Bpa v. Ferc ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BONNEVILLE POWER ADMINISTRATION, 
Petitioner,
CITY OF TACOMA; PORT OF SEATTLE;
CORAL POWER, L.L.C.;
CONSTELLATION ENERGY COMMODITIES
GROUP, INC., No. 02-70262
Intervenors,
 FERC No.
v. EL00-95-001
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent,
PACIFICORP,
Respondent-Intervenor. 
12263
12264 BONNEVILLE POWER v. FERC
ARIZONA ELECTRIC POWER 
COOPERATIVE, INC.; DYNEGY POWER
MARKETING, INC.; DUKE ENERGY
NORTH AMERICA, LLC, DUKE ENERGY
TRADING AND MARKETING, LLC,
(COLLECTIVELY, “DUKE ENERGY”); EL
PASO MERCHANT ENERGY L.P.;
METROPOLITAN WATER DISTRICT OF
SOUTHERN CALIFORNIA; WILLIAMS No. 03-70185
ENERGY MARKETING & TRADING
COMPANY; RELIANT ENERGY POWER  FERC No.
GENERATION, INC., Power Act
Petitioners,
CORAL POWER, L.L.C.,
Intervenor,
v.
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent. 
BONNEVILLE POWER v. FERC 12265
SOUTHERN CALIFORNIA EDISON 
COMPANY; CITY OF LOS ANGELES
DEPARTMENT OF WATER AND POWER,
Petitioners,
PORT OF SEATTLE; CITY OF TACOMA;
No. 02-70294
PEOPLE OF THE STATE OF CALIFORNIA;
CITY OF PASADENA; CITY OF SAN
DIEGO; CA STATE ASSEMBLY,
 FERC No.
FERC-EL00-95-
Petitioners-Intervenors, 004
v.
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent. 
SACRAMENTO MUNICIPAL UTILITY 
DISTRICT,
Petitioner,
PORT OF SEATTLE; CITY OF TACOMA;
PEOPLE OF THE STATE OF CALIFORNIA;
CITY OF PASADENA; CITY OF SAN
DIEGO; CA STATE ASSEMBLY, No. 02-70274
Petitioners-Intervenors,  FERC No.
CITY OF PASADENA, CALIFORNIA, FERC-EL95-001
Intevenor,
v.
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent. 
12266 BONNEVILLE POWER v. FERC
AZUSA, BANNING, COLTON, AND 
RIVERSIDE, CALIFORNIA,
Petitioner,
CORAL POWER, L.L.C.;
CONSTELLATION ENERGY COMMODITIES
No. 02-70270
GROUP, INC.,
Intervenors,
 FERC No.
EL00-95
v.
OPINION
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent,
PACIFICORP,
Respondent-Intervenor. 
On Petition for Review of an Order of the
Federal Energy Regulatory Commission
Argued and Submitted
April 12, 2005—San Diego, California
Filed September 6, 2005
Before: Sidney R. Thomas, M. Margaret McKeown, and
Richard R. Clifton, Circuit Judges.
Opinion by Judge McKeown
12270 BONNEVILLE POWER v. FERC
COUNSEL
Howard Shapiro, Van Ness Feldman, Washington, D.C.;
Mark W. Pennak, United States Department of Justice, Appel-
late Staff, Washington, D.C., for petitioner Public Entities and
petitioner-intervenors.
Dennis Lane, Solicitor, Federal Energy Regulatory Commis-
sion, Washington, D.C., for respondent Federal Energy Regu-
latory Commission.
Deborah A. Swanstrom, Patton Boggs, Washington, D.C., for
petitioner-intervenor Salt River Project Agricultural Improve-
ment and Power District.
Richard L. Roberts, Steptoe & Johnson, Washington, D.C.;
Traci Bone, Public Utilities Commission of the State of Cali-
fornia, San Francisco, California, for respondent-intervenor
California Parties.
J. Phillip Jordan, Swidler Berlin, Washington, D.C., for
respondent-intervenor California Independent System Opera-
tor Corp.
OPINION
McKEOWN, Circuit Judge:
The California energy crisis of 2000 and 2001 is a subject
that is well-known to this court and to the public.1 Following
1
See California ex rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004);
California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831 (9th Cir. 2004);
In re California Power Exch. Corp., 245 F.3d 1110, 1114-16 (9th Cir.
2001).
BONNEVILLE POWER v. FERC 12271
moves in the mid-1990s to deregulate and restructure the Cal-
ifornia market, prices soared. In an effort to remedy in part
what it termed a “dysfunctional” and “seriously flawed” mar-
ket, the Federal Energy Regulatory Commission (“FERC” or
“Commission”) ordered both public and non-public utilities to
make refunds.
In this appeal, various non-public utilities—which some-
what confusingly are public, governmental entities, but are
not classified by federal statute as public utilities—challenge
the refund orders. The utilities take the position that FERC’s
refund authority extends only to “public utilities” and that the
public entities, as governmental bodies, are not “public utili-
ties” and are expressly exempted from FERC’s refund juris-
diction. FERC, which is the federal agency charged with
regulation of all facilities for transmission and sale of electric
energy for resale in interstate commerce, acknowledges that
while it does “not have direct regulatory rate authority over
power sales by non-public utilities,” it has the “authority to
order them to abide by the market rules . . . and to make
refunds of unjust and unreasonable rates . . . .” 96 FERC
¶ 61,120, at 61,511 (2001). This case boils down to whether
FERC’s authority to order refunds is based on the identities
of the sellers subject to the refund order, i.e., public versus
non-public utilities, or on the nature of the transactions, i.e.,
FERC’s broad regulatory authority over the sale of electric
energy for resale in interstate commerce.
We conclude that FERC does not have refund authority
over wholesale electric energy sales made by governmental
entities and non-public utilities. Our resolution of this ques-
tion flows from a straightforward analysis of the statute, the
Federal Power Act (“FPA”). The text is clear and unambigu-
ous. In coming to this conclusion, we are not unmindful of the
impact our decision may have on the overall refunds claimed
by California ratepayers. But it is not our task to second guess
Congress’s judgment as to the breadth of FERC’s refund
12272 BONNEVILLE POWER v. FERC
authority. Our role is a limited one—interpreting the statute
as Congress wrote it.
The FPA provides FERC certain authority in connection
with public utilities as contrasted with non-public utilities and
also provides an exemption for governmental entities.
Although there is considerable overlap between non-public
utilities and governmental entities, the categories are not co-
extensive. See discussion below in §§ I(A) and (B). The
FPA’s requirement that all rates for wholesale sales of electric
energy must be “just and reasonable”—the basis of the refund
orders—applies only to “public utilities” and makes no refer-
ence, specific or otherwise, to non-public utilities. FPA § 205
(16 U.S.C. § 824d).2 Similarly, FERC’s authority to investi-
gate rates and to order refunds is limited to any rate collected
by “any public utility”; the statute carries no reference to non-
public utilities. FPA § 206 (16 U.S.C. § 824e). The FPA also
unambiguously states that the provisions of subchapter II,
which is the basis of FERC’s refund authority, do not apply
to governmental entities “unless such provision makes spe-
cific reference thereto.” FPA § 201(f) (16 U.S.C. § 824(f)).
