Duke Energy Trading and Marketing, L.L.C. v. Gray Davis, Governor of the State of California, and California Power Exchange Corporation

267 F.3d 1042 (9th Cir. 2001) DUKE ENERGY TRADING AND MARKETING, L.L.C., PLAINTIFF APPELLANT, v. GRAY DAVIS, GOVERNOR OF THE STATE OF CALIFORNIA, DEFENDANT APPELLEE, AND CALIFORNIA POWER EXCHANGE CORPORATION, DEFENDANT. No. 01-55770 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT San Francisco, California Filed September 20, 2001 Filed September 20, 2001 1 [Copyrighted Material Omitted] 2 Counsel Geoffrey Bestor (argued), Barry R. Ostrager, Seth A. Ribner, Steven H. Bergman, Simpson Thacher & Bartlett, Universal City, California; Joel B. Kleinman, Larry F. Eisenstat, Geoffrey Bestor, Mark L. Perlis, Dickstein Shapiro Morin & Oshinsky Llp, for Appellant. 3 Danette E. Valdez (argued), Deputy Attorney General, Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistance Attorney General, Morris Beatus, Senior Assistant Attorney General, Andrea Lynn Hoch, Supervising Deputy Attorney General, San Francisco, California, for Appellee. 4 Appeal from the United States District Court for the Central District of California Terry J. Hatter, Chief District Judge, Presiding Argued and Submitted August 16, 2001 D.C. No. CV-01-01252-TJH 5 Before: Harlington Wood, Jr., * Alex…

*1045 OPINION

We must decide whether a wholesale energy supplier is entitled to injunctive relief from orders issued by the Governor of California commandeering its contractual rights to deliver electricity to public utilities within the state.

I

A

The electricity contracts at issue in this appeal are the products of the restructuring of the California electricity market, which commenced with the 1996 passage of Assembly Bill 1890 (“AB 1890”). 1996 Cal. Legis. Serv. 854 (West). AB 1890 called for the creation of the California Power Exchange (“CalPX”), a nonprofit entity that would provide an initially-mandatory auction market for the trading of electricity. 1 Electricity Restructuring Act § 1(c). The CalPX was deemed a public utility under the Federal Power Act (“FPA”); hence, it was subject to the jurisdiction of the Federal Energy Regulatory Commission (“FERC”) and operated pursuant to FERC-approved tariffs and FERC-ap-proved wholesale rate schedules. 2 Pac. Gas & Elec. Co., 77 FERC ¶ 61,204 , at 61,803-05 (Nov. 26, 1996).

The CalPX commenced operations in March 1998. Initially, it operated only a single-price auction for day-ahead and day-of electricity trading (the…

dissenting.

Whether plaintiff may maintain this action against the Governor of California under Ex parte Young, 209 U.S. 123 , 28 S.Ct. 441 , 52 L.Ed. 714 (1908), is surely a close and difficult question. Judge O’Scannlain has written a fine opinion and I am almost persuaded — but not quite. I read Idaho v. Coeur d’Alene Tribe, 521 U.S. 261 , 117 S.Ct. 2028 , 138 L.Ed.2d 438 (1997), as creating an exception to Ex parte Young where the suit implicates the state’s fundamental sovereign interests. 521 U.S. at 282-84, 287-88 , 117 S.Ct. 2028 . Here, Governor Davis exercised the state’s power of eminent domain in response to what was concededly a major emergency affecting the health, safety, welfare and comfort of the people of California. This emergency affected not merely the price of electrical power, but its very availability. For the first time in its history, the state was confronted with rolling blackouts which themselves caused serious disruptions; there was good reason to believe that far worse was in store.

Under authority vested in him by the state legislature, the Governor acted decisively to restore order in the electricity market and thus to avert further disruptions.…