Potomac Electric Power Co. v. Federal Energy Regulatory Commission

Potomac Electric Power Company (Potomac) (plaintiff) entered into a power-supply agreement with the Allegheny Power System (Allegheny) in 1987 to purchase electricity at a fixed rate over the course of 18.5 years. The rate was subject to two increases over the duration of the agreement. Section 9.3 of the agreement provided that the rates and terms of the contract could be modified only by mutual agreement of the parties if reasonably unforeseeable circumstances resulted in a gross inequity to any party. The agreement was filed with and approved by the Federal Energy Regulatory Commission (FERC) (defendant). Potomac supported the filing, representing that the rates were justified based on cost factors. Nine years later, FERC issued orders requiring all public utilities with interstate-transmission facilities to file an open-access nondiscriminatory transmission tariff (OATT). With respect to the OATT, Allegheny agreed to charge substantially less than Potomac’s contractual rate. Potomac filed a complaint with FERC, seeking a reduced rate for transmission services comparable to the OATT because Potomac was paying about double the OATT. However, Potomac did not present evidence showing that the rates were unduly discriminatory or excessively burdensome on Potomac’s ratepayers. FERC dismissed Potomac’s complaint because the agreement failed to satisfy the Mobile-Sierra public-interest standard. Potomac appealed.