No reference is found in the statute. Consequently, we grant
the petition and set aside FERC’s orders related to the 2000
and 2001 spot market to the extent the orders subject the gov-
ernmental entities and non-public utilities to FERC’s refund
authority under FPA subchapter II.
FACTUAL AND PROCEDURAL BACKGROUND
The history and legacy of the California energy crisis are
long, detailed, and tortured. For purposes of resolving the
jurisdictional question before us, however, a lengthy recita-
tion of the background is unnecessary.
2
By convention, the parties and courts tend to refer to the FPA sections
instead of the United States Code sections. This opinion will include dual
references when each FPA section is referenced for the first time. Each
subsequent reference will be to the FPA section only.
BONNEVILLE POWER v. FERC 12273
In the mid-1990s, California initiated an aggressive market
experiment to deregulate and restructure its electric energy
markets. The deregulation plan, sometimes referred to as the
restructured energy market, called for the creation of two non-
profit public benefit corporations, California Independent
System Operator (“ISO”) and California Power Exchange
(“CalPX”). Until it ceased operations, CalPX was the overseer
of an auction market for electricity across the California grid
and operated subject to FERC tariffs and rate schedules. ISO
was responsible for managing the flow of electricity across
the grid.
One of the features of the restructured market was the cre-
ation of spot markets operated by CalPX and ISO for the
wholesale sale of electric energy. The markets, tariffs, and
rate schedules of both entities were approved by FERC
because the markets involved the “sale of electric energy at
wholesale in interstate commerce.” FPA § 201(b)(1) (16
U.S.C. § 824(b)(1)).
The spot markets were organized on the basis of a single-
price auction in which sellers of electric energy would bid
into the market. Those sellers included both public and non-
public utilities. In a single-price auction, all of the bidders are
paid the same price as was bid by the highest-priced seller
whose electric energy was needed to “clear the market” or
balance the supply of electric energy against the demand for
electric energy. As a result, all of the bidders in a particular
hour in the spot market received the same price for their sales.
FERC offered this explanation of how the single-price auc-
tion mechanism contributed to high wholesale electricity
prices during the California electricity crisis and provided an
opportunity for sellers to game the California spot markets:
In times of adequate supply the single price auction
disciplines prices by encouraging suppliers to bid
their marginal costs so that they can be selected for
12274 BONNEVILLE POWER v. FERC
dispatch and be paid the clearing price. However, in
times of scarcity the single price auction can exacer-
bate the effect of supply shortages by allowing sell-
ers who have small market shares to set the clearing
price. Not only is the seller transformed into a price
setter rather than a price taker, but the resulting price
is ascribed to the entire market.
93 FERC ¶ 61,121, at 61,365 (2000).
The petitioners3 in this case are public entities (cities, coun-
ties, irrigation districts, states, and a federal agency) (collec-
tively, “Public Entities”) that participated in the ISO/CalPX
spot markets as sellers of electric energy. Each entity received
the single price for its electric energy sales regardless of
whether it was the last and highest bid that cleared the market.
According to FERC, these public entities accounted for nearly
30% of the electric energy and ancillary services sales in the
ISO and CalPX spot markets during the 2000-2001 period.
On August 23, 2000, FERC initiated an investigation in
response to a complaint filed by San Diego Gas & Electric
(“SDG&E”) which claimed that the ISO/CalPX electric
energy markets were producing unjust and unreasonable
prices. SDG&E labeled the wholesale markets “dysfunction-
3
The petitioners are the Bonneville Power Administration (“BPA”); Cit-
ies of Anaheim, Azusa, Banning, Colton, and Riverside, California
(“Southern Cities”); Sacramento Municipal Utility District (“SMUD”);
City of Los Angeles Department of Water and Power (“LADWP”); and
Arizona Electric Power Cooperative, Inc. (“AEPCO”); the petitioner-
intervenors are the Cities of Burbank, Palo Alto, Pasadena, Redding, and
Santa Clara, California; Imperial, Modesto and Turlock Irrigation Dis-
tricts; State Water Contractors/The Metropolitan Water District of South-
ern California (“SWC/MWD”); M-S-R Public Power Agency; Northern
California Power Agency; and Transmission Agency of Northern Califor-
nia. Except for three entities, the Public Entities engage in wholesale and
retail generation, transmission, distribution, purchase and/or sale of elec-
tric power and energy in California. BPA, SWC/MWD, and AEPCO do
not participate in the retail market.
BONNEVILLE POWER v. FERC 12275
al” and noted that beginning in June 2000, wholesale electric
prices at times exceeded, often by a multiple of three or four,
price levels at comparable load levels in prior years. In
August, FERC ordered a hearing “concerning the justness and
reasonableness of the rates, charges, and practices of public
utility sellers of wholesale power into the California” markets.
92 FERC ¶ 61,172, at 61,603 (2000). The order contained no
reference to governmental entities/non-public utilities. Id.
Following the August 2000 Order, FERC initiated an inves-
tigation. In a November 1, 2000 Order, FERC found that the
California market structure and rates were seriously “flawed”
and proposed fundamental modifications to the wholesale
market. 93 FERC ¶ 61,121, at 61,370 (2000). The Order
included proposed price mitigation measures and refund lia-
bility of public utility sellers. Id.
Just six weeks later, in a December 15, 2000 Order, FERC
terminated the CalPX wholesale rate schedule, outlined a
complex web of mitigation measures, and conceded “[t]here
[a]re [n]o [e]asy [a]nswers.” 93 FERC ¶ 61,294, at 61,997
(2000). Specifically, the Commission proposed to limit the
single-price auction by refunding prices in excess of a “break-
point” price. Id. at 61,983.
To implement the “breakpoint” price, on March 9, 2001,
FERC established for public utilities a “just and reasonable
‘rate screen’ above which refunds will either be required or
further investigation will be undertaken.” 94 FERC ¶ 61,245,
at 61,862 (2001). The Commission order was directed to
“public utility sellers” and, referencing “non-public utility
sellers,” the Commission stated that it “has no authority to
order such sellers to make refunds.” Id. at 61,864. A follow-
up order on June 19, 2001, expanded the mitigation plan and
directed “public utility sellers and buyers” to participate in
settlement discussions. 95 FERC ¶ 61,418, at 62,570 (2001).
The first order critical to this appeal came on July 25, 2001,
when FERC made “clear that transactions subject to refund
12276 BONNEVILLE POWER v. FERC
are limited to spot transactions in the organized markets oper-
ated by the ISO and CalPX during the period October 2, 2000,
through June 20, 2001, and include sales by public and non-
public utilities into these markets.” 96 FERC ¶ 61,120, at
61,499 (2001) (emphasis added).
In discussing jurisdiction over non-public utilities, FERC
noted that “non-public utility sellers . . . are not subject to our
direct jurisdiction under FPA section 206.” Id. at 61,511-12.
But FERC went on to conclude:
Under the specific circumstances presented, . . . such
jurisdiction may properly be asserted over non-
public utility sellers of energy. Under the single
price auction mechanism that operated in the central-
ized ISO and [CalPX] spot markets, all sellers
agreed to accept the same clearing price for any
given sale. . . . [A]ll sellers into those markets were
on notice that those clearing prices, and the market
rules that set the clearing prices, were subject to
change if they were found to be unjust and unreason-
able.
