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U.S. Supreme Court Refuses to Hear Snohomish Appeal Against Western Power Suppliers

The U.S. Supreme Court last week declined without explanation to hear an appeal by the Public Utility District (PUD) of Snohomish County, WA, which sought millions of dollars in refunds for power purchases it made during the western U.S. electricity crisis of 2000-01.

The move by the U.S. Supreme Court now means that the PUD's only avenue of relief is through the Federal Energy Regulatory Commission (FERC), which can return profits, but does not have the authority to order punitive damages.

"We are obviously disappointed," said Eric Christensen, the PUD's assistant General Counsel. "The upshot of it is we now have to focus our efforts on FERC, which is pretty much the remaining forum to get relief for our ratepayers. From a public policy perspective, the whole problem with this doctrine is that FERC has very limited power to make consumers whole and to punish those who would violate market rules and exercise market power."

Under these rulings, Christensen said the worst that can happen to a company that intends to manipulate the electricity market is that FERC may take away your profits. "That is a very dangerous precedent," he said.

As it has in various legal and regulatory forums, Snohomish PUD filed a case in July 2002 against Dynegy and a number of other wholesale power suppliers based on their alleged market manipulations during the western crisis period in 2000-2001.

Defendants included Duke Energy, Dynegy Inc., Mirant Corp., Reliant Energy Inc., Sempra Energy, Williams and Xcel Energy Inc.

The PUD alleged that the suppliers used their market power with merchant plants they operated in California to create false shortages that in turn drove up already-high wholesale electricity prices. A federal district court in Southern California rejected Snohomish's case, holding that the claims were preempted by federal law, which authorizes FERC to set wholesale electricity rates.

Snohomish subsequently appealed that ruling unsuccessfully to the U.S. Court of Appeals for the Ninth Circuit. The PUD asserted that FERC's policy of setting rates in accordance with market forces amounts to an abdication of rate making.

In March, the U.S. Supreme Court gave some belated attention to the appeal, but gave no assurances that the case would be heard.

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