California ex rel. Lockyer v. Federal Energy Regulatory Commission

The State of California (plaintiff) deregulated its power market and started using market-based rates for wholesale electricity prices. The Federal Energy Regulatory Commission (FERC) (defendant) had authority over approval of a utility’s market-based-rate application. FERC approved applications from several utilities that sought authority to sell electricity at market-based rates. The market-based rates needed to be just and reasonable. The market-based rates were approved only if the individual utility applying for approval of such rates either lacked market power or had mitigated its market power. In addition, utilities that were wholesale sellers of power were required to file a market analysis every four months and quarterly transaction summaries. Several years after the restructuring of the electricity industry, wholesale electricity prices spiked. California’s largest utility filed for bankruptcy due to sustained, high electricity prices. The California government eventually declared a state of emergency. The state spent $10 billion purchasing wholesale power on the spot market because of rolling blackouts. FERC found violations of its reporting requirements by some sellers of wholesale power. California brought a complaint against all the sellers of wholesale power to the state, alleging that the market-based-rate requirements violated the Federal Power Act (FPA). California sought a refund of up to $2.8 billion. FERC declined to offer refunds. California appealed to the United States Court of Appeals for the Ninth Circuit.