Id. at 61,512.
FERC admitted that its decision to order refunds from the
Public Entities could be perceived as a change in FERC pol-
icy:
While the Commission in other orders and in other
contexts has stated that it does not have jurisdiction
over non-public utilities under sections 205 and 206
of the FPA, we have re-examined our authority in
the particular circumstances presented here: a cen-
tralized single clearing price auction that sets whole-
sale prices for both public utilities and non-public
utilities, pursuant to market rules set by this Com-
mission and administered by public utilities subject
BONNEVILLE POWER v. FERC 12277
to this Commission’s jurisdiction (the California ISO
and [CalPX]).
Id. at 61,511 n.53. The two dissenting FERC commissioners
were a bit more blunt: “The refund rules of section 206 of the
Federal Power Act are rather specific. If Congress had wanted
the Commission to have refund authority over non-public util-
ities, Congress would have surely so specified. The breathtak-
ing conclusion that this agency has the power to tell non-
public utilities to pay money back will come as a shock to
most observers.” Id. at 61,523.
The Public Entities, along with other non-public utility sell-
ers, sought rehearing on FERC’s refund orders. FERC reiter-
ated its finding that “all sellers, including governmental
entities” agreed to accept FERC’s single price auction mecha-
nism and are “subject to, FERC jurisdiction regarding the
rates to be received for those sales, including FERC rate and
refund orders.” 97 FERC ¶ 61,275, at 62,182-83 (2001).
FERC denied that it was invoking the public interest to over-
ride jurisdictional limitations thus “doing indirectly that
which we cannot do directly.” Id. In conclusion, FERC stated
that “the subject matter of the sales here provides us with
jurisdiction.” Id. One commissioner dissented on this point.
Id. at 62,260.
STANDARD OF REVIEW
We review de novo the question of whether an agency has
exceeded its statutory mandate. Am. Rivers v. FERC, 201 F.3d
1186, 1194 (9th Cir. 2000). The two-step Chevron analysis
applies to FERC’s interpretation of the FPA. Id. “[T]he first
step under Chevron is to ask whether ‘the intent of Congress
is clear.’ ” Columbia Gas Transmission Corp. v. FERC, 404
F.3d 459, 461 (D.C. Cir. 2005) (quoting Chevron U.S.A., Inc.
v. Natural Res. Def. Council, 467 U.S. 837, 842 (1984)). If
Congress’s intent is clear, we “ ‘must give effect to the unam-
biguously expressed intent of Congress,’ regardless of the
12278 BONNEVILLE POWER v. FERC
interpretation pressed by the Commission.” Id. (quoting Chev-
ron, 467 U.S. at 843). If Congress did not address the “precise
question at issue” in this case, “the court does not simply
impose its own construction on the statute. . . . Rather, if the
statute is silent or ambiguous with respect to the specific
issue, the question for the court is whether the agency’s
answer is based on a permissible construction of the statute.”
Chevron, 467 U.S. at 843.
ANALYSIS
I. THE FPA UNAMBIGUOUSLY EXCLUDES GOVERNMENTAL
ENTITIES AND NON-PUBLIC UTILITIES FROM FERC’S
REFUND AUTHORITY
We must first consider whether the FPA clearly addresses
FERC’s authority to order refunds from governmental
entities/non-public utilities that sold electric energy in the
markets operated by CalPX and ISO. To determine whether
Congress spoke directly to the precise question at issue, we
apply the traditional tools of statutory interpretation. See, e.g.,
Irvine Med. Ctr. v. Thompson, 275 F.3d 823, 828-30 (9th Cir.
2002).
The dispute centers on whether the general applicability of
the FPA to “the sale of electric energy at wholesale in inter-
state commerce,” contained in § 201(b)(1), overrides more
specific FPA provisions that exclude non-public utilities and
governmental entities from FERC’s authority to enforce just
and reasonable rates and to order refunds. See §§ 201(f), 205,
and 206.
The import of these provisions is clear. Congress was care-
ful to specify which utilities fall within the definition of “pub-
lic utility.” Even though governmental and municipal utilities
are public in normal parlance, they are not “public utilities”
under the FPA.
BONNEVILLE POWER v. FERC 12279
FERC derives its refund authority from subchapter II of the
FPA, which governs the regulation of electric utility compa-
nies engaged in interstate commerce. Two discrete aspects of
subchapter II inform our analysis and cabin FERC’s authority:
1) section 201(f)’s exemption for governmental entities, and
2) section 201(e)’s definition of “public utility” and the limi-
tation of certain authority to public utilities in sections 205
and 206. With this backdrop in mind, we now examine the
role these provisions play in determining the scope of FERC’s
jurisdiction.
A. SECTION 201(f)
[1] Section 201(f) of the FPA provides that governmental
entities are not subject to the provisions of subchapter II of
the FPA unless specifically stated in the relevant provision:
(f) United States, State, political subdivision of a
State, or agency or instrumentality thereof exempt
No provision in this subchapter shall apply to, or
be deemed to include, the United States, a State or
any political subdivision of a State, or any agency,
authority, or instrumentality of any one or more of
the foregoing, or any corporation which is wholly
owned, directly or indirectly, by any one or more of
the foregoing, or any officer, agent, or employee of
any of the foregoing acting as such in the course of
his official duty, unless such provision makes spe-
cific reference thereto.
FPA § 201(f) (emphasis added).
[2] The sweep of this exemption is huge. Nothing in sub-
chapter II applies to the United States or any state, including
any political subdivision, unless the statute makes specific
reference to any of these entities. By way of shorthand, this
exemption is generally viewed as applicable to “governmental
12280 BONNEVILLE POWER v. FERC
entities.” Each of the utilities here, except AEPCO,4 falls
within the general exclusion. The BPA is an agency of the
United States,5 and the SWC is an instrumentality of the state
of California.6 The remaining utilities are each classified as a
“municipality”7 as defined in § 3(7) of the FPA (16 U.S.C.
§ 796(7)). A municipality is, of course, a “political subdivi-
sion of a State.” See FPA § 201(f). A search of subchapter II
for specific reference to FERC’s jurisdiction over governmen-
tal entities for refund purposes comes up empty-handed for
FERC.
It is also significant that Congress did in fact specify partic-
ular provisions of subchapter II as applicable to governmental
entities for limited purposes. Sections 210-213 (16 U.S.C.
§§ 824i-824l) of the FPA refer to “electric utilities,” which
are defined as “any person or State agency (including any
4
AEPCO is a non-profit rural electric generation and transmission coop-
erative that obtained some of its financing through the Rural Utilities Ser-
vice (“RUS”), and is subject to a RUS mortgage under the federal Rural
Electrification Act of 1936. Sierra Southwest Coop. Servs., Inc., 95 FERC
¶ 61,310, at 62,057 (2001). We agree with the D.C. Circuit’s conclusion
in City of Paris v. Fed. Power Comm’n, 399 F.2d 983, 986 (D.C. Cir.
1968), that Rural Electrification Administration (now RUS)-financed
cooperatives are not government instrumentalities for the purposes of
§ 201(f) because “[t]hey are neither operated nor controlled by any gov-
ernment, federal, state or local.”
