Michigan’s requirement that electricity providers get their capacity from within the state; MCL 460.6w (Act 341); Individual Local Clearing Requirement (ILCR); Whether Michigan can prevent in-state retailers from obtaining their merchandise from outside the state; Challenge under the “dormant Commerce Clause”; Whether the ILCR is “facially discriminatory”; Wyoming v Oklahoma; Whether an exception to the dormant Commerce Clause applied; General Motors v Tracy; Whether Congress authorized the ILCR in the Federal Power Act (FPA); “Strict scrutiny”; Michigan Public Service Commission (MPSC); Load Serving Entity (LSE)

[This appeal was from the ED-MI.] The court held that Michigan’s ILCR (requiring electricity providers obtain their capacity from in-state facilities) “ facially discriminates” against interstate commerce, that the FPA does not immunize the ILCR, and that strict scrutiny must be applied. This case involved “Michigan electricity market regulations that expressly restrict where Michigan’s electricity retailers may procure their capacity.” Every LSE serving the Michigan retail market “needs to procure some amount of its total capacity from within the confines of Michigan’s lower peninsula.” Plaintiffs sued defendant-MPSC and its commissioners alleging that Michigan’s ILCR violated the dormant Commerce Clause. The district court ruled that the ILCR did not violate the Commerce Clause. On appeal, the court held that “the ILCR is facially discriminatory.” After reviewing a Supreme Court case involving state regulation of electricity markets, Wyoming, the court held that the ILCR results in “a law that is explicitly ‘territorially based,’ requiring those that sell electricity in Michigan’s lower peninsula to procure a certain percentage of its electrical capacity from that region.” It rejected defendants’ arguments based on a case involving Ohio’s natural gas market, Tracy, finding that case distinguishable and concluding that “far from establishing an exception to the dormant Commerce Clause, Tracy simply clarified what qualifies as discrimination in the unique regulatory setting in which that case arose.” It also rejected the contention that Congress authorized the ILCR in the FPA, concluding that “recognition of a state’s general authority to regulate does not amount to a clear and unambiguous statement immunizing the state from Commerce Clause scrutiny when it acts under that general authority.” The court determined that strict scrutiny must be applied. Thus, the inquiry is “whether the state demonstrated that the ILCR is the only means of achieving its goal of securing a reliable energy supply. The district court, however, never reached that question.” Reversed and remanded.