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Legal Update

The US Supreme Court Issues Opinion in Entergy Corp vs. EPA

28 April 2009
Mayer Brown Legal Update
The Federal Power Act (“FPA”), 16 U.S.C. §824 et seq., gives the Federal Energy Regulatory Commission (“FERC”) exclusive authority to regulate the transmission and sale for resale of electricity in interstate commerce.  Section 206 of the Act, 16 U.S.C. § 824e(a), requires that the rates for any such services be “just and reasonable.”  Under the well-established Mobile-Sierra doctrine, however, the FERC must “presume that the rate set out in a freely negotiated wholesale-energy contract meets the ‘just and reasonable’ requirement imposed by law,” and that “presumption may be overcome only if FERC concludes that the contract seriously harms the public interest.”  Morgan Stanley Capital Group Inc. v. Pub. Util. Dist. No. 1,128 S. Ct. 2733, 2737 (2008). 

The Supreme Court granted certiorari today in NRG Power Marketing, LLC  v. Maine Public Utilities Commission (No. 08-674) to consider whether Mobile-Sierra’s public-interest standard applies when the entity challenging a contractual rate is not a party to the contract at issue.  The Court’s resolution of this question will determine the extent to which the FERC may disturb the settled expectations of contracting parties absent a finding that their agreement is contrary to the public interest. 

In the case below, parties to a contested FERC proceeding opposed a settlement agreement entered into by other parties.  That agreement specified that the Mobile-Sierra presumption would apply to any future challenges to electricity rates governed by the agreement.  The non-settling parties asserted that the FPA’s “just and reasonable” standard, rather than the more restrictive Mobile-Sierra “public interest” standard, should govern future third-party challenges, such as theirs, to rates filed pursuant to the settlement agreement.  The FERC disagreed, concluding in its administrative proceeding that a non-signatory may not unilaterally seek to abrogate a freely negotiated contract under the “just and reasonable” standard of review.  The D.C. Circuit reversed, holding that the Mobile-Sierra doctrine was a narrow exception to the rule that the FERC must adjudicate a rate challenge under the “just and reasonable” standard, and that the Mobile-Sierra presumption applied to ensure contract stability only “as between the contracting parties.”  520 F.3d 464, 478 (emphasis added).  In its view, “when a rate challenge is brought by a non-contracting third party, the Mobile-Sierra doctrine simply does not apply.”  Id.

Absent extensions, amicus briefs in support of the petitioner are due June 18, 2009, and amicus briefs in support of the respondent are due July 20, 2009.  Any questions about this case should be directed to (+1 202 263 3204) in our Washington, DC office.

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