Court of Appeals Denies Appeal of FERC Order on RPM Buyers Complaint

The U.S. Court of Appeals for the District of Columbia Circuit denied an appeal brought by several load interests, collectively referred to as RPM Buyers, against a prior FERC order which dismissed the RPM Buyers' complaint against the transitional Reliability Pricing Model auctions (9/22/08).

Citing prior precedent, the Court said that "[b]ecause issues of rate design are fairly technical and, insofar as they are not technical, involve policy judgments that lie at the core of the regulatory mission, our review of whether a particular rate design is just and reasonable is highly deferential."

Given this, the Court said that FERC, "had a substantial basis on which to conclude that the RPM was an appropriate tool for increasing reliability in electricity markets, that the RPM did precisely what it was intended to do, even during the transition period ... and that the price hikes in its wake were attributable to legitimate causes, not the suppliers' exercise of market power."

One other noteworthy finding was contained in a footnote. In its defense, FERC had contended that under Blumenthal v. FERC, 552 F.3d 875 (D.C. Cir. 2009), it is not enough for a petitioner such as RPM Buyers to show that the challenged rates are not just and reasonable; the petitioner must also propose rates that are just and reasonable.

The Court rebuked this analysis.

"[T]he language cited by the Commission was unnecessary to our holding and inaccurate insofar as it implied that a challenge to rates must propose alternative rates that are just and reasonable. As the Federal Power Act clearly provides, '[w]henever the Commission, after a hearing held upon its own motion or upon complaint, shall find that any rate ... [under its jurisdiction] is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate ... to be thereafter observed and in force, and shall fix the same by order.' 16 U.S.C. § 824e(a) (emphasis added); see also Tenn. Gas Pipeline Co. v. FERC, 860 F.2d 446, 454 (D.C. Cir. 1988) ('Once [FERC determines a rate is unjust], the Commission is required to reach a further determination: the just and reasonable rate to be fixed in place of either an unlawful proposed or existing rate.').

"It is the Commission's job - not the petitioner's - to find a just and reasonable rate," the Court affirmed.

EPSA immediately seized on the Court's decision as, "affirm[ing] FERC's ability to address market power concerns by requiring bids at competitive levels," and attempted to apply such precedent to the, "use buyer-side market power to distort prices."

The case was No. 09-1296, Maryland Public Service Commission and New Jersey Board of Public Utilities v. Federal Energy Regulatory Commission.