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No. 07-835

 

In the Supreme Court of the United States

COLORADO OFFICE OF CONSUMER COUNSEL, ET AL.,
PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION, ET AL.

 

 

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE
FEDERAL ENERGY REGULATORY COMMISSION
IN OPPOSITION

 

PAUL D. CLEMENT
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

CYNTHIA A. MARLETTE
General Counsel
ROBERT H. SOLOMON
Solicitor
LONA T. PERRY
Senior Attorney
Federal Energy Regulatory
Commission
Washington, D.C. 20426

QUESTION PRESENTED

Whether the Federal Energy Regulatory Commis sion was required, in a Commission-initiated investiga tion into the tariffs of wholesale sellers of electricity with market-based rate authorization, to address peti tioners' broader challenges to the Commission's market- based rate program.

In the Supreme Court of the United States

No. 07-835

COLORADO OFFICE OF CONSUMER COUNSEL, ET AL.,
PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE
FEDERAL ENERGY REGULATORY COMMISSION
IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-5a) is reported at 490 F.3d 954. The orders of the Federal Energy Regulatory Commission (Pet. App. 17a-128a, 129a-215a) are reported at 105 F.E.R.C. ¶ 61,218 and 107 F.E.R.C. ¶ 61,175.

JURISDICTION

The judgment of the court of appeals was entered on June 22, 2007. Petitions for rehearing were denied on August 20, 2007 (Pet. App. 6a, 7a). The petition for a writ of certiorari was filed on November 19, 2007 (Monday). The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. a. The Federal Power Act (FPA), 16 U.S.C. 791a et seq., grants the Federal Energy Regulatory Commis sion (Commission or FERC) jurisdiction over the "transmission of electric energy in interstate commerce" and the "sale of electric energy at wholesale in inter state commerce." 16 U.S.C. 824(b)(1). Proposed rates for the sale or transmission of power within the Commis sion's jurisdiction are subject to FERC review to ensure that they are "just and reasonable" and not unduly dis criminatory or preferential. 16 U.S.C. 824d(a).

In addition to reviewing proposed rates, the Commis sion may also initiate proceedings to investigate the justness and reasonableness of any existing rate. If the Commission determines that any "rate, charge, or classi fication," or "any rule, regulation, practice, or contract affect[ing] such rate, charge, or classification," is "un just, unreasonable, unduly discriminatory or preferen tial," then the Commission must determine and "fix" the "just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter ob served and in force." 16 U.S.C. 824e(a) (Supp. V 2005).

b. Until the 1980s, the Commission established rates primarily on a cost-of-service basis. As barriers to entry in the generation sector declined, however, a competi tive market for wholesale sales of electricity began to develop. In response to those developments, the Com mission began considering and approving market-based rates for wholesale electricity sales in the late 1980s.

Under the Commission's market-based rate pro gram, the Commission approves a seller's request to sell electricity at market-based rates only if it first finds that the seller and its affiliates either do not have mar ket power or have adequately mitigated their market power. See California ex rel. Lockyer v. FERC, 383 F.3d 1006, 1009 (9th Cir. 2004), cert. denied, 127 S. Ct. 2972 (2007) (Lockyer). Market-based rates are permis sible in those circumstances because "when there is a competitive market the FERC may rely upon market- based prices in lieu of cost-of-service regulation to as sure a 'just and reasonable' result." Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870 (D.C. Cir. 1993) (Eliza bethtown). See Lockyer, 383 F.3d at 1013 (noting that "[i]n a competitive market, where neither buyer nor sel ler has significant market power, it is rational to assume that the terms of their voluntary exchange are reason able") (quoting Tejas Power Corp. v. FERC, 908 F.2d 998, 1004 (D.C. Cir. 1990) (Tejas)).

