Bonneville Power Admin. v. F.E.R.C., 02-70262.
| Decision Date | 06 September 2005 |
| Docket Number | No. 02-70274.,No. 02-70294.,No. 02-70262.,No. 03-70185.,No. 02-70270.,02-70262.,02-70274.,03-70185.,02-70270.,02-70294. |
| Citation | 422 F.3d 908 |
| Parties | BONNEVILLE POWER ADMINISTRATION, Petitioner, City of Tacoma; Port of Seattle; Coral Power, L.L.C.; Constellation Energy Commodities Group, Inc., Intervenors, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, PacifiCorp, Respondent-Intervenor. Arizona Electric Power Cooperative, Inc.; Dynegy Power Marketing, Inc.; Duke Energy North America, LLC, Duke Energy Trading and Marketing, LLC, (Collectively, "Duke Energy"); El Paso Merchant Energy L.P.; Metropolitan Water District of Southern California; Williams Energy Marketing & Trading Company; Reliant Energy Power Generation, Inc., Petitioners, Coral Power, L.L.C., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company; City of Los Angeles Department of Water and Power, Petitioners, Port of Seattle; City of Tacoma; People of the State of California; City of Pasadena; City of San Diego; CA State Assembly, Petitioners-Intervenors, v. Federal Energy Regulatory Commission, Respondent. Sacramento Municipal Utility District, Petitioner, Port of Seattle; City of Tacoma; People of the State of California; City of Pasadena; City of San Diego; CA State Assembly, Petitioners-Intervenors, City of Pasadena, California, Intervenor, v. Federal Energy Regulatory Commission, Respondent. Azusa, Banning, Colton, and Riverside, California, Petitioner, Coral Power, L.L.C.; Constellation Energy Commodities Group, Inc., Intervenors, v. Federal Energy Regulatory commission, Respondent, PacifiCorp, Respondent-Intervenor. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Howard Shapiro, Van Ness Feldman, Washington, D.C.; Mark W. Pennak, United States Department of Justice, Appellate Staff, Washington, D.C., for petitioner Public Entities and petitioner-intervenors.
Dennis Lane, Solicitor, Federal Energy Regulatory Commission, Washington, D.C., for respondent Federal Energy Regulatory Commission.
Deborah A. Swanstrom, Patton Boggs, Washington, D.C., for petitioner-intervenor Salt River Project Agricultural Improvement and Power District.
Richard L. Roberts, Steptoe & Johnson, Washington, D.C.; Traci Bone, Public Utilities Commission of the State of California, San Francisco, CA, for respondent-intervenor California Parties.
J. Phillip Jordan, Swidler Berlin, Washington, D.C., for respondent-intervenor California Independent System Operator Corp.
On Petition for Review of an Order of the Federal Energy Regulatory Commission.
Before: THOMAS, McKEOWN, and CLIFTON, Circuit Judges.
The California energy crisis of 2000 and 2001 is a subject that is well-known to this court and to the public.1 Following moves in the mid-1990s to deregulate and restructure the California market, prices soared. In an effort to remedy in part what it termed a "dysfunctional" and "seriously flawed" market, the Federal Energy Regulatory Commission ("FERC" or "Commission") ordered both public and non-public utilities to make refunds.
In this appeal, various non-public utilities—which somewhat confusingly are public, governmental entities, but are not classified by federal statute as public utilities—challenge the refund orders. The utilities take the position that FERC's refund authority extends only to "public utilities" and that the public entities, as governmental bodies, are not "public utilities" and are expressly exempted from FERC's refund jurisdiction. FERC, which is the federal agency charged with regulation of all facilities for transmission and sale of electric energy for resale in interstate commerce, acknowledges that while it does "not have direct regulatory rate authority over power sales by non-public utilities," it has the "authority to order them to abide by the market rules . . . and to make refunds of unjust and unreasonable rates. . . ." 96 FERC ¶ 61,120, at 61,511, 2001 WL 1704964 (2001). This case boils down to whether FERC's authority to order refunds is based on the identities of the sellers subject to the refund order, i.e., public versus non-public utilities, or on the nature of the transactions, i.e., FERC's broad regulatory authority over the sale of electric energy for resale in interstate commerce.
