784 F.3d 1267
9th Cir.2015Background
- The California Parties (State AG, CPUC, PG&E, SCE) challenged FERC orders on remand from this Court’s decision in Lockyer v. FERC, which approved market-based tariffs only if paired with ex ante market-power review and enforceable post-approval transaction reporting.
- In Lockyer the Ninth Circuit found FERC had abdicated oversight during the 2000–01 California energy crisis by ignoring widespread failures to provide required transaction-specific reports and remanded for remedial proceedings.
- On remand FERC limited the inquiry to whether sellers accumulated market power under its 20% hub-and-spoke market-share screen and excluded evidence of other tariff violations, gaming, anomalous bidding, or alternative market-power measures.
- An ALJ granted summary disposition for sellers after the California Parties failed to show accumulation of market power under the hub-and-spoke test, despite the record showing widespread reporting violations.
- FERC affirmed the ALJ, concluding no relief was available because the hub-and-spoke test did not show market-share-based market power; the California Parties petitioned for review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC lawfully confined remand to hub-and-spoke market-share proof before considering refunds for reporting violations | Lockyer requires enforceable post-approval reporting; FERC must evaluate whether reporting deficiencies masked unjust/unreasonable rates and may order refunds without a hub-and-spoke showing | FERC: only sellers who accumulated market share under hub-and-spoke could have charged unjust rates; remand may be limited to that screen | The court held FERC unlawfully restricted remand to the hub-and-spoke screen; reporting enforcement is an independent, necessary element and FERC must consider evidence beyond market-share tests |
| Whether enforcing only the hub-and-spoke test renders market-based tariffs compatible with §205 of the FPA | Reporting is essential to determine if rates were just and reasonable; limiting review immunizes overcharges and contravenes §205 | Limiting to hub-and-spoke is consistent with prior market-power determinations and prevents relitigation of ex ante findings | The court held FERC’s approach undermined §205 and the Lockyer dual-track framework; FERC must evaluate whether deficient reporting masked market manipulation or accumulation of power |
| Whether evidence of gaming, anomalous bidding, or other market indicators could be excluded from remand proceedings | Such evidence is relevant to whether reporting deficiencies masked market power and whether rates were unjust; exclusion was improper | FERC argued those issues were being or could be addressed in separate proceedings and were outside the scope of the remand | The court held FERC erred by excluding related evidence; agency must consider nexus between reporting violations and manipulative conduct on remand |
| Whether the agency’s remand proceedings satisfied administrative reasoned decisionmaking | FERC failed to examine relevant data or articulate adequate reasons for limiting scope; its structuring was arbitrary and capricious | FERC contended it acted within its discretion and used appropriate standards in effect at the time | The court found FERC’s structuring arbitrary and capricious and remanded for reconsideration consistent with Lockyer and the FPA |
Key Cases Cited
- California ex rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004) (approved market-based tariffs only with ex ante market-power analysis and enforceable post-approval transaction reporting)
- MCI Telecomms. Corp. v. AT&T, 512 U.S. 218 (1994) (rejected certain market-based ratemaking frameworks absent adequate safeguards)
- Maislin Indus. v. Primary Steel, 497 U.S. 116 (1990) (filed-rate doctrine limits after-the-fact tariff changes)
- Blumenthal v. FERC, 552 F.3d 875 (D.C. Cir. 2009) (approved hybrid market with required transaction reporting; emphasizes reporting to assess competitiveness)
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (1983) (agency must examine relevant data and articulate satisfactory explanation for actions)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (courts should remand to agencies to make initial policy determinations)