Capacity markets have been a significant source of controversy since the inception of competitive wholesale markets.
Bench Report: Top 10 Groundbreaking Legal Decisions in 2009
1. NRG Power Marketing v. Maine PUC: High Court Reconsiders ‘Just and Reasonable’ Standard
When the U.S. Supreme Court granted certiorari to hear NRG’s appeal, it raised uncertainty about the industry’s longstanding “just and reasonable” standard for assessing wholesale power rates, based on the Mobile-Sierra doctrine (referring to a pair of Supreme Court decisions from 1956). The Mobile-Sierra doctrine holds that FERC must presume that rates established in freely negotiated wholesale energy contracts are just and reasonable. Just last year, the Supreme Court clarified Mobile-Sierra, deciding in Morgan Stanley v. PUD No. 1 that the only way to overcome the Mobile-Sierra presumption is if FERC concludes a contract “seriously harms the public interest.” In the NRG case now before the Court, petitioners argue that a D.C. Circuit decision conflicts with Morgan Stanley . In a case involving a FERC settlement establishing ISO New England’s capacity market, the D.C. Circuit ruled that the Mobile-Sierra doctrine doesn’t apply to transactions between parties who weren’t part of the FERC settlement. NRG alleges that any participant in the ISO New England market is, in effect, entering a contract that’s subject to the FERC settlement agreement and any such transactions should be covered by Mobile-Sierra. If the High Court agrees with NRG and vacates the D.C. Circuit’s decision, it might mean that Morgan Stanley’s public-interest standard applies not only to parties to the FERC settlement, but to anyone who participates in a competitive wholesale market. But if the Court affirms the decision, it would clarify that FERC’s settlement agreement doesn’t make a de facto just-and-reasonable rate out of any trade conducted in an organized market. NRG Power Marketing, LLC v. Maine PUC (No. 08-674),USSC granted cert., April 27, 2009.
2. Massachusetts v. EPA: EPA Endangerment Finding: Implementing
When the U.S. Supreme Court ruled in April 2007 that EPA has authority to regulate greenhouse gases (GHG) under the Clean Air Act (CAA), it marked a major turning point in the climate policy debate. Then, when voters elected President Obama in November 2009, the new administration was expected quickly to reverse the previous EPA’s position on GHG emissions. In April 2009, EPA Administrator Lisa Jackson did exactly that, signing a proposed finding that increasing concentrations of atmospheric GHGs “endanger the public health and welfare of current and future generations,” with observable effects that trigger regulation under CAA. Further, the administrator proposed defining new motor vehicle GHG emissions as pollutants endangering public health and welfare. The finding set the stage for federal regulation of GHGs from both stationary and mobile sources, and indeed this fall the White House formally asked Jackson to draft such regulations. EPA Docket ID No. EPA-HQ-OAR-2009-0171.
3. ComEd v. FERC: Paying the Postage for Grid Expansion
In August, a federal appeals court in Chicago struck a blow against those advocating a national program to remake the nation’s electric grid—akin to Eisenhower’s 1950s Interstate Highway Project—by insisting that local ratepayers in