce that occurs "wholly out-of-state." It only regulates the procurement practices and contracts of California LSEs buying for the California retail market. As the Ninth Circuit explained in Gravquick A/S v. Trimble Navigation International Ltd. (9th Cir. 2003) 323 F.3d 1219, 1224, cases finding extraterritorial regulation "deal with laws that regulate out-of-state parties directly, not through contract."³²² The Ninth Circuit held that when a state regulates contractual relationships in which at least one party is located within California, it does not regulate commerce entirely outside of the State of California.³²³

Also, SCE argues that: "[c]ourts have repeatedly struck down state laws that burden interstate commerce by conditioning access to the local market on compliance with local environmental policies."³²⁴ However none of the cases cited by SCE support SCE's claim.³²⁵ States are permitted to prevent sales to in-state entities based on potential in-state environmental effects.³²⁶ Indeed, the Supreme Court held that it was not a violation of the dormant Commerce Clause for the City of Detroit to condition access to its port by requiring compliance with local environmental regulations.³²⁷

An out-of-state company can still decide whether to sell electricity to the California LSEs under the EPS (e.g., by utilizing powerplants that already comply with the EPS, by retrofitting existing, non-compliant powerplants, by building a new complying powerplant), or by selling into California under contracts of less than five years), or the out-of-state company can choose to sell electricity to utilities in states other than California. The EPS is indifferent to electric sales to entities in other states. Simply because the sales to California LSEs under the EPS may affect the costs or profits of an out-of-state generation company (as well as generators in California), this does not make the regulation extraterritorial.³²⁸ We thus reject CEED's and SCE's arguments, and conclude that the EPS is not an "extraterritorial" regulation.

8.4. Conclusion

For the reasons discussed above, we conclude that the EPS does not: 1) discriminate against interstate commerce, 2) impose excessive burdens on interstate commerce in relation to local benefits, or 3) have an extraterritorial effect. In sum, the EPS is valid under the dormant Commerce Clause. As stated aptly by the Ninth Circuit Court:

"The constitutional principles underlying the Commerce Clause cannot be read as requiring the State ... to sit idly and wait until potentially irreversible environmental damage has occurred ... before it acts to avoid such consequences."³²⁹

²⁴⁷ U.S. Const. art. I, § 8, cls. 1, 3.

²⁴⁸ See, e.g., H. P. Hood & Sons, Inc. v. Du Mond (1949) 336 U.S. 525, 533-36.

²⁴⁹ See, e.g., Oregon Waste Systems, Inc. v. Department of Environmental Quality of the State of Oregon (1994) 511 U.S. 93, 100-101; but see Maine v. Taylor (1986) 477 U.S. 131, 151-52 (Supreme Court upheld a discriminatory rule that furthered legitimate state interests where there were no reasonable, nondiscriminatory alternatives).

²⁵⁰ Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142.

²⁵¹ See, e.g., Healy v. Beer Institute (1989) 491 U.S. 324, 336-37.

²⁵² See Hughes v. Oklahoma (1979) 441 U.S. 322, 336.

²⁵³ See, e.g., CEED's Opening Comments on Final Workshop Report, October 18, 2006, p. 19. Similar Commerce Clause arguments were addressed in a related proceeding, D.06-06-071, "Order Denying Rehearing of Decision 06-02-032" (June 29, 2006).

²⁵⁴ See, e.g., CEED's Reply Brief on Jurisdictional and Other Legal Issues, July 11, 2006, p. 4 (Citing City of Philadelphia v. New Jersey (1970) 437 U.S. 617, 620.).

²⁵⁵ See, e.g., CEED's Opening Brief on Jurisdictional and Other Legal Issues, June 30, 2006, p. 7.

²⁵⁶ Reply of Environmental Defense to Comments on Draft Interim Decision on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard, January 8, 2007, p. 1 (Citing Kleenwell Biohazard Waste and General Ecology Consultants, Inc. v. Nelson (9th Cir. 1995) 48 F.3d 391, 397-98; Hass v. Oregon State Bar (9th Cir. 1989) 883 F.2d 1453, 1462.).