2. a. From 2000 until mid-2001, the California elec tric energy markets were subject to considerable up heaval, and the Commission responded by conducting an investigation under Section 824e into the justness and reasonableness of rates in those markets. See Lockyer, 383 F.3d at 1009. The Commission determined that the "'California market structure provide[d] the opportunity for sellers to exercise market power' in times of tight supply and that such market power could result in 'un just and unreasonable rates.'" Id. at 1010 (quoting San Diego Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs., 93 F.E.R.C. ¶ 61,121 (2000) (San Diego)). The Commission further concluded that the "electric market structure and market rules for wholesale sales of elec tric energy in California [were] seriously flawed" and had helped to cause, "and continue[d] to have the poten tial to cause, unjust and unreasonable rates for short- term energy * * * under certain conditions." Id. at 61,349-61,350.

b. As a result of its experience with the California markets, the Commission became concerned that public utilities with market-based rate authorization elsewhere might be able, under certain circumstances, to exercise market power or engage in anticompetitive behavior that could result in unjust and unreasonable rates. See Investigation of Terms & Conditions of Pub. Util. Mar ket-Based Rate Authorizations, 97 F.E.R.C. ¶ 61,220, at 61,976 (2001) (Investigation I). Accordingly, in an order issued in November 2001, the Commission instituted a proceeding under Section 824e to investigate the just ness and reasonableness of the market-based rate tariffs and authorizations of public utilities that sell electric energy and ancillary services at wholesale in interstate commerce. Id. at 61,977. Although the Commission did not find that particular sellers had exercised market power, it proposed to protect against the possibility of unjust and unreasonable rates by taking steps to mini mize the potential for market-power abuse or anticom petitive behavior. Id. at 61,976.

Specifically, the Commission proposed to revise all existing market-based rate tariffs and authorizations to include the following provision: "As a condition of ob taining and retaining market-based rate authority, the seller is prohibited from engaging in anticompetitive behavior or the exercise of market power. The seller's market-based rate authority is subject to refunds or other remedies as may be appropriate to address any anticompetitive behavior or exercise of market power." Investigation I, 97 F.E.R.C. at 61,976. The Commission also proposed to include that provision in all new mar ket-based rate tariffs and authorizations. Ibid.

After receiving comments on its proposal, and after taking into account additional information regarding behavior that occurred in western markets in 2000 and 2001, as well as additional experience in other competi tive markets (especially organized spot markets in the east), the Commission issued a modified proposal. In vestigation of Terms & Conditions of Pub. Util. Market- Based Rate Authorizations, 103 F.E.R.C. ¶ 61,349, at 62,372 (2003) (Investigation II). That proposal was aimed at identifying more precisely and comprehen sively the transactions and practices that would be pro hibited under sellers' market-based rate tariffs and au thorizations. Specifically, the Commission proposed six Market Behavior Rules relating to (1) unit operation (requiring generators and other sellers to comply with market rules); (2) market manipulation (prohibiting ac tions without a legitimate business purpose that manipu late or attempt to manipulate the market); (3) communi cations (prohibiting false or misleading communica tions); (4) reporting (requiring accurate reporting of transactions); (5) record retention (retaining informa tion necessary to reconstruct energy prices charged for a period of three years); and (6) related tariffs (requir ing compliance with seller's code of conduct and the standards of conduct under Open Access Same-Time In formation System and Standards of Conduct, Order No. 889, FERC Stats. & Regs. ¶ 31,037, 61 Fed. Reg. 21,737 (1996)). Investigation II, 103 F.E.RC. at 62,375-62,377. In November 2003, after considering comments submit ted in response to the modified proposal, the Commis sion issued an order amending market-based rate tariffs and authorizations to include the Market Behavior Rules. Pet. App. 17a-128a.

Several parties, including petitioners, sought rehear ing. They challenged the scope of the agency-initiated proceeding, arguing that the Commission's Market Be havior Rules rested on the assumption that market- based rates can be just and reasonable, an assumption they contended was inconsistent with the FPA. Pet. App. 183a. The Commission denied rehearing. Id. at 129a-215a. The Commission explained that its orders were focused narrowly on "seller conduct." Id. at 184a. The broader issues raised by petitioners, the Commis sion had previously observed, were best addressed "in other concurrent proceedings," id. at 82a, not "in the context of this proceeding," id. at 184a.