5
16 U.S.C. § 832a(a). The BPA is a federal agency within the Depart-
ment of Energy and a government seller of power whose rates are regu-
lated by the Northwest Power Act, 16 U.S.C. §§ 839-839g—not the FPA.
Because BPA falls within § 201(f)’s exemption of all governmental enti-
ties, we need not address BPA’s additional arguments regarding its status
under the Northwest Power Act.
6
See www.publicaffairs.water.ca.gov/swp/contractors_intro.cfm (last
visited July 5, 2005). Further, the SWC does not fall within the definition
of a public utility because it does not own or operate facilities subject to
the jurisdiction of FERC.
7
A “municipality” is defined as “a city, county, irrigation district, drain-
age district, or other political subdivision or agency of a State competent
under the laws thereof to carry on the business of developing, transmitting,
utilizing, or distributing power.”
BONNEVILLE POWER v. FERC 12281
municipality) which sells electric energy.” FPA § 3(22) (16
U.S.C. § 796(22)). As elaborated below, this definition is
broader in scope than the definition of “public utility.” See
FPA § 201(e) (16 U.S.C. § 824(e)). Congress was mindful,
however, to establish that the regulatory authority over gov-
ernmental entities contained in these provisions of the FPA
should not be construed to subject such electric utilities to the
general jurisdiction of FERC:
The provisions of sections [210, 211 and 212] shall
apply to the entities described in such provisions,
and such entities shall be subject to the jurisdiction
of the Commission for purposes of carrying out such
provisions and for purposes of applying the enforce-
ment authorities of this chapter with respect to such
provisions. Compliance with any order of the Com-
mission under the provisions of section [210 or 211],
shall not make an electric utility or other entity sub-
ject to the jurisdiction of the Commission for any
purposes other than the purposes specified in the
preceding sentence.
FPA § 201(b)(2) (16 U.SC. § 824(b)(2)) (emphasis added).
When Congress wanted a provision of FPA subchapter II
to apply to governmental entities, it knew how to so specify.
To its credit, FERC does not try to duck the clear import of
the statutory requirement; rather, FERC argues that we should
ignore the identity of the sellers and look instead to the sub-
ject matter—FERC’s broad powers over wholesale sales of
electric energy under FPA § 201(b)(1), which states that the
FPA applies to “the sale of electric energy at wholesale in
interstate commerce.” This argument ignores a basic principle
of statutory construction, namely that the specific prevails
over the general. See Santiago Salgado v. Garcia, 384 F.3d
769, 774 (9th Cir. 2004) (holding a specific statutory provi-
sion will control a general one). FERC’s approach could also
render a nullity multiple provisions of the FPA. For example,
12282 BONNEVILLE POWER v. FERC
§ 201(f) would be unnecessary. If FERC could invoke plenary
jurisdiction over “the sale of electric energy,” then Congress
could have saved time and ink by not bothering to narrow that
jurisdiction. And § 201(b)(2), which makes clear that FERC
does not have broad jurisdiction over electric utilities, would
have been superfluous.
B. SECTIONS 205 AND 206
[3] The second limitation on FERC’s jurisdiction stems
from the definition of “public utility” and the unambiguous
dictate of §§ 205 and 206 that those sections apply only to
public utilities.
[4] Before looking at the scope of FERC’s refund authority,
it is important first to identify the statutory provision in sub-
chapter II that defines “public utility.”
The term “public utility” when used in this subchap-
ter and subchapter III of this chapter means any per-
son who owns or operates facilities subject to the
jurisdiction of the Commission under this subchapter
(other than facilities subject to such jurisdiction
solely by reason of section 824i, 824j, or 824k of this
title).
FPA § 201(e) (16 U.S.C. § 824(e)). The FPA’s definition of
“person” does not include municipalities or state agencies.
“Person” means an “individual or a corporation,” FPA § 3(4)
(16 U.S.C. § 796(4)), and the definition of “corporation” spe-
cifically excludes “municipalities,” FPA § 3(3) (16 U.S.C.
§ 796(3)). As noted earlier, “municipality” includes cities,
counties, irrigation and drainage districts, and other state
agencies and subdivisions that are in the power business. FPA
§ 3(7). Under these definitions, none of the municipal/state
Public Entities is categorized as a “public utility” because
they are not individuals and because municipalities and state
agencies are specifically excluded from the definition of cor-
BONNEVILLE POWER v. FERC 12283
poration. We have no reason to consider BPA’s status under
these provisions as there is no question that it is exempt as an
agency of the United States under § 201(f).
We diverge for a moment to consider the status of AEPCO,
which requires a more detailed analysis of its classification as
a non-public utility. Pursuant to Dairyland Power Coop., 37
FPC 12 (1967), FERC does not consider AEPCO to be a
“public utility” within the Commission’s FPA jurisdiction.
See Sierra Southwest Coop. Servs., 95 FERC ¶ 61,310, at
62,057 n.7 (2001) (explaining that AEPCO, a RUS-financed
cooperative, is not a public utility under the FPA). Based on
Dairyland and Sierra Southwest, AEPCO appears to fall out-
side FERC’s § 206(b) refund authority because it is not a pub-
lic utility and § 206(b) refers only to public utilities.
Nonetheless, FERC urges us to hold that AEPCO is a pub-
lic utility. FERC relies on equivocal language in a D.C. Cir-
cuit decision that suggested some RUS-financed cooperatives
could be considered public utilities. In deferring to FERC’s
conclusion in Dairyland that RUS-financed cooperatives gen-
erally are not public utilities, the D.C. Circuit stated in a foot-
note that
[i]f the Commission had found that conditions in the
power industry had so changed that generating coop-
eratives now did fall within its jurisdiction, this court
would be faced with a different issue. For just as the
Commission’s determination here that it is without
jurisdiction is entitled to judicial deference, so would
be its determination that it had the requisite author-
ity.
Salt River Project Agric. Improvement and Power Dist. v.
Fed. Power Comm., 391 F.2d 470, 474 n.8 (D.C. Cir. 1968)
(internal citation omitted). The D.C. Circuit noted that RUS-
financed cooperatives “do seem to fall within the ambit of the
[FPA’s] central phrase, ‘public utilities,’ ” id. at 474, but
12284 BONNEVILLE POWER v. FERC
agreed with FERC that the legislative history surrounding the
FPA and Rural Electrification Act permitted it to defer to
FERC’s conclusion that Congress did not intend to regulate
cooperatives through the FPA as public utilities. Id. at 475-77.
FERC has, until its appellate brief in this proceeding,
treated AEPCO as a non-public utility. FERC has offered
nothing in the record to support its change of position nor did
its refund orders single out AEPCO for treatment as a public
utility. We cannot accept FERC’s post-hoc rationalization for
ordering refunds from AEPCO.8 Consequently, in this pro-
ceeding we treat AEPCO as a non-public utility but without
prejudice to reclassification by FERC in a different proceed-
ing.