²⁵⁷ City of Philadelphia v. New Jersey, 437 U.S. at 618 (Emphasis added).

²⁵⁸ City of Philadelphia v. New Jersey, 437 U.S. at 627-28 (Emphasis added).

²⁵⁹ CEED makes the claim that the "Order itself concedes, `non-California generators . . . must adjust their behavior' to comply with CPUC's GHG cap (and presumably with the interim EPS as well)." (See, e.g., CEED's Opening Brief on Jurisdictional and Other Legal Issues, June 30, 2006, p. 6.) The complete sentence on page 23 of D. 06-02-032, "The Opinion on Procurement Incentives Framework" (February 16, 2006), reads: "California and non-California generators are subject to the cap and must adjust their behavior accordingly." (Emphasis added.)

²⁶⁰ Reply Brief to CEED for the People of the State of California, Oct. 31, 2006, p. 5 (Citing CO₂ Emission from Coal and Natural Gas from WECC Power Plants with High Capacity Factor in 2005 (CEC, Oct. 27, 2006).). According to this CEC report, at least 22 major out-of-state plants would meet the EPS.

²⁶¹ CEED's Comments on Draft Workshop Report, September 8, 2006, p. 15.

²⁶² See Draft Workshop Report, August 21, 2006, pp. 21-23, and its Summary of Comments, Responses to Workshop Question # 4, p. 47. Subsequently, the 60% capacity factor was codified by SB 1368 § 2. See Public Utilities Code § 8340(a).

²⁶³ See Draft Workshop Report, August 21, 2006, pp. 21-23, and its Summary of Comments, Responses to Workshop Question # 4, p. 47.

²⁶⁴ See D.06-06-064, "Opinion on Local Resource Adequacy Requirements" (June 29, 2006).

²⁶⁵ See General Motors Corp. v. Tracy (1997) 519 U.S. 278, 297-310.

²⁶⁶ The Attorney General notes that: "[t]hese estimates may change when fuel use for non-electricity production is accounted for." Reply Brief to CEED Comments for the People of the State of California, Oct. 31, 2006, p. 5 (Citing CO2 Emission from Coal and Natural Gas from WECC Power Plants with High Capacity Factor in 2005 (CEC, Oct. 27, 2006).).

²⁶⁷ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, p. 17.

²⁶⁸ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, pp. 17-18.

²⁶⁹ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, p. 18.

²⁷⁰ See Exxon Corp. v. Maryland (1978) 437 U.S. 117, 127-28.

²⁷¹ Id.

²⁷² See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, pp. 13-14.

²⁷³ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, pp. 12-13.

²⁷⁴ Opening Comments/Legal Brief on Final Workshop Report of NRDC/TURN/UCS/WRA, October 18, 2006, p. 22.

²⁷⁵ Exxon Corp. v. Maryland, 437 U.S. at 127-28.

²⁷⁶ 397 U.S. at 142.

²⁷⁷ Reply of Environmental Defense to Comments on Draft Interim Decision on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard, January 8, 2007, p. 3 (Citing Pharmaceutical Care Management Ass'n v. Rowe (1st Cir. 2005) 429 F.3d 294, 313.).

²⁷⁸ Maine v. Taylor, 477 U.S. at 138.

²⁷⁹ CEED previously argued that: "in the absence of specific findings regarding putative local benefits, the proposed EPS presumptively violates the Commerce Clause." (CEED's Reply Brief on Jurisdictional and Other Legal Issues, July 11, 2006, p. 3.) This point has become moot with the passage of SB 1368.

²⁸⁰ SB 1368, Section 1, (a).

²⁸¹ SB 1368 Section 1, (f).

²⁸² SB 1368 Section 1 (e).

²⁸³ SB 1368 Section 1, (i).

