US appeals court affirms FERC wholesale power rate authority
Washington (Platts)--10Aug2004
The US Court of Appeals for the Ninth Circuit Tuesday affirmed that the US Federal Energy Regulatory Commission has exclusive authority over interstate wholesale power markets and backed up FERC's market-based rate regulation practices. In dismissing an appeal by the Public Utility District No 1 of Grays Harbor County, Washington, against Idacorp, the court affirmed a lower court's ruling that held FERC, not state or other courts, is the agency to deal with wholesale power rates. Grays County in late 2002 challenged the $249/Mwh contract it had signed with Idacorp for Oct 1, 2001 to March 21, 2002, saying that because it was based on a dysfunctional, manipulated market, refunds were owed it. The ruling, however, was not a complete victory for FERC because the court opened the door for Grays Harbor to again press its argument before the lower court. Remanding in part, the appeals court disagreed with the US District Court for the Western District of Washington that Grays Harbor could not approach it again to seek contract reformation. "A complaint that merely seeks declaratory relief as to contract formation issues would not necessarily intrude upon the rate-setting jurisdiction of FERC," the opinion said. "For instance, the district court could determine that, because of wide-spread market manipulation and dysfunction, the contract was formed under circumstances of unilateral or mutual mistake." But, Judge Consuelo Callahan dissented on this point from the majority opinion written by Judge Harry Pregerson, writing separately to contend that the contract formation issues at hand "are tightly intertwined" with FERC regulation. Grays Harbor's claims of a mistake in connection with the contract are tied to its allegation that the Pacific Northwest energy markets were running haywire, so the district court again would be faced with a matter for FERC, Callahan said. "This case calls to mind the famous ontological debate of whether the chicken begat the egg. Like the scrambled relationship of the chicken and the egg, it is impossible to sever the issues of state contract reformation in this case from matters of federal energy regulation that are purely in the province of FERC," the dissent added.
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