Exelon Generation Company, LLC v. Federal Energy Regulatory Commission

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EXELON GENERATION COMPANY,
LLC,
Petitioner,
CALIFORNIA PUBLIC UTILITIES
COMMISSION; et al.,
Intervenors,
v.
FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent.
No. 15-73836
FERC No. EL00-95-280
MEMORANDUM*
On Petition for Review of an Order of the
Federal Energy Regulatory Commission
Submitted August 1, 2016**
San Francisco, California
Before: THOMAS, Chief Judge, and McKEOWN, and CLIFTON, Circuit Judges.
FILED
AUG 04 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Exelon Generation Company, LLC (“Exelon”), successor in interest to AES
New Energy, Inc., petitions for review of certain orders issued by the Federal
Energy Regulatory Commission (“FERC”). We deny the petition for review.
Because the parties are familiar with the history of the case, we need not recount it
here.1
I
FERC correctly concluded that the Mobile-Sierra presumption of
reasonability does not apply to Exelon’s forward sale. See generally Morgan
Stanley Capital Grp., Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 532-34 (2008)
(explaining the presumption and its origins in United Gas Pipe Line Co. v. Mobile
Gas Serv. Corp., 350 U.S. 332 (1956) and Fed. Power Comm’n v. Sierra Pac.
Power Co., 350 U.S. 348 (1956)). FERC reasonably interpreted Section 19 of the
Cal-ISO Tariff as a Memphis clause that permitted the California Independent
System Operator Corporation (“Cal-ISO”) unilaterally to seek modifications to
contract rates. See PSEG Energy Res. & Trade LLC v. FERC, 665 F.3d 203, 208
(D.C. Cir. 2011) (establishing “two-step, Chevron-like” review for FERC’s
interpretations of filed tariffs), Cal. ex rel. Harris v. FERC, 809 F.3d 491, 502 n.6
1 The panel’s January 20, 2016, order consolidated this and several petitions
for argument. We sever this petition from that group in an order filed concurrently
with this disposition.
2

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(9th Cir. 2015) (describing holding in United Gas Pipe Line Co. v. Memphis Light,
Gas & Water Div., 358 U.S. 103, 110-13 (1958), that parties may contract out of
the Mobile-Sierra presumption by specifying in their contracts that a new rate filed
with the Commission would supersede the contract rate).
Exelon provides no authority for the argument that Cal-ISO could opt out of
the Mobile-Sierra presumption only by “mak[ing] a Section 205 rate filing.” See
Morgan Stanley, 554 U.S. at 534 (“[P]arties c[an] contract out of the Mobile-Sierra
presumption by specifying in their contracts that a new rate filed with the
Commission would supersede the contract rate.”) (emphasis added). Accordingly,
the Mobile-Sierra doctrine does not apply to Exelon’s forward sale. FERC
therefore properly assessed whether that sale’s terms were just and reasonable. See
San Diego Gas & Elec. Co. v. Sellers of Energy, 149 FERC ¶ 61,116 at paras. 216,
230 (Nov. 10, 2014).
II
Substantial evidence supports FERC’s finding that the terms of Exelon’s
forward sale were unjust and unreasonable. See San Diego Gas & Elec. Co., 149
FERC ¶ 61,116 at paras. 230-36, 16 U.S.C. § 825l(b) (2012). This conclusion
follows from our decision in Pub. Utils. Comm’n of State of Cal. v. FERC, 462
F.3d 1027 (9th Cir. 2006). In that case, we held that FERC reasonably mitigated
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out-of-market (“OOM”) spot electricity transactions entered by Cal-ISO between
October 2, 2000, and June 20, 2001 (the “Refund Period”). Id. at 1051-53. We
defined “spot” transactions as “sales that are 24 hours or less and that are entered
into the day of or day prior to delivery.” Id. at 1055. We upheld FERC’s
mitigation of such transactions because “there was systemic dysfunction in the
wholesale energy market and . . . during the time that Cal-ISO was making OOM
purchases, it was in an emergency must-buy situation, which gave the sellers even
greater market power[.]” Id. at 1052. Substantial evidence supports FERC’s
conclusion that these conditions prevailed during December 2000. See also id. at
1056-57 (crediting expert testimony establishing that “purposeful[] manipulat[ion]
[of] short-term energy markets . . . [had] forc[ed] Cal-ISO to buy necessary energy
outside of the spot market at higher prices and for longer contract periods”)
(emphasis added).
Exelon has not distinguished its forward sale from the out-of-market
transactions that we held that FERC reasonably mitigated. Exelon correctly
observes that forward sales shift risk. But Exelon does not explain why the risk
associated with a “forward” sale for 32 hours, beginning three hours after the sale’s
execution, produces a Section 206 result different than the risk associated with a
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“spot” sale for 24 hours, beginning 24 hours after the sale’s execution. See id. at
1055.
Moreover, we cannot hold FERC’s Section 206 determination arbitrary or
capricious for failing to recognize that Exelon’s forward sale would “create
stability in power supply costs[.]” See 5 U.S.C. § 706(2)(A) (2012). Exelon’s sale
created no such stability: Cal-ISO agreed to pay Exelon’s costs, which—according
to an Exelon expert and Cal-ISO’s dispute logs—varied over the duration of the
transaction. Indeed, the parties’ “expectation[s] of future prices” in no way
determined the transaction’s terms, see San Diego Gas & Elec. Co. v. Sellers of
Energy, 153 FERC ¶ 61,144 at para. 159 (Nov. 4, 2015), which merely passed
Exelon’s moment-to-moment costs on to Cal-ISO.2 FERC reasonably determined
that Exelon’s forward sale “was very similar to OOM spot transactions . . .
previously mitigated[.]” San Diego Gas & Elec. Co., 149 FERC ¶ 61,116 at para.
230. Therefore, we deny the petition for review.
PETITION DENIED.
2 Exelon has not yet sought this court’s review of FERC’s determinations
regarding the company’s cost offset filing. Accordingly, we reserve the question
whether those determinations were arbitrary and capricious.
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