Montana Consumer Counsel v. FERC

FERC's Order 697, which establishes a market-based regulatory policy, does not exceed its authority under the FPA because FERC has enhanced its upfront tests for market power and oversight of market-based rates.

A group of petitioners brought this suit against the Federal Energy Regulatory Commission (FERC) seeking review of an order of FERC. The petitioners contend that the order is in violation of FERC's governing statutes. Petitioners contend that FERC is in violation of its statutory obligations to ensure rates are just and reasonable because it relies solely on the market to determine rates. Furthermore, petitioners claim that because sellers are not required to give sixty day notice of change in market price, this violates the FPA. The Federal Power Act sets forth FERC's statutory mandate. It requires that "all rates and charges made, demanded, or received" by power wholesalers be "just and reasonable". Every public utility is required to file with FERC. In the 1990s, utilities began filing market based rates with FERC, and FERC codified the limited market based policy in Order 697. Participants in the market-based policy are pre-screened and update FERC on changes. The Court applied the Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) analysis. For FERC's policy to be bad it would have to violate an unambiguous command of Congress or adopt an impermissible interpretation of the FPA. FERC has a reasonable belief that a competitive market will provide just and reasonable rates. Furthermore, FERC will monitor the data to ensure the transactions reported are consistent with an unmanipulated, competitive market. The FPA statute does not clearly prohibit the filing of market-based rates. Additionally, the statute clearly authorizes an exception to the requirement of notice for market-based rate changes. Finally, the Court found that FERC does not exceeds its authority granted by the FPA in using the market-based rate policy of Order 697. PETITION DENIED.