Court: District Court, W.D. Pennsylvania; September 5, 2018; Federal District Court
Mark R. Hornak, United States District Judge, is presiding over a putative class action lawsuit filed by Karen Gorecki against Clearview Electric, Inc. Gorecki claims that Clearview violated its service contract by not adjusting prices according to wholesale market conditions, resulting in higher charges for her and the proposed class. Additionally, she alleges that Clearview has been unjustly enriched by overcharging for electricity. Clearview has moved to dismiss the Amended Complaint for failing to present a viable claim.
The court accepts the facts from Gorecki's Complaint as true, noting that Pennsylvania's retail energy market was deregulated in 1996, transitioning from exclusive utility supply to a competitive market aimed at lowering costs through Electric Generation Suppliers (EGSs), like Clearview. EGSs procure electricity from producers and sell it to consumers, while delivery remains the responsibility of local utility companies.
Gorecki switched her service from Duquesne Light Company to Clearview in October 2012, enticed by a promise of savings. Initially, she was placed on a fixed-rate plan for six months, which subsequently converted to a variable rate plan. Clearview notified her of this change in February 2014, providing a Sales Agreement that outlined the terms of the variable rate plan, including a disclaimer that the rate would vary based on wholesale market conditions and that Clearview would set the generation supply rate.
Plaintiff paid a specified rate to Clearview from May 2014 until October 2017, during which Clearview's rate was consistently .1299/kWh from September 11, 2016, to August 13, 2017. In this period, wholesale electricity prices fluctuated between .0484/kWh and .0836/kWh. Plaintiff claims that Clearview breached their agreement (Count I) and was unjustly enriched (Count II) at the expense of herself and similarly situated customers in Pennsylvania. Clearview has moved to dismiss these claims under Federal Rule of Civil Procedure 12(b)(6), which necessitates that complaints must present sufficient factual allegations to support a plausible claim for relief.
To assess the appropriateness of dismissal, the Court will identify the elements of the claims, eliminate conclusory statements, and evaluate whether the well-pleaded allegations meet the identified elements. Under Pennsylvania law, to establish a breach of contract, a plaintiff must demonstrate the existence of a contract, a breach of its terms, and resultant damages. The contract must specify how prices will vary. Both parties acknowledge the contract's existence and its essential terms, including that rates are based on wholesale market conditions. Plaintiff contends that Clearview did not adhere to this provision, arguing that Clearview's rates were consistently higher than those charged by local utilities, which reflect wholesale market conditions, and that Clearview's variable rates did not correspond to market price fluctuations.
Clearview counters that these allegations are conclusory and misinterpret the wholesale market. It cites the Third Circuit's decision in Orange v. Starion Energy PA, Inc., where similar allegations of contract breach due to significantly higher variable rates were examined.
The Court determined that the plaintiff's complaint was inadequate because a simple comparison of Clearview's local utility rates with those of a public utility did not sufficiently support the inference that Clearview violated the pricing formula. Clearview contended that the rationale from the case of Orange warranted the dismissal of the plaintiff’s complaint. The plaintiff alleged that Clearview charged variable electricity rates not aligned with wholesale market conditions, supporting this claim with two comparison tables: one juxtaposing Clearview's rates with Duquesne Light's rates and the other with wholesale market prices over a specific twelve-month period. The plaintiff calculated the wholesale market price using weighted locational marginal pricing (LMP) and other charges from PJM.
Clearview argued that the plaintiff's connection between its rates and wholesale prices was flawed, suggesting that the definition of "Wholesale Market Price" in the plaintiff's table lacked factual basis. While acknowledging the possible validity of Clearview's argument regarding the distinction between wholesale market conditions and wholesale market prices, the Sales Agreement did not define "wholesale market conditions." It stated that the price per kWh included various charges and that Clearview would set the generation supply rate based on wholesale market conditions, without clarifying what those conditions entailed. Unlike the case referenced in Orange, Clearview did not specify additional factors or territories linked to rate fluctuations.
The plaintiff’s factual assertions were likened to other cases where breach of contract claims succeeded at the motion to dismiss stage, indicating that the complaint sufficiently demonstrated a plausible breach. Clearview attempted to clarify what constituted "wholesale market conditions" by listing components of generation service as defined by the Pennsylvania Public Utility Commission (PaPUC), including various costs related to energy supply and compliance.
The Court analyzed Pennsylvania regulation 69.1808 and determined that the price-to-compare (PTC) encompasses all unbundled generation and transmission charges for default service customers. Clearview contends that these charges reflect "wholesale market conditions," but "default service" is defined as electric generation supply for customers not served by an Electric Generation Supplier (EGS) like Clearview. The PTC allows consumers to compare EGS rates with default service prices. Clearview's rate remained constant at .1299/kWh over twelve months, despite fluctuations in the alleged wholesale rate, raising questions about whether other costs identified, such as transmission charges and state taxes, could fully explain this stability.
The Court found that Plaintiff has sufficiently alleged a breach of contract claim, as Clearview's rate did not appear to align with the variable wholesale conditions. Although Clearview presented arguments that could be valid, they were premature for resolution at this stage, as all reasonable inferences must be made in favor of the Plaintiff.
Regarding the unjust enrichment claim (Count II), the Court noted that since the existence of a valid contract is undisputed, such a claim is not applicable. Therefore, the Court granted Clearview's Motion to Dismiss Count II without prejudice but denied the motion concerning Count I, indicating that a plausible breach of contract claim exists. The Court also clarified that the Sales Agreement does not restrict market conditions solely to local distribution utility rates, which was a point raised by the Plaintiff in discussions about market conditions.
