More Doubts About FERC’s Market Rate Regime From Ninth Circuit

In several opinions in recent years, the Court of Appeals for the Ninth Circuit has remanded cases to FERC to consider refunds to remedy flagrant market rate manipulation by sellers with FERC-approved “market-based rates.” Also, for at least five years, consumer advocates have been asking FERC and the federal courts to consider whether the FERC private market rate regime is consistent with the public filing requirements of the Federal Power Act. To date, the courts have not ruled on the merits of their claims, which are based on the plain language of statutory filing requirements of the Federal Power Act and a Supreme Court decision involving analogous efforts of a federal regulatory agency to implement price deregulation without a change in the law establishing a filed rate regulation system. See May the FERC Rely on Markets to Set Electric Rates?

The Ninth Circuit has indicated further judicial impatience with FERC arguments that market rates, never filed or reviewed, should receive the same deference courts normally give to reasoned federal agency decisions based on a full record and their expertise. Circuit Judge Fletcher, in a case questioning whether the “filed rate doctrine” should be followed when rates were never filed subject to FERC review, stated in her concurring opinion:

Without minimum standards for FERC oversight, the Filed Rate Doctrine threatens to come unmoored from its rationale of respecting the actions of a federal agency to which Congress has delegated authority. Instead, I fear respect is being given to agency passivity, allowing anticompetitive and otherwise illegal actions to escape review. E & J Gallo Winery v. EnCana Corporation, No. 05-17352 (9th Cir. Sept 19, 2007)

Several consumer advocates have been pressing claims that the current FERC system allowing unfiled market rates and unfiled contracts for wholesale electricity sales is inconsistent with Supreme Court decisions involving similar statutes which hold that a federal regulatory agency cannot disregard rate filing and review procedures contained in statutes enacted by Congress. See Consumer Challenge to FERC “Market-Based Rate” System Proceeds; FERC Escapes Court Review of Legal Authority for its Electricity Market Rate Regime; Consumer Advocates Seek Rehearing of D.C. Circuit Court Decision Allowing FERC to Avoid Consideration of Statutory Filing Requirements

To date, the Court of Appeals for the District of Columbia, which wrote opinions generally supporting FERC’s deregulation agenda in the 1990’s, has never analyzed the argument of consumers — supported by strong Supreme Court Decisions rejecting attempts of other federal regulatory agencies to deregulate the industries they were charged by Congress to regulate — that under Section 205 of the Federal Power Act, all rates for wholesale electricity must be publicly filed in advance, subject to FERC review and protest by consumers. On four recent occasions the court has dismissed petitions without grappling with the apparent inconsistency of FERC’s relaxation of filing and review requirements with longstanding statutes. The Ninth Circuit decisions have arisen in cases where FERC invoked the “filed rate doctrine” as a bar to refunds of charges inflated by rate manipulation, even though the actual rates and charges had never been filed and thus were never publicly known or subject to FERC review for reasonableness before the charges were imposed.

Some utilities ordered to give refunds under other Ninth Circuit decisions are challenging whether those decisions permitting refunds of excessive market rates — involving billions of dollars — are correct. Eventually, these cases, or cases brought by consumers, may reach the Supreme Court.

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