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September 17, 2009 |
Supreme Court Scheduled to Hold Oral Argument on Mobile-Sierra Doctrine On November 3, 2009, the Supreme Court will hear oral argument in NRG Power Marketing, LLC v. Maine Public Utilities Commission (No. 08-674) ("NRG") to consider whether Mobile-Sierra's public interest standard applies when the entity challenging a contractual rate is not a party to the contract at issue. In the decision below, the court of appeals held that when a rate challenge is brought by a non-contracting third party, the Mobile-Sierra doctrine does not apply. This case arose in the context of a contested settlement establishing the capacity market in New England. NRG will be the Supreme Court's second recent decision concerning the Mobile-Sierra doctrine. After the court of appeals issued the decision below here, the Supreme Court decided Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1, 128 S. Ct. 2733 (2008) ("Morgan Stanley"). In Morgan Stanley, the Court elaborated on the Mobile-Sierra doctrine, holding that the just and reasonable standard is the only statutory standard for assessing wholesale electricity rates, whether set by contract or tariff. According to the Court, instead of 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. Requests for rehearing of the decision below, prompted by the Morgan Stanley decision, were denied. In its merit brief, the Federal Energy Regulatory Commission ("FERC") argued that it acted reasonably and within its statutory authority in approving, as just and reasonable, a comprehensive settlement concerning the structure of the market for electric capacity in New England. That settlement contained a provision stating that future challenges to certain rates established under the settlement would be governed by the Mobile-Sierra "public interest" standard of review. According to FERC, Mobile-Sierra rests on a presumption that rates set out in a freely-negotiated wholesale energy contract are just and reasonable, and nothing in the Mobile-Sierra doctrine or Morgan Stanley limits its applicability to contracting parties. Petitioners NRG et al. argued in their merit brief that the decision below squarely conflicts with the Court's decision in Morgan Stanley. NRG and supporting amici curiae further argued that the decision below prevents Mobile-Sierra from providing the contract stability that the doctrine was intended to provide. They argued that a presumption that protects contract rates only from a few persons (the contracting parties), while allowing everyone else to challenge them free of Mobile-Sierra restrictions provides no stability at all. The amici curiae supporting NRG include a power marketer, trade associations in the financial industry, and a group of academic professors. As a threshold matter, respondents Maine Public Utility Commission et al., who objected to the settlement, argued in their merit brief that the rates produced by the settlement are not "contract" rates to which Mobile-Sierra would apply. Second, they argued that the question presented is not whether the Mobile-Sierra doctrine applies to a challenge by an indirectly affected member of the general public, but rather, whether it applies to challenges by third parties such as respondents who, they argued, were bound against their will to rates agreed upon by others. According to the respondents, while the Mobile-Sierra doctrine sensibly presumes that contractual rates are just and reasonable as between the contracting parties, there is no sound basis to presume that such rates are just and reasonable as to non-contracting parties. The respondents are supported by amici curiae including a state public utility commission and industry associations representing publicly-owned electric utilities and customer-owned rural electric cooperatives. The next round of briefs is due October 5, 2009 and oral argument is scheduled for the morning session on November 3, 2009. 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. Buying and selling energy in often difficult market conditions has become more complicated in the face of anticipated yet undefined climate change legislation and regulation. For the managers and general counsel of many energy companies, success in uncertain times has been the result of the counsel and representation provided by Schiff Hardin attorneys in the Energy and Public Utilities group. For more information, contact us.
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