Ferc

The energy crisis in 2000-2001 resulted in extreme power shortages and price volatility in California and other western states. This consolidated appeal raises several interrelated issues concerning a series of wholesale energy contracts for future energy supplies — known as “forward” contracts — entered into by power companies in California, Nevada, and Washington during the energy crisis. Petitioners, including retail power companies and state agencies, contended before the Federal Energy Regulatory Commission (FERC) that the contracts should be modified, but FERC concluded that they should not be.

Petitioners (the “local utilities”) now allege that FERC, in so deciding, did not appropriately apply the just and reasonable standard set by section 206(a) of the Federal Power Act (FPA). They allege that FERC erred in applying the Mobile-Sierra “public interest” mode of review to contracts that were (1) not subject to meaningful initial review or approval, and (2) formed during one of the most erratic and bizarre periods of activity for the western energy market.

We hold that FERC erred both in its procedural reliance on Mobile-Sierra and in the substantive standard it used in…