[5] FERC’s rate jurisdiction under § 205 and its refund
jurisdiction under § 206 expressly apply only to public utili-
ties, again reinforcing the definitional and scope provisions of
the statutory scheme. For example, § 205’s requirement that
all rates for sales of electric energy must be “just and reason-
able” applies only to public utilities and includes no specific
reference to governmental entities as would be required to
escape the broad exemption in § 201(f). FPA § 205(a) (16
U.S.C. § 824d(a)) (“All rates and charges made, demanded, or
received by any public utility for or in connection with the
8
FERC’s orders during the California energy crisis specifically treated
AEPCO as a non-public utility equivalent to a governmental entity. 99
FERC ¶ 61,160, at 61,660 n.62 (2002) (“AEPCO also asked for clarifica-
tion that, for purposes of the December 19 order, RUS-financed coopera-
tives receive the same treatment as ‘governmental entities.’ The December
19 order was sufficiently clear that discussions regarding governmental
entities include non-public utilities such as RUS-financed cooperatives.”).
A February 2005 FERC order held that “Central Iowa is a Rural Utility
Service (RUS)-financed electric cooperative and, thus, is not a
Commission-regulated ‘public utility’ under the FPA.” Cent. Iowa Power
Coop. v. Midwest Indep. Transmission Sys. Operator, Inc., 110 FERC
¶ 61,093 (2005). Long after its orders in the California refund cases,
FERC continued to treat RUS-financed cooperatives as non-public utili-
ties.
BONNEVILLE POWER v. FERC 12285
transmission or sale of electric energy subject to the jurisdic-
tion of the Commission, and all rules and regulations affecting
or pertaining to such rates or charges shall be just and reason-
able, and any such rate or charge that is not just and reason-
able is hereby declared to be unlawful.” (emphasis added)).
[6] Notably, FERC’s authority under §§ 206(a) and (b) to
investigate rates and to order refunds for unjust and unreason-
able rates is limited to “any rate, charge, or classification,
demanded, observed, charged, or collected by any public util-
ity for any transmission or sale subject to the jurisdiction of
the Commission”; again, no specific reference is made to gov-
ernmental entities or non-public utilities. FPA § 206(a) (16
U.S.C. § 824e(a)) (emphasis added); see also FPA § 206(b)
(16 U.S.C. § 824e(b)) (“At the conclusion of any proceeding
under this section, the Commission may order the public util-
ity to make refunds of any amounts paid, . . . in excess of
those which would have been paid under the just and reason-
able rate, charge, classification, rule, regulation, . . . .”
(emphasis added)).
Again, FERC attempts to counter the clear language of the
FPA by shifting the analysis away from the identity of the
sellers, and focusing instead on the nature of their transactions
and the markets and tariffs under which these transactions
were conducted. FERC acknowledged in its July 25, 2001
Order that “we do not have direct regulatory rate authority
over power sales by non-public utilities,” 96 FERC ¶ 61,120,
at 61,511 (2001), but concluded that it could still reach the
sales of the Public Entities. FERC emphasizes that ISO and
CalPX were public utilities that operated FERC-jurisdictional
wholesale electricity markets and had FERC-approved tariffs
and that the sales in the ISO and PX markets, whether by pub-
lic utilities or governmental entities/non-public utilities,
involved wholesale sales of electric energy in interstate com-
merce that are within FERC’s § 201(b)(1) jurisdiction. Id. at
61,513 (“[T]he [Public Entities’ transactions], wholesale sales
of energy in interstate commerce, were governed by FERC-
12286 BONNEVILLE POWER v. FERC
approved rules and a FERC-jurisdictional ISO and [CalPX].
Those transactions thus fell within FERC’s jurisdiction
regardless of the jurisdictional nature of the sellers or buy-
ers.”).
FERC relies on these observations about the jurisdictional
status of the ISO and CalPX and their markets to reach around
the limits of § 201(f):
While [FPA § 201(f)] exempts governmental entities
generally from Commission jurisdiction under Part II
of the FPA, it does not do so under the specific cir-
cumstances here. Here, governmental entities and
others sold energy in a centralized, single clearing
price auction market under which all sellers received
the same price for a given sale, pursuant to market
rules set by this Commission and administered by
public utilities (the California PX and ISO) subject
to this Commission’s jurisdiction. The involvement
of the PX and ISO, whose roles are central in these
California spot markets, along with the nature of the
interstate wholesale sales, give us subject matter
jurisdiction entirely independent of the jurisdictional
nature of the entities selling into the markets at issue.
Thus, FPA section 201(f) does not change the analy-
sis or the result in determining whether we have sub-
ject matter jurisdiction over the sales at issue.
97 FERC ¶ 61,275, at 62,181-82 (2001).
FERC attempts to deflect our attention away from the fact
that it is ordering refunds from the Public Entities by arguing
that FERC is simply using its §§ 205 and 206 authority to
reset the prices of the single-price auction to a just and rea-
sonable level:
Our action thus revises the market clearing prices
that all market participants previously agreed to
BONNEVILLE POWER v. FERC 12287
accept for their sales. In this context, we see no rea-
son to treat non-public utility sellers differently, as
they are receiving the same price, the just and rea-
sonable market clearing price established pursuant to
market rules approved by this Commission, that they
expected to obtain for their wholesale sales into the
centralized ISO and PX spot markets.
96 FERC ¶ 61,120, at 61,512 (2001); see also 97 FERC
¶ 61,275, at 62,182 (2001). ISO similarly tries to cast FERC’s
orders as resetting the market clearing price under FERC-
jurisdictional tariffs and characterizes the refunds by the Pub-
lic Entities as just a “byproduct” of the resettlement of the
ISO and CalPX markets.
The rationale advanced by FERC and ISO is flawed. Per-
ceiving FERC’s orders as effecting a reset market clearing
price for all spot market sales under the ISO and CalPX tar-
iffs, rather than as an order for refunds under § 206(b),
ignores the explicit language of FERC’s July 25, 2001 Order:
The Commission has determined that all sellers of
energy in the California ISO and PX spot markets
should be subject to refund liability for the period
beginning October 2, 2000. We have decided to
extend refund liability to public and non-public util-
ity sellers based on our review of the controlling law,
the involvement of both types of sellers in the Cali-
fornia centralized ISO and PX spot markets, and the
equities of the situation.
96 FERC ¶ 61,120, at 61,511 (footnote omitted). We cannot
conclude that FERC said “refund” but meant resettlement of
the market-clearing price.
FERC’s order does more than simply reset the market-
clearing price for power in the FERC-jurisdictional ISO and
CalPX markets. FERC specifically ordered governmental
12288 BONNEVILLE POWER v. FERC
entities/non-public utilities to pay refunds, an action that lies
outside Congress’s clearly expressed intent that FERC’s § 206
refund authority should apply only to public utilities. In addi-
tion, the fact that ISO and CalPX were public utilities is irrel-
evant because FERC is ordering refunds from the
governmental entities/non-public utilities, not ISO or CalPX
themselves. Indeed, it would be one thing for FERC to order
CalPX and ISO to operate the market in a different fashion or
to set a market-clearing price for power on a going-forward
basis, but the retroactive imposition of a market price that
effects a refund responsibility is a regulatory action that falls
outside of FERC’s jurisdiction with respect to non-public util-
ities and governmental entities.
