(CN) – The Supreme Court on Wednesday made it more difficult for third parties to challenge energy rates approved by the Federal Energy Regulatory Commission, ruling 8-1 that third parties can only challenge a contract rate that “seriously harms the consuming public.”
The D.C. Circuit had ruled that third parties weren’t bound by the strict public-interest standard established in the Supreme Court’s Mobile-Sierra provision.
Under that provision, FERC must presume that an energy agreement between two more parties is “just and reasonable,” unless the commission concludes that the contract severely harms the public interest.
In 2006, FERC approved a settlement among 115 negotiating parties over electricity rates in New England, where for many years energy supply barely met demand.
Eight parties objected to the settlement agreement, six of which sought review in the D.C. Circuit, including the Maine Public Utilities Commission and the attorneys general of Connecticut and Massachusetts.
The federal appeals court largely rejected their objections, but agreed with them on the Mobile-Sierra issue, holding that the provision only applies to contracting parties.
NRG Power Marketing and other companies defending the settlement appealed, arguing that non-parties should not be able to disrupt contracts so easily.
Justice Ruth Bader Ginsburg agreed that the D.C. Circuit’s restriction of the Mobile-Sierra doctrine to contracting parties “diminishes the animating purpose of the doctrine: promotion of ‘the stability of supply arrangements which all agree is essential to the health of the [energy] industry.”
“A presumption applicable to contracting parties only, and inoperative as to everyone else-consumers, advocacy groups, state utility commissions, elected officials acting parens patriae-could scarcely provide the stability Mobile-Sierra aimed to secure,” she wrote.
She concluded that the “just-and-reasonable” presumption extends to third-party challenges.
In a lone dissent, Justice John Paul Stevens called the decision “the third chapter in a story about how a reasonable principle, extended beyond its foundation, becomes bad law.”
In this story, he said, “the Court applies a rule-one designed initially to protect the enforceability of freely negotiated contracts against parties who seek a release from their obligations-to impose a special burden on third parties exercising their statutory right to object to unjust and unreasonable rates.”
“This application of the rule represents a quantum leap from the modest origin set forth in the first chapter of this tale.”