# Amicus Curiae Brief — Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty.

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0538%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2008
- **Citation:** 554 U.S. 527

## Text

(3) a @ AUG 6 - 2007

FILED 1

Nos. 06-1454, 06-1457, 06-1462, 06- & OF THE aan

Iu the
Supreme Court of the United States 8) 7/o on

SEMPRA GENERATION et al., PETITIONERS,
We
PUBLIC UTILITIES COMMISSION OF THE STATE OF CA, et al.

MORGAN STANLEY CAPITAL GROUP INC., PETITIONER,
V.
PUBLIC UTILITY Dist. No. 1 OF SNOHOMISH COUNTY WA, et al.

CALPINE ENERGY SERVICES, L.P., et al., PETITIONERS.
Vv.
PUBLIC UTILITY Dist. NO. 1 OF SNOHOMISH COUNTY WA, et al.

DYNEGY POWER MARKETING, INC., et al., PETITIONERS,
Vv.
PUBLIC UTILITIES COMMISSION OF THE STATE OF CA, et al.,

On Petition for a Writ of Certiorari to the
United States Court of Appeals for the Ninth Circuit

BRIEF OF THE ELECTRIC POWER SUPPLY
ASSOCIATION, COLORADO INDEPENDENT
ENERGY ASSOCIATION, INDEPENDENT ENERGY
PRODUCERS ASSOCIATION, INDEPENDENT
POWER PRODUCERS OF NEW YORK, NEW
ENGLAND POWER GENERATORS ASSOCIATION,
INC., NORTHWEST & INTERMOUNTAIN POWER
PRODUCERS COALITION, AND WESTERN POWER
TRADING FORUM AS AMICI CURIAE IN SUPPORT
OF PETITIONS FOR CERTIORARI

NEIL L. LEVY KENNETH W. STARR

DAVID G. TEWKSBURY Counsel of Record

BETH A. SCHONMULLER KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS LLP 777 South Figueroa Street
655 Fifteenth Street, NW Los Angeles, CA 90017
Washington, D.C. 20005 (213) 680-8400

Attorneys for Electric Power Supply Association
August 6, 2007

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— VASHINGTON, D.C. 20002

Additional counsel:

NICHOLAS MULLER
EXECUTIVE DIRECTOR
COLORADO
INDEPENDENT ENERGY
ASSOCIATION

475 17th Street, Suite 940
Denver, CO 80202

(303) 297-1970

Counsel for
Colorado Independent
Energy Association

GLENN D. HAAKE
GENERAL COUNSEL
INDEPENDENT POWER
PRODUCERS OF NEW
YORK, INC.

19 Dove Street, Suite 302
Albany, NY 12033

(518) 436-3749

Counsel for
Independent Power
Producers of New York

DAVID G. TEWKSBURY
KIRKLAND & ELLIS LLP
655 FIFTEENTH STREET, NW
WASHINGTON, D.C. 20005
(202) 879-5000

Counsel for
New England Power
Generators Association, Inc.

JAN SMUTNY-JONES
EXECUTIVE DIRECTOR
INDEPENDENT |
ENERGY PRODUCERS
ASSOCIATION

1215 K Street, Suite 900
Sacramento, CA 95814
(916) 448-9499

Counsel for
Independent Energy
Producers Association

DAVID G. TEWKSBURY
KIRKLAND & ELLIS LLP
655 FIFTEENTH STREET, NW
WASHINGTON, D.C. 20005
(202) 879-5000

Counsel for
Northwest & Intermountain
Power Producers Coalition

DANIEL W. DOUGLASS
DOUGLASS & LIDDELL
21700 Oxnard Street
Suite 1030

Woodland Hill, CA 91367
(818) 961-3001

Counsel for Western
Power Trading Forum

i
QUESTION PRESENTED

Under the Federal Power Act, as interpreted by
this Court in United Gas Pipe Line Co. v. Mobile Gas
Serv. Co., 350 U.S. 332 (1956), and Federal Power
Commission v. Sierra Pacific Power Co., 350 U.S. 348
(1956), the Federal Energy Regulatory Commission
is prohibited from abrogating the terms of valid
wholesale power contracts except in extraordinary |
circumstances of unequivocal public necessity. In
conflict with decisions of this Court and every other
Court of Appeals to consider the issue, the Ninth
Circuit held that the Commission may nullify a
wholesale power contract, even in the absence of
public necessity, if the contract rates were not pre-
approved by the Commission or if the contract is
later deemed to have been formed during a period of
market “dysfunction.”

The questions presented are:

1. Whether the Ninth Circuit erred in failing to
abide by this Court’s decisions precluding the
Federal Energy Regulatory Commission from
retroactively abrogating valid, bilaterally negotiated
wholesale energy contracts absent a showing that
abrogation is required in the public interest.

2. Whether the Ninth Circuit erred in effectively
determining that the Mobile-Sierra public-interest
standard applies to sellers, but not buyers, that are
seeking to escape the terms of freely negotiated
wholesale power contracts.

ii

TABLE OF CONTENTS
ED te IE vipndsorsenscncnsesscsysnsansecninetounnsecenese i
Ee BT HE IED orc eserensscoccevsscsnscsesesnveresessscsen iv
INTEREST OF AMICI CURIA ................ccsscscesssocssseceeee 1
STI il edinprtanchinniiepsneetalicinniinieidnmbensebessonination 3
REASONS FOR GRANTING THE WRIT ......00.00000000.... 4

A. The Decisions Below Conflict With This
Court’s Controlling Authorities And
Upend More Than Fifty Years Of Settled
iliac iaiteisunmntnand 4

B. The Decisions Below Threaten The
Public’s Long-Term Interests In Reliable
I N iicthencsviitniinitennntiicinitiimnnnagnenies 8

1. The Ninth Circuit Decisions Threaten
To Destabilize Contracts And Inject
Uncertainty Into The Nation’s
Wholesale Energy Markets. ....................0000- 8

2. The Ninth Circuit Decisions Threaten
To Prevent The Commission From
Maintaining A Workable Market-
EAST AL ATR 14

C. The Decisions Below Remove An
Important Constraint On _ Arbitrary
TING thai ki heipenictciesiclatiianenieietinpihlenaimiidialieied 17

EE niinitudittesininniantnsoutewsnsensienitersdnmnenineaniinittion 20

iii

TABLE OF AUTHORITIES
Page(s)

