Judge: Bloom competitor may fight surcharge

A judge has allowed a competitor of Bloom Energy to proceed with its case against the state-sanctioned surcharge on Delmarva Power bills.

On Thursday, U.S. District Court Magistrate Judge Christopher Burke ruled that FuelCell Energy, of Connecticut, has standing to pursue its case saying that Gov. Jack Markell and the Public Service Commission violated the U.S. Dormant Commerce Clause in changing state policies. The change in policies enabled a Bloom subsidiary to set up an electrical project that acts as a Bloom subsidy.

Burke also denied standing to Middletown resident John Nichols to pursue that claim, and dismissed his accusation that the Bloom subsidy violates the U.S. Equal Protection Clause of the Constitution by requiring only one class of Delaware ratepayers – Delmarva residential customers – to pay the surcharge.

The subsidy was created by the General Assembly and approved by the commission in 2011 to entice Silicon Valley-based Bloom to set up a factory in Newark. Lawmakers changed the law to make it possible for Delmarva to satisfy some of its state renewable power purchase requirements using Bloom's fuel cells, which run on natural gas. Average residential ratepayers have in recent months been paying between $4 and almost $6 per month to support the Bloom project.

There was no public solicitation for bids from out-of-state fuel cell companies.

Burke determined that FuelCell's allegations of future competitive injury in the East Coast market are sufficient to challenge the surcharge on the basis of the Dormant Commerce Clause, which says states may not pass legislation that excessively interferes with interstate commerce.

Burke wrote that the challenged tariff is accused of easing a competitive burden on Bloom, but not FuelCell, in a way that disadvantages FuelCell's competitive position in the regional marketplace. Accordingly, he wrote, "Plaintiffs have sufficiently demonstrated the causal connection between the tariff and the competitive disadvantage that FuelCell alleges it will suffer."

Burke wrote he was skeptical of FuelCell's claim that it was injured by Bloom's advantage to compete for new fuel cell business within Delaware, stating FuelCell showed no real efforts to do business in this state prior to Bloom's entry in 2011. He called this form of injury "excessively conjectural or hypothetical."

David McBride of Young Conaway Stargatt & Taylor, which represents the defendants, said in an email released by Markell's office: "We are gratified by the decision of the court, which is largely a victory for the defendants. The Court dismissed all of the claims asserted by Mr. Nichols and substantially narrowed the claim asserted by Fuel Cell by rejecting many of its claims of injury. We look forward to addressing the remaining claim in court."

Matt Hartigan, spokesman for the PSC, said the agency was aware of the ruling but does not have any further comment at this time.

Likewise, said Bloom spokesman Bryan Horsey, "We have no comment."

Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance, said the fact the judge left a charge open "means the can of worms remains uncanned.

"The fact it wasn't dismissed entirely, it proceeds, means, in my view, all bets are off," Elson said.

Contact Aaron Nathans at (302) 324-2786 or anathans@delawareonline.com.