Indiana Municipal Power Agency v. Federal Energy Regulatory Commission

A power company bought rights to several coal mines, projecting that the mines would yield profits for the company. Those projections were off, and the company suffered substantial losses. As a result, the power company passed on those losses to wholesale electric purchasers, some of whom were members of the Indiana Municipal Power Agency (IMPA) (plaintiff). Passing on the losses in that way was challenged, which resulted in a settlement. The settlement allowed the power company to pass along only one-third of the coal costs to wholesale purchasers; the company would need to find another source to offset the other two-thirds of the losses. Eventually, a buyer emerged that was willing to pay enough for leases to the mines to cover the losses. At the same time, the power company entered several contracts with the buyer to have the buyer supply coal from the buyer’s other mines to the power company’s facilities. These contracts led the IMPA to suspect that the contracts contained sweeteners for the buyer (i.e., the contracts would pay the buyer higher prices for the coal). According to the IMPA, the contracts must have contained such sweeteners given that no one else had been willing to purchase the mines and cover the power company’s losses. The IMPA claimed that the alleged sweeteners violated (among other laws) § 205 of the Federal Power Act. An administrative-law judge agreed, but the Federal Energy Regulatory Commission (FERC) (defendant) reversed. The FERC’s staff prepared a market study, which concluded that the contract prices were comparable to other coal contracts. Based on this study, the FERC rejected the IMPA’s challenges. The IMPA petitioned the United States Court of Appeals for the District of Columbia Circuit for review.