City of Redding v. Fed. Energy Regulatory Comm'n

• Decision Date: 27 August 2012
• Docket Number: 09–72791.,Nos. 09–72775,09–72789,s. 09–72775
• Citation: 693 F.3d 828
• Parties: CITY OF REDDING, CALIFORNIA, Petitioner, Northern California Power Agency, Petitioner–Intervenor, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, People of the State of California; Pacific Gas and Electric Company; Public Utilities Commission of the State of California; Southern California Edison Company, Respondents–Intervenors. Arizona Electric Power Cooperative, Inc., Petitioner, Northern California Power Agency, Petitioner–Intervenor, v. Federal Energy Regulatory Commission, Respondent, California Independent System Operator Corporation, Respondent–Intervenor. Bonneville Power Administration; Western Area Power Administration, Petitioners, v. Federal Energy Regulatory Commission, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

693 F.3d 828

2012 Daily Journal D.A.R. 11,913

CITY OF REDDING, CALIFORNIA, Petitioner,

Northern California Power Agency, Petitioner–Intervenor,

v.FEDERAL ENERGY REGULATORY COMMISSION, Respondent,People of the State of California; Pacific Gas and Electric Company; Public Utilities Commission of the State of California; Southern California Edison Company, Respondents–Intervenors.

Arizona Electric Power Cooperative, Inc., Petitioner,

Northern California Power Agency, Petitioner–Intervenor,

v.Federal Energy Regulatory Commission, Respondent,California Independent System Operator Corporation, Respondent–Intervenor.

Bonneville Power Administration; Western Area Power Administration, Petitioners,

v.Federal Energy Regulatory Commission, Respondent.

Nos. 09–72775, 09–72789, 09–72791.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Sept. 23, 2010.

Filed Aug. 27, 2012.

Michael F. Hertz, Thomas M. Bondy, Mark Pennak (argued), Department of Justice, Washington, DC, Bonneville Power Administration and Western Area Power Administration, petitioner.

William L. Slover, Robert D. Rosenberg, Stephanie P. Lyons, Stephanie M. Adams, Slover & Loftus LLP, Washington, DC, for Arizona Electric Power Cooperative, Inc., petitioner.

Robert C. McDiarmid, Peter J. Hopkins, Margaret Meiser, Spiegel & McDiarmid LLP, Washington, DC, for Northern California Power Agency, petitioner.

Peter J. Scanlon, Lisa S. Gast, Jason T. Gray, Duncan Weinberg, Genzer & Pembroke, P.C., Washington, DC, for the City of Redding, CA, petitioner.

Harvey L. Reiter, Stinson Morrison Hecker LLP, Washington, DC, for the Sacramento Municipal Utility District (argued), petitioner.

Thomas R. Sheets, Robert H. Solomon, Lona T. Perry (argued), Washington, DC, for Federal Energy Regulatory Commission, respondent.

Frank R. Lindh, Mary F. McKenzie, Candace J. Morey, San Francisco, CA, for Public Utilities Commission of California, respondent-intervenor.

Mark D. Patrizio, Pacific Gas and Electric Company, San Francisco, CA, and Stan Berman, Sidley Austin LLP, Seattle, WA, for Pacific Gas and Electric Company, respondent-intervenor.

Richard L. Roberts (argued) and Catherine M. Giovannoni, Steptoe & Johnson LLP, Washington, DC, and Russell Swartz and Leon Bass, Jr., Southern California Edison Company, Rosemead, CA, for Southern California Edison Company, respondent-intervenor.

Edmund G. Brown, Jr., Attorney General, James M. Humes, Chief Deputy Attorney General, and Matt Rodriquez, Chief Assistant Attorney General, Sacramento, CA, David M. Gustafson, Deputy Attorney General, Oakland, CA, Kevin J. McKeon and Lillian S. Harris, Hawke McKeon & Sniscak LLP, Harrisburg, PA, for the People of the State of California, respondent-intervenor.

Daniel Shonkwiler, Folsom, CA, for California Independent System Operator Corporation, respondent-intervenor.

On Petition for Review of an Order of the Federal Energy Regulatory Commission. FERC No. EL00–95–202.

Before: SIDNEY R. THOMAS, M. MARGARET McKEOWN, and RICHARD R. CLIFTON, Circuit Judges.

Opinion by Judge CLIFTON; Dissent by Judge McKEOWN.

OPINION

CLIFTON, Circuit Judge:

This story begins over a decade ago during the California energy crisis of 2000 and 2001. This court ¹ and this panel ² have become very familiar with those events. After California deregulated and restructured its electricity market in the mid 1990s, prices skyrocketed. The Federal Energy Regulatory Commission (“FERC”) attempted to ameliorate this problem by ordering refunds from both jurisdictional (public) and non-jurisdictional (non-public) entities for prices paid above what FERC later determined to be the just and reasonable rate. We held, in Bonneville Power Administration v. FERC, 422 F.3d 908 (9th Cir.2005), that FERC lacked authority to order refunds from those entities not under its jurisdiction, namely the non-public utilities. In a set of orders subsequent to Bonneville—the orders that we now review—FERC stated that it had “revised” or “reset” ³ the market rates for the period for which it had ordered refunds, and that its authority to do so stemmed from § 206 of the Federal Power Act (“FPA”), 16 U.S.C. § 824e. It is from these Orders that Petitioners, ⁴ a group of municipal and federal governmental entities, which sold electricity in the affected markets but who are outside of FERC's refund jurisdiction,⁵ appeal.

