California Dept. of Water Resources v. F.E.R.C.
| Decision Date | 27 August 2003 |
| Docket Number | No. 01-71405.,01-71405. |
| Citation | 341 F.3d 906 |
| Parties | CALIFORNIA DEPARTMENT OF WATER RESOURCES, Petitioner, Southern California Edison Company, Intervenor-Petitioner, Public Utilities Commission of the State of California; Pacificorp, Intervenors-Respondents, Southern California Edison Company, Intervenor, Dynegy Power Marketing, Inc., Intervenor-Respondent, El Segundo Power LLC; Long Beach Generation LLC; Cabrillo Power I LLC; Cabrillo Power II LLC.; South Coast Air Quality Maintenance District, Intervenors, Idacorp Energy L.P., Intervenor-Petitioner, Coral Power L.L.C.; Constellation Power Source, Inc., Intervenors-Respondents, Public Service Company of Colorado; Pinnacle West Capital Corporation; Arizona Public Service Company, Intervenors, Mirant Americas Energy Marketing, L.P.; Mirant California L.L.C.; Mirant Delta, L.L.C.; Mirant Portrero L.L.C., Intervenors-Respondents, Puget Sound Energy, Inc., Intervenor, Northern California Power Agency; Transmission Agency of Northern California; The M-S-R Public Power Company, Intervenors-Respondents, The Modesto Irrigation District, Intervenor-Petitioner, The City of Palo Alto, California; The City of Redding, California, Intervenors-Respondents, The City of Santa Clara, California, Intervenor-Petitioner, California Independent System Operator Corporation; Morgan Stanley Capital Group, Inc., Intervenors-Respondents, Williams Energy Marketing & Trading Company, Intervenor, Merrill Lynch Capital Services, Inc., Intervenor-Respondent, Portland General Electric Company; California Electricity Oversight Board, Intervenors, El Paso Merchant Energy, L.P., Intervenor-Respondent, The Port of Seattle, Washington, Intervenor, Duke Energy North America LLC; Duke Energy Trading And Marketing, LLC, Intervenors-Respondents, The City of Los Angeles Department of Water And Power, Intervenor-Petitioner, Sempra Energy Trading Corporation; Avista Energy, Inc.; City of Tacoma, Washington, Intervenors, Port of Seattle; City of Tacoma; Pacific Gas and Electric Company; Enron Power Marketing Inc., Intervenors-Respondents, Puget Sound Energy; California Independent System Operator Corporation, Intervenors, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Edna Walz, Deputy Attorney General, Sacramento, California, and Peter C. Kissel, Washington, D.C., for the petitioner.
Robert H. Solomon, Deputy Solicitor, Federal Energy Commission, Washington, D.C., for the respondent.
Michael E. Ward, Swidler, Berlin, Shereff, Friedman, LLP, and Sean M. Neal, Duncan, Weinberg, Genzer & Pembroke, P.C., Washington, D.C., for the intervenors.
On Petition for Review of an Order of the Federal Energy Regulatory Commission.
Before: MARY M. SCHROEDER, Chief Judge, DOROTHY W. NELSON and WILLIAM A. FLETCHER, Circuit Judges.
The California Department of Water Resources ("DWR") is a state agency charged with managing California's water supply. As a by-product of its operation of dams and reservoirs, it generates electricity that is subject to federal regulation. The Federal Energy Regulatory Commission ("FERC") is a federal agency charged with regulating interstate energy markets, and as a by-product of that regulation, finds itself involved in regulating California's water supply. The intersection of the agencies' respective authority is the source of this dispute. DWR challenges a FERC order that granted authority to control DWR's power outages to the California Independent System Operator ("the ISO"), the public corporation that operates California's energy grid.
Specifically, DWR petitions for review under Section 313(b) of the Federal Power Act, 16 U.S.C. § 825l(b), of a FERC order denying reconsideration of an earlier FERC order granting the ISO control over the planned power outages of DWR's generation units. DWR contended before FERC that the ISO's enhanced authority would interfere with DWR's primary responsibility to store and deliver water. In the orders under review, FERC did not address DWR's position and failed to explain the rationale behind giving the ISO the authority to control DWR's power outages. We vacate those portions of the orders that grant the ISO authority to control DWR's power outages. We remand to FERC to address DWR's concerns.
The petitioner in this case, DWR, is a state agency responsible for the control and management of much of California's water supply. DWR operates the State Water Project, a storage and delivery system of reservoirs, aqueducts, pumping plants, and hydroelectric and geothermal power plants. DWR operates the water system so that its electricity consumption and generation are complementary, consuming electricity to pump water during off-peak hours to allow water delivery and electricity generation during periods of peak electricity demand. DWR consumes much of the electricity it generates. It sells its surplus electricity on the ISO's wholesale markets to the extent that its water-management responsibilities permit.
The ISO, an intervenor in this case, is a nonprofit public benefit corporation responsible for the operation of California's energy grid and wholesale energy markets. Those markets are governed by the ISO Tariff, which requires that all generators enter into Participating Generator Agreements ("PGAs") that bind generators to the terms of the Tariff. DWR operates six hydroelectric generation units and one geothermal unit under PGAs with the ISO.
The two orders at issue in this petition for review arise from a FERC proceeding initiated on August 23, 2000, to address problems in the California wholesale energy market. See San Diego Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs., et al., 92 FERC ¶ 61,172 (Aug. 23, 2000). In the relevant portion of the first order on review, 95 FERC ¶ 61,115 (April 26, 2001), FERC ordered the ISO to amend its Tariff to require participating generators, including DWR, to submit to enhanced ISO control over planned outages of generation units. Id. at 61,355. Under the prior Tariff, the ISO's control over planned outages was limited to a subset of generators and to cases of actual or imminent system emergency. In contrast, the amended Tariff requires every generator to submit, for ISO approval, a schedule proposing all planned outages for the upcoming year. The April 26 order also directed the ISO to implement a mechanism requiring participating generators to sell all of their available electricity into California's real-time energy markets, an obligation known as the "must-offer" requirement. Id. at 61,355-56. While FERC subjected all generators to ISO outage control, FERC gave DWR an exemption from the must-offer requirement on the ground that it would unduly interfere with DWR's primary water-management responsibilities. Id. at 61,357. DWR contends that FERC should have granted it a similar exemption from the outage control requirement.
DWR presented this contention to FERC when it petitioned FERC for rehearing of the April 26 order. The rehearing petition challenged the ISO's enhanced authority to control DWR's planned outages. In the second order on review, 95 FERC ¶ 61,418 (June 19, 2001), FERC denied DWR's request for rehearing and reaffirmed that DWR's hydroelectric units would be subject to ISO outage control. Id. at 62,550-51. The June 19 order did not alter...
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