Cases
Arizona Corp. Comm’n v. FERC,

SOT F.3G GSB CD.C. Cav. BOOB) ..crcccscccsscccccccccscceess 18
Arkansas La. Gas Co. v. Hall,

i ssspnneiniondente 5
Atlantic City Elec. Co. v. FERC,

to | ne 5
Borough of Lansdale v. FPC,

494 F.2d 1104 (D.C. Cir. 1974) ....... eee 7,18
Boston Edison Co. v. FERC,

LL | ee ee 18
Boston Edison Co. v. FERC,

OES FBS FSi CRGt Cie. 1BGB).......cccccccccccccceccccccocesece 7
D.C. Fed’n of Civic Assoc. v. Volpe,

460 F.2d 1231 (D.C. Cir. 1972) ............0.0ccsscccoseee 19
Federal Power Comm’n v.

Sierra Pac. Power Co.,

I I acs sbscesnsnnnnccrosedemnevdie passim
In re Permian Basin Area Rate Cases,

I i cceiomenbscinnsiael 5, 18
Louisiana Pub. Serv. Comm’n v. FCC,

| EEE EDO 19
Metropolitan Edison Co. v. FERC,

606 F.20 861 (D.C. Cir. 1078) ..................00cccc0008. 18
Natural Gas Pipeline Co. of Am. v. Harrington,

eg Ee __: ) 7
Northeast Pub. Util. Comm’n v. FERC,

BB FBG GEG (Rat Civ. 19GB) .....cccccccccccccccccccccsscescce 18

Northeast Utils. Serv. Co. v. FERC,
ee Ce GS Bi Piccicccccccencccsststoccessanesecs 5

iv

Potomac Elec. Power Co. v. FERC,

210 F.3d 403 (D.C. Cir. 2000) .............. eee 5, 18
Public Serv. Comm’n of N.Y. v. FPC,
643 F.2d 767 (D.C. Cir. 1974) ...:...cccccccccocscceccoseee 17

Public Util. Dist. No. 1 of
Snohomish County v. FERC,

471 F.3d 1053 (Sth Cir. 2006) ...............cccccccsscsooees 3
Public Utils. Comm’n of Cal. v. FERC,

474 F.3d 587 (9th Cir. 2006) .00..... ee eee eeeee eee 3
Reno v. Bossier Parish Sch. Bd.,

eT os seenbeiinallicuisnbsaieinliclinns 14
Rodriguez de Quijas v.

Shearson/Am. Express, Inc.,

ss sciscaliespeabeeemsaabiaial 14
Rodriguez v. United States,

gs A FRETS RII ree ean re emers 10
Sam Rayburn Dam Elec. Coop. v. FPC,

515 F.2d 998 (D.C. Cir. 1975) oo... eee eee 18
San Diego Gas & Elec. Co. v. FERC, .

PE ce FEE Ce. Gee BID cocccccveccccscccccoccocscies 10
Texaco, Inc. v. FERC,

148 F.3d 1091 (D.C. Cir. 1998)... 18

Transmission Access Policy Study
Group v. FERC,
225 F.3d 667 (D.C. Cir. 2000) .................ccceeeeeeeee 18

United States Gas Pipe Line Co. v.
Mobile Gas Serv. Co.,

Se CEI canctnicctisensasconiecsasenseesanpien passim
Verizon Comme’ns, Inc. v. FCC,
I a 5, 10

Wisconsin Pub. Power, Inc. v. FERC,
Nos. 04-1414, et al., 2007 WL 206724
rh Mk REE RR er 5,18

Agency Cases

Complaint by The People of The State of Illinois,
Ex Rel. Illinois Attorney General Lisa Madigan,
Docket No. EL07-47-000 (Mar. 15, 2007)
Section 206 Complaint,

FERC Docket No. ELO7-50-000 (Mar. 26, 2007)
Section 206 Complaint,

FERC Docket No. EL07-49-000 (Mar. 16, 2007)
Section 206 Complaint,

FERC Docket No. EL07-40-000 (Mar. 2, 2007)
Section 206 Complaint,

FERC Docket No. EL07-37-000 (Feb. 22, 2007). 16

Public Utils. Comm’n of Cal. v.
Sellers of Long Term Contracts,
103 FERC J 61,354 (2003) .............ccceccccsssccsscscees 13

Public Utils. Comm’n of Cal. v.
Sellers of Long Term Contracts,
I ID ooo cn ccccccncccscccccesscesscoceses 11

San Diego Gas & Elec. Co. v.
Sellers of Energy & Ancillary Servs.,
I I snc sccccccnsnsccccoccsconececee 13

Standard of Review for Proposed Changes
to Market-Based Rate Contracts for
Wholesale Sales of Electric Energy by
Public Utilities, Proposed Policy Statement,
te ID CIID cccccccsscccocesesccecesccsessoces 12

Other Authorities

502 Foster Elec. Report 10,
S&P Warns That Re-Regulating Utilities Is
Like Trying To Put Toothpaste Back In
I ai dtictnatntnastooscnnsconne 17

EE eee SS eee Sih Se ne
i
5
',
:

vi

Bandt, William D.,
William D. Bandt, et al., Manifesto on
the Cal. Elec. Crisis (Jan. 30, 2003),
available at http:/ / www.anderson.ucla.edu
/ faculty /dick.rumelt/ Docs /
Commentary / Manifesto2003.pdf...................00000++ 9

Brockway, Walter
Comments of Walter Brockway, Conference to
Examine the State of Competition in Wholesale
Power Markets (May 8, 2007),
available at http://elibrary.ferc.gov
Admws/nvcommon/NVViewer. .
I iret stncctscnncesescssncecscesesetsoes 9

CERA Advisory Services, California Power Crisis
Aftershock: The Potential Modification of
Western Power Contracts (April 2007),
available at http://www.cera.com/aspx/cda/
client/report/reportpreview.aspx?
IT ci cicinniicteanistiatesenssccsousccesees passim

Dep’t of Energy, Energy Info. Admin.,
The Changing Structure of the Elec.
Power Indus. 2000: An Update (Oct. 2000),
available at http://www.eia.doe.gov
/cneaf/electricity/chg_stru_update/
update2000.pdf. nie santana ieadhiedidaadiamieneeniienn 15,17

Feinstein, Dianne,
U.S. Sen. Dianne Feinstein, Press Release,
Senator Feinstein Statement on FERC Ruling
By U.S. Ninth Circuit Court of Appeals
(Dec. 20, 2006),
available at http://feinstein.senate.gov
/O6releases/r-ferc-stmnt1220.pdf ....................2.-- 19

FERC, Office of Markets
Oversight and Investigations, 2004
State of the Markets Report (June 2005),
available at http://www.ferc.gov/
EventCalendar/Files/20050615
093455-06-15-05-som2004.pdf ...................... 12, 16

_ sere ee eer
" °
.