c. Petitioners sought review in the court of appeals. After the petitions were filed but before the case was decided, the Commission rescinded certain Market Be havior Rules, including Rule 2 (prohibiting anticom petitive behavior), on the ground that they were unnec essary in light of the Commission's new authority to pro hibit manipulative devices or contrivances under the Energy Policy Act of 2005 (2005 Act), Pub. L. No.109-58, § 1283, 119 Stat. 979 (16 U.S.C. 824v). See In vestigation of Terms & Conditions of Pub. Util. Market- Based Rate Authorizations, 114 F.E.R.C. ¶ 61,165 at 61,528-61,529 (2006) (Investigation III). The remaining Market Behavior Rules were removed from seller tariffs and codified in regulations applicable to market-based rate sellers. Ibid.

3. The court of appeals denied the petitions for re view. Pet. App. 1a-5a. The court held that the petitions were not moot, because the rescission of the market- based rules did not change the Commission's determina tion that market-based rates under the old tariffs had become unjust and unreasonable. Id. at 3a.

On the merits, petitioners argued that the Commis sion had found market-based rates unjust and unreason able, and that it was therefore required not simply to enact new rules to govern sellers' behavior, but to "fix" a new just and reasonable rate. Pet. App. 2a-3a. Ac cording to petitioners, fixing a new just and reasonable rate would require rejection of all market-based rates. Ibid. The court of appeals disagreed. It held that 16 U.S.C. 824e (2000 & Supp. V 2005) did not require the Commission, having found only one aspect of the mar ket-based rate tariffs to be unjust or unreasonable, to revisit all elements of market-based rate tariffs. Pet. App. 4a.

The court of appeals explained that "[w]hile the stat ute requires the Commission to act upon a finding that rates * * * are unjust or unreasonable, it nowhere mandates that having made such a finding with respect to a discrete issue, the Commission must reopen and reevaluate all other aspects of the filed rate." Pet. App. 4a. "To the contrary," the court observed, the statute requires "that '[a]ny complaint or motion of the Commis sion to initiate a proceeding under this section shall state the change or changes to be made in the rate,'" and it requires "that the Commission 'specify the issues to be adjudicated'" in a hearing under Section 824e. Ibid. (quoting 16 U.S.C. 824e(a) (Supp. V 2005)) (alterations in original). The court concluded that "the FPA makes clear that" proceedings under Section 824e "are de signed to identify and address * * * discrete issues." Ibid. Having initiated a discrete investigation into the specific issues of anticompetitive behavior and market manipulation, and having adopted the Market Behavior Rules, the Commission had "fixed" the rate with respect to the only issues it had set forth in its order initiating the proceeding. Id. at 5a.

ARGUMENT

Petitioners renew their argument (Pet. 7-13) that the Commission, having initiated a proceeding under 16 U.S.C. 824e (2000 & Supp. V 2005) to consider certain aspects of market-based rates, was required to expand its inquiry to address other issues raised by petitioners. The court of appeals correctly rejected that argument, and its decision does not conflict with any decision of this Court or any other court of appeals. The decision below does not limit the Commission's authority; in stead, it recognizes that when the Commission initiates an investigation, it is not obligated to resolve issues that are outside the scope of that investigation. Nothing in the decision limits the right of interested persons to file a complaint under Section 824e or to raise relevant is sues in the context of a rulemaking. Further review is not warranted.

1. Petitioners assert (Pet. 9-10) that the decision below "would restrict FERC's authority" in a proceed ing under Section 824e "to considering only those rate elements that it proposes to remedy at the outset of a hearing, regardless of any evidence or legal arguments produced by others during the hearing." Petitioners are incorrect. The decision of the court of appeals reflects nothing more than the long-recognized authority of the Commission to determine the scope of its own investiga tion, and to address the justness and reasonableness of individual rate elements without the obligation of con ducting a full-blown rate examination. The Commission certainly has authority under Section 824e(a) "to ad dress all unlawful elements of initial and 'long-estab lished' rates" (Pet. 11), but that does not mean that the Commission is required to expand the scope of its inves tigation to address every element of a rate before it may find one element unjust and unreasonable.