We conclude that FERC does not have refund authority over wholesale electric energy sales made by governmental entities and non-public utilities. Our resolution of this question flows from a straightforward analysis of the statute, the Federal Power Act ("FPA"). The text is clear and unambiguous. In coming to this conclusion, we are not unmindful of the impact our decision may have on the overall refunds claimed by California ratepayers. But it is not our task to second guess Congress's judgment as to the breadth of FERC's refund authority. Our role is a limited one—interpreting the statute as Congress wrote it.
The FPA provides FERC certain authority in connection with public utilities as contrasted with non-public utilities and also provides an exemption for governmental entities. Although there is considerable overlap between non-public utilities and governmental entities, the categories are not co-extensive. See discussion below in §§ I(A) and (B). The FPA's requirement that all rates for wholesale sales of electric energy must be "just and reasonable"—the basis of the refund orders—applies only to "public utilities" and makes no reference, specific or otherwise, to non-public utilities. FPA § 205 (16 U.S.C. § 824d).2 Similarly, FERC's authority to investigate rates and to order refunds is limited to any rate collected by "any public utility"; the statute carries no reference to non-public utilities. FPA § 206 (16 U.S.C. § 824e). The FPA also unambiguously states that the provisions of subchapter II, which is the basis of FERC's refund authority, do not apply to governmental entities "unless such provision makes specific reference thereto." FPA § 201(f) (16 U.S.C. § 824(f)). No reference is found in the statute. Consequently, we grant the petition and set aside FERC's orders related to the 2000 and 2001 spot market to the extent the orders subject the governmental entities and non-public utilities to FERC's refund authority under FPA subchapter II.
The history and legacy of the California energy crisis are long, detailed, and tortured. For purposes of resolving the jurisdictional question before us, however, a lengthy recitation of the background is unnecessary.
In the mid-1990s, California initiated an aggressive market experiment to deregulate and restructure its electric energy markets. The deregulation plan, sometimes referred to as the restructured energy market, called for the creation of two non-profit public benefit corporations, California Independent System Operator ("ISO") and California Power Exchange ("CalPX"). Until it ceased operations, CalPX was the overseer of an auction market for electricity across the California grid and operated subject to FERC tariffs and rate schedules. ISO was responsible for managing the flow of electricity across the grid.
One of the features of the restructured market was the creation of spot markets operated by CalPX and ISO for the wholesale sale of electric energy. The markets, tariffs, and rate schedules of both entities were approved by FERC because the markets involved the "sale of electric energy at wholesale in interstate commerce." FPA § 201(b)(1) (16 U.S.C. § 824(b)(1)).
The spot markets were organized on the basis of a single-price auction in which sellers of electric energy would bid into the market. Those sellers included both public and non-public utilities. In a single-price auction, all of the bidders are paid the same price as was bid by the highest-priced seller whose electric energy was needed to "clear the market" or balance the supply of electric energy against the demand for electric energy. As a result, all of the bidders in a particular hour in the spot market received the same price for their sales.
FERC offered this explanation of how the single-price auction mechanism contributed to high wholesale electricity prices during the California electricity crisis and provided an opportunity for sellers to game the California spot markets:
In times of adequate supply the single price auction disciplines prices by encouraging suppliers to bid their marginal costs so that they can be selected for dispatch and be paid the clearing price. However, in times of scarcity the single price auction can exacerbate the effect of supply shortages by allowing sellers who have small market shares to set the clearing price. Not only is the seller transformed into a price setter rather than a price taker, but the resulting price is ascribed to the entire market.
93 FERC ¶ 61,121, at 61,365, 2000 WL 1637060 (2000).
The petitioners3 in this case are public entities (cities, counties, irrigation districts, states, and a federal agency) (collectively, "Public Entities") that participated in the ISO/CalPX spot markets as sellers of electric energy. Each entity received the single price for its electric energy sales regardless of whether it was the last and highest bid that cleared the market. According to FERC, these public entities accounted for nearly 30% of the electric energy and ancillary services sales in the ISO and CalPX spot markets during the 2000-2001 period.
On August 23, 2000, FERC initiated an investigation in response to a complaint filed by San Diego Gas & Electric ("SDG & E") which claimed that the ISO/CalPX electric energy markets were producing unjust and unreasonable prices. SDG & E labeled the wholesale markets "dysfunctional" and noted that beginning in June 2000, wholesale electric prices at times exceeded, often by a multiple of three or four, price levels at comparable load levels in prior years. In August, FERC...
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