FERC’s attempt to order refunds based on its general juris-
diction over wholesale sales of electric energy in interstate
commerce contained in § 201(b)(1) contravenes the more spe-
cific provisions of the FPA that limit FERC’s authority over
governmental entities, see § 201(f), and limit FERC’s author-
ity to ensure just and reasonable rates and to order refunds to
“public utilities,” see §§ 205, 206(b). In sum, the text and
structure of the FPA are unambiguous: Chevron deference is
not due where FERC’s authority to order refunds under
§ 206(b) is specifically limited to “public utilities” and no
explicit reference to governmental entities is made in
§ 206(b), as required by § 201(f).
FERC tries to escape the clear dictates of the statute by
referring to the FPA’s legislative history. This effort is
unavailing. Legislative history cannot trump the statute. See
Am. Rivers, 201 F.3d at 1204 (“[W]e are mindful that this
Court steadfastly abides by the principle that ‘legislative
history—no matter how clear—can’t override statutory
text.’ ” (quoting Hearn v. W. Conference of Teamsters Pen-
sion Trust Fund, 68 F.3d 301, 304 (9th Cir. 1995) (citations
omitted); see also Columbia Gas Transmission Corp., 404
F.3d at 461 (noting that we “ ‘must give effect to the unam-
biguously expressed intent of Congress,’ regardless of the
BONNEVILLE POWER v. FERC 12289
interpretation pressed by the Commission”) (quoting Chev-
ron, 467 U.S. at 843).
[7] In any event, FERC’s own interpretation of the legisla-
tive history in a previous administrative order belies its argu-
ment in this case. In a 1998 FERC proceeding, when asked to
interpret § 201(f)’s legislative history, FERC concluded that
Congress deliberately put governmental entities, such as states
and municipalities, outside of FERC’s jurisdiction:
The legislative history of the FPA shows clearly that
Congress was deliberate and careful in its efforts not
to impose FPA public utility regulation on states and
municipalities, even if they transmitted power across
state lines. The Senate Report on the bill, for exam-
ple, stated, “The revision has also removed every
encroachment upon the authority of the States,” and
noted that a new subsection 201(e) [which later
became 201(f)] “has been added to remove all doubt
that the act is not to apply to public projects, Federal,
State, or municipal.”
New West Energy Corp., 83 FERC ¶ 61,004, at 61,018 (1998)
(footnotes omitted) (alteration in original). Although, as
FERC now argues,9 the motivation behind § 201(f) in 1935
9
FERC quotes the following portion of the Senate Report:
[Subsection (f)] has been added to remove all doubt that the act
is not to apply to public projects, Federal, State or municipal.
Despite repeated assurances by representatives of the Federal
Power Commission that no such authority was intended, the
charge was frequently made that the bill as originally introduced
authorized the Commission to compel private utilities to establish
connection or exchange power with public plants. This new sub-
section carries out in unmistakeable terms the original intention
of the bill in this respect.
S. Rep. No. 74-621, at 19 (1935). Whatever the intention in terms of pro-
tecting private utilities, both the statutory language and this paragraph are
at odds with FERC’s position in this proceeding.
12290 BONNEVILLE POWER v. FERC
may have been to prevent government-owned utilities from
gaining a competitive advantage over private utilities, Con-
gress unambiguously removed government-owned utilities
from FERC’s refund jurisdiction.10
II. FERC’S PRIOR CONTROLLING INTERPRETATION OF ITS
AUTHORITY UNDER FPA §§ 205 AND 206 IS CONSISTENT
WITH A PLAIN READING OF THE FPA
[8] Although we recognize that the California energy crisis
was extraordinary, the fact remains that it does not alter
FERC’s statutory authority. It should be obvious that FERC
cannot invoke a “one-time” rule for this circumstance.
FERC’s long-standing interpretation of §§ 205 and 206 con-
firms that governmental entities/non-public utilities lie outside
its rate-making and refund authority.
As referenced above, FERC concluded in New West Energy
that Congress expressed its clear intent through § 201(f) that
the FPA was to “ ‘subject private enterprise alone to regula-
tion by the Federal Power Commission, and not to extend that
regulation to government and its instrumentalities.’ ” 83
10
Although we do not read too much into legislative amendments occur-
ring after the FERC decision in this case became final, we note that in
August 2005, Congress passed legislation to amend FERC’s § 206 refund
authority. The legislation amends § 206 to extend FERC’s refund author-
ity to entities described in § 201(f) if the entity makes a voluntary, short-
term sale of electricity through an organized market in violation of FERC
rules or tariffs. The new authority does not apply to cooperatives or to
municipal or Federal utilities that sell less than 8 million MWh of electric-
ity per year. Energy Policy Act of 2005, Pub. L. No. 109-___, § 1286, ___
Stat. ___, ___ (2005); see also S. Rep. No. 109-78, at 52 (2005); 151
Cong. Rec. H6969 (daily ed. July 28, 2005) (statement of Rep. Barton,
Conference Committee Chairman). This amendment suggests that because
existing law did not permit FERC to order refunds from governmental
entities, Congress felt the need to create an exemption to § 201(f) and lim-
ited that exemption to governmental entities selling large quantities of
power. In any event, the adoption of this amendment comports with our
interpretation of the FPA.
BONNEVILLE POWER v. FERC 12291
FERC ¶ 61,004, at 61,018 (1998). New West Energy, a gov-
ernmental entity, sought § 205 approval from FERC to sell
electric energy at market-based rates. FERC refused to exer-
cise its § 205 rate authority over New West Energy, even with
New West Energy’s consent, because §§ 205 and 206 do not
extend FERC’s authority to governmental entities:
The statute is thus clear that Part II of the FPA,
which contains Sections 205 and 206, shall not apply
to any political subdivision of a state or any corpora-
tion wholly owned by a political subdivision of a
state, unless the provision makes specific reference
thereto. Sections 205 and 206 provide the Commis-
sion authority over the rates, terms, and conditions of
jurisdictional service by public utilities. Those sec-
tions do not make reference to the entities listed in
Section 201(f).
Id. at 61,015. We see no justification for reading §§ 201(f),
205, and 206 any differently in this case.
In a proceeding even more analogous to this case than New
West Energy, FERC again emphasized that its § 206 refund
authority did not apply to governmental entities/non-public
utilities. In Mid-Continent Area Power Pool, 89 FERC
¶ 61,135 (1999) (“MAPP”), Enron Power Marketing, Inc.,
sought refunds from both public utility and non-public utility
members of a transmission power pool operating under a joint
open-access transmission tariff. FERC refused to order
refunds from one of the governmental entities that was a
member of the power pool:
[W]e address Nebraska District’s request that we
clarify that the Commission’s refund direction in the
April Order does not apply to nonpublic utility mem-
bers of a power pool. We note that Nebraska Dis-
trict, as a utility owned and operated by the State of
Nebraska, is not a public utility under the FPA.
12292 BONNEVILLE POWER v. FERC
Therefore, we cannot assert jurisdiction over
Nebraska District, and the requirements in our April
Order apply only to the public utility members of
MAPP (since they are within our jurisdiction).