As the court of appeals explained, "[w]hile the stat ute requires the Commission to act upon a finding that rates (or regulations, practices, or contracts affecting those rates) are unjust or unreasonable, it nowhere man dates that having made such a finding with respect to a discrete issue, the Commission must reopen and reeval uate all other aspects of the filed rate." Pet. App. 4a. Instead, the statute provides that a "complaint or mo tion of the Commission to initiate a proceeding * * * shall state the change or changes to be made in the rate," and it also requires that the Commission's order setting a hearing shall "specify the issues to be adjudi cated." 16 U.S.C. 824e(a) (Supp. V 2005). Based on that language, the court correctly concluded that proceed ings under Section 824e "are designed to identify and address * * * discrete issues." Pet. App. 4a.

2. The decision of the court of appeals is consistent with this Court's decisions interpreting the FPA. For example, in New York v. FERC, 535 U.S. 1 (2002), the Court upheld Commission orders issued under Section 824e that required every transmission-owning utility under Commission jurisdiction to file a tariff providing for open access in order to remedy undue discrimination. The Court rejected contentions that the Commission should have extended its open-access remedy to bundled retail transactions, and it emphasized that the problem FERC sought to remedy in the first place was discrimi nation in the wholesale power market. Id. at 26. "Be cause FERC determined that the remedy it ordered constituted a sufficient response to the problems FERC had identified in the wholesale market, FERC had no [Section 824e] obligation to regulate bundled retail transmissions or to order universal unbundling." Id. at 27. The Court acknowledged that findings of discrimina tion in the wholesale market might suggest the existence of such discrimination in the retail market, but it con cluded that "because the scope of the order presently under review did not concern discrimination in the retail market," the Commission was not obligated "to provide a full array of retail-market remedies." Ibid.

This Court reached a similar conclusion in Mobil Oil Exploration & Producing Southeast, Inc. v. FERC, 498 U.S. 211 (1991) (Mobile Oil), with regard to a Commis sion-initiated rulemaking under the Natural Gas Policy Act of 1978, 15 U.S.C. 3301 et seq., concerning the vin tage pricing of "old" natural gas. The Commission re jected suggestions that its rulemaking should also re solve the issue of take-or-pay provisions in certain natu ral gas contracts. Mobile Oil, 498 U.S. at 220. This Court affirmed that determination, holding that "[a]n agency enjoys broad discretion in determining how best to handle related, yet discrete, issues in terms of proce dures," id. at 230, and that "an agency need not solve every problem before it in the same proceeding." Id. at 231. See Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 543 (1978) ("Absent constitutional constraints or extremely compelling circumstances the administrative agencies should be free to fashion their own rules of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudi nous duties.") (quotation marks omitted); FCC v. Potts ville Broad. Co., 309 U.S. 134, 142-143 (1940) ("Adminis trative agencies have power themselves to initiate in quiry, or, when their authority is invoked, to control the range of investigation in ascertaining what is to satisfy the requirements of the public interest."). Cf. FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 154- 155 (1962) (under Natural Gas Act (NGA) § 5, 52 Stat. 823, 15 U.S.C. 717d, the Commission may impose relief with regard to a particular rate element after finding that element unjust and unreasonable, even though other rate issues are still being litigated); FPC v. Natu ral Gas Pipeline Co., 315 U.S. 575, 585 (1942) (under NGA § 5, the Commission may enter an order decreas ing revenues in advance of establishing a specific sched ule of rates).

The decision below is also consistent with the deci sions of other courts of appeals, which have consistently held that agencies are not obligated to expand rate in vestigations beyond their intended scope. See, e.g., Georgia Power Co. v. FPC, 373 F.2d 485, 487 (5th Cir. 1967) ("There is nothing in Section [824e(a)] which pro hibits the Commission from eliminating an unlawful practice without simultaneously holding a full rate hear ing to prescribe a proper rate."); Alliant Energy Corp. v. FERC, 253 F.3d 748, 754 (D.C. Cir. 2001) (where pro ceeding concerned third-party compensation charges under power pool tariff, Commission had no obligation to consider allegation that border utility charges were unjust and unreasonable); cf. AT&T Corp. v. FCC, 448 F.3d 426, 435 (D.C. Cir. 2006) ("The Commission has the authority to determine the scope of its investigations, and AT&T has no authority to force a separate inquiry by the Commission without filing a complaint.") (cita tions omitted). In short, nothing in the FPA requires the Commission "to solve all problems that may be re lated to a particular decision at the same time." Wiscon sin Gas Co. v. FERC, 770 F.2d 1144, 1160 (D.C. Cir. 1985), cert. denied, 476 U.S. 1114 (1986).

