Public Citizen implores FERC chief to recognize agency's job to protect 'hordes' from excessive rates

Options Toolbox

Related Companies NRG Energy Inc. (NRG)

Related Documents Industry Document "Letter from Tyson Slocum to Senator Barbara Boxer" presented on 11/5/2009

Related Articles 11/4/2009 Supreme Court considers appropriate standard of review for 3rd-party challenges

Taking extreme umbrage at recent suggestions by utilities in a court brief that the Federal Power Act was designed to protect regulated utility sellers from the "hordes" of public citizens and ratepayers, Public Citizen is asking Senate Environment and Public Works Committee Chairman Barbara Boxer, D-Calif., to hear additional testimony from FERC Chairman Jon Wellinghoff and others on the issue.

"The Committee may also wish to remind Chair Wellinghoff that ours is a government of the hordes, by the hordes and for the hordes, and that his own job description is to protect these hordes from excessive wholesale electric and natural gas rates," wrote Public Citizen Director Tyson Slocum in a Nov. 5 letter to Boxer.

Boxer held a hearing in late October on a provision in a pending bill, S 1733, that would establish an Office of Consumer Advocacy to monitor rates and services of companies regulated by FERC. During that hearing, Slocum recalled, Wellinghoff generally supported the provision. Slocum suggested that he therefore has been left somewhat perplexed by FERC's support of positions expressed during recent court cases that he claimed "may gut the ability of the Office of Consumer Advocacy to protect consumers before it is even enacted."

In particular, Slocum slammed court decisions requiring FERC to use the highly deferential public interest standard that has been described by some as "practically insurmountable" instead of the less restrictive just and reasonable standard when reviewing demands that existing power or natural gas supply contracts be modified. In contrast, the U.S. Court of Appeals for the District of Columbia Circuit in March 2008 remanded a FERC ruling allowing a provision to be written into a New England settlement that required nonparties to the agreement to overcome the public interest standard of review before certain transitional rates and auction clearing prices could be modified.

After several of the settling parties asked the U.S. Supreme Court to review that decision, FERC initially opposed that request, but the agency changed its position once certiorari was granted and supported many of the settling parties' assertions. In particular, NRG Energy Inc. and others argued that in addition to parties to a rate contract, third parties, such as consumer advocates, state utility commissions and consumers themselves also must meet the public interest standard before electric or natural gas rates can be modified.

The Supreme Court on Nov. 3 heard oral arguments on the issue, during which NRG lawyer Jeffrey Lamken repeated assertions set forth in earlier briefs arguing that if the circuit court's decision were allowed to stand, it would invite "hordes" of consumers indirectly affected by a rate to file challenges and thereby threaten industry stability.

Specifically, the utilities wrote in a reply brief, "[T]he broad range of parties and amici before the Court today — from elected officials, to industry associations, to AARP, to the aptly named Public Citizen — makes clear that the 'hordes of motivated non-parties' have arrived already."

"It is astonishing to Public Citizen that plaintiffs can argue with a straight face that the Federal Power Act was designed to protect regulated utility sellers from the 'hordes' of public citizens/ratepayers rather than vice versa. What is more astonishing, and much sadder, is that FERC is supporting the utilities' appeal," Slocum wrote in his letter.

Slocum also slammed the commission's claims that it has the discretion to impose "this impossibly high standard in advance on anyone challenging future FERC rates whenever the agency finds it appropriate to do so. This is contrary to both the letter and the spirit of the Federal Power Act, a consumer-protection statute that requires rates to be not only 'reasonable' but also 'just.'"

Public Citizen is not alone in its opposition to FERC's assertions, Slocum maintained. He recalled that Justices John Paul Stevens and David Souter wrote in a dissent in a case (Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County et al.; 06-1457, 06-1462) decided in 2008 that the majority was wrong to find that the public interest standard of review should apply to changes sought by parties to bilateral contracts. Specifically, Slocum said the two justices contended that the majority had "mangled" both the text of the Federal Power Act and court precedent by concluding that wholesale power rates must be "presumed" to be lawful simply because the seller and buyer have agreed to them.

"Now the utilities contend that if such parties are allowed to object to rates because they are excessive (as they have been able to do for seventy-four years), the American utility system will collapse," Slocum wrote. "In fact, contrary to most of the rest of the world, which nationalized their public utilities after the Great Depression, investor-owned utilities in the U.S. thrived under extensive rate and corporate regulation."

Since Wellinghoff did not mention the NRG case in his testimony on the OCA, nor "FERC's position in it, and its implications for consumers, those 'hordes' of ratepayers that the … [OCA] is supposed to protect," Slocum urged that Boxer's committee take supplemental testimony from him on this issue.