Case Involving Unilateral Modification to Power Contracts Heading to Supreme Court

Michael Giberson

Tracy Davis, writing at Energy Legal Blog, takes note of the Supreme Court's decision to take on a pair of Ninth Circuit court decisions:

In a pair of decisions issued last December, Public Utility District No. 1 of Snohomish County, WA v. FERC and California Public Utilities Commission v. FERC, the Ninth Circuit held that the long-standing Mobile-Sierra doctrine and its "public interest" standard did not protect contracts from unilateral modification when they were entered in a dysfunctional market that caused prices to exceed a "zone of reasonableness." The Ninth Circuit held that FERC should have reviewed the circumstances under which the contracts were entered, and possibly set those contracts aside if it found the prices to be unreasonable.

Several groups of sellers sought Supreme Court review of the Snohomish and CPUC decisions to determine whether the Ninth Circuit's formulation of the Mobile-Sierra doctrine was appropriate. Many argued the Ninth Circuit's view would upend contract certainty in electric markets, thereby inhibiting investment, if contracts could later be revised because of changes in the market, buyer's remorse, or other circumstances outside of a seller's immediate control.

Also at Energy Legal Blog this morning: Commodity Futures Trading Commission and Federal Energy Regulatory Commission No Longer Playing Nice In Jurisdictional Battle over Gas Futures Market Enforcement.