We do not agree with FERC's assertion that it has broad authority under § 206 of the FPA to retroactively reset rates that were charged in the California electricity markets during the time in question, October 2, 2000 through June 20, 2001. As we held in Bonneville, the FPA grants FERC the authority to investigate rates and to order refunds only from public utilities. Bonneville, 422 F.3d at 911. Nonetheless, we conclude that the specific FERC Orders that are challenged in the current petitions for review do not exceed the limits on FERC's authority. As a result, we deny the petitions.

I. Factual and Procedural Background

Only a brief summary of the long and detailed history of the California energy crisis and subsequent litigation is necessary here. In the mid–1990's, California restructured its electric energy markets in an attempt to lower electricity prices that were far higher than the national average. As part of its plan, California created two non-profit public benefit corporations: the California Power Exchange (“CalPX”) and the California Independent System Operator (“ISO”). The former oversaw a statewide electricity auction market, which it operated subject to FERC tariffs and rate schedules. The latter managed the flow of the electricity transmission grid.

Together CalPX and ISO operated single-price auction spot markets for the wholesale sale of electricity. California's investor-owned (“public”) utilities were required to purchase the electricity their customers needed in this market. In re California Power Exch. Corp., 245 F.3d at 1114–15.⁶ The primary sellers in the market were merchant generators who owned power plants that had been divested by the investor-owned utilities during an earlier phase of deregulation. Id.;94 FERC ¶ 61245, at 61864–65, 2001 WL 406581 (2001). These merchant generators were considered “public utilities” subject to FERC regulation. 94 FERC ¶ 61245, at 61864–65.

Power-producing municipal and federal government entities also sold electricity into the market. These entities are “non-public” utilities not subject to FERC's jurisdiction.

Sellers of electricity, both public and non-public, would bid into the market until sufficient power was secured to meet demand, at which point all sellers were paid the price bid by the seller whose electricity was needed to “clear the market.” See generally Bonneville, 422 F.3d at 911–12.

Although intended to reduce prices for electricity, the CalPX and ISO electric energy markets produced prices far above those in prior years, at comparable load levels. In August of 2000, San Diego Gas & Electric Company (“SDG & E”) filed a complaint with FERC alleging that the rates charged on the CalPX and ISO markets, the market clearing prices, “d[id] not reflect legitimate forces of supply and demand.” In response, FERC initiated hearing proceedings to investigate the justness and reasonableness of the CalPX/ISO rates. 92 FERC ¶ 61,172, 2000 WL 1204898 (2000). On November 11, 2000, FERC issued an order declaring that it would “determine whether public utility sellers to the ISO and PX are charging unjust and unreasonable rates.” 93 FERC ¶ 61,121, at 61,357, 2000 WL 1637060 (2000) (“November 2000 Order”).

Following an investigation, on March 9, 2001, FERC issued another order in which it concluded that the CalPX/ISO rates were in fact unjust and unreasonable. In this order, FERC established a mitigation plan and set a mitigated market clearing price—the price that would have been in effect “had there been competitive forces at work”—above which refunds may be required. 94 FERC ¶ 61,245, at 61,862. The order noted that, as to non-public utility sellers, FERC “has no authority to order such sellers to make refunds.” Id. at 61,864.

In a July 25, 2001 order (“July 2001 Order”), FERC announced that the transactions subject to refund would “include sales by public and nonpublic utilities into these markets.” Bonneville, 422 F.3d at 913 (quoting 96 FERC ¶ 61,120, at 61,499, 2001 WL 1704964 (2001)) (emphasis in Bonneville ). FERC offered the following description of its authority to retroactively reset the market rates:

A number of parties confuse the just and reasonable standard with the authority to order retroactive refunds of unjust and unreasonable rates. Whether rates are unjust and unreasonable is a separate issue from whether the Commission is authorized under the statute to order refunds retroactively. Under FPA section 206, if the Commission finds that rates no longer meet the just and reasonable standard, the Commission has a statutory obligation to fix a new rate or to fix practices “to be thereafter observed.” In amending FPA section 206, Congress did not give the Commission authority to modify unjust and unreasonable rates retroactively.

96 FERC ¶ 61,120, at 61,505 (emphasis added) (quoting 16 U.S.C. § 824e(a)).

Following the July 2001 Order, non-public utilities brought a petition for review to this court. In our 2005 opinion in Bonneville, we held that in keeping with Congress's clearly expressed intent, FERC lacked jurisdiction over non-public utilities and could not order them to pay refunds. 422 F.3d at 911, 920. As we observed in passing, for those who purchased electricity from non-public sellers “the remedy, if any, may rest in a contract claim, not a refund action,” id. at 925, but we followed this statement with the proviso that “we take no position on remedies available outside of the FPA,” id. at 926.

In proceedings following the remand from Bonneville, FERC issued a new order on October 19, 2007 (“October 2007 Order”). 121 FERC ¶ 61,067, at 61,346, ...