Public Citizen Leads Consumer Advocates? Challenge to FERC?s Illegal Deregulation of Electricity Rates

Public Citizen and a group of State Attorneys General and other national and State consumer advocacy groups* (together, “Consumer Advocates”) have filed briefs in the U.S. Court of Appeals for the D.C. Circuit challenging the deregulation of wholesale electricity rates by the federal agency that is supposed to regulate them. This agency, the Federal Energy Regulatory Commission, or FERC, is required by the 1935 Federal Power Act to ensure that all prices charged between utilities (for ultimate resale to retail customers) are “just and reasonable.” The U.S. Supreme Court has held that the goal of Congress in enacting the Federal Power Act was to ensure consumers a “complete, effective and permanent bond of protection” from excessive wholesale electric rates. Instead, Consumer Advocates contend, FERC has in recent years illegally deregulated such rates by allowing “the market,” that is, the utilities themselves, to set wholesale electric prices by agreement, without measuring such prices against the seller’s costs to ensure that huge profits are not being made off of essential utility services. 

In their briefs, Consumer Advocates cite court decisions that find buyers in wholesale markets lack incentives to negotiate strongly for lower rates because the States are required by the U.S. Constitution to pass through such FERC-accepted wholesale prices to retail utility ratepayers. Wholesale buyers have only mildly protested as FERC has effectively deregulated wholesale electricity sales without benefit of a change in the Federal Power Act, perhaps because it is the ultimate retail consumers who actually pay these passed-through prices. Consumer Advocates in their appeal cite numerous cases in which the U.S. Supreme Court and other courts have held that only Congress, not FERC, can permit deregulation of a Congressionally-regulated utility service, such as wholesale electric sales, and Congress has not done so here.  Congress would, at the least, have to hold hearings to determine whether deregulation is either workable or desirable in the unique context of wholesale electricity sales.  Moreover, Congress, unlike the FERC, would have to answer to voters if it decides to allow an essential service like wholesale electricity to become deregulated after seventy years.

Read Public Citizen's Press Release on the Case 
Read the Consumer Advocates' Initial Brief
Read FERC's Response Brief
Read the Consumer Advocates' Reply Brief

Click here for more on the history of the case.
Click here for more information on the impacts of deregulation on the public.

*Colorado Office of Consumer Counsel, the Rhode Island Attorney General, the New Mexico Attorney General, the Utah Committee of Consumer Services, the Public Utility Law Project of New York, Inc., the National Consumer Law Center on behalf of its low income clients, and Public Citizen, Inc., D.C. Circuit No. 04-1238, consolidated under CINERGY Marketing & Trading, LP, D.C. Circuit No. 04-1168.

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