Idaho Power Co. v. Federal Energy Regulatory Commission

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IDAHO POWER COMPANY; IDACORP No. 13-72220
ENERGY SERVICES COMPANY,
Petitioners, FERC Nos.
EL01-10-096
v. 13-1002
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent,
EL PASO MARKETING COMPANY,
LLC, FKA El Paso Marketing, LP,
FKA El Paso Merchant Energy, LP;
EXELON GENERATION COMPANY,
LLC, as successor to Constellation
Energy Commodities Group, Inc.;
KAMALA D. HARRIS, Attorney
General; TALEN ENERGY
MARKETING, LLC; TALEN
MONTANA, LLC; PEOPLE OF THE
STATE OF CALIFORNIA; PUBLIC
UTILITIES COMMISSION OF THE
STATE OF CALIFORNIA; SOUTHERN
CALIFORNIA EDISON COMPANY,
Respondents-Intervenors.
2 IDAHO POWER CO. V. FERC
IDAHO POWER COMPANY; IDACORP No. 14-72384
ENERGY SERVICES COMPANY,
Petitioners, FERC No.
EL01-10-129
v.
FEDERAL ENERGY REGULATORY OPINION
COMMISSION,
Respondent,
TALEN ENERGY MARKETING, LLC;
TALEN MONTANA, LLC,
Respondents-Intervenors.
On Petition for Review of an Order of the
Federal Energy Regulatory Commission
Argued and Submitted
June 16, 2015—San Francisco, California
Filed September 4, 2015
Before: Sidney R. Thomas, Chief Judge and M. Margaret
McKeown and Richard R. Clifton, Circuit Judges.
Opinion by Judge McKeown
IDAHO POWER CO. V. FERC 3
SUMMARY*
Federal Energy Regulatory Commission
The panel granted two petitions for review concerning
proposed settlements submitted to the Federal Energy
Regulatory Commission (“FERC”) by Idaho Power
Company, related to electricity sales in the Pacific Northwest
in 2000 and 2001, and remanded for further proceedings.
The panel held that FERC departed from its rules and
precedent without explanation when it treated the first
proposed settlement as uncontested. Because the settlements
and petitions were inextricably intertwined, the panel granted
both petitions. The panel directed FERC to reconsider its
decision on the petitions and issue a decision within sixty
days of the issuance of this court’s mandate.
COUNSEL
Lawrence G. Acker (argued), Howard E. Shapiro, and
Thomas G. Hutton, Van Ness Feldman, LLP, Washington,
D.C.; Rex Blackburn and Brian R. Buckham, Idaho Power
Company, Boise, Idaho, for Petitioners.
David L. Morenoff, General Counsel, Robert H. Solomon,
Solicitor, Lona T. Perry and Susanna Y. Chu (argued),
Deputy Solicitors, Washington, D.C., for Respondent Federal
Energy Regulatory Commission.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 IDAHO POWER CO. V. FERC
OPINION
McKEOWN, Circuit Judge:
These petitions call to mind the classic lyric: “You can
check out any time you like, but you can never leave.”1 Idaho
Power Company and its subsidiary, IDACORP, Inc.,
(collectively, IDACORP), in an effort to conclude their role
in the now-epic Federal Energy Regulatory Commission
(“FERC”) proceeding related to electricity sales in the Pacific
Northwest in 2000 and 2001, submitted proposed settlements
to FERC with the expectation that the companies would be
able to wash their hands of the proceeding for good.
We consider whether FERC abused its discretion in
considering these proposed settlements and conclude that the
agency departed from its rules and precedent without
explanation when it treated the first proposed settlement as
uncontested. Because the settlements and petitions are
inextricably intertwined, we grant both petitions and remand
for further proceedings. The irony of prolonging the
proceedings further is not lost on us, so in line with FERC’s
representation at argument that reconsideration would not
take long, we order FERC to issue its decision within sixty
days of the issuance of the mandate here.
BACKGROUND
We recounted the now-familiar backdrop of this litigation
in Port of Seattle v. FERC, 499 F.3d 1016 (9th Cir. 2007),
cert. denied sub nom. Puget Sound Energy, Inc. v. California,
558 U.S. 1136 (2010). We reviewed several challenges to
1
Eagles, Hotel California (Asylum 1976).
IDAHO POWER CO. V. FERC 5
FERC’s decision to deny refunds to wholesale buyers of
electricity that purchased energy in the short-term supply
market in the Pacific Northwest at unusually high prices.
That petition for review resulted in a remand for further
proceedings.
Few details of our remand in Port of Seattle are relevant
to these particular petitions for review, which arise from
settlement proceedings before FERC that followed the
remand. Suffice it to say, we credited some of the
petitioners’ challenges to FERC’s structuring of the refund
proceedings and remanded, noting that FERC may in the
future “find it necessary to call for additional fact-finding” if
the record is insufficient to inform a reasoned decision. Id. at
1035–36.
