San Diego Gas & Electric Co. v. Federal Energy Regulatory Commission

904 F.2d 727 (1990)

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San Diego Gas & Electric Co. v. Federal Energy Regulatory Commission

United States Court of Appeals for the District of Columbia Circuit
904 F.2d 727 (1990)

Facts

In November 1985, San Diego Gas & Electric Company (San Diego) (plaintiff) entered into a long-term contract for the purchase of electricity from Public Service Company of New Mexico (New Mexico). The sales were to commence in 1988. The contract was good for both parties at the time it was signed. New Mexico was set to have excess generating capacity from three nuclear reactors that were set to start up over the next two years, and San Diego needed more capacity and sought to diversify its mix of power sources. The price was the best available to San Diego and in line with then market prices. However, oil prices fell significantly between November 1985 and March 1986. Natural-gas prices fell as a result. In turn, the wholesale electricity market experienced a drop in prices because cheaper oil and gas meant less need for more expensive nuclear and coal power sources. New contracts for wholesale electricity in 1988 were much lower than the 1985 contract price. New Mexico filed the contract rates with the Federal Energy Regulatory Commission (the commission) (defendant) for approval. San Diego asserted to the commission that it ought to reject the contract as unjust and unreasonable. The commission refused. San Diego appealed.

Rule of Law

Issue

Holding and Reasoning (Williams, J.)

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