In Re Electric Refund Cases

INTRODUCTION

The facts underlying this appeal concern the intricate realm of California’s energy crisis of May 2000 to June 2001. The precise legal issue, however, is relatively straightforward: the exhaustion of administrative remedies doctrine. Plaintiffs and appellants are Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company (collectively referred to as the IOU’s), entities that bought electricity during the crisis. Defendant and respondent is Arizona Electric Power Cooperative, Inc. (Arizona), which sold electricity during the crisis.

In 2000, the IOU’s initiated a proceeding before the Federal Energy Regulatory Commission (FERC), the federal agency charged with regulating transmission and sale of electric energy for resale in interstate commerce. FERC found that unjust and unreasonable rates had been charged during the crisis and ordered refunds from energy sellers, including Arizona. The problem with the order was that FERC’s jurisdiction extended to “public utilities,” which essentially were private sellers of energy. “Nonpublic entities,” including governmental entities, were not subject to FERC’s…