The U.S. Supreme Court last Monday declined to hear a recent challenge to a lower court’s ruling affirming that transfers of electric generating facilities between public utilities are not subject to FERC’s review under section 203 of the Federal Power Act (FPA).

The decision is a blow to the American Public Power Association (APPA) and Citizen Power, a non-profit advocacy organization, both of which have been pushing hard over the past several years for a federal review of such transactions.

This week’s action at the Supreme Court can be traced back to filings made by APPA and Citizen Power in 1999 and 2000 at the Federal Energy Regulatory Commission. APPA and Citizen Power asked the Commission to clarify whether under section 203 of the FPA, FERC has jurisdiction when a public utility disposes of generation-only facilities.

APPA and Citizen Power told FERC that federal review of generation-only transactions is needed, given what they perceived as the failure of state regulation to protect the public interest and promote competition in the restructured electric utility industry. APPA and Citizen Power also said that while they were aware of the Commission’s precedents disclaiming jurisdiction in this area, the association and Citizen Power believe that these cases were wrongly decided.

FERC, in an order issued on Feb. 7, 2001, rejected the arguments forwarded by APPA and Citizen Power. “For Section 203 purposes, the term jurisdictional facilities has never been read to include generation facilities,” FERC said in the order.

In addition, the Commission pointed out that another section of the FPA expressly exempts from FERC’s jurisdiction facilities used for the generation of electric energy. Consistent with this explicit statutory language, the Commission has held repeatedly that Section 203 does not apply to dispositions of generation only facilities.

APPA and Citizen Power the following month filed a request for rehearing of the Commission’s decision, an appeal that was quickly rejected by FERC.

In response, APPA and Citizen Power asked the U.S. Court of Appeals for the District of Columbia Circuit to review FERC’s 2001 orders. But the court of appeals also turned a deaf ear to the arguments made by the public power group and Citizen Power. The court said that under the “plain text” of the FPA, FERC properly disclaimed jurisdiction over generation-only transactions.

Not satisfied with that ruling, APPA and Citizen Power on Sept. 19 filed a so-called “Writ of Certiorari” at the Supreme Court seeking the high court’s review of the denial of the appeal made by APPA and Citizen Power to the court of appeals.

The petition asserted that the decision by the court of appeals conflicts with prior Supreme Court and other lower court rulings. The petition further argued that resolving the conflict of opinions is extremely important to the nation’s electricity industry and customers.

“The industry is now undergoing a fundamental restructuring that makes generator disposition review essential,” APPA and Citizen Power said. “Vertically-integrated utilities, legacies of the break up that followed the Public Utility Holding Company Act of 1935, are in turn being dismantled.”

APPA and Citizen Power also pointed out that denial of market entry through transmission control used to be the main source of vertically integrated utilities’ market power. “With transmission control being passed to generation-independent entities and the loosening of rate regulation, the main market power problem becomes the consolidation of generation control.”

The petition said that if the D.C. court of appeals’ “erroneous finding that FERC has no jurisdiction over generator dispositions is allowed to stand, generators will be consolidated and multi-state markets imperiled without FERC review.”

In addition, APPA and Citizen Power said that state regulatory commissions and other federal agencies “are no substitute for FERC’s national public interest mandate, energy expertise and Congressionally-intended ability to integrate disposition review with other forms of ongoing regulatory supervision.”

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