Pne Energy Supply LLC v. Eversource Energy

• Decision Date: 09 September 2020
• Docket Number: No. 19-1678,19-1678
• Parties: PNE ENERGY SUPPLY LLC, on behalf of itself and all others similarly situated, Plaintiff, Appellant, v. EVERSOURCE ENERGY, a Massachusetts Voluntary Association; Avangrid, Inc., a New York Corporation, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

974 F.3d 77

PNE ENERGY SUPPLY LLC, on behalf of itself and all others similarly situated, Plaintiff, Appellant,

v.EVERSOURCE ENERGY, a Massachusetts Voluntary Association; Avangrid, Inc., a New York Corporation, Defendants, Appellees.

No. 19-1678

United States Court of Appeals, First Circuit.

September 9, 2020

Austin B. Cohen, Philadelphia, PA, Keith J. Verrier, Levin Sedran & Berman LLP, Anthony Tarricone, and Kreindler & Kreindler LLP, Boston, MA, on brief for appellant.

Mark A. Gottlieb, Public Health Advocacy Institute, Sandeep Vaheesan, Open Markets Institute, Paula S. Bliss, and Bernheim Dolinsky Kelley LLC, Fort Lauderdale, FL, on brief for Open Markets Institute, amicus curiae.

Douglas G. Green, Shannen W. Coffin, Washington, DC, Mark C. Savignac, Steptoe & Johnson LLP, John D. Donovan, Jr., Boston, MA, Chong S. Park, Washington, DC, and Ropes & Gray LLP, on joint brief for appellee Eversource Energy.

Richard P. Bress, Marguerite M. Sullivan, Washington, DC, Caroline A. Flynn, and Latham & Watkins LLP on joint brief for appellee Avangrid, Inc.

Before Thompson, Lipez, and Kayatta, Circuit Judges.

KAYATTA, Circuit Judge.

In 2017, a group of economists working with the Environmental Defense Fund published a report alleging that the defendants in this case were able to increase electricity prices in New England about 20% on average, totaling $3.6 billion in surcharges over three years between 2013 and 2016, by buying up and refusing to release excess transmission capacity in the Algonquin pipeline. See Levi Marks et al., Vertical Market Power in Interconnected Natural Gas and Electricity Markets 4 (2017), https://www.edf.org/sites/default/files/vertical-market-power.pdf. In response, a group of electricity end consumers filed suit in November 2017 alleging violations of state and federal antitrust and unfair competition law. See Breiding v. Eversource Energy, 344 F. Supp. 3d 433, 444 (D. Mass. 2018), aff'd, 939 F.3d 47 (1st Cir. 2019). After the defendants challenged the electricity consumers' standing to sue under the federal antitrust laws for manipulation in gas transmission markets, PNE Energy Supply LLC, a wholesale energy purchaser, filed this lawsuit on behalf of itself and other similarly situated energy purchasers, also challenging the defendants' alleged manipulation of natural gas pipeline capacity. Last fall, we affirmed the dismissal of the electricity consumers' suit. Breiding, 939 F.3d at 57. Rather than taking up the defendants' challenge to the electricity consumers' antitrust standing, we held that the antitrust claims failed on their merits because the defendants' challenged conduct, in neither using nor releasing reserved pipeline capacity, all occurred pursuant to a tariff approved by the Federal Energy Regulatory Commission. Id. at 52–56. We now consider in this second case whether any differences between the two cases warrant a different outcome. For the following reasons, we find that Breiding controls. We therefore affirm the dismissal of this case.

I.

A.

To provide context regarding the relevant energy market and actors at issue in this case, we begin by repeating verbatim the description we provided in Breiding, 939 F.3d at 49–51 :

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"Wellhead" sales comprise the first step in the chain of market transactions that readies extracted natural gas for consumption in the form of retail electricity. At this initial stage, natural gas producers sell natural gas to direct purchasers through gas futures contracts, in which the producer agrees to sell a specific quantity of natural gas at some fixed time in the future to the direct purchaser. Load-distribution companies (LDCs) -- those entities that locally distribute natural gas, primarily to retail consumers who use the gas for heating and cooking -- have a relatively predictable need for natural gas and, thus, often make use of this type of contract.¹ Consumers with more variable demand for natural gas, such as power generators, often purchase gas on the secondary wholesale "spot market." The spot market for natural gas allows direct purchasers that find themselves with rights to excess, unneeded natural gas to resell those rights in the immediate or near future.

