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January 13, 2010 |
U.S. Supreme Court Acts in Two Major Energy Cases U.S. Supreme Court Issues Decision in NRG v. Maine Public Utilities Commission On January 13, 2010, the Supreme Court issued an opinion in NRG Power Marketing, LLC v. Maine Public Utilities Commission (No. 08-674) ("NRG"), in which it held that Mobile-Sierra's public-interest standard applies when the entity challenging a contractual rate is not a party to the contract at issue. Under the Mobile-Sierra doctrine, the Federal Energy Regulatory Commission ("Commission" or "FERC") must presume that the electricity rate set in a freely negotiated wholesale-energy contract meets the "just and reasonable" requirement of the Federal Power Act, and the presumption may be overcome only if FERC concludes that the contract seriously harms the public interest. Many have viewed this standard as "practically insurmountable." In the decision below, the U.S. Court of Appeals for the D.C. Circuit held that when a rate challenge is brought by a non-contracting third party, the Mobile-Sierra doctrine does not apply. The Supreme Court stated that the D.C. Circuit's confinement of Mobile-Sierra to rate challenges by contracting parties "diminishes the doctrine's animating purpose: promotion of 'the stability of supply arrangements which all agree is essential to the health of the [energy] industry.'" The agreement at issue in the NRG case is a comprehensive settlement concerning the structure of the market for electric capacity in New England. On remand, the D.C. Circuit is to consider whether the settlement agreement, approved by FERC regarding New England capacity rates, constitutes a "contract rate," to which the Mobile-Sierra doctrine would apply, or whether FERC could treat the settlement analogously as a "contract rate." Justice Stevens wrote a dissent. The NRG decision is the Supreme Court's second recent decision concerning the Mobile-Sierra doctrine. Two terms ago, it decided Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1, 128 S. Ct. 2733 (2008), in which the Court held that rather than representing a wholly different standard, the Mobile-Sierra "public-interest standard" refers to the differing application of the just-and-reasonable standard to contract rates. U.S. Supreme Court Denies Petition for Writ of Certiorari in Connecticut Department of Public Utility Control et al. v. FERC The U.S. Supreme Court on January 11, 2010 denied the petition for writ of certiorari filed by the Connecticut Department of Public Utility Control and Richard Blumenthal, Attorney General for the State of Connecticut, following the D.C. Circuit's denial of the Connecticut Department of Public Utility Control's ("Connecticut") appeal in Connecticut Department of Public Utility Control v. Federal Energy Regulatory Commission, 569 F.3d 477 (D.C. Cir. 2009). This case concerns whether FERC has jurisdiction pursuant to the Federal Power Act to review ISO New England, Inc.'s ("ISO") annual calculation of the region's Installed Capacity Requirement, which is the minimum amount of wholesale electric capacity that must be available to assure reliable service in the New England region. It involves a longstanding dispute in New England over whether the states or FERC has jurisdiction over the Installed Capacity Requirement. The contested rulings at issue consist of a series of FERC orders in which the Commission asserted jurisdiction over the Installed Capacity Requirement. In particular, the ISO and the New England Power Pool Participants Committee filed with the Commission proposed revisions to the ISO's tariff to formalize the method by which the annual Installed Capacity Requirement is calculated. In accepting the ISO's proposed tariff changes, the Commission concluded that it has jurisdiction under the Federal Power Act to make this determination. On rehearing, the Commission rejected Connecticut's challenge to the agency's jurisdiction. In other orders, the Commission reviewed the ISO's filing of its Installed Capacity Requirement values, and again it held, over Connecticut's objection, that it has jurisdiction to review this calculation. On appeal, the D.C. Circuit considered whether the Commission had jurisdiction to review the Installed Capacity Requirement, which it characterized as a key input into the market-based mechanism that determines transmission tariffs and end-user costs in the New England bulk power system. In particular, the D.C. Circuit considered whether FERC's review of the Installed Capacity Requirement constituted direct regulation of electrical generation facilities. If so, FERC's review of the Installed Capacity Requirement exceeded its authority under the Federal Power Act. If not, such review fell within the Commission's jurisdiction over practices affecting wholesale rates. The D.C. Circuit found no direct regulation of electrical generation facilities in the Commission's review of the Installed Capacity Requirement, and denied the petition for review. The D.C. Circuit upheld FERC's ruling that it had jurisdiction over the Installed Capacity Requirement. With the U.S. Supreme Court's denial of Connecticut's petition for writ of certiorari, the D.C. Circuit's ruling upholding FERC's jurisdiction over the Installed Capacity Requirement stands. Schiff Hardin represented ISO New England, Inc. in these proceedings. ABOUT SCHIFF HARDIN LLP Energy industry stakeholders face unprecedented challenges in everyday operations as they seek to comply with changing market rules, evolving compliance obligations, and potential enforcement actions. 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