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EPSA-Led Coalition Urges Supreme Court to Preserve Integrity of Market-based Energy Contracts

"It is hard to overstate the importance of regulatory certainty and contractual integrity to the efficient working of the energy industry."

WASHINGTON, D.C. - The Electric Power Supply Association (EPSA) has filed a "friend of the court" brief with the U.S. Supreme Court asking it to reverse a lower court's decision that, if left standing, could threaten the integrity of privately negotiated energy contracts. EPSA was joined by 11 other organizations representing a diverse array of participants in the electric and natural gas industries in filing its amici curiae brief asking the Supreme Court to reverse a Ninth Circuit Court decision (Public Utility District No. 1 of Snohomish County v. FERC) concerning the standard of review for market-based wholesale energy contracts.

EPSA President and CEO John E. Shelk said, "Preserving the integrity of contracts is vital to promoting capital investment in the energy industry. Consumers are better off, benefiting from reduced costs and more reliable energy, when the intent of the Federal Power Act to protect the integrity of private contracts is respected."

In its brief, EPSA said the Federal Power Act and the Supreme Court's longstanding precedents protect the integrity of privately negotiated contracts. The brief argues the Ninth Circuit incorrectly found that individual contract rates require prior review or approval by the Federal Energy Regulatory Commission (FERC) before such protections apply. EPSA said the Ninth Circuit Court erred when it held that FERC could nullify a wholesale power contract in the absence of public necessity. Moreover, by allowing parties to invalidate contracts whenever market conditions meet some indefinable standard of "dysfunction," the Ninth Circuit complicated the negotiation of long-term contracts in precisely those circumstances in which they may be needed most, EPSA said.

According to the brief, the Court should reverse the Ninth Circuit decision in order to prevent damage to the nation's wholesale energy markets. If not corrected, EPSA argued that the decision threatens to expose consumers to the very type of high and volatile prices and frequent supply shortages that the Federal Power Act was designed to prevent.

The EPSA brief said, "It is hard to overstate the importance of regulatory certainty and contractual integrity to the efficient working of the energy industry." The brief stated, "The market-based regime cannot function effectively if freely and fairly negotiated contracts remain open to challenge and revision in costly litigation."

Reversing the judgment will stabilize contracts and restore certainty to the nation's wholesale energy markets, EPSA said. EPSA was joined by the Colorado Independent Energy Association; the Electric Power Generation Association; the Independent Energy Producers Association; the Independent Petroleum Association of America; the Independent Power Producers of New York; the Interstate Natural Gas Association of America; the Natural Gas Supply Association; the New England Power Generators Association, Inc.; the Northeast Energy and Commerce Association; the Northwest and Intermountain Power Producers Coalition and the Western Power Trading Forum in the "friends of the court" brief.

The complete brief is available on the EPSA web site at www.epsa.org.

-EPSA-

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.