Ninth Circuit’s Burr in FERC’s Back

By Published On: August 31, 2007

The following is a roundup of recent Ninth Circuit cases involving federal regulators and the 2000-01 energy crisis: -December 19, 2006–In an order to the Federal Energy Regulatory Commission to reconsider a decision on power contract refunds, the Ninth Circuit Court of Appeals refined an established “fair and reasonable” public-interest standard. The amount of refunds at stake in the court’s decision could be as high as $1.4 billion. -September 18, 2006–The Ninth Circuit refused to intercede in a double-billing and settlement controversy between Pacific Gas & Electric and the grid operator arising from the 2000-01 energy crisis. In a decision, a three-judge panel supported the status quo and dismissed the utility’s petition alleging that federal regulators erred in allowing the California Independent System Operator to reallocate costs for market participants. -August 2, 2006–The Ninth Circuit ruled that federal regulators’ refund proceedings must include “unjust” power sales made before October 2000–but not power purchases made by the Department of Water Resources during the 2000-01 energy crisis. In an August decision involving nearly 200 petitions for review, a three-judge panel also held that forward market buys, out-of-market power purchases, and exchange sales made by the grid operator fall within the purview of FERC’s crisis-related refund proceedings. -September 7, 2005–Potentially affecting up to $1 billion in possible refunds from settlements for energy crisis-era alleged manipulations, the Ninth Circuit ruled that FERC has authority over investor-owned utilities, but not municipal and quasi-governmental utilities. The munis sued as a preemptive measure to avoid paying potential settlements. Calling it a “straightforward analysis,” the court wrote that “FERC does not have refund authority over wholesale electric energy sales made by governmental entities and non-public utilities.” The court set aside FERC’s potential orders for munis, remanding the issue to federal regulators. -September 9, 2004–The Ninth Circuit ruled that FERC improperly denied California refunds of up to $2.8 billion. The court sent the matter back to FERC to decide the amount due to state ratepayers. The California Attorney General successfully challenged federal regulators’ claim that the agency lacked the authority to order refunds prior to October 2000. At the same time, the court upheld FERC’s market-based tariffs. -July 6, 2004–The Ninth Circuit ruled California cannot litigate allegations of double-selling energy in state court because it is a federal issue. Then-Attorney General Bill Lockyer’s appeal primarily involved a dispute over which venue should hear the allegations. The presumption is that a California court would be more receptive to the attorney general’s argument. The underlying state-sponsored petition at issue in the Circuit court’s August 24 decision claims Californians were denied between $2.5 billion and $3.5 billion in refunds. How much more the state may reap in refunds as a result of this decision will be determined by a federal regulatory commission, which now includes four members from Western states. In a separate order, the court directed pursuit of mediation.

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