The U.S. Supreme Court last Tuesday said it would hear two cases in which a Nevada utility and Pacific Northwest utility district seek to terminate above-market power contracts that were signed during the western energy market meltdown in 2000-2001.

The case before the high court puts a spotlight on the higher Mobile-Sierra public interest standard that the Federal Energy Regulatory Commission used in June 2003 to uphold the sanctity of long-term power contracts, which buyers negotiated with suppliers during the West Coast energy crisis in 2000-2001.

The challengers had argued that the contracts were “unjust and unreasonable” because of the crisis-driven prices, but FERC said they had failed to meet the higher Mobile-Sierra doctrine that required them to show that the contracts were contrary to the public interest. In December 2006, the U.S. Circuit Court of Appeals for the Ninth Circuit disagreed with FERC and remanded the case.

The Snohomish County Public Utility District (PUD) in Washington state and Las Vegas, NV-based Nevada Power Co., which is owned by Sierra Pacific Resources, then appealed the ruling to the Supreme Court. A group of power suppliers in August filed an amicus brief with the Supreme Court, seeking to overturn the Ninth Circuit’s decision.

The Electric Power Supply Association (EPSA) said it welcomed the high court’s decision to review the Ninth Circuit’s ruling. “As EPSA stated at the time of the troubling decisions issued by a panel of the Ninth Circuit in December 2006, contract stability is essential to any industry, but particularly one such as electricity with long lead development times and high capital costs,” said EPSA President John E. Shelk. “The uncertainty created by the Ninth Circuit decisions could prove costly for consumers and suppliers alike” if allowed to stand.

The high court has consolidated the Snohomish PUD and Nevada Power cases. The cases are styled Morgan Stanley Capital Group vs. Public Utility District, et al. [06-1457], and Calpine Energy Services vs. Public Utility District, et al. [06-1462]. The brief of petitioners is due Nov. 5; the brief of respondents is due Dec. 3; and reply briefs are to be filed by Dec. 28.

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