3. Petitioners err when they assert (Pet. 7) that the decision of the court of appeals is "of critical importance to the proper administration of FERC's responsibilities to protect consumers." Nothing in the decision below limits the ability of interested parties to challenge rates that they believe to be unjust and unreasonable by filing a complaint under Section 824e. Indeed, that is pre cisely the means by which the petitioner in Lockyer chal lenged the Commission's market-based rates. Parties may also present their views on relevant issues within the scope of Commission rulemaking proceedings, see, e.g., FPC v. Sunray DX Oil Co., 391 U.S. 9, 50 (1968), as several of the petitioners are currently doing in an ongo ing Commission rulemaking regarding market-based rates. Market-Based Rates for Wholesale Sales of Elec. Energy, Capacity & Ancillary Servs. by Pub. Utils., Order No. 697, FERC Stats. & Regs. ¶ 31,252, 119 F.E.R.C. ¶ 61,295 paras. 938-942, 956-958 (2007) (Order No. 697), petitions for rehearing pending. In that rule making, petitioners are raising the same challenges to market-based rates that they attempted to raise in this case, see id. paras. 938-942, 956-958, and the Commis sion has answered those arguments, see id. paras. 943- 955, 959-971.

Thus, the decision below in no way limits "the ability of consumers and their advocates to participate mean ingfully" (Pet. 8) in proceedings before the Commission. Indeed, the importance of the decision is further dimin ished by the fact that the Market Behavior Rules that were the subject of the challenged orders have been re scinded or removed from seller tariffs and recodified, in final orders that were not appealed. Pet. App. 3a; Inves tigation III, 114 F.E.R.C. ¶ 61,165, at 61,528-61,529.

4. Because the general validity of the Commission's market-based rate program was not at issue in the ad ministrative proceedings below-and was not passed up on by the court of appeals-this case presents no occa sion to consider petitioners' arguments (Pet. 14-24) chal lenging the program. In any event, the market-based rate program fully complies with the FPA, which grants FERC broad discretion as to how to satisfy the statute's ratemaking mandate.

a. While 16 U.S.C. 824d(a) requires that "[a]ll rates and charges made * * * shall be just and reasonable," the FPA does not dictate, or even mention, any particu lar ratemaking methodology. See Duquesne Light Co. v. Barasch, 488 U.S. 299, 315 (1989). And although the FPA also requires that every public utility file "sched ules showing all rates and charges for any transmission or sale subject to the jurisdiction of the Commission," 16 U.S.C. 824d(c), it explicitly leaves the timing and form of those filings to FERC's discretion. In particular, public utilities must file "schedules showing all rates and charges" under "such rules and regulations as the Com mission may prescribe," and "within such time and in such form as the Commission may designate." Ibid. The FPA does not define "schedules," leaving that to FERC's discretion as well. See 18 C.F.R. 35.2(b) (defin ing "rate schedule"). Accordingly, "so long as FERC has approved a tariff within the scope of its FPA author ity, it has broad discretion to establish effective report ing requirements for administration of the tariff." Lock yer, 383 F.3d at 1013.