vil

Harvey, Scott M., et al., LECG LLC,
Analysis of the Impact of Coordinated
Elec. Mkts. on Consumer Elec. Charges
(Nov. 20, 2006),
available at http://www.pjm.com/
documents/downloads/reports/
20061121-analysis-coordinated-elec-mkts. pdf ... 16

ISO/RTO Council,
The Value of Independent Regional
Grid Operators (Nov. 2005),
available at http://www.caiso.com
/1406/1406c4291aa40.pdf...........scececsesceeeseseeeeeeeee 16

Kelliher, Joseph T.,
Opening Remarks at the Competition in
Wholesale Power Markets Conference,
FERC Docket No. AD07-7-000 (Feb. 27, 2007),
available at http://elibrary.ferc.gov
/Aidmws/nvcommon/NVViewer.asp
EEE Se 15

Kelliher, Joseph T..,
Statement of Joseph T. Kelliher,
Open Commission Meeting of the Federal
Energy Regulatory Commission (Apr. 19, 2007),
available at http://www.ferc.gov/
news/statements-speeches/kelliher/
2007/04-19-07-kelliher-M-1.pdf .......................... 14

Kelliher, Joseph T.,
Testimony of the Hon. Joseph T. Kelliher
before the Senate Energy and Natural
Resources Committee (May 10, 2007),
available at http://www.ferc.gov/Event
Calendar/Files/20070510122541-05-10-07.pdf... 12

Letter to FERC Chairman Patrick H. Wood III
from U.S. Sen. John Kerry, Docket Nos.
EL00-95-045, et al. (Apr. 23, 2003),
available at http://elibrary.ferc.gov/
idmws/nvcommon/NVViewer.asp?
IIIT niceties intanthiitindimirinasiineniccinenennummenesitig 19

vill

Letter to FERC Chairman Patrick H. Wood III
from U.S. Sens. M. Cantwell, G. Smith,
H. Reid, R. Wyden, B. Boxer, and
D. Feinstein, Docket Nos.
EL02-28-000, et al. (Oct. 29, 2003),
available at http://elibrary.ferc.gov
Aidmws/nvcommon/NVViewer.asp
a ueeinine 19

National Energy Policy Dev. Group,
Nat'l Energy Policy (May 2001),
available at http://www.whitehouse.gov
/energy/National-Energy-Policy.pdf ............. 13, 15

Rigby, Peter,
Statement of Peter Rigby,
Standard & Poor’s Director,
FERC Docket Nos. EL02-60-000,
et al. (Mar. 20, 2002),
available at http://elibrary.ferc.gov/
idmws/common/opennat.asp?
ET 9,11

Spence, David B. & Cross, Frank,
A Public Choice Case
for the Administrative State,
ES 19

- Spitzer, Marc,
Statement of Comm’r Marc Spitzer
(June 21, 2007),
available at http://www.ferc.gov/news
/statements-speeches/spitzer/
2007/06-21-07 -spitzer-E-3.pdf lain echtendicialiitad 12

The Electric Energy Market Competition Task Force,
Report to Congress on Competition in
Wholesale Retail Markets for
Electric Energy (April 2007),
available at http://www.ferc.gov/
legal/maj-ord-reg/ fed-sta/
ene-pol-act/epact-final-rpt.pdf .................. 9, 11,16

Wells, Jim,
Statement of Jim Wells, Meeting Energy
Demand in the 21st Century,
er “+ yer aoe 16, 2005), a
available at http://www.gao.gov.
new.items/d05414t. pdf ...............:ccccceeceeeeeeeeceeeees

2 i 7 y ’ “ ~ . ~ Pv . “ 5 = > * a,
ce he el 8 te ely tei Bo a Ae ol 8 a ee ee le a ee ee ee a ee ae

INTEREST OF AMICI CURIAE!

Amici and their members represent a diverse
array of participants in the Nation’s electric and
natural gas industries, and are directly affected by
the issues raised in these cases. Amici and their
members have made _ long-term financial
commitments, involving hundreds of billions of
dollars, in reliance on this Court’s settled authorities
protecting the integrity of privately negotiated
wholesale power contracts. Because the Ninth
Circuit decisions purport to grant the Federal
Energy Regulatory Commission never-before-
recognized authority to abrogate such contracts,
amici are concerned that the decisions below will
destabilize the Nation’s power markets, discourage
much-needed investment, and ultimately lead to
higher costs for consumers.

The Electric Power Supply Association
(“EPSA”). EPSA is a national trade association
representing competitive electric power suppliers,
including independent power producers, merchant
generators, and power marketers. EPSA’s mission is
to promote legislative and regulatory policies
encouraging a competitive market for electricity.

Colorado Independent Energy Association
(“CIEA”). CIEA is a trade association of competitive

1 Petitioners and respondents have consented to the filing of
this brief in letters on file in the Clerk’s office. Pursuant to S.
Ct. R. 37.6, amici state that no counsel for a party authored any
part of this brief. No person or entity other than amici, their
members, or their counsel made a monetary contribution to the
preparation or submission of this brief. The attorneys
preparing this brief direct the Court’s attention to the fact that
a second brief as amicus curiae will be filed in these same cases
on behalf of the Natural Gas Supply Association by different
attorneys from the same law firm. Although the attorneys
working on the two briefs have shared work product and
engaged in joint efforts, the resulting briefs are independent
statements reflecting the independent views of the respective
clients on whose behalf each of the two individual briefs are
being filed.

2

independent power producers, who are an integral
part of Colorado’s a industry, producing
electricity with clean, efficient natural gas-fired

cogeneration and renewable technologies.

Independent Energy Producers Association
(“IEP”). JEP is a California non-profit mutual
benefit corporation whose members collectively own
and operate approximately one-third of California’s
installed generating capacity. IEP seeks to reduce
dependence on imported energy sources, and to
encourage supply options that benefit society
economically, socially, and environmentally.

Independent Power Producers of New York
(“IPPNY”). IPPNY is a New York State not-for-
profit trade association of independent power
producers that is committed, among other things, to
ensuring that contractual and regulatory agreements
and commitments are iully honored.

New England Power Generators Association,
Inc. (““NEPGA”). NEPGA is the largest trade
association representing electric generating
companies in New England. Its mission is to
promote sound energy policies that further economic
development, jobs, and balanced environmental
policy.

Northwest & Intermountain Power
Producers Coalition (“NIPPC”). NIPPC
represents developers, owners, and operators of non-
utility power plants in the Northwest and
Intermountain region. The electricity generated at
these plants is delivered under long-term contracts
to utilities or sold in the spot market.

