MPS Merch. Servs., Inc. v. Fed. Energy Regulatory Comm'n
| Decision Date | 08 September 2016 |
| Docket Number | No. 16-70524,No. 15-73803, No. 16-70004, No. 16-70868, No. 15-73905, No. 15-73912, No. 16-70525, No. 15-73818,15-73803 |
| Citation | 836 F.3d 1155 |
| Parties | MPS Merchant Services, Inc., Petitioner, California Public Utilities Commission, Intervenor, Pacific Gas & Electric Company; Southern California Edison Co.; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors, v. Federal Energy Regulatory Commission, Respondent. Illinova Corporation, on behalf of Illinova Energy Partners, Inc., Petitioner, California Public Utilities Commission ; Pacific Gas & Electric Company; Southern California Edison Co.; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors, v. Federal Energy Regulatory Commission, Respondent. BP Energy Company, Petitioner, California Public Utilities Commission ; Pacific Gas & Electric Company; Southern California Edison Co.; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors, v. Federal Energy Regulatory Commission, Respondent. APX, Inc., Petitioner California Public Utilities Commission ; Pacific Gas & Electric Company; Southern California Edison Co.; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors v. Federal Energy Regulatory Commission, Respondent Shell Energy North America (US), L.P., Petitioner, California Public Utilities Commission ; Pacific Gas & Electric Company; Southern California Edison Co.; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors, v. Federal Energy Regulatory Commission, Respondent. MPS Merchant Services, Inc., Petitioner, California Public Utilities Commission ; Pacific Gas & Electric Company; Southern California Edison Company; The People of the State of California, ex rel. Kamala D. Harris, Attorney General, Intervenors, v. Federal Energy Regulatory Commission, Respondent. Illinova Corporation, on behalf of Illinova Energy Partners, Inc., Petitioner, v. Federal Energy Regulatory Commission, Respondent. Shell Energy North America (US), L.P., Petitioner, v. Federal Energy Regulatory Commission, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
James P. Danley, Cheryl M. Foley, John Lee Shepherd, Jr., and John N. Estes III, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, D.C., for Petitioners MPS Merchant Services, Inc., and Illinova Corporation.
Brett A. Snyder and Mark R. Haskell, Cadwalader, Wickersham & Taft LLP, Washington, D.C., for Petitioner BP Energy Company.
Matthew T. Rick and Douglas F. John, John & Hengerer, Washington, D.C., for Petitioner APX, Inc.
Jessica L. Bayles, William M. Friedman, and Jeffrey D. Watkiss, McDermott, Will & Emery LLP, Washington, D.C., for Petitioner Shell Energy North America (US), L.P.
Candace J. Morey and Arocles Aguilar, General Counsel, San Francisco, California, as and for Intervenor California Public Utilities Commission.
Eric Todderud and Stan Berman, Sidley Austin LLP, Seattle, Washington; Joshua S. Levenberg and Mark D. Patrizio, Pacific Gas and Electric Company; for Intervenor Pacific Gas & Electric Company.
Catherine M. Giovannoni and Richard L. Roberts, Steptoe & Johnson LLP, Washington, D.C.; Russell A. Archer, J. Eric Isken, and Russell C. Swartz, Southern California Edison Company; for Intervenor Southern California Edison Co.
Danette E. Valdez, Supervising Deputy Attorney General; Martin Goyette, Senior Assistant Attorney General; Mark Breckler, Chief Assistant Attorney General; Kamala K. Harris, Attorney General; Office of the Attorney General, San Francisco, California; Whitney E. Snyder, Judith D. Cassel, and Kevin J. McKeon, Hawke McKeon & Sniscak LLP, Harrisburg, Pennsylvania; for Intervenor People of the State of California ex rel. Kamala D. Harris, Attorney General.
Beth G. Pacella, Deputy Solicitor; Robert H. Solomon, Solicitor; Max Minzner, General Counsel; Washington, D.C.; as and for Respondent Federal Energy Regulatory Commission.
Before: Sidney R. Thomas, Chief Judge, and M. Margaret McKeown and Richard R. Clifton, Circuit Judges.
THOMAS
, Chief Circuit Judge:
In these petitions for review, we consider whether the Federal Energy Regulatory Commission (“FERC” or “Commission”) arbitrarily and capriciously determined that various energy companies committed tariff violations in California during the summer of 2000. We conclude that it did not, and we deny the petitions for review.