Id. at 61,387 (footnotes omitted).11
[9] Similar to the situation in the MAPP proceedings, here
both public utilities and governmental entities/non-public util-
ities were selling electric energy in the wholesale markets
operated by ISO and CalPX. Just as in MAPP, FERC’s § 206
refund authority extends only to the public utilities selling in
the ISO and CalPX wholesale markets. FERC’s long-standing
interpretation of its authority under § 206 reinforces the clear
and unambiguous intent of Congress—governmental entities/
non-public utilities lie outside FERC’s jurisdiction even when
engaged in wholesale sales of electric energy.
11
FERC reiterated its refusal to order refunds under § 206 from the
Nebraska District in two subsequent decisions in the MAPP case: “The
tariffs and agreements on file with us are subject to our jurisdiction.
MAPP’s jurisdictional public utility members are subject to our jurisdic-
tion, but Nebraska District is not. Therefore, when we ordered MAPP to
make refunds we clearly meant MAPP, on behalf of its jurisdictional pub-
lic utility members.” 92 FERC ¶ 61,229, at 61,755 (2000). In another
order, FERC stated:
The Commission clarifies that its prior orders found that MAPP
had overcharged transmission customers served under its juris-
dictional transmission tariff and that full refunds were owed by
MAPP. However, because Nebraska District, although a member
of the pool and a party to the Restated Agreement, refused to pay
refunds and is not subject to our jurisdiction as a public utility
under Sections 205 and 206 of the FPA, we recognized that we
cannot enforce the refunds requirement against Nebraska District.
91 FERC ¶ 61,353, at 62,182 (2000).
BONNEVILLE POWER v. FERC 12293
III. THE UNITED DISTRIBUTION COMPANIES CASE IS NOT
APPLICABLE
Other than FERC’s own new-found interpretation of its
refund authority under § 206, the only significant legal
authority the Commission points to is the D.C. Circuit’s deci-
sion in United Distribution Cos. v. FERC, 88 F.3d 1105 (D.C.
Cir. 1996) (“UDC”), which construed the jurisdictional provi-
sions of the Natural Gas Act. Although this case provides
some support for FERC’s argument, it is no small matter that
it involved a completely different statute, and it falls far short
of persuading us of FERC’s position.
[10] FERC claims that UDC supports its focus on the sub-
ject matter of the transactions and the central role of CalPX
and ISO in the California markets, rather than the identity of
the sellers, as grounds for exercising refund authority. In
UDC, which involved interpretation of the Natural Gas Act
and FERC’s gas pipeline regulations, the court upheld
FERC’s requirement that municipalities must comply with
FERC’s capacity release regulations when they purchase
transportation capacity on a FERC-jurisdictional interstate
pipeline and then seek to release, or resell, any unused capac-
ity. 88 F.3d at 1149-50, 1154. The Natural Gas Act includes
provisions similar to the FPA that extend FERC’s jurisdiction
over only “natural-gas companies” and over interstate trans-
portation of natural gas with municipalities typically lying
beyond the reach of FERC’s jurisdiction. Id. at 1153-54. The
court concluded, however, that FERC could require munici-
palities to comply with its capacity release regulations, rely-
ing on the subject matter of the transactions and the central
role of a jurisdictional pipeline in the capacity transactions:
FERC may, consistent with the [Natural Gas Act],
require municipalities to comply with its capacity
release regulations. As we explained above, . . .
FERC’s transportation jurisdiction extends as a sepa-
rate matter over capacity release given the involve-
12294 BONNEVILLE POWER v. FERC
ment of interstate gas pipelines. The pipelines’ role
in capacity release is absolutely central, and the
transaction itself controls access to interstate trans-
portation capacity, entirely independent of the juris-
dictional nature of the releasing and replacement
shippers.
Id. at 1154 (footnotes omitted).
[11] The D.C. Circuit’s focus on the jurisdictional nature of
the subject matter of the transaction—transportation of natural
gas in interstate commerce—and the central role of a FERC-
jurisdictional pipeline does not translate to the same result
here. Significantly, the Natural Gas Act does not include a
provision analogous to FPA § 201(f), which exempts govern-
mental entities. Furthermore, UDC did not involve the ques-
tion whether FERC may order refunds from governmental
entities. UDC therefore does not provide a framework that
permits FERC to ignore the clear language of the FPA. The
FPA clearly states in § 201(f) that the provisions of subchap-
ter II of the FPA, including FERC’s §§ 205 and 206 rate and
refund authority, do not apply to governmental entities unless
the governmental entities are specifically referenced. Sec-
tion 206 only gives FERC the authority to order refunds from
public utilities.
IV. THE PARTIES MAY NOT WAIVE THE LIMITS OF FERC’S
STATUTORY AUTHORITY
FERC also attempts to avoid the § 201(f) restrictions on
refund authority by employing inapt analogies to civil juris-
diction doctrines. FERC characterizes its § 201(b)(1) author-
ity to regulate wholesale sales of electric energy in interstate
commerce as “subject matter jurisdiction,” and characterizes
the restrictions in § 201(f) as restrictions on its “personal
jurisdiction.” According to FERC, the Public Entities waived
any restriction on FERC’s authority to order refunds from the
governmental entities/non-public utilities because they volun-
BONNEVILLE POWER v. FERC 12295
tarily participated in markets that were governed by FERC-
approved tariffs and agreements:12
Moreover, governmental entities that made sales in
the [CalPX] and ISO spot markets waived any
exemption they otherwise may have had from the
Commission’s personal jurisdiction regarding those
sales. Because the markets did not exist prior to
FERC authorization and operate according to FERC
rules, all those who participated in them reasonably
had to recognize the controlling weight of FERC
authority. . . . All sellers were on notice that those
clearing prices, and the market rules that set the
clearing prices, were subject to change and refund if
they were found to be unjust and unreasonable.
. . . [T]he subject matter of the sales here provides
us with jurisdiction. As a separate matter, by selling
in the [CalPX] and ISO spot markets, the govern-
mental entities waived any personal jurisdictional
limitations.
97 FERC ¶ 61,275, at 62,182-83 (2001) (footnotes omitted).
[12] The fact is that FERC’s regulatory authority is bound
by statute, and utilities can neither waive that authority to opt
in or out of FERC’s jurisdiction. FERC’s effort to recast its
statutory authority as a question of bifurcated subject matter/
personal jurisdiction is without statutory support. As the D.C.
Circuit observed in a recent decision, FERC cannot exercise
jurisdiction or authority unless authorized by statute, regard-
less of whether the jurisdiction is exercised without objection
or even with the consent of the relevant parties. In Columbia
Gas Transmission Corp. v. FERC, the key question was
12
FERC’s waiver argument offers more than a little irony given FERC’s
consistent position—until the ultimate refund order—that it did not have
jurisdiction over governmental entities/non-public utilities.