Western Power Trading Forum (“WPTF”).
WPTF is a California non-profit, mutual benefit
corporation whose members actively participate in
California’s restr:wctured electricity markets and are
dedicated to enhz ‘cing competition. WPTF’s broad-
based membership includes energy service providers,
scheduling coordinators, generators, energy
consultants, and public utilities.

3

INTRODUCTION

For more than fifty years, the Federal Power Act
has protected the integrity of contracts. Buyers and
sellers of wholesale power have negotiated long-term,
fixed-rate contracts with the guarantee that the
Federal Energy Regulatory Commission, the Federal
Power Commission’s successor, has no authority to
abrogate those contracts except in extraordinary
circumstances “when necessary in the _ public
interest.” United States Gas Pipe Line Co. v. Mobile
Gas Serv. Co., 350 U.S. 332, 344 (1956).

The decisions below upend the balance struck by
Congress and long recognized by this Court and
various Courts of Appeals. In an_ abrupt,
unwarranted break from precedent, the Ninth
Circuit reinterpreted the Federal Power Act,
granting the Commission new authority to abrogate
valid contracts if the Commission has _ not
pre-approved the contract rates or if the contracts
are later deemed to have been formed during a
period of market “dysfunction.” Public Util. Dist. No.
1 of Snohomish County v. FERC, 471 F.3d 1053,
1061, 1086 (9th Cir. 2006); Public Utils. Comm’n of
Cal. v. FERC, 474 F.3d 587, 594-96 (9th Cir. 2006).
Even more troubling, the Ninth Circuit
fundamentally altered the even-handed public-
interest standard applied in earlier cases, effectively
holding that henceforth only buyers, but not sellers,
are entitled to protection from Commission-imposed
contract abrogation.

Amici file this brief to emphasize the practical
importance of the questions presented. Most
importantly, it is essential that the Court appreciate
the grave, potentially disastrous effects the Ninth
Circuit decisions are likely to have on consumers and
the Nation’s energy markets. If permitted to stand,
the decisions below threaten to destabilize the
regulatory framework on which thousands of
wholesale power contracts are premised and to
impose billions of dollars of unnecessary costs on
consumers.

4

REASONS FOR GRANTING THE WRIT

This Court should grant certiorari because the
decisions below contravene its own prior decisions
and conflict with the decisions of every other Court of
Appeals to have considered the issue. (See Section A,
below.) If they are left uncorrected, the Ninth
Circuit decisions threaten to unsettle contract
stability, to inhibit much-needed investment in
energy infrastructure, and to undermine the
Commission’s efforts to promote competition and
maintain a workable, market-based rate system.
Most troubling of all, they may well set the stage for
future crises in the Nation’s bulk power markets.
(See Section B, below.) Finally, in greatly expanding
and simultaneously blurring the circumstances in
which the Commission may abrogate private
contracts, the Ninth Circuit decisions have removed
an important constraint on arbitrary agency
decision-making. (See Section C, below.)

A. The Decisions Below Conflict With This
Court’s Controlling Authorities And
Upend More Than Fifty Years Of Settled
Precedent.

Over a half-century ago, this Court held in two
unanimous decisions that. the Federal Power Act
preserves the integrity of private contracts. See
Mobile, 350 U.S. at 347; Federal Power Comm’n v.
Sierra Pac. Power Co., 350 U.S. 348 (1956). These
decisions, referred to collectively as Mobile-Sierra,
have since become towering landmarks in the
regulatory jurisprudence governing domestic energy
markets. The decisions recognize that because the
Federal Power Act creates a regulatory system based
on privately negotiated agreements, the
Commission’s authority to interfere with private
contracts is limited. When sophisticated parties
negotiate a wholesale energy contract, the agreed-on
rates are presumptively “just and reasonable” and
the contract may not be abrogated except in
“extraordinary circumstances” of “unequivocal! public

5

necessity.” In re Permian Basin Area Rate Cases,
390 U.S. 747, 822 (1968); see also Arkansas La. Gas
Co. v. Hall, 453 U.S. 571, 582 (1981).

The continuing vitality of Mobile-Sierra has been
confirmed by this Court and assumed by lower courts
in a long line of cases. See, e.g., Verizon Commce’ns,
Inc. v. FCC, 535 U.S. 467, 479 (2002); Wisconsin Pub.
Power, Inc. v. FERC, Nos. 04-1414, et al., 2007 WL
206724 (D.C. Cir. July 20, 2007); Atlantic City Elec.
Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002); Northeast
Utils. Serv. Co. v. FERC, 993 F.2d 937, 960 (1st Cir.
1993). These cases have reaffirmed that, absent
duress or bad faith at the time the contracts are
negotiated, parties must “live with their bargains as
time passes and various projections about the future
are proved correct or incorrect.” Potomac Elec. Power
Co. v. FERC, 210 F.3d 403, 410 (D.C. Cir. 2000).

Faithfully applying this weil-established
understanding of Mobile-Sierra, the Commission
rejected an attempt by California and other buyers of
wholesale electricity to escape contracts they had
negotiated at arm’s-length. The Commission found
that, although “other alternatives were available,”
the buyers freely chose “to enter into the contracts”
and knowingly accepted the market risks. Sempra
Pet. App. 96a. And the Commission determined that
the buyers’ “dissatisfaction” with their “bargains”
could not justify abrogating the contracts under the .
public-interest standard. Jd. (no factor “on this
record demonstrates that the contracts are contrary
to the public interest”).

The Commission’s application of the public-
interest standard was in no wise unreasonable.
California and the. other buyers enjoyed significant
bargaining advantages and freely chose to enter the
long-term contracts, which at the time they
trumpeted as “fair, negotiated, hard-fought deals.”
Sempra Pet. 9. Although the buyers knew the
Commission was taking steps to address the
market’s structural problems, they chose to execute
the agreements, because the negotiated contract

6

rates were well below the then-existing prices for
energy on the spot market. Because the buyers had
significant bargaining power, some suppliers even
agreed to sell power initially “at a substantial loss in
hopes of recovering those losses over the life of the
contracts.” Sempra Pet. 8. Perhaps most
significantly, the Commission determined that,
although the buyers loudly complained when spot ~
prices later dropped, they could not “demonstrate
that the contracts were priced above long-run
competitive prices” or otherwise show that the
eo rates exceeded just and reasonable levels.
. at 10.