²⁸⁴ SB 1368 Section 1, (j).

²⁸⁵ The CATR was drafted as part of a multi-agency effort to address climate change and its effects on California.

²⁸⁶ California Health & Safety Code § 38501(a).

²⁸⁷ Final Climate Action Team Report to the Governor and the Legislature, March, 2006, pp. 19-24.

²⁸⁸ Id. at 25-27.

²⁸⁹ Id. at 27.

²⁹⁰ Id.

²⁹¹ Id. at 28-29.

²⁹² Id.

²⁹³ Id. A state`s right to protect its water supply is well-established. (See, e.g., Proctor and Gamble v. City of Chicago (7th Cir. 1975) 509 F.2d 69 (Upheld city ordinance forbidding the sale and use of detergents containing phosphates, which had a detrimental effect on the water supply.).)

²⁹⁴ Final Climate Action Team Report to the Governor and the Legislature, March, 2006, p. 36.

²⁹⁵ Id. at 31.

²⁹⁶ Id. at 33.

²⁹⁷ Phase 1, Pre-Workshop Comments of the People of the State of California, June 12, 2006, Exs. A-L.

²⁹⁸ Phase 1, Pre-Workshop Comments of the People of the State of California, June 12, 2006, Ex. F, p. 2.

²⁹⁹ Phase 1, Pre-Workshop Comments of the People of the State of California, June 12, 2006, Ex. G, p. 13.

³⁰⁰ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, p. 17.

³⁰¹ Reply of Environmental Defense to Comments on Draft Interim Decision on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard, January 8, 2007, p. 3.

³⁰² Reply of Environmental Defense to Comments on Draft Interim Decision on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard, January 8, 2007, p. 4 (Citing Kleenwell Biohazard v. Nelson, 48 F.3d at 397-98; Pharmaceutical Care v. Rowe, 429 F.3d at 313; National Solid Waste Management Ass'n v. Pine Belt Regional Solid Waste Management Authority (5th Cir. 2004) 389 F.3d 491, 502 ("while the ordinances may have the effect of shifting some business away from plaintiffs, as the ordinances increase their costs and make them relatively less competitive, this result does not mean that the ordinances burden interstate commerce"; International Truck and Engine Corp. v. Bray (5th Cir. 2004) 372 F.3d 717, 727 ("[t]he fact that a regulation causes some business to shift from one supplier to another does not mean that the regulation burdens commerce"); Brown & Williamson Tobacco Corp. v. Pataki (2d Cir. 2003) 320 F.3d 200, 213 ("The fact that these particular Plaintiffs may be priced out of the retail cigarette market does not establish a discriminatory effect.").).

³⁰³ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, p. 15.

³⁰⁴ CEED's Comments on Draft Workshop Report, September 8, 2006, Ex. 1, pp. 12-13.

³⁰⁵ CEED's Comments on Draft Workshop Report, September 8, 2006, Exs. 4, 5, 6.

³⁰⁶ Energy Ventures Analysis, Inc. (EVA) is a Virginia-based consulting firm which states on its website that is has assisted with: "[c]oal turnaround management and/or liquidations, including assuming coal company CEO and administrative responsibility." (< http://www.evainc.com/coal.htm>.)

³⁰⁷ CEED's Comments on Draft Workshop Report, September 8, 2006, Ex. 1, p. 12.

³⁰⁸ CEED's Comments on Draft Workshop Report, September 8, 2006, Ex. 1, p. 13.

³⁰⁹ The Center for Energy and Economic Development's Comments on Draft Workshop Report, September 8, 2006, Ex. 5, p. 18.

³¹⁰ The Center for Energy and Economic Development's Comments on Draft Workshop Report, September 8, 2006, Ex. 5, pp. 18-19.

