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Electric Ratepayers Finally Get their Day in Court

Public Citizen has finally gotten a briefing schedule in the Ninth Circuit Court of Appeals for our challenge to the legality of the congressionally unauthorized deregulation of electric rates by the federal agency charged with regulating them, the Federal Energy Regulatory Commission or “FERC.”  FERC’s so-called “market rate” regime allows electric utilities to set their own rates by negotiating with wholesale sellers for whatever price the market will bear.  FERC simply reviews the seller to see if, in FERC’s view, it has “market power”; if not, FERC allows the prices, or rates, to be treated as though they had been filed with and reviewed by FERC, as mandated by the Federal Power Act, even though FERC has never seen the rates, much less reviewed them to determine if they are “just and reasonable” as the law requires.

FERC has thus turned itself into an antitrust review agency rather than an electric rate review agency, despite the facts that the Federal Power Act does not provide for such a metamorphosis and that FERC has no particular expertise in antitrust law.  In addition, FERC’s “market based rates” system is based on the premise that there is now substantially more competition among power generators than there was in 1935 when the FPA was passed. Unfortunately, at the same time, (a) FERC supported the 2005 repeal of the 1935 Public Utility Holding Company Act (PUHCA) which was an extremely effective utility antitrust and regulatory law, and (b) FERC now grants every utility merger application that comes before it for approval, including proposed mergers of huge utility holding companies that had to “register” under PUHCA and become highly regulated because of their tremendous economic power. As a result, there is now rapidly increasing concentration of utility ownership, rather than an increased number of actual utility competitors.

Effectively, FERC no longer regulates electric rates for resale, while still pretending to do so. As a result, state utility commissions are still required, by federal preemption, to pass through to retail electric consumers the power prices that selling utilities have negotiated, even though FERC has never reviewed such rates to determine whether they are “just and reasonable” as the Federal Power Act demands it must.

This means that you and I have lost our protection from excessive wholesale electric rates even though a law guaranteeing such protection is still on the books.

Public Citizen challenged FERC’s rulemaking on market based rules before the agency and in the court when those rules were first issued in June, 2007. FERC has since granted numerous revisions to parts of those rules, preventing them from becoming final for court review until recently.  Public Citizen now has a briefing date in the Ninth Circuit of September 23, 2010.  There, we can make the legal and consumer policy case that FERC should regulate wholesale electric rates to ensure that they are “just and reasonable” to consumers as its enabling statute, the Federal Power Act, demands. Scott Nelson, a senior Litigation attorney, will write the briefs.

-Lynn Hargis is an energy attorney for Public Citizen’s Energy Program.