Reversing the Commission, the Ninth Circuit
brushed aside the agency’s expert determinations
and recast Mobile-Sierra as a narrow “mode of
review that applies only in “certain limited
circumstances.” Sempra Pet. App. 300a-301a.
Invading the province of both this Court and the
Commission, the Ninth Circuit fashioned a brand
new test for determining when Mobile-Sierra’s
public-interest standard protects the integrity of
contracts. See id. at 324a-327a. The Ninth Circuit
ruled that henceforth, if a party seeks to escape its
contractual obligations, Mobile-Sierra will not apply
unless (1) the Commission had an opportunity to pre-
approve the contract rates; and (2)the contract
negotiations occurred in a market free from
“dysfunction” and the influence of other “improper
factors.” Id. at 319a-320a.

Even as it narrowed its field of application, the
Ninth Circuit reinvented Mobile-Sierra, creating a
new asymmetrical standard in favor of buyers who
become dissatisfied with their long-term agreements.
In the Ninth Circuit’s view, the public-interest
standard differs depending on whether it is a seller
or a buyer that is challenging a contract: When a
seller negotiates an improvident bargain (a so-called
“low rate” case), the Commission may not modify the
parties’ agreement unless the agreement imposes an
“excessive burden” on consumers; in contrast, when a

7

buyer negotiates an improvident bargain (a so-called
“high rate” case), the Commission must abrogate the
parties’ agreement whenever “consumers’ electricity
bills have been affected” and the challenged rates fall
outside a “zone of reasonableness.” Sempra Pet.
App. 326a (rates fall outside a “zone of
reasonableness” if they exceed marginal costs and
are not “part of a general trend toward rates that do
reflect cost”).

Because the Ninth Circuit’s newly-fashioned test
contravenes this Court’s prior decisions, certiorari is
warranted. See Sempra Pet. 3; Morgan Stanley Pet.
3; Dynegy Pet. 3-4; Calpine Pet. 2. Certiorari is also
warranted because the Ninth Circuit has opened an
irreconcilable conflict between its decisions below
and decisions from other Courts of Appeals,
including those of the First, Fifth, and D.C. Circuits.
These other courts have held that Commission
approval of contract rates is not a prerequisite to
applying Mobile-Sierra. See, e.g., Boston Edison Co.
v. FERC, 856 F.2d 361, 371 (1st Cir. 1988); Borough
of Lansdale v. FPC, 494 F.2d 1104, 1114 (D.C. Cir.
1974); Natural Gas Pipeline Co. of Am. v.
Harrington, 246 F.2d 915, 919 (5th Cir. 1957); see
also Dynegy Pet. 11 (noting that the Commission’s
orders in Mobile and Sierra accepted, but did not
approve, the contracts at issue). These courts have
rejected attempts by parties to escape their
contractual obligations on grounds. of market
dysfunction. See Dynegy Pet. 19-23. And they have
refused to interpret Mobile-Sierra as establishing an
asymmetrical standard that disadvantages sellers
and focuses on buyers’ short-term interests to the
exclusion of long-term contractual stability. See id.
at 23-26; see also Sempra Pet. 25-26.

In short, the Ninth Circuit has ignored settled
principles of stare decisis, transforming the Mobile-
Sierra public-interest standard beyond _ all
recognition and_ granting the Commission
unprecedented authority to abrogate contracts that
might have short-term effects on retail rates. This

8

Court should grant review to correct the Ninth
Circuit’s improper exercise of judicial policymaking.

B. The Decisions Below Threaten The
Public’s Long-Term Interests In Reliable
And Affordable Energy.

Apart from correcting the Ninth Circuit’s
improper departure from precedent, this Court’s
review is needed to prevent lasting damage to the
Nation’s wholesale energy markets. By making
buyer’s (but not seller’s) remorse a basis for escaping
long-term contracts, the Ninth Circuit’s newly-
fashioned, asymmetrical rules will discourage much-
needed investment and undermine the Commission’s
market-based system, ultimately setting the stage
for higher energy costs and less reliable energy
supplies.

1. The Ninth Circuit Decisions Threaten
To Destabilize Contracts And Inject
Uncertainty Into The _ Nation’s
Wholesale Energy Markets.

Power markets are highly volatile and hard to
predict. As commentators have noted, because power
markets are susceptible to periods of inelastic
demand and supply, the industry often faces large,
sudden shifts in price. See CERA Advisory Services,
California Power Crisis Aftershock: The Potential
Modification of Western Power Contracts at 5 (April
2007) (“Aftershock”). These price dynamics mean
that cash flows from spot markets are cyclical,
unpredictable, and often insufficient to cover the full
costs of power plant investments. At the same time,
the capital requirements of the electric generation
sector are enormous. In the next 15 years, the power
sector must grow by an estimated 35 percent to keep
pace with projected demand. See id. at 14. This
expansion will require at least “$400 billion in
investment in new and existing power plants.” Jd. at
15-16.

In this market environment, fixed-price, long-
term contracts are an essential tool for encouraging

9

investment in infrastructure. In particular, given
the large upfront costs and long payout periods
characteristic of power plant investments, long-term
contracts are an important mechanism through
which buyers and sellers manage risk. Long-term
contracts “smooth out future cash flows for investors,
reducing the cost of investments by re‘ucing the
price risk exposure and in doing so, creatsag savings
for buyers too.” Aftershock, at 6; see also Statement
of Peter Rigby, Standard & Poor’s Director, at 7-8,
FERC Docket Nos. EL02-60-000, et al. (Mar. 20,
2002) (“Rigby Statement”) (stable contracts
“introduce a greater degree of stability and
predictability to cash flows”). As a representative of
one of the Nation’s largest consumers of electric
power recently explained, long-term contracts
provide security to both buyers and sellers: the
“seller gets the security of a long-term revenue
stream with which to finance the capital costs of base
load generation,” while the “buyer receives the
security of locking in those capital costs for the term
of the contract.” Comments of Walter Brockway,
Conference to Examine the State of Competition in
Wholesale Power Markets (May 8, 2007). Sanctity of
contract thus “remains vitally important” to
attracting the “capital needed to build adequate
generating infrastructure.” Sempra Pet. App. 242a.

It is hard to overstate the importance of
regulatory certainty and contractual integrity to the
efficient working of the electric power industry. See
The Electric Energy Market Competition Task Force,
Report to Congress on Competition in Wholesale and
Retail Markets for Electric Energy, at 74, 76-77 (April
2007) (“Competition Report”); see also William D.
Bandt, et al., Manifesto on the Cal. Elec. Crisis (Jan.
30, 2003) (the “key to the success of an electricity
market is the ability of consumers and suppliers to
enter into bilateral long-term contracts”). As this
Court has _ recognized, energy facilities “may
frequently require substantial investments” that
would not be made absent “long-term commitments”

10

that, once entered, cannot be changed except in
extraordinary circumstances. Mobile, 350 U.S. at
344. The “certainty and stability” that “stems from
contract performance and enforcement” is “essential
to an orderly bulk power market.” San Diego Gas &
Elec. Co. v. FERC, 904 F.2d 727, 730 (D.C. Cir.
1990). If the Commission may abrogate contracts
whenever short term retail rates may be affected,
“business would be transacted without legally
enforceable assurances and ... the market, the
industry[,] and ultimately the consumer will suffer.”