12296 BONNEVILLE POWER v. FERC
whether FERC “has jurisdiction to compel compliance with
the tariff provision [applying to facilities outside FERC’s
jurisdiction] solely because the tariff was voluntarily filed by
the pipeline, even if FERC would not otherwise have jurisdic-
tion over such [facilities].” 404 F.3d at 461 (internal quotation
marks omitted). Because the Natural Gas Act specifically pro-
vides that FERC’s jurisdiction over the transportation and sale
of natural gas “shall not apply . . . to the production or gather-
ing of natural gas,” 15 U.S.C. § 717(b), the D.C. Circuit
rejected FERC’s attempt to regulate Columbia’s natural gas
gathering facilities based on a FERC-approved tariff contain-
ing provisions that applied to gathering facilities. See 404
F.3d at 462-63. The court pointed out that
jurisdiction cannot arise from the absence of objec-
tion, or even from affirmative agreement. To the
contrary, “as a statutory entity, the Commission can-
not acquire jurisdiction merely by agreement of the
parties before it.” As the Supreme Court has
explained, “parties . . . cannot confer jurisdiction;
only Congress can.” In this case, Congress has
clearly declined to do so.
Id. at 463 (internal citations omitted). Simply because Colum-
bia included natural gas gathering facilities in a FERC-
approved tariff did not give FERC jurisdiction to regulate
such facilities in the face of a contrary statutory mandate.
Similarly, FERC cannot expand its statutory authority to
reach governmental entities/non-public utilities through
§ 206(b) simply because such entities voluntarily participated
in markets approved by FERC that involved FERC-
jurisdictional wholesale sales of electric energy in interstate
commerce.
FERC’s decision in the New West Energy proceedings bol-
sters our rejection of FERC’s waiver argument. FERC denied
New West Energy’s attempt to waive limitations on FERC’s
so-called “personal jurisdiction” in § 201(f):
BONNEVILLE POWER v. FERC 12297
[W]e note . . . that an entity that is not a public utility
under the FPA cannot volunteer to be one. As we
said before with respect to the South Carolina Public
Service Authority, which is an authority of the state
of South Carolina:
Moreover, because the Commission is pro-
hibited by statute from regulating directly
the activities of nonpublic utilities under
Sections 205 and 206, the Authority cannot
simply waive this restriction and volunteer
to become subject to this Commission’s
jurisdiction under Section 205 and 206.
Likewise, New West cannot be regulated as a public
utility simply because it desires to be so regulated.
New West Energy Corp., 83 FERC ¶ 61,004, at 61,015 (1998)
(footnote omitted).13 We see no distinction between a govern-
mental entity/non-public utility that volunteers to be subject
to the Commission’s jurisdiction and a governmental entity/
non-public utility that voluntarily participates in a FERC-
approved market to make wholesale sales of electric energy
in interstate commerce.
In a variation on the waiver argument, FERC and interve-
nor California Parties14 emphasize that the Public Entities
13
See also South Carolina Pub. Serv. Auth., 75 FERC ¶ 61,209, at
61,696 (1996) (while FERC agreed to “evaluate non-jurisdictional activi-
ties to the extent they affect the Commission’s jurisdictional responsibili-
ties,” FERC emphasized its §§ 205 and 206 rate authority could not apply
to South Carolina Public Service Authority as a state agency and the “Au-
thority cannot simply waive this restriction and volunteer to become sub-
ject to the Commission’s jurisdiction under sections 205 and 206”).
14
The California Parties consist of the California Public Utilities Com-
mission, Pacific Gas & Electric Co., San Diego Gas & Electric Co., South-
ern California Edison Co., California Electricity Oversight Board, and
People of the State of California, ex rel. Bill Lockyer, Attorney General.
12298 BONNEVILLE POWER v. FERC
entered into agreements with ISO and CalPX that obligated
them to abide by the ISO and CalPX tariffs. They argue that
these agreements made it obvious to the Public Entities that
the tariffs setting the prices in the ISO and CalPX markets
would be subject to FERC regulation under §§ 205 and 206.
All of this is true. But it does not change our conclusion that
FERC cannot use § 206(b) to order refunds from governmen-
tal entities/non-public utilities, even if the price they received
for their electric energy sales was set by the FERC-approved
tariff of a public utility.
The focus on the agreements between the Public Entities
and ISO and CalPX only serves to demonstrate that the rem-
edy, if any, may rest in a contract claim, not a refund action.
Such an approach is not novel, as illustrated by FERC’s
MAPP proceedings and the related cases in federal district
and circuit court. MAPP is a power pool that includes both
public utility and non-public utility transmission owners. In
1999, FERC concluded that portions of the MAPP tariff vio-
lated § 205 and ordered refunds from the MAPP members. 89
FERC ¶ 61,135, at 61,384 (1999). Although the Commission
concluded that it could not order refunds from the Nebraska
Public Power District (“Nebraska District”), a governmental
entity/non-public utility, the Commission suggested that a
contract action might provide a remedy for public utility
members of MAPP against the Nebraska District: “However,
we need not and do not address whether nonpublic utility
members of MAPP are nevertheless bound to take or refrain
from taking any actions, including providing refunds, under
the terms of any agreement.” Id. at 61,387-88.
Later proceedings in federal court illustrate that although
FERC had no authority to order the Nebraska District to pay
refunds, a contract action brought by parties to the MAPP
agreement could result in the equivalent refund relief from the
Nebraska District. Alliant Energy, Inc. v. Neb. Pub. Power
Dist., Civ. No. 00-2139 ADM/FLN, 2001 U.S. Dist. LEXIS
17802 (D. Minn. Oct. 18, 2001), aff’d, 347 F.3d 1046 (8th
BONNEVILLE POWER v. FERC 12299
Cir. 2003). The district court held that Nebraska District was
contractually liable to pay refunds as a result of FERC’s
orders that changed MAPP’s FERC-jurisdictional tariff and
the MAPP agreement:
The Restated Agreement is a contract to which
[Nebraska District] is a signatory. [Nebraska Dis-
trict] is bound by the contract regardless of whether
FERC has regulatory authority over [Nebraska Dis-
trict] itself. FERC concluded that certain tariff provi-
sions of Schedule F did not comply with Order 888
and that MAPP must revise the Restated Agreement.
Accordingly, [Nebraska District] is contractually
obligated to refund the amounts it overcollected
under the nullified Schedule F tariff provisions, even
if the contract amendments resulted from a FERC
order.
2001 U.S. Dist. LEXIS 17802, at *14 (footnote omitted). The
Eighth Circuit affirmed, noting, “[w]hen a contract provides
that its terms are subject to a regulatory body, all parties to
that contract are bound by the actions of the regulatory body.
As a result, we are not enforcing the FERC order; instead, we
are enforcing an agreement, which [Nebraska District] freely
entered.” 347 F.3d at 1050 (internal citation omitted).15
[13] At bottom, FERC’s waiver argument is an effort to
have this court restructure the scope of FERC’s statutory
authority. In declining to do so, we take no position on reme-
dies available outside of the FPA. We hold that FERC does
not have refund jurisdiction under FPA § 206 with respect to
15
See also W. Sys. Power Pool, 55 FERC ¶ 61,495, at 62,713 (1991)
(stating that any requirements imposed on the power pool, which included
both non-public utility and public utility members, applied only to the
public utility members, and that while “nonpublic utility members of
WSPP may have agreed by contract to be bound by the WSPP Agree-
ment” it was “not a matter for this Commission under the Federal Power
Act”).
12300 BONNEVILLE POWER v. FERC
governmental entities and non-public utilities. The petition for
review is GRANTED; we remand to FERC for proceedings
consistent with this opinion.
PETITION FOR REVIEW GRANTED.