NRG Power Marketing v. Maine Public Utilities Commission

The Supreme Court today reversed an appeals court decision that allowed third parties to meet a lower standard for challenging electricity agreements than what contracting parties must meet.

The case challenges a March 2008 ruling by a three-judge panel on the U.S. Circuit Court of Appeals for the District of Columbia, which found that third parties may challenge electricity prices based on the "just and reasonable" standard of review.

Contracting parties must meet a higher standard, known as Mobile-Sierra, which presumes they will arrive at a just and reasonable rate and allows only one of the contracting parties to challenge it later under extraordinary circumstances of public interest -- if, for example, the deal would force the utility out of business.

The lower court's ruling involved a long-term deal that created New England's forward capacity market. Several parties involved in the contract are subject to the Mobile-Sierra doctrine, the panel ruled, but not the downstream purchasers that were not a party to the contract and objected to it.

"When a rate challenge is brought by a non-contracting third party, the Mobile-Sierra doctrine simply does not apply," the court held. "The proper standard of review remains the 'just and reasonable' standard."

In its petition for certiorari, NRG contended that the appeals court ruling "overturns decades of settled understanding and eliminates the stability and certainty that are critical to the maintenance and development of energy infrastructure."

On Jan. 13, 2010, the U.S. Supreme Court reversed in part and remanded the case in an 8-1 decision written by Justice Ruth Bader Ginsburg.

"A presumption applicable to contracting parties only, and inoperative as to everyone else -- consumers, advocacy groups, state utility commissions, elected officials acting parens patriae -- could scarcely provide the stability Mobile-Sierra aimed to secure," Ginsburg wrote.

Justice John Paul Stevens dissented, arguing that the ruling would necessarily "set a higher bar" for third-party challenges.

Question presented: Whether the principles of the Mobile-Sierra doctrine apply to the Federal Energy Regulatory Commission’s review of wholesale electricity rates set by contract when those rates are challenged by a non-contracting party.