The Ninth Circuit did not address’ these
important features of the industry. It instead took a
simplistic view that subordinates “the stability of
contract considerations that underlie the Mobdile-
Sierra doctrine” to advantaging buyers and
insulating consumers from what the lower court
described as “unjustifiably high rates.” Sempra Pet.
App. 325a-326a. The Ninth Circuit decisions, which
are driven by an overweening concern for rates paid
by consumers in the shorter term, cannot be
reconciled with Congress’s considered judgment that,
over the longer term, consumers are better off,
enjoying lower costs and more reliable energy, when
the Commission respects the integrity of private
contracts. See Verizon, 535 U.S. at 479; see also
Ro ‘riguez v. United States, 480 U.S. 522, 525 (1987)
(“it frustrates rather than effectuates legislative
intent simplistically to assume that whatever
— the statute’s primary objective must be the
aw”).

Today, more than ever, long-term contracts are
vital to promoting capital investment in the energy
industry, which depends on billions of dollars to
maintain and expand the infrastructure essential to
providing consumers with clean, reliable, and
inexpensive energy. As the Commission has noted,
the “[plreservation of contracts has, if anything,
become even more critical since the [Mobile-Sierra]
policy was first adopted.” Public Utils. Comm’n of

11

Cal. v. Sellers of Long Term Contracts, 99 FERC
¥ 61,087 at 61,383 (2002). Under the traditional,
cost-based regulatory system, “utility investment
decisions were based in part on the promise of a
regulated revenue stream with little associated risk
to the utility.” Report to Congress, at 78. Although
“money from capital markets was generally available
when utilities needed to fund new infrastructure,”
id., ratepayers shouldered most of the risks of over-
or under-building. The same cannot be said of
today’s competitive regulatory regime where markets
are efficient and highly competitive. In _ this
competitive regime, “([plotential entrants to
generation markets must be able to convince capital
markets that generation is a viable profitable
undertaking” and, hence, the “availability of long-
term contracts ... is critical to the ability of non-
utility generators to secure capital for new
investment.” Jd. at 4. As highlighted by recent
bankruptcies of several large merchant power
developers, by write-downs of over $30 billion in
generating assets, and by lender takeovers of
numerous power plants, “building merchant power
plants—constructed without contracts for power
output or fuel inputs—has proven to be very risky.”
Aftershock, at 16. Projects without long-term
contracts have rarely obtained investment-grade
ratings. See, e.g., Rigby Statement, at 6-7.

If the decisions below are left uncorrected,
investors will need to discount the value of long-term
contracts to account for the heightened,
unquantifiable risk that the Commission may later
modify contracts when buyers complain that rates
are too high. Sophisticated investors “will not
participate in a market in which disgruntled buyers
are allowed to break their contracts, at least not
without charging a significant risk premium—a cost
that will ultimately be borne by consumers.”
Standard of Review for Proposed Changes to Market-
Based Rate Contracts for Wholesale Sales of Elec.
Energy by Pub. Utils., Proposed Policy Statement,

12

100 FERC 9 61,145 at 61,545 (2002) (Brownell and
Breathitt, Comm’rs, concurring). As__ the
Commission’s Chairman recently testified, if “our
energy infrastructure is inadequate, consumers are
exposed to higher prices and greater price volatility.”
Testimony of the Hon. Joseph T. Kelliher before the
Senate Energy and Natural Res. Comm., at 2 (May
10, 2007). Notwithstanding the Ninth Circuit’s
purported concerns for consumer welfare, its
decisions threaten to harm consumers by
destabilizing competitive markets and adding
potentially “billions of dollars per year to the costs of
the power business.” Aftershock, at i.

The Ninth Circuit’s short-sighted judicial
policymaking also may hinder conservation efforts.
Although vital to investment in all types of
generation, reliable contracts may weil be most
essential to ongoing efforts to promote renewable
energy sources. Numerous __ state-approved
competitive contract solicitations require utilities to
enter long-term contracts obligating them to
purchase energy from plants that rely on alternative,
renewable energy sources. See Aftershock, at 19.
Similarly, investment opportunities in conservation
and energy-efficient technologies are likely to rely on
long-term contracts. See id; see also Statement of
Comm’r Marc Spitzer (June 21, 2007) (“it is difficult
to encourage entities to build much needed
infrastructure, including fostering renewable
resources, if those parties are unable to enter into
enforceable long-term contracts”); FERC, Office of
Markets Oversight and Investigations, 2004 State of
the Markets Report, at 232 (June 2005) (“2004
Markets Report”) (describing difficulties faced by
wind developers in markets where long-term
contracts are unavailable). Investors will be loath to
risk capital on such projects if the underlying
contracts are subject to abrogation by the
Commission and market solutions are replaced by
court-imposed command-and-control regulation. In
fact, under the Ninth Circuit’s new asymmetrical

13

rules, contracts to buy power generated from
renewable sources are especially susceptible to
abrogation because “technological advances are
likely to dramatically reduce” the cost of such power,
which could well “push the previous, existing
renewable power as well as conservation and
efficiency contracts” out of the court-created “zone of
reasonableness.” Aftershock, at 19.

Finally, if the Ninth Circuit decisions are not
corrected, its new, asymmetrical rules will likely
exacerbate future crises that might occur during
periods of volatile energy prices. Sensible regulatory
policies encourage market participants to hedge
against market fluctuations by negotiating fixed-
price, long-term contracts. Such contracts are
especially important when spot market prices are
volatile and unpredictable. By undermining
regulatory certainty and contract stability, however,
the Ninth Circuit decisions discourage market
participants from negotiating long-term contracts.
In fact, by requiring the Commission to invalidate
contracts whenever market conditions meet some
undefinable standard of “dysfunction,” the Ninth
Circuit has greatly complicated the negotiation of
long-term contracts in precisely those circumstances
in which they may be needed most. See id. at 20.