Contrary to petitioners' contention, the market- based rate program does not result in the "detariffing" (Pet. 14) of rates. The Commission's market-based rate program consists of an initial determination by the Com mission that the applicant lacks market power or has taken sufficient steps to mitigate market power, coupled with "strict reporting requirements to ensure that the rate is 'just and reasonable' and that markets are not subject to manipulation." Lockyer, 383 F.3d at 1013. Sellers with market-based rate authorization are re quired to file quarterly reports detailing for each indi vidual purchase and sale the names of the parties, a de scription of the service, the delivery point of the service, the price charged and quantity provided, the contract duration, and any other attribute of the product being purchased or sold that contributed to its market value. Ibid. The reporting requirement thus encompasses the core of sellers' contracts in a form that is useful and un derstandable, and it provides a means for the Commis sion and the public to spot pricing trends, discriminatory patterns, or other indicia of the exercise of market power. California ex rel. Lockyer v. British Columbia Power Exch. Corp., 99 F.E.R.C. ¶ 61,247, at 62,063 (2002).

b. Petitioners argue (Pet. 14-18) that FERC's mar ket-based rate program is inconsistent with this Court's decisions in Maislin Indus. U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116 (1990) (Maislin), and MCI Telecoms. Corp. v. AT&T, 512 U.S. 218 (1994) (MCI). Petitioners are incorrect, because the Commission's interconnected program of ex ante findings of no market power coupled with post-approval reporting requirements distinguishes FERC's market-based rate program from those invali dated by this Court in Maislin and MCI.

Maislin involved an ICC policy that allowed carriers to charge privately negotiated contract rates that dif fered from the filed tariff rate, that were never disclosed to nor reviewed by the ICC, and that were not subject to any challenge for discrimination. Maislin, 497 U.S. at 132-133. This Court held that the policy violated the filed-rate doctrine. Id. at 126-127. Here, in contrast, market-based rate sales are made in accordance with a market-based rate umbrella tariff, approved only after FERC determines, in a publicly-noticed proceeding with opportunity for interested parties to protest, that a seller lacks market power. Lockyer, 383 F.3d at 1013. Moreover, FERC's system requires the quarterly filing of the actual rates charged for individual transactions, allowing both FERC and the public to review rates for reasonableness and lack of undue discrimination. Ibid. And after market-based rate authority is granted, par ties can file complaint proceedings, or FERC can insti tute its own proceeding, to challenge market-based rates as unduly discriminatory or unjust or unreasonable or to question whether the seller has market power.

Petitioners' reliance on MCI, 512 U.S. at 229-231, is similarly misplaced. MCI rejected an FCC policy that relieved all nondominant carriers of any requirement to file any of their rates with the agency. This Court found that such wholesale detariffing for nondominant carriers effectively removed all rate regulation where the FCC found competition to exist, in violation of specific lan guage in the Communications Act of 1934, 47 U.S.C. 151 et seq. MCI, 512 U.S. at 224-225, 231-232. FERC's mar ket-based rate system, by contrast, requires every seller with market-based rate authority to have on file an um brella market-rate tariff and to file quarterly reports detailing the specific rates charged for each sale. No detariffing occurs in these circumstances. As the MCI Court held, it would not violate the filed-rate doctrine for the FCC to "modify the form, contents, and location of required filings, and [to] defer filing or perhaps even waive it altogether in limited circumstances." Id. at 234. That is what FERC has done here.

c. Petitioners do not suggest that the decision below is inconsistent with any decision of any other court of appeals. Instead, they contend (Pet. 19) that the court below has never actually considered the validity of mar ket-based rates. If that were true, it would hardly pro vide a justification for this Court to consider the issue in the first instance, particularly in a case where the ques tion is not directly presented. In any event, petitioners misread the relevant decisions of the court of appeals.

The courts of appeals have agreed that the Commis sion's market-based rate program is consistent with the requirements of the FPA, because "when there is a com petitive market the FERC may rely upon market-based prices in lieu of cost-of-service regulation to assure a 'just and reasonable' result." Elizabethtown, 10 F.3d at 870. "[I]n a competitive market, where neither buyer nor seller has significant market power, it is rational to as sume that the terms of their voluntary exchange are reasonable, and specifically to infer that the price is close to marginal cost, such that the seller makes only a normal return on its investment." Lockyer, 383 F.3d at 1013 (quoting Tejas, 908 F.2d at 1004). See Louisiana Energy & Power Auth. v. FERC, 141 F.3d 364, 365 (D.C. Cir. 1998); Cajun Elec. Power Coop., Inc. v. FERC, 28 F.3d 173, 176, 179, 180 (D.C. Cir. 1994).

