Gas v. United States

• Decision Date: 16 March 2015
• Docket Number: No. 07-157C,No. 07-167C,No. 07-184C,07-157C,07-167C,07-184C
• Parties: PACIFIC GAS AND ELECTRIC COMPANY, and SOUTHERN CALIFORNIA EDISON COMPANY, Plaintiffs, v. THE UNITED STATES, Defendant. SAN DIEGO GAS & ELECTRIC COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. THE PEOPLE OF THE STATE OF CALIFORNIA EX REL. EDMUND G. BROWN JR., ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, and the CALIFORNIA DEPARTMENT OF WATER RESOURCES BY AND THROUGH ITS CALIFORNIA ENERGY RESOURCES SCHEDULING DIVISION, Plaintiff, v. THE UNITED STATES, Defendant.
• Court: Court of Federal Claims

PACIFIC GAS AND ELECTRIC COMPANY,and SOUTHERN CALIFORNIA EDISON COMPANY, Plaintiffs, v. THE UNITED STATES, Defendant.

SAN DIEGO GAS & ELECTRIC COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.

THE PEOPLE OF THE STATE OF

CALIFORNIA EX REL. EDMUND G. BROWN JR.,

ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,

and the CALIFORNIA DEPARTMENT OF WATER

RESOURCES BY AND THROUGH ITS CALIFORNIA

ENERGY RESOURCES SCHEDULING DIVISION, Plaintiff, v. THE UNITED STATES, Defendant.

No. 07-157C

No. 07-167C

No. 07-184C

United States Court of Federal Claims

March 16, 2015

Cal. Pub. Util. Code §§ 330-398.5;

Certification, 28 U.S.C. § 1292(d)(2);

Contracts Disputes Act, 41 U.S.C. §§ 601-13;

Department of Energy Organization Act, 42 U.S.C. §§ 7101, et seq.;

Department of Energy Power Marketing Rates Delegation Order Confirmation And Approval, 43 FED. REG. 60,636-37;

Federal Energy Regulatory Commission;

Federal Power Act, 16 U.S.C. §§ 791a et seq.;

Judgment on Multiple Claims or Involving Multiple Parties, RCFC 54(b);

Jurisdiction;

Law-of-the-Case Doctrine;

Motion for Reconsideration, RCFC 59;

Public Utility Regulatory Policies Act, 16 U.S.C. §§ 2601 et seq.;

Standing;

Submitting Claims To Contracting Officer, 41 U.S.C. § 7103(a)(2), (b)(1).

Marie L. Fiala, Sidley Austin, LLP, San Francisco, California, Counsel for Plaintiff, Pacific Gas & Electric Company.

Jane I. Ryan, Steptoe & Johnson, LLP, Washington, D.C., Counsel for Plaintiff, Southern California Edison Company.

Mark Fogelman, Friedman & Springwater, LLP, San Francisco, California, Counsel for Plaintiff, San Diego Gas & Electric Company.

Kenneth D. Woodrow, United States Department of Justice, Civil Division, Washington, D.C., Counsel for Defendant.

Gary Alexander, Deputy Attorney General, Counsel for Plaintiff The People of the State of California et al., Office of the Attorney General, San Francisco, California.

BRADEN, Judge.

MEMORANDUM OPINION AND FINAL ORDER REGARDING PLAINTIFFS' BREACH OF CONTRACT CLAIMS

This case arises from the California Energy Crisis of 2000-2001, during which electricity prices soared to record levels. Plaintiffs first attempted to obtain relief from the Federal Energy Regulatory Commission ("FERC") or the United States Court of Appeals for the Ninth Circuit. These efforts were unsuccessful. See Bonneville Power Admin. v. FERC, 422 F.3d 908, 911 (9th Cir. 2005) ("Bonneville") ("We conclude that FERC does not have refund authority over wholesale electric energy sales made by governmental entities and non-public utilities."), cert. denied, 552 U.S. 1076 (2007); see also City of Redding v. FERC, 693 F.3d 828, 841 (9th Cir. 2012) ("FERC clearly acknowledged that it did not have authority to order refunds from the non-public utilities and explained that it was establishing just and reasonable rates in order to determine the appropriate refund amount for public entities[.]"). On March 12, 2007, three California-based investor-owned or public utilities and the State of California filed refund claims for overcharges in the above-captioned cases in the United States Court of Federal Claims. The Complaints allege that because two federal power authorities were liable for breach of power exchange agreements with two non-profit California corporations, these federal power authorities were in breach of contract with Plaintiffs, because the power exchange agreements were subject to the FERC tariffs incorporated therein.

To facilitate review of this Memorandum Opinion and Final Judgment, the court has provided the following outline.

I. REGULATORY BACKGROUND.

A. Prior To September 24, 1996, The Electric Utility Industry In The State Of California Was Subject Both To Federal And State Regulation.

B. On September 24, 1996, The State Of California Decided To Deregulate The Electric Utility Industry, But That Decision Resulted In An Energy Crisis In 2000-Mid-2001.

II. PROCEDURAL HISTORY.

A. 2000-2006 Proceedings In The Federal Energy Regulatory Commission And The United States Court Of Appeals For The Ninth Circuit.

B. 2007-2012 Proceedings In The United States Court Of Federal Claims And May 12, 2012 Liability Decision.

C. The August 27, 2012 Decision Of The United States Court Of Appeals For The Ninth Circuit.

D. The Government's November 2, 2012 Motion For Reconsideration In The United States Court Of Federal Claims And April 2, 2013 Order Denying Reconsideration.

