MAYER, BROWN & PLATT

SUPREME COURT DOCKET REPORT

2000 Term, Number 10 / February  26, 2001

Today the Supreme Court granted certiorari in five cases, two of which have been consolidated and are of potential interest to the business community. Amicus briefs in support of the petitioners are due on Thursday, April 12, 2001, and amicus briefs in support of the respondents are due on Monday, May 14, 2001. Any questions about these cases should be directed to Donald Falk (202-263-3245), Eileen Penner (202-263-3242) or Miriam Nemetz (202-263-3253) in our Washington office.

1. FERC — Jurisdiction to Regulate Transmission of Electricity to Retail Customers. The Federal Power Act ("FPA") gives the Federal Energy Regulatory Commission ("FERC") jurisdiction over "the transmission of electric energy in interstate commerce" and "all facilities for such transmission." 16 U.S.C. § 824(b). It also gives FERC jurisdiction over "the sale of electric energy at wholesale in interstate commerce." Id. The Supreme Court granted certiorari in and consolidated New York v. FERC, No. 00-568, and Enron Power Marketing, Inc. v. FERC, No. 00-809, to decide (1) whether FERC has jurisdiction to regulate the transmission of electricity to in-state retail customers when the electricity and its delivery are "bundled," or sold at one combined rate; and (2) whether FERC has jurisdiction to regulate transmission of electricity to in-state retail customers when the charges for delivery and electricity are unbundled.

In 1996, FERC issued Order No. 888, which was designed to promote competition in the sale of electricity. See Order No. 888, FERC Stats. & Regs. (CCH) ¶ 31,036, 61 Fed. Reg. 21,540 (clarification and rehearing orders omitted). To give electricity generators and resellers access to electricity transmission facilities, FERC required public utilities to "unbundle" their prices for wholesale generation and transmission services, and to make transmission services available to all wholesalers at the prices they charge their own wholesale customers. FERC asserted jurisdiction over, and applied the same requirements to, all unbundled retail transmissions, leaving to the states the regulation of only the sales portion of unbundled retail transactions. However, FERC declined to assert jurisdiction over bundled retail transmissions, concluding that "when transmission is sold at retail as part and parcel of the delivered product called electric energy, the transaction is a sale of electric energy at retail" over which FERC lacks jurisdiction. Order No. 888, ¶ 31,036 at 31,781. Thus, FERC allowed electric utilities to continue to give their retail customers purchasing bundled energy and transmission preferential access to transmission services. 

Regulatory agencies of New York and other states challenged the regulation, contending that FERC had jurisdiction only over interstate transmission of electricity, and lacked power to regulate unbundled retail transmissions. Enron Power Marketing, Inc., the nation's largest power wholesaler, contended that FERC had understated its jurisdiction by declining to regulate bundled retail transmissions. 

The D.C. Circuit upheld FERC's interpretation of its jurisdiction. 225 F.3d 667 (2000) [97-1715b | 97-1715c].  Noting that the Supreme Court held in Federal Power Commission v. Florida Power & Light Co., 404 U.S. 453 (1972), that the connection of utilities to the interstate grid commingles electricity so that it flows across state lines, the court of appeals concluded that FERC had the authority to regulate all unbundled transmissions, whether retail or wholesale. 225 F.3d at 694. The court also upheld FERC's decision not to assert jurisdiction over bundled retail transmissions, stating that "FERC's decision to characterize bundled transmissions as part of retail sales subject to state jurisdiction * * * represents a statutorily permissible policy choice to which we must * * * defer under [Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984)]." 225 F.3d at 694-695.

The case is of immediate concern to all companies involved in the generation, transmission, or distribution of electricity. Because the case may affect the extent of competition in the national electricity market, any large-scale user of electricity should also be interested in its outcome. 

This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.