The Court should bear in mind that the
Commissior and others identified an “over reliance”
on spot markets as a major cause of the California
energy crisis in 2000-2001. San Diego Gas & Elec.
Co. v. Sellers of Energy & Ancillary Servs., 93 FERC
¥ 61,121 at 61,359 (2000); see also National Energy
Policy Dev. Group, Nat'l Energy Policy, at 5-12 (May
2001) (“forcing utilities to purchase all their power
through volatile spot markets, imposing a single-
price auction system, and barring bilateral contracts
all contributed to the problems that California now
faces”); Public Utils. Comm’n of Cal. v. Sellers of
Long Term Contracts, 103 FERC ¥ 61,354 at 62,416
(2003) (quoting the Governor of California stating
that the contracts challenged in this case “should

14

stabilize the market and drive the price of electricit
down”). As the Commission’s Chairman qubelend.
one “of the lessons of the California and Western
power crisis was that relying exclusively on short-
term markets presents major risks to both utilities
and consumers.” Statement of Joseph T. Kelliher,
Open Commission Meeting of the Federal Energy
Regulatory Commission (Apr. 19, 2007). This is only
one of the many lessons that the Ninth Circuit
decisions disregard.

2. The Ninth Circuit Decisions Threaten
To Prevent The Commission From
Maintaining A Workable Market-
Based Rate System.

Over and above their impact on contract stability,
the decisions below threaten to deprive consumers of
the long-term benefits of competition that Congress
and the Commission have introduced into the
Nation’s wholesale power markets.

Although the Ninth Circuit asserted that the shift .
to market-based rates requires rewriting this Court’s
Mobile-Sierra decisions, Congress has taken a
different approach. Congress has amended the
Federal Power Act on numerous occasions, including
revising it in 2005, but has consistently declined to
change the public-interest standard or to expand the
Commission’s authority to abrogate private
contracts. See, e.g., Reno v. Bossier Parish Sch. Bd.,
520 U.S. 471, 483-84 (1997) (it is significant when
Congress has failed to modify a statute in the face of
a longstanding judicial interpretation); Rodriguez de
Quijas v. Shearson/Am. Express, Inc., 490 Us. 477,
496 (1989) (Stevens, J., dissenting) (it tips the
“balance between judicial and legislative authority”
to depart from earlier decisions giving “a statutory
provision concrete meaning, which Congress elects
not to amend during the ensuing 3 1/2 decades”). In
fact, Congress has moved steadily in the opposite
direction, recognizing that competitive energy
markets offer substantial long-term benefits to
consumers, including lower retail rates. As the

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15

Commission’s Chairman recently observed, the
Energy Policy of Act of 2005 represents the “third
major federal law enacted in the last 25 years to
embrace wholesale competition.” Joseph Kelliher,
Opening Remarks at the Competition in Wholesale
Power Markets Conference, FERC Docket No. ADO7-
7-000 (Feb. 27, 2007). Whether “competition is the
correct national policy” is not an open question. /d.;
see also National Energy Policy, at 5-12
(recommending that President Bush encourage the
Commission “to use its existing statutory authority
to promote competition”); Dep’t of Energy, Energy
Info..Admin., The Changing Structure of the Elec.
Power Indus. 2000: An Update, at 63 (Oct. 2000)
(“Changing Structure”) (describing President
Clinton’s 1998 and 1999 Comprehensive Electricity
Competition Plans as “built on the premise that a
competitive electric energy market will lower prices,
encourage innovation, and allow customers a choice
in electric energy suppliers”).

Following Congress’s lead, the Commission, like
other federal and _ state policymakers, has
implemented initiatives designed to _ correct
inefficiencies inherent in the command-and-control
model of regulation favored by the Ninth Circuit.
These pro-competitive initiatives have yielded
significant benefits to consumers. Studies suggest
that consumers have saved an estimated $34 billion
in electricity costs between 1989 and 1996 as a result
of Commission policies favoring market-based rates.
See Aftershock, at 24. Most importantly, the
Commission’s balanced, market-based regime has
facilitated investment in energy infrastructure and
broader participation in energy markets. As of April
1, 2006, the Commission had granted market-based
rate authority to approximately 1,170 diverse
entities, including 390 independent power
marketers, 100 power marketers affiliated with
traditional utilities, 180 independent power
producers, 400 power producers affiliated with
traditional utilities, and 30 financial institutions.

16

See Competition Report, at 35. The emergence of this
new and more flexible power industry, including
power marketers and financial institutions, has
“improved the industry’s ability to address credit
issues, increased the ability of companies to buy and
sell energy, and increased market liquidity.” 2004
Markets Report, at 64. The Commission’s balanced,
pro-competitive policies have also facilitated the
development of organized, bid-based markets, which
have “created significant savings for electricity
buyers.” ISO/RTO Council, The Value of
Independent Reg’l Grid Operators at 25 (Nov. 2005);
see also Competition Report, at 31. A recent study
estimates a net sg: > to consumers of $1.2 million
per day in portions of the East and Midwest where
bid-based markets have been established. See Scott
M. Harvey, et al., LECG LLC, Analysis of the Impact
of Coordinated Elec. Mkts. on Consumer Elec.
Charges, at 1 (Nov. 20, 2006).

The Ninth Circuit decisions threaten to undo
these accomplishments. Its new, asymmetrical rules
will make it difficult for the Commission to manage a
workable, market-based rate regime. Even if it seeks
to cabin the Ninth Circuit decisions as limited to
their facts, the Commission cannot unilaterally
repair the damage because uncertainty will continue
to loom over the industry as reviewing courts wrestle
with the inter-circuit split and disappointed litigants
maneuver for Ninth Circuit review. In fact, the new
authority granted to the Commission by the Ninth
Circuit has already spawned challenges to billions of
dollars of power contracts. See, e.g., Compl. by The
People of The State of Ill., Ex Rel. Ill. Attorney
General Lisa Madigan, Docket No. EL07-47-000
(Mar. 15, 2007); Section 206 Compl., FERC Docket
No. ELO07-50-000 (Mar. 26, 2007); Section 206
Compl., FERC Docket No. EL07-49-000 (Mar. 16,
2007); Section 206 Compl., FERC Docket No. ELO7-
40-000 (Mar. 2, 2007); Section 206 Compl., FERC
Docket No. EL07-37-000 (Feb. 22, 2007).

17

More significantly, the regulatory uncertainty
created by the Ninth Circuit’s asymmetrical rules
may well drive contracting parties back toward the
relative certainty afforded by cost-based rates. See
Statement of Jim Wells, Director National Resources
and Environment, Meeting Energy Demand in the
21st Century, GAO-05-414T, at 7-8 (Mar. 16, 2005)
(“[elnergy suppliers require clear signals regarding
a le and confidence that those policies
will be sustained over time”). Such a move
threatens, among other things, the viability of
competitive, bid-based markets, which depend on the
certainty provided by a prior grant of general
Commission authorization to transact at market-
based rates. See Changing Structure, at 65. Even if
one could ignore the potentially billions of dollars in
benefits that would be lost by a retreat from
competition, there is no ignoring the substantial
costs such a retreat would impose on consumers.
See, e.g., S&P Warns That Re-Regulating Utilities Is
Like Trying To Put Toothpaste Back In The Tube,
502 Foster Elec. Report 10 (Apr. 11, 2007).