On remand, FERC planned evidentiary hearings on
violations that may warrant refunds. See Puget Sound
Energy, Inc. v. All Jurisdictional Sellers of Energy,
137 FERC ¶ 61,001 (Oct. 3, 2011). FERC held the refund
proceedings in abeyance, however, to allow for settlement
and appointed a settlement judge under Commission Rule
603, 18 C.F.R. § 385.603 (2011). 137 FERC ¶ 61,001, at
paras. 30–31. A schedule was set for refund claims to be
presented as a part of settlement procedures.
These petitions concern FERC’s handling of two
proposed settlements in relation to refund claims filed against
IDACORP by the cities of Tacoma and Seattle, Washington.
The first settlement at issue here was between IDACORP
and Tacoma. The proposed settlement would have resolved
Tacoma’s claims against IDACORP, reserved Seattle’s
claims for later disposition, and released claims between
6 IDAHO POWER CO. V. FERC
IDACORP and all other parties—thus ending IDACORP’s
participation in the FERC proceedings once the Seattle claim
was resolved.
Powerex Corporation, PPL Montana, LLC, and PPL
EnergyPlus, LLC (the latter two collectively referred to as the
PPL entities)—all respondents in the FERC proceeding—
filed comments contesting part of the proposed Tacoma
settlement. See 18 C.F.R. § 385.602(f). They contended that
the provisions releasing all other parties’ claims interfered
with the preservation of potential “ripple claims,” which
FERC defined as “sequential claims against a succession of
sellers in a chain of purchases that are triggered if the last
wholesale purchaser in the chain is entitled to a refund,” thus
“rippling” through the market. 96 FERC ¶ 63,044, 65,300
(Sept. 24, 2001).
Despite these objections, the settlement judge certified the
proposed Tacoma settlement to the Commission as
uncontested. 139 FERC ¶ 63,004, at paras. 2, 34 (April 24,
2012). FERC then approved the portions of the settlement
regarding Tacoma and Seattle’s claims, but rejected the
provisions that purported to release all other claims.
139 FERC ¶ 61,209 (June 13, 2012). FERC explained that
“[w]hile the potential for ripple claims is speculative”
because FERC had precluded market-wide remedies in the
proceedings, the proposed settlement could not “be used to
extinguish potential claims of others” without conflicting
with FERC’s policy against settlements that impair the rights
of non-parties. Id. at para. 7. FERC directed IDACORP to
modify the proposed settlement to remove the disputed
language. Id.
IDAHO POWER CO. V. FERC 7
IDACORP filed the requested modification and requested
rehearing. FERC accepted the modification, which excluded
all parties other than Tacoma from the release provisions, and
denied rehearing. 141 FERC ¶ 61,148 (Nov. 20, 2012).
IDACORP petitioned for review.
While that petition was pending, IDACORP submitted the
second proposed settlement at issue here—this one with
Powerex. Under the proposed Powerex settlement, Powerex
would withdraw its objections to the original proposed
Tacoma settlement and agree not to pursue any claims against
IDACORP. This settlement would also exempt the PPL
entities from the release provisions that they had disputed in
the proposed Tacoma settlement. According to IDACORP,
the proposed Powerex settlement “was structured
procedurally and substantively to remove the objections
FERC expressed regarding the [original proposed Tacoma
settlement].”
No objections were filed to the proposed Powerex
settlement. 145 FERC ¶ 63,018, at paras. 27–29 (Dec. 20,
2013). FERC, however, rejected its release provisions and
required a modification similar to the one it imposed on the
Tacoma settlement.2 146 FERC ¶ 61,123 (Feb. 21, 2014).
IDACORP complied to FERC’s satisfaction, and FERC
denied rehearing. 147 FERC ¶ 61,223 (June 17, 2014).
IDACORP again petitioned for review.
2
IDACORP contends that had FERC instead approved the settlement,
its petition in No. 13-72220 would have been moot.
8 IDAHO POWER CO. V. FERC
ANALYSIS
We review FERC decisions to determine whether they are
“arbitrary, capricious, an abuse of discretion, unsupported by
substantial evidence, or not in accordance with law.” Cal.
Dep’t of Water Res. v. FERC, 341 F.3d 906, 910 (9th Cir.
2003). While our review of FERC’s interpretation of its own
regulations is quite deferential, see Pac. Gas & Elec. Co. v.
FERC, 746 F.2d 1383, 1386 (9th Cir. 1984), an agency “may
not depart, sub silentio, from its usual rules of decision to
reach a different, unexplained result in a single case,” Cal.
Trout v. FERC, 572 F.3d 1003, 1023 (9th Cir. 2009) (internal
quotation marks and citation omitted).
The decisions challenged here involve FERC’s authority
to informally settle ratemaking proceedings. See United Mun.
Distribs. Grp. v. FERC, 732 F.2d 202, 207 n.7 (D.C. Cir.
1984); 18 C.F.R. § 385.602.