³¹¹ This study does not purport to attack the effects of the EPS per se, but rather deals with a nationwide trend, which DRA aptly points out "will not happen overnight." (DRA's Written Reply to the Supplemental Material CEED on Commerce Clause Issues, Nov. 1, 2006, p. 11.) Aside from that, the failure to incorporate the impact of externalities severely limits its usefulness in a dormant Commerce Clause analysis. DRA points to research that assessed such externalities. (Id. at pp. 11-14.)

³¹² 449 U.S. 456.

³¹³ Minnesota v. Clover Leaf Creamery, 449 U.S. at 473.

³¹⁴ Id.

³¹⁵ The Division of Ratepayer Advocates' Written Reply to the Supplemental Material of CEED on Commerce Clause Issues, Nov. 1, 2006, p. 7.

³¹⁶ Also, nothing in the EPS prohibits high-GHG emitters from transmitting electricity through the California grid to other states and nations.

³¹⁷ See Minnesota v. Clover Leaf Creamery, 449 U.S. 456; Exxon Corp. v. Maryland, 437 U.S. 117; Cf. Huron Portland Cement Co. v. City of Detroit (1960) 362 U.S. 440.

³¹⁸ See, e.g., Brown-Forman Distillers Corp. v. New York State Liquor Authority (1986) 476 U.S. 573, 579.

³¹⁹ Edgar v. MITE Corp. (1982) 457 U.S. 624, 642-43 (plur. opn.).

³²⁰ See, e.g., CEED's Comments on Draft Workshop Report, September 8, 2006, p. 18.

³²¹ Healy v. Beer, 491 U.S. at 339.

³²² See Healy v. Beer, 491 U.S. at 343 (Supreme Court invalidated statute that prevented sale of alcohol at a price higher than that sold in neighboring states.).

³²³ Gravquick A/S v. Trimble Navigation International Ltd., 323 F.3d at 1224.

³²⁴ Comments of Southern California Edison Company on the Proposed Decision, January 2, 2007, p. 14.

³²⁵ Comments of Southern California Edison Company on the Proposed Decision, January 2, 2007, p. 14, fn. 18. The cases relied on by SCE involved mandatory reciprocity agreements (Hardage v. Atkins (10th Cir. 1980) 619 F.2d 871, 872; Great Atl. & Pac. Tea Co. v. Cottrell (1976) 424 U.S. 366), a compelled preferences for in-state waste (Hazardous Waste Treatment Council v. South Carolina (4th Cir. 1991) 945 F.2d 781, 785, 791-92), and a solid waste program that required other states to have adopted "effective" community recycling programs in order to receive waste from them (National Solid Waste Management Ass'n v. Meyer (7th Cir. 1995) 63 F.3d 652, 654-62). These cases are distinguishable from the EPS which contains no mandatory preferences for in-state goods, no mandatory reciprocity agreements, nor does it require other states to comply with California regulations.

³²⁶ See Cotto Way Co. v. Williams (8th Cir. 1995) 46 F.3d 790, 794 (Minnesota law banning sale of petroleum-based sweeping compounds in Minnesota was not extraterritorial, because the statute was indifferent to sales in other states.).

³²⁷ Huron v. Detroit, 362 U.S. at 448.

³²⁸ See National Electrical Manufacturers Association v. Sorrell (2d Cir. 2001) 272 F.3d 104, 110-111 (Vermont statute upheld because lamp manufacturers had choice as to putting hazardous waste warning label on all lamps sold nationwide, modifying their production and distribution systems to distinguish sales in Vermont and the other states, or to withdraw from the Vermont market entirely.); See also Star Scientific v. Beales (4th Cir. 2002) 278 F.3d 339, 356 (Virginia statute imposing a fee only on cigarettes sold within the state upheld, even though it affected prices charged by out-of-state distributors. The Fourth Circuit noted that the statute does not have the practical effect of controlling prices outside of the state.).

³²⁹ Pacific Northwest Venison Producers v. Baker (9th Cir. 1994) 20 F.3d 1008, 1017, (Quoting Maine v. Taylor, 477 U.S. at 148.).