C. The Decisions Below Remove An
Important Constraint On Arbitrary
Agency Action.

By rewriting Mobile-Sierra, the Ninth Circuit has
not only substituted its views for those of the expert
Commission, it also has (somewhat paradoxically)
eliminated an important constraint on arbitrary
agency decisionmaking. For decades, Mobdile-Sierra
framed the boundaries of permissible Commission
action, ensuring that the public interest is
adequately protected, while imposing carefully
prescribed limits on the Commission’s authority to
abrogate privately negotiated agreements. See, e.g.,
Public Serv. Comm’n of N.Y. v. FPC, 543 F.2d 757,
797 (D.C. Cir. 1974). Until the decisions below,
courts deferred to the Commission’s special expertise
in deciding when abrogating a contract may be
required in the public interest, see Sempra Pet. 26-

18

28, but did not allow the Commission to exceed the
scope of its authority.

The system has worked well. When the
Commission has determined’ that contracts
contravene the public interest, its decisions have
been upheld. See, e.g.‘ Arizona Corp. Comm’n uv.
FERC, 397 F.3d 952 (D.C. Cir. 2005); Transmission
Access Policy Study Group v. FERC, 225 F.3d 667,
709-12 (D.C. Cir. 2000); Texaco, Inc. v. FERC, 148
F.3d 1091, 1096-97 (D.C. Cir. 1998); Northeast Pub.
Util. Comm’n v. FERC, 55 F.3d 686 (1st Cir. 1995).
Similarly, until now, courts have, without exception,
affirmed Commission orders withholding relief
where it found that contract modification was not in
the public interest. See e.g., Permian, 390 U.S. at
820-22; Wisconsin Pub. Power, slip op. at 57-61;
Potomac Elec. Power Co. v. FERC, 210 F.3d 403 (D.C.
Cir. 2000); Metropolitan Edison Co. v. FERC, 595
F.2d 851 (D.C. Cir. 1979). It is indisputable that the
Commission retains “plenary authority to limit or to
proscribe contractual arrangements that contravene
the relevant public interests.” Permian, 390 U.S. at
784. But there is an important difference between
protecting the public and abrogating contracts for
the benefit of particular constituents. When the
Commission has lost sight of the public interest,
courts have not hesitated to “remind” the
Commission that “it is not free to ignore” this Court’s
decisions in Mobile-Sierra. Sam Rayburn Dam Elec.
Coop. v. FPC, 515 F.2d 998, 1005 (D.C. Cir. 1975).

The Commission’s reluctance, in the face of the
Ninth Circuit decisions, to defend the Mobile-Sierra
doctrine is therefore not entirely unexpected. The
Commission has a longstanding, well-documented
record of ambivalence toward Mobile-Sierra. See,
e.g., Boston Edison Co. v. FERC, 233 F.3d 60, 68 (1st
Cir. 2000) (the Commission is “becoming hostile to
Mobile-Sierra”); Rayburn, 515 F.2d at 1005 (the
Commission’s “distaste for the Mobile-Sierra doctrine
is well known”); Lansdale, 494 F.2d at 1110 (the
Commission “very much dislikes the Sierra Mobile

19

doctrine”). This ambivalence is presumably the
product, at least in part, of the agency’s institutional
interest in being liberated from the statutory
constraints that Mobile-Sierra recognizes. See, e.g.,
David B. Spence & Frank Cross, A Public Choice
Case for the Administrative State, 89 Geo. L.J. 97,
113 (2000) (“when an agency must make decisions
about the reach of its own jurisdiction, self-interest
propels the agency toward ever more expansive
interpretations of the law”); cf. Louisiana Pub. Serv.
Comm'n v. FCC, 476 U.S. 355, 374-75 (1986) (an
“agency may not ... expand its power in the face of a
congressional limitation on its jurisdiction”).

Finally, the Court should recognize that the
Ninth Circuit decisions remove an important barrier
protecting the Commission from improper political
pressures. Cf. D.C. Fed’n of Civic Assoc. v. Volpe,
459 F.2d 1231, 1245-46 (D.C. Cir. 1972) (agency
decisions based on political pressures are invalid). In
these proceedings, for example, the Commission has
faced an unprecedented degree of purely political
pressure to ignore this Court’s precedents and
interfere with the arm’s-length agreements
negotiated by the sophisticated contracting parties
involved. See, e.g., Ltr. to FERC Chairman Patrick
H. Wood III from U.S. Sens. M. Cantwell, G. Smith,
H. Reid, R. Wyden, B. Boxer, and D. Feinstein,
Docket Nos. EL02-28-000, et al. (Oct. 29, 2003)
(“writing in support of requests for rehearing by the
- complainants”); Ltr. to FERC Chairman Patrick H.
Wood III from U.S. Sen. John Kerry, Docket Nos.
EL00-95-045, et al. (Apr. 23, 2003) (urging the
Commission to “support the State’s efforts to
renegotiate the long-term energy contracts”); see also
U.S. Sen. Dianne Feinstein, Press Release, Senator
Feinstein Statement on FERC Ruling By U.S. Ninth
Circuit Court of Appeals (Dec. 20, 2006). The even-
handed, market-based system that has generated
significant benefits to consumers will undoubtedly
suffer if the Commission is empowered to look
beyond the public interest and put a regulatory

20

thumb on buyers’ side of the scale whenever buyers
become dissatisfied with the contract rates they have
freely negotiated.

* * *

The Federal Power Act establishes a regulatory
system founded on private contracts. That system,
as recognized in the Mobiie-Sierra line of cases,
operates for the benefit of both the public and the
Commission. The Ninth Circuit decisions unwisely
depart from binding precedent, create an uneven
standard in favor of buyers, and threaten to upend
the stability of long-term contracts on which this
Nation’s energy markets depend. The lower court’s
disruptive, short-sighted decisions should not be
allowed to stand.

CONCLUSION

For the foregoing reasons, the Court should grant
the writ of certiorari.

Respectfully submitted,
NEIL L. LEvy KENNETH W. STARR
DAVID G. TEWKSBURY Counsel of Record

BETH A. SCHONMULLER KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS LLP 777 South Figueroa Street
655 Fifteenth Street, NW Los Angeles, CA 90017
Washington, DC 20005 (213) 680-8400

(202) 879-5000

Attorneys for the Electric Power Supply Association .
August 6, 2007

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0538%3A09. Public record. Not legal advice.