Contrary to petitioners' suggestion (Pet. 19-20), Eliz abethtown specifically addressed arguments, like those made here, that market-based pricing constituted vir tual deregulation of rates, in contravention of the Natu ral Gas Act, 15 U.S.C. 717 et seq., which parallels the FPA. Elizabethtown, 10 F.3d at 870. The court of ap peals rejected that contention, determining that the just and reasonable standard does not compel the use of any single pricing formula, and that where there is a compet itive market FERC may rely on market-based prices in lieu of cost-of-service regulation to assure a just and reasonable result. Ibid. And no court of appeals has held that FERC's approval of a market-based system is inconsistent with the FPA's mandates.

d. The 2005 Act, which petitioners do not address, further undermines their position. Several provisions of that statute are premised on the existence of the market-based rate system and, like the Market Behavior Rules in this case, are aimed at enhancing that system and ensuring its smooth functioning. For example, Con gress adopted a prohibition on "market manipulation" that is modeled on the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. See 2005 Act § 1283, 119 Stat. 979 (16 U.S.C. 824v (Supp. V 2005)). The prohibition on market manipulation presupposes the existence of mar ket transactions.

In another provision of the 2005 Act, Congress di rected FERC to adopt rules "to facilitate price transpar ency in markets for the sale and transmission of electric energy" and "to ensure that consumers and competitive markets are protected from the adverse effects of poten tial collusion or other anticompetitive behaviors." 2005 Act § 1281(a)(1) and (b)(2), 119 Stat. 978 (16 U.S.C. 824t(a)(1) and (b)(2) (Supp. V 2005)); see § 1286, 119 Stat. 981 (16 U.S.C. 824e(e)(2) (Supp. V 2005)) (giving FERC new "refund authority" over entities otherwise not subject to FERC's jurisdiction that make "short- term sale[s] of electric energy through an organized market in which the rates for the sale are established by Commission-approved tariff"); § 1290(a), 119 Stat. 984 (enhancing the Commission's remedial authority in cases where it has "revoked the seller's authority to sell any electricity at market-based rates"). In all of these provi sions, Congress has "effectively ratified the [Commis sion's] previous position" regarding its authority to ap prove a framework of market-based rates under the FPA. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 156 (2000).

The Commission also has new authority to remedy manipulative behavior by participants in wholesale elec tricity markets, 2005 Act § 1283, 119 Stat. 979 (16 U.S.C. 824v (Supp. V 2005)), including the authority to impose increased civil penalties for violations of the FPA, 2005 Act § 1284(e), 119 Stat. 980 (16 U.S.C. 825o-1) (Supp. V 2005)). And it has taken a series of steps "to ensure that there are appropriate market safeguards in place to pre vent a repeat of the California 2000-2001 energy crisis." CAlifornians for Renewable Energy, Inc. v. California Pub. Utils. Comm'n, 119 F.E.R.C. ¶ 61,058, at 61,247- 61,249 (2007) (CARE) (citing numerous agency initia tives). For example, the Commission has created an expanded office to oversee competitive markets and has revised its program for evaluating requests for market- based rates. See, e.g., Order No. 697, 119 F.E.R.C. ¶ 61,295, at 62,653, petitions for reh'g pending.

As the Commission has explained, the "improved market-based rate program provides the foundation to ensure that sellers and buyers can continue to rely on market-based rate contracts to provide price certainty, flexibility in contract terms, and the contract stability necessary to support new investment." CARE, 119 F.E.R.C. ¶ 61,058, at 61,249. It would be premature for this Court to consider the validity of the market-based rate system before any court of appeals has examined the system in light of the 2005 Act and the Commission's recent initiatives.

CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.

PAUL D. CLEMENT
Solicitor General
CYNTHIA A. MARLETTE
General Counsel
ROBERT H. SOLOMON
Solicitor
LONA T. PERRY
Senior Attorney
Federal Energy Regulatory
Commission

MARCH 2008