The Federal Energy Regulatory Commission (FERC) is the agency charged with implementing and executing the Natural Gas Act (NGA), "a comprehensive scheme of federal regulation of ‘all wholesales of natural gas in interstate commerce.’ " N. Nat. Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 91, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963) (quoting Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 682, 74 S.Ct. 794, 98 L.Ed. 1035 (1954) ); see also 15 U.S.C. § 717c(a) (tasking FERC with ensuring that rates charged for sales of natural gas within FERC's jurisdiction are "just and reasonable"). Notwithstanding the comprehensiveness of this regulatory scheme, Congress also exempted wellhead sales from FERC's regulatory jurisdiction. See 15 U.S.C. § 3431(a)(1)(A). Accordingly, market forces dictate the wellhead price of natural gas. Id. § 3431(b)(1)(A) ("[A]ny amount paid in any first sale of natural gas shall be deemed to be just and reasonable."). And while the NGA grants FERC regulatory authority over "sale[s] ... for resale" in the spot market for natural gas, see 15 U.S.C. § 717(b), FERC has issued a "blanket certificate of public convenience and necessity" that allows such transactions to proceed at market rates, see 18 C.F.R. § 284.402.

Direct purchasers of natural gas also pay for the transmission of natural gas from the wellhead. The Algonquin Gas pipeline serves as the primary interstate artery through which natural gas is transported in New England. Direct purchasers in New England must reserve transmission capacity -- that is, the physical space in the pipeline needed to transport the natural gas purchased from the producer -- along the Algonquin pipeline commensurate with their transportation needs. FERC also has "exclusive jurisdiction over the transportation ... of natural gas in interstate commerce for resale" and is charged with "determin[ing] a ‘just and reasonable’ rate for [its] transportation." Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300–01, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988). Pursuant to this exclusive authority, FERC requires interstate pipeline operators like Algonquin to allow LDCs to purchase capacity using "no-notice" contracts. See Order No. 636, 57 Fed. Reg. 13,267 (Apr. 16, 1992). Such contracts allow LDCs to adjust capacity reservations downward or upward (up to their daily "firm entitlements") at any time without incurring penalties. Id. at 13,286. Importantly, FERC regulations allow, but do not require, LDCs to resell unneeded transportation capacity to other natural gas purchasers when they downwardly adjust their capacity reservations. See 18 C.F.R. § 284.8 ; Tenn. Gas Pipeline Co., 102 FERC ¶ 61,075, 61,119 (2003) ("[N]othing requires a shipper to release its capacity: it does so by choice.").

In the wholesale market for electricity, load-serving entities (LSEs) that sell and deliver electricity to consumers for retail consumption purchase electricity from power generators. The Federal Power Act (FPA) charges FERC with regulating these wholesale sales² of electricity in interstate commerce and ensuring that rates in that market are "just and reasonable." See 16 U.S.C. §§ 824(b)(1), 824d(a). In executing that charge, FERC has delegated authority to nonprofit organizations, including independent system operators (ISOs), to manage auctions for wholesale electricity in the various regional markets across the country. Hughes v. Talen Energy Mktg., LLC, ––– U.S. ––––, 136 S. Ct. 1288, 1292, 194 L.Ed.2d 414 (2016). ISO New England (ISO-NE) oversees the markets for wholesale electricity in the New England region and administers two auctions for wholesale electricity that are relevant to this appeal: a same-day auction and a next-day auction to satisfy LSEs' short-term and near-term demand for electricity. In both auctions, ISO-NE accepts orders from LSEs designating the amount of energy they need at a given time. Power generators then submit bids indicating the amount of electricity they can produce at those times and the price they are willing to charge for it. ISO-NE accepts those bids from lowest to highest until demand is satisfied. The price of the last accepted bid is the "clearing price," which sets the price paid to all the generators whose bids were accepted.

Approximately half of New England's electricity is generated from natural gas power plants. As a result, bids from natural gas generators usually set the clearing price for wholesale electricity, which then drives the retail prices charged by LSEs to retail consumers. FERC does not oversee the retail sale of electricity. See FERC v. Elec. Power Supply Ass'n, ––– U.S. ––––, 136 S. Ct. 760, 766, 193 L.Ed.2d 661 (2016) ("[T]he law places beyond FERC's power, and leaves to the States alone, the regulation of ‘any other sale’ -- most notably, any retail sale -- of electricity." (citing 16 U.S.C. § 824(b) )).

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B.

In Breiding, we held that the filed-rate doctrine insulated from challenge in a private antitrust lawsuit the defendants' alleged use of no-notice contracts to restrict supply in the Algonquin pipeline transmission capacity market. 939 F.3d at 52–56. "The filed-rate doctrine is ‘a set of rules that ... revolve[s] around the notion that ... utility filings with the regulatory agency prevail over ... other claims seeking different rates or terms than those reflected in the filings with the agency.’ " Id. at 52 (second and third omissions in original) (quoting Town of Norwood v. FERC, 217 F.3d 24, 28 (1st Cir. 2000) ). It is "a form of deference and preemption, which precludes interference with the rate setting authority of an administrative agency, like FERC." Id. (quoting Wah Chang v. Duke Energy Trading & Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir. 2007) ). Significant here, it applies not...