NRG Power Mktg., LLC v. Me. Pub. Utilities Comm'n
| Citation | 130 S.Ct. 693,558 U.S. 165,175 L.Ed.2d 642 |
| Decision Date | 13 January 2010 |
| Docket Number | No. 08–674.,08–674. |
| Parties | NRG POWER MARKETING, LLC, et al., Petitioners, v. MAINE PUBLIC UTILITIES COMMISSION et al. |
| Court | United States Supreme Court |
Jeffrey A. Lamken, for petitioners.
Eric D. Miller, for respondent Federal Energy Regulatory Commission, supporting petitioners.
Richard Blumenthal, Attorney General, for respondents.
Elena Kagan, Solicitor General, Counsel of Record, Department of Justice, Washington, D.C., for Federal Energy Regulatory Commission.
Michael R. Bramnick, General Counsel, Christopher C. O'Hara, Assistant General Counsel, Princeton, NJ, John N. Estes III, Counsel of Record, John Lee Shepherd, Jr., Skadden, Arps, Slate Meagher & Flom LLP, Washington, D.C., Jeffrey A. Lamken, Robert K. Kry, MoloLamken LLP, Washington, D.C., for Petitioners.
Richard Blumenthal, Attorney General for State of Connecticut, Counsel of Record, John S. Wright, Michael C. Wertheimer, Assistant Attorneys General, Office of the Attorney General, Hartford, CT, for Respondent Richard Blumenthal, Attorney General of Connecticut, Jesse S. Reyes, Assistant Attorney General, Office of the Attorney General, Boston, MA, for Respondent Martha Coakley, Attorney General of the Commonwealth of Massachusetts, Mary E. Grover, Assistant General Counsel, NSTAR Electric & Gas Corporation, Boston, MA, for Respondent NSTAR Electric & Gas Corporation, Donald J. Sipe, Preti, Flaherty, Beliveau & Pachios, LLP, Augusta, ME, for Respondent Industrial Energy Consumer Group, Lisa Fink, State of Maine Public Utilities Commission, Augusta, ME, for Respondent Maine Public Utilities Commission, Stephen L. Teichler, Duane Morris, LLP, Washington, DC, for Respondent NSTAR Electric & Gas Corporation, Robert A. Weishaar, Jr., McNees Wallace & Nurick LLC, Washington, DC, for Respondent NEPOOL Industrial Customer Coalition, Vasiliki Karandrikas, McNees Wallace & Nurick LLC, Harrisburg, PA, for Respondent NEPOOL Industrial Customer Coalition.
Cynthia A. Marlette, General Counsel, Robert H. Solomon, Solicitor, Lona T. Perry, Senior Attorney, Federal Energy Regulatory Commission, Washington, D.C., Elena Kagan, Solicitor General, Counsel of Record, Edwin S. Kneedler, Deputy Solicitor General, Eric D. Miller, Assistant to the Solicitor General, Department of Justice, Washington, D.C., for Federal Energy Regulatory Commission.
The Federal Power Act (FPA or Act), 41 Stat. 1063, as amended, 16 U.S.C. § 791a et seq., authorizes the Federal Energy Regulatory Commission (FERC or Commission) to superintend the sale of electricity in interstate commerce and provides that all wholesale-electricity rates must be “just and reasonable,” § 824d(a). Under this Court's Mobile –Sierra doctrine, FERC must presume that a rate set by “a freely negotiated wholesale-energy contract” meets the statutory “just and reasonable” requirement. Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, ––––, 128 S.Ct. 2733, 2734, 171 L.Ed.2d 607 (2008). “The presumption may be overcome only if FERC concludes that the contract seriously harms the public interest.” Ibid.
This case stems from New England's difficulties in maintaining the reliability of its energy grid. In 2006, after several attempts by the Commission and concerned parties to address the problems, FERC approved a comprehensive settlement agreement (hereinafter Settlement Agreement or Agreement). Most relevant here, the Agreement established rate-setting mechanisms for sales of energy capacity, and provided that the Mobile –sierra public interest standard would govern rate challenges. parties who opposed the settlement petitioned for review in the United States Court of Appeals for the D.C. Circuit. Among multiple objections to FERC's order approving the Agreement, the settlement opponents urged that the rate challenges of nonsettling parties should not be controlled by the restrictive Mobile –Sierra public interest standard. The Court of Appeals agreed, holding that “when a rate challenge is brought by a non-contracting third party, the Mobile –Sierra doctrine simply does not apply.” Maine Pub. Util. Comm'n v. FERC, 520 F.3d 464, 478 (2008)(per curiam) .