This case is part of a long-standing series of decisions arising out of California's energy crisis in 2000 and 2001. The relevant factual background was described in our prior opinions, so we need not describe it in detail here.1 In brief, FERC in the 1990s commenced a program of deregulating and “unbundling” the wholesale electric power industry by restructuring and separating electrical generation, transmission, and distribution.2 As a result, California deregulated its investor-owned, regulated, vertically integrated utility market.3
As part of the deregulation, California created two nonprofit entities: the California Power Exchange Corporation (“CalPX”) and the California Independent System Operator Corporation (“Cal–ISO”). CPUC , 462 F.3d at 1037–39
. CalPX was a wholesale clearinghouse created primarily to operate two spot markets: (1) the “day-ahead” trading market, in which the market clearing price was derived from the sellers' and buyers' price and quantity determinations for the next day's energy transactions, and (2) the “day of” or “hour-ahead” trading market, in which CalPX would determine, on an hourly basis, a single market clearing price which all suppliers would be paid. Id. at 1038. Cal–ISO managed California's electricity transmission grid and was responsible for all real-time operations, including balancing electrical supply and demand. Id. at 1038–39. Both entities were subject to FERC jurisdiction, with CalPX operating pursuant to a FERC-approved tariff and wholesale rate schedule. Pac. Gas & Elec. Co. , 77 FERC ¶ 61,204 at 61,803–05 (1996),reh'g denied , 81 FERC ¶ 61,122 (1997).
The Cal–ISO tariff comprehensively regulated California's power markets. In relevant part, the tariff barred power marketers from buying electricity in the day-ahead market in order to resell that electricity in the real-time market. And the tariff incorporated a protocol—the Market Monitoring and Information Protocol (“MMIP”)—which set forth rules for identifying and protecting against abuses of market power. See Am. Elec. Power Serv. Corp. , 103 FERC ¶ 61,345 at para. 8 (2003)
.
Unlike most energy markets, 80% of the California transactions during the relevant period were conducted in the spot markets. See CPUC , 462 F.3d at 1039
. Most electricity, by design, traded in CalPX's day-ahead market. After a summer 2000 spike in energy prices and a series of rolling blackouts, San Diego Gas & Electric Company (“SDG&E”) filed a complaint with FERC under § 206 of the Federal Power Act, 16 U.S.C. § 824(e). See
id. at 1040–41. SDG&E's complaint requested that the agency impose a price cap on sales into the CalPX and Cal–ISO markets. See
id . at 1041. FERC denied the request, but then commenced an investigatory proceeding into the justness and reasonableness of the market rates.
San Diego Gas & Elec. Co. , 92 FERC ¶ 61,172 (2000)
. FERC ultimately issued a number of orders, which have been the subject of prior petitions for review. This case returns to us after our decision in CPUC , in which we directed FERC to determine whether certain sellers of electricity in California power markets violated the rules governing those markets in the summer of 2000, and whether these violations could be remedied under the agency's authority in § 309 of the FPA. CPUC , 462 F.3d at 1048–51, 1065.
Following our remand in CPUC ,
FERC instructed an administrative law judge (“ALJ”) to determine for the period from May 1, 2000 to October 1, 2000 (the “Summer Period”): (1) which market practices and behaviors constituted a violation of the then-current Cal–ISO, CalPX, and individual seller's tariffs and Commission orders; (2) whether any of the respondents engaged in those tariff violations; and (3) whether any such tariff violations affected the market clearing price. San Diego Gas & Elec. Co. , 135 FERC ¶ 61,183 at para. 31 (2011).
Months of hearings followed. The California Parties,4 the energy companies and Commission staff presented evidence, producing a transcript more than 10,000 pages long. An Initial Decision
issued in February 2013. See
San Diego Gas & Elec. Co. , 142 FERC ¶ 63,011 (2013) (“Initial Decision”). The Initial Decision found that certain energy companies had violated the Cal–ISO tariff via several marketing strategies, which the ALJ dubbed “False Export,” “False Load Scheduling” and “Anomalous Bidding.”
A False Export violation occurred when a marketer purchased electricity from the CalPX or other sources internal to California, scheduled that electricity in advance for export, and subsequently scheduled that electricity in real-time for import. See, e.g. , San Diego Gas & Elec. Co. , 149 FERC ¶ 61,116 at para. 108 (2014)
(“Op.536”);San Diego Gas & Elec. Co. , 153 FERC ¶ 61,144 at para. 80 (2015) (“Op.536–A”). The twin transactions “disguised [the] energy [as] sourced from outside,” 142 FERC ¶ 63,011 at para. 36, even though the electricity never left California. See 149 FERC ¶ 61,116 at para. 122 (). The False Export strategy let sellers “evade the [Cal–ISO] real time price caps,” which did not apply to imported power. 142 FERC ¶ 63,011 at para. 26.
False Load Scheduling—or, “overscheduling”—occurred when sellers in California's day-ahead market submitted exaggerated demand schedules to Cal–ISO. See, e.g. , 142 FERC ¶ 63,011 at para. 38.
The so-called “uninstructed energy” would then flow on...
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