E. 2013 Reassignment Of This Case, December 20, 2013 Decision To Vacate, And Subsequent Proceedings In The United States Court Of Federal Claims.

III. DISCUSSION.

A. Whether Plaintiffs Have Standing.

1. Neither The California Investor-Owned Utilities Nor The State Of California Were In Privity Of Contract, Either With The Western Power Administration Or The Bonneville Power Administration.

2. Neither The California Investor-Owned Utilities Nor The State Of California Were Third-Party Beneficiaries To A Contract With Either The Western Power Administration Or The Bonneville Power Administration.

3. Neither Cal-PX Nor Cal-ISO Was An Agent Of The Cal-IOUs Or The State Of California.

B. Jurisdiction

C. Assuming Arguendo, Plaintiffs Have Standing, Count I Of Plaintiffs' Refund Period Breach Of Contract Claims Must Be Dismissed.

1. The Government's Argument.

2. Plaintiffs' Response.

3. The Government's Reply.

4. The Court's Resolution.

D. Plaintiffs' July 1, 2014 Motion To Reinstate The May 2, 2012 Liability Decision And For Certification Of Orders For Interlocutory Appeal Is Denied.

IV. CONCLUSION.

* * *

I. REGULATORY BACKGROUND.

To understand this sui generis case, a review of the labyrinth of state and federal law and regulations that governed the electric utility industry in the State of California is required.

A. Prior To September 24, 1996, The Electric Utility Industry In The State Of California Was Subject Both To Federal And State Regulation.

In 1935, Congress enacted the Federal Power Act, 16 U.S.C. §§ 791a et seq. This Act "had two primary and related purposes: to curb abusive practices of public utility companies by bringing them under effective control, and to provide effective federal regulation of the expanding business of transmitting and selling electric power in interstate commerce." Gulf States Utils. Co. v. Fed. Power Comm'n, 411 U.S. 747, 758 (1973). To accomplish this end, Congress created the Federal Power Commission ("FPC"). Id.

In 1977, in response to power shortages and rising energy costs, Congress consolidated all federal energy-related programs and agencies in the new Department of Energy ("DOE"). See Department of Energy Organization Act, codified at 42 U.S.C. §§ 7101 et seq. (1977). That Act established the Federal Energy Regulatory Commission ("FERC") as an independent agency to assume most of the functions previously delegated to the FPC, including expanded regulatory authority over the interstate sale of all wholesale electricity and transmission service.¹ Id. §§ 7171-72; see also Department of Energy, Power Marketing Rates, Delegation Order For Confirmation and Approval, 43 FED. REG. 60636-60637 (Dec. 22, 1978).

In 1978, Congress enacted the Public Utility Regulatory Policies Act to conserve the use of fossil fuels and promote development of new generating facilities with equitable rates. See 16 U.S.C. §§ 2601 et seq. By that time, the number of electricity generators in the country wasgrowing, because technological advances made it possible to transmit electric power over long distances at a lower cost by "wheeling," i.e., "an arrangement in which one electric company allows another company to use its lines to transmit power to customers in its service area." FED. REGULATORY DIRECTORY 172 (16th ed. 2014).

On April 24, 1996, FERC issued Order No. 888, finding that the nation's larger public utilities had discriminated in "the wholesale bulk power marketplace" by providing inferior or no access to third-party power wholesalers. See 61 FED. REG. 21540, 21541 ("FERC Order No. 888"); see also Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667, 683 (D.C. Cir. 2000) ("[T]he open access requirement of [FERC] Order 888 is premised . . . on FERC's identification of a fundamental systemic problem in the industry."), aff'd, New York v. FERC, 535 U.S. 1 (2002). To remedy this situation, FERC ordered all investor-owned electric utilities engaged in interstate transmission to file a single open access, non-discriminatory tariff that offered "network, load-based service and point-to-point, contract-based service." FERC Order No. 888, at 21,541. "The theory behind separating these functions, known as 'unbundling,' was that wholesale power competition would be promoted, and consumers would benefit, if public utilities were required to provide nondiscriminatory, open access, transmission." Pub. Utils. Comm'n of Cal. v. FERC, 462 F.3d 1027, 1036 (9th Cir. 2006) ("CPUC").

B. On September 24, 1996, The State Of California Decided To Deregulate The Electric Utility Industry, But That Decision Resulted In An Energy Crisis In 2000-Mid-2001.²

On September 24, 1996, in response to FERC Order No. 888, California enacted Assembly Bill 1890 ("AB 1890") to establish a deregulated market for wholesale electric power in California, where prices would be set by a competitive process to facilitate consumer choice. See Cal. Pub. Util. Code §§ 330-398.5. At this time, three investor-owned electric utilities operated in the State of California: Pacific Gas & Electric Company ("PG&E"); San Diego Gas and Electric Company ("SG&E"); and Southern California Edison ("SC Edison") (collectively hereinafter "the Cal-IOUs"). The Cal-IOUs generated and purchased wholesale power and also owned, operated, and maintained transmission and distribution systems. PE Ex. 214 at 316-17. The terms, conditions, and prices for these services were set forth in tariffs and rates filed with FERC. See Pac. Gas & Elec. Co. v. FERC, 306 F.3d 1112, 1114 (D.C. Cir. 2002) (explaining that the Cal-IOUs "originally consisted of three investor-owned utilities (PG&E, [SC] Edison,...