Under FERC’s rules, when a proposed settlement is
uncontested, FERC can approve it if the settlement appears to
be “fair and reasonable and in the public interest.” 18 C.F.R.
§ 385.602(g)(3). As FERC acknowledges, this rule permits
the agency to approve an uncontested settlement without
determining whether it is “just and reasonable.” See Mobil
Oil Corp. v. Fed. Power Comm’n, 417 U.S. 283, 314 (1974).
Contested settlements are different. FERC regulations set
forth procedures for settlements that are “contested in whole
or in part” and allow for severance of contested issues.
18 C.F.R. § 385.602(h). Under the framework established in
Trailblazer Pipeline Co., 85 FERC ¶ 61,345 (Dec. 16, 1998),
when a proposed settlement is contested, FERC may decide
the merits of the contested issues if substantial evidence
IDAHO POWER CO. V. FERC 9
supports a reasoned decision or if FERC “determines there is
no genuine issue of material fact.” 18 C.F.R.
§ 385.602(h)(1)(i).
Beginning chronologically, we are perplexed why FERC
treated the proposed Tacoma settlement as uncontested. A
litany of references in the record underscore that it was
contested. For example, Powerex—one of the objectors—
headlined its argument, “The Settlement is Partially
Contested and May Not Be Approved Without Modification
or Severance of the Contested Issue under the Commission’s
Trailblazer Precedent,” and explained that it “opposes certain
portions” of the proposed settlement. The PPL entities, in
turn, filed “comments in opposition to certain provisions” of
the proposed settlement and concluded by stating that FERC
“should not approve” it “unless the terms . . . affecting non-
parties’ rights are stricken.” Reflecting that it too understood
the settlement to be contested, IDACORP acknowledged in
its reply comments that Trailblazer would apply.
FERC acknowledged in its June 13, 2012 Letter Order
that the proposed settlement contained “disputed language.”
139 FERC ¶ 61,209, at para. 7. Despite this reference, FERC
did not conduct the Trailblazer analysis. Nor did it refer to
its own regulations or otherwise resolve “that the record
contains substantial evidence from which the Commission
may reach a reasoned decision on the merits of the contested
issues.” 18 C.F.R. § 385.602(h)(2). FERC instead called the
settlement uncontested but still mandated its modification to
address the issues that Powerex and the PPL entities had
disputed, apparently, as the agency explained later, to avoid
“foreclos[ing] even remotely possible third party claims.”
141 FERC ¶ 61,148, at para. 9.
10 IDAHO POWER CO. V. FERC
We hold that FERC abused its discretion by foregoing the
Trailblazer analysis and merits analysis dictated by FERC’s
regulations. The proposed settlement was at least in part
contested. Even affording FERC substantial latitude in
interpreting and applying its own regulations, FERC’s
recognition of disputed issues coupled with its lack of
explanation for proceeding how it did makes it impossible for
us to assess FERC’s reasons for departing from its own rules
and precedent.
FERC’s lone, unexplained citation to San Diego Gas &
Elec. Co. v. Sellers of Energy and Ancillary Servs., 113 FERC
¶ 61,171, at para. 40 (Nov. 15, 2005), in which FERC noted
one possible way that opposition to a settlement would not
create a genuine material issue of fact (so it could permissibly
be considered uncontested), does not explain why FERC
could dispose of this proposed settlement as uncontested.
Nor does the reference point to any basis in favor of the
settlement modification demanded by FERC. The lonely
footnote is thus insufficient to support a departure from the
agency’s established rules and precedent. See Cal. Trout,
572 F.3d at 1023; Nw. Envtl. Def. Ctr. v. Bonneville Power
Admin., 477 F.3d 668, 687–88 (9th Cir. 2007) (“[I]f an
agency glosses over or swerves from prior precedents without
discussion it may cross the line from the tolerably terse to the
intolerably mute.” (internal quotation mark and citation
omitted)). We therefore grant the petition with regard to the
proposed Tacoma settlement and remand to FERC for the
agency to either consider the proposed Tacoma settlement
under the proper standards or provide an explanation for why
a different approach is appropriate in this case.
This brings us to the second settlement at issue here.
Given the interdependency of these petitions for review, this
IDAHO POWER CO. V. FERC 11
settlement warrants just a few words. IDACORP would
simply have had no reason to propose the settlement with
Powerex had the parties been satisfied with FERC’s treatment
of the contested provisions of the initial proposed Tacoma
settlement. In light of our decision to remand with regard to
the proposed Tacoma settlement, we also grant the petition
with regard to the proposed Powerex settlement and remand
for reconsideration together with the Tacoma settlement.
CONCLUSION
The petitions in Nos. 13-72220 and 14-72384 are
GRANTED; we remand to FERC for consideration of the
proposed settlements in accordance with this decision,
including the directive for FERC to reconsider its decision on
the petitions and issue a decision within sixty days of the
issuance of this court’s mandate.