We reverse the D.C. Circuit's judgment to the extent that it rejects the application of Mobile –Sierra to noncontracting parties. Our decision in Morgan Stanley, announced three months after the D.C. Circuit's disposition, made clear that the Mobile –Sierra public interest standard is not an exception to the statutory just-and-reasonable standard; it is an application of that standard in the context of rates set by contract. The “venerable Mobile –Sierra doctrine” rests on “the stabilizing force of contracts.” Morgan Stanley, 554 U.S., at ––––, 128 S.Ct. at 2747; see id., at ––––, 128 S.Ct. at 2749 (). To retain vitality, the doctrine must control FERC itself, and, we hold, challenges to contract rates brought by noncontracting as well as contracting parties.
In a capacity market, in contrast to a wholesale energy market, an electricity provider purchases from a generator an option to buy a quantity of energy, rather than purchasing the energy itself. To maintain the reliability of the grid, electricity providers generally purchase more capacity, i.e., rights to acquire energy, than necessary to meet their customers' anticipated demand. For many years in New England, the supply of capacity was barely sufficient to meet the region's demand. FERC and New England's generators, electricity providers, and power customers made several attempts to address this problem. This case stems from the latest effort to design a solution.
In 2003, a group of generators sought to enter into “reliability must-run” agreements with the New England Independent System Operator (ISO), which operates the region's transmission system.1 In its orders addressing those agreements, FERC directed the ISO to develop a new market mechanism that would set prices separately for various geographical sub-regions. Devon Power LLC, 103 FERC ¶ 61,082, pp. 61,266, 61,271 (2003).
In March 2004, the ISO proposed a market structure responsive to FERC's directions. See Devon Power LLC, 107 FERC ¶ 61,240, p. 62,020 (2004). FERC set the matter for hearing before an Administrative Law Judge (ALJ), who issued a 177–page order largely accepting the ISO's proposal. Devon Power LLC, 111 FERC ¶ 63,063, p. 65,205 (2005). Several parties filed exceptions to the ALJ's order; on September 20, 2005, the full Commission heard arguments on the proposed market structure, and thereafter established settlement procedures. Devon Power LLC, 113 FERC ¶ 61,075, p. 61,271 (2005).
After four months of negotiations, on March 6, 2006, a settlement was reached. Of the 115 negotiating parties, only 8 opposed the settlement.
The Settlement Agreement installed a “forward capacity market” under which annual auctions would set capacity prices; auctions would be conducted three years in advance of the time when the capacity would be needed. Devon Power LLC, 115 FERC ¶ 61,340, pp. 62,304, 62,306–62,308 (2006). Each energy provider would be required to purchase enough capacity to meet its share of the “installed capacity requirement,” i.e., the minimum level of capacity needed to maintain reliability on the grid, as determined by the ISO. Id., at 62,307. For the three-year gap between the first auction and the time when the capacity procured in that auction would be provided,2 the Agreement prescribed a series of fixed, transition-period payments to capacity-supplying generators. Id., at 62,308–62,309.
The issue before us centers on § 4.C of the Agreement (hereinafter Mobile –Sierra provision). Under that provision, challenges to both transition-period payments and auction-clearing prices would be adjudicated under “the ‘public interest’ standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956) [,] and [FPC ] v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956) (the ‘Mobile–Sierra’ doctrine).” App. 95. Mobile –Sierra applies, § 4.C instructs, “whether the [price is challenged] by a Settling Party, a non-Settling Party, or [by] the FERC acting sua sponte .” Ibid.
FERC approved the Settlement Agreement, “finding that as a package, it presents a just and reasonable outcome for this proceeding consistent with the public interest.” 115 FERC, at 62,304. The Mobile –Sierra provision, FERC explicitly determined, “appropriately balances the need for rate stability and the interests of the diverse entities who will be subject to the [forward capacity market's auction system].” Id., at 62,335.
Six of the eight objectors to the settlement sought review in the D.C. Circuit. For the most part, the Court of Appeals rejected the objectors' efforts to overturn FERC's order approving the settlement. 520 F.3d, at 467. But the objectors prevailed on the Mobile –Sierra issue: The D.C. Circuit held that Mobile –Sierra applies only to contracting parties. Id., at 478. In this Court, the parties have switched places. Defenders of the settlement, including the Mobile –sierra provision, are petitioners; objectors to the settlement, victorious in the Court of Appeals only on the Mobile –Sierra issue, are respondents.
Because of the importance of the issue, and in light of our recent decision in Morgan Stanley, we granted certiorari, 556 U.S. ––––, 129 S.Ct. 2050, 173 L.Ed.2d 1132 (2009), to resolve this question: “[Does] Mobile –Sierra 's public-interest standard appl[y] when a contract rate is challenged by an entity that was not a party to the contract[?]” Brief for Petitioners i. Satisfied that the answer to that question is yes, we reverse the D.C. Circuit's judgment insofar as it rejected application of Mobile –Sierra to noncontracting parties.
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