PNE Energy Supply LLC v. Eversource Energy ( 2020 )

United States Court of Appeals
For the First Circuit
No. 19-1678
PNE ENERGY SUPPLY LLC, on behalf of itself
and all others similarly situated,
Plaintiff, Appellant,
v.
EVERSOURCE ENERGY, a Massachusetts Voluntary Association;
AVANGRID, INC., a New York Corporation,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Thompson, Lipez, and Kayatta,
Circuit Judges.
Austin B. Cohen, Keith J. Verrier, Levin Sedran & Berman LLP,
Anthony Tarricone, and Kreindler & Kreindler LLP on brief for
appellant.
Mark A. Gottlieb, Public Health Advocacy Institute, Sandeep
Vaheesan, Open Markets Institute, Paula S. Bliss, and Bernheim
Dolinsky Kelley LLC on brief for Open Markets Institute, amicus
curiae.
Douglas G. Green, Shannen W. Coffin, Mark C. Savignac, Steptoe
& Johnson LLP, John D. Donovan, Jr., Chong S. Park, and Ropes &
Gray LLP on joint brief for appellee Eversource Energy.
Richard P. Bress, Marguerite M. Sullivan, Caroline A. Flynn,
and Latham & Watkins LLP on joint brief for appellee Avangrid,
Inc.
September 9, 2020
KAYATTA, Circuit Judge. In 2017, a group of economists
working with the Environmental Defense Fund published a report
alleging that the defendants in this case were able to increase
electricity prices in New England about 20% on average, totaling
$3.6 billion in surcharges over three years between 2013 and 2016,
by buying up and refusing to release excess transmission capacity
in the Algonquin pipeline. See Levi Marks et al., Vertical Market
Power in Interconnected Natural Gas and Electricity Markets 4
(2017), https://www.edf.org/sites/default/files/vertical-market-
power.pdf. In response, a group of electricity end consumers filed
suit in November 2017 alleging violations of state and federal
antitrust and unfair competition law. See Breiding v. Eversource
Energy, 344 F. Supp. 3d 433, 444 (D. Mass. 2018), aff'd, 939 F.3d
47 (1st Cir. 2019). After the defendants challenged the
electricity consumers' standing to sue under the federal antitrust
laws for manipulation in gas transmission markets, PNE Energy
Supply LLC, a wholesale energy purchaser, filed this lawsuit on
behalf of itself and other similarly situated energy purchasers,
also challenging the defendants' alleged manipulation of natural
gas pipeline capacity. Last fall, we affirmed the dismissal of
the electricity consumers' suit. Breiding, 939 F.3d at 57. Rather
than taking up the defendants' challenge to the electricity
consumers' antitrust standing, we held that the antitrust claims
failed on their merits because the defendants' challenged conduct,
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in neither using nor releasing reserved pipeline capacity, all
occurred pursuant to a tariff approved by the Federal Energy
Regulatory Commission. Id. at 52–56. We now consider in this
second case whether any differences between the two cases warrant
a different outcome. For the following reasons, we find that
Breiding controls. We therefore affirm the dismissal of this case.
I.
A.
To provide context regarding the relevant energy market
and actors at issue in this case, we begin by repeating verbatim
the description we provided in Breiding, 939 F.3d at 49–51:
* * *
"Wellhead" sales comprise the first step in the chain of
market transactions that readies extracted natural gas for
consumption in the form of retail electricity. At this initial
stage, natural gas producers sell natural gas to direct purchasers
through gas futures contracts, in which the producer agrees to
sell a specific quantity of natural gas at some fixed time in the
future to the direct purchaser. Load-distribution companies
(LDCs) -- those entities that locally distribute natural gas,
primarily to retail consumers who use the gas for heating and
cooking -- have a relatively predictable need for natural gas and,
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thus, often make use of this type of contract.1 Consumers with
more variable demand for natural gas, such as power generators,
often purchase gas on the secondary wholesale "spot market." The
spot market for natural gas allows direct purchasers that find
themselves with rights to excess, unneeded natural gas to resell
those rights in the immediate or near future.
The Federal Energy Regulatory Commission (FERC) is the
agency charged with implementing and executing the Natural Gas Act
(NGA), "a comprehensive scheme of federal regulation of 'all
wholesales of natural gas in interstate commerce.'" N. Nat. Gas
Co. v. State Corp. Comm'n, 372 U.S. 84, 91 (1963) (quoting Phillips
Petroleum Co. v. Wisconsin, 347 U.S. 672, 682 (1954)); see also 15
U.S.C. § 717c(a) (tasking FERC with ensuring that rates charged
for sales of natural gas within FERC's jurisdiction are "just and
reasonable"). Notwithstanding the comprehensiveness of this
regulatory scheme, Congress also exempted wellhead sales from
FERC's regulatory jurisdiction. See 15 U.S.C. § 3431(a)(1)(A).
Accordingly, market forces dictate the wellhead price of natural
gas. Id. § 3431(b)(1)(A) ("[A]ny amount paid in any first sale of
natural gas shall be deemed to be just and reasonable."). And
while the NGA grants FERC regulatory authority over "sale[s] . . .
1The defendants nevertheless point out that LDCs operating
in New England do face some variability in demand for natural gas
due to rapidly changing weather conditions in the region.
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for resale" in the spot market for natural gas, see 15 U.S.C.
§ 717(b), FERC has issued a "blanket certificate of public
convenience and necessity" that allows such transactions to
proceed at market rates, see 18 C.F.R. § 284.402.
Direct purchasers of natural gas also pay for the
transmission of natural gas from the wellhead. The Algonquin Gas
pipeline serves as the primary interstate artery through which
natural gas is transported in New England. Direct purchasers in
New England must reserve transmission capacity -- that is, the
physical space in the pipeline needed to transport the natural gas
purchased from the producer -- along the Algonquin pipeline
commensurate with their transportation needs. FERC also has
"exclusive jurisdiction over the transportation . . . of natural
gas in interstate commerce for resale" and is charged with
"determin[ing] a 'just and reasonable' rate for [its]
transportation." Schneidewind v. ANR Pipeline Co., 485 U.S. 293,
300–01 (1988). Pursuant to this exclusive authority, FERC requires
interstate pipeline operators like Algonquin to allow LDCs to
purchase capacity using "no-notice" contracts. See Order No. 636,
57 Fed. Reg. 13,267 (Apr. 16, 1992). Such contracts allow LDCs to
adjust capacity reservations downward or upward (up to their daily
"firm entitlements") at any time without incurring penalties. Id.
at 13,286. Importantly, FERC regulations allow, but do not
require, LDCs to resell unneeded transportation capacity to other
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natural gas purchasers when they downwardly adjust their capacity
reservations. See 18 C.F.R. § 284.8; Tenn. Gas Pipeline Co., 102
FERC ¶ 61,075, 61,119 (2003) ("[N]othing requires a shipper to
release its capacity: it does so by choice.").
In the wholesale market for electricity, load-serving
entities (LSEs) that sell and deliver electricity to consumers for
retail consumption purchase electricity from power generators.
The Federal Power Act (FPA) charges FERC with regulating these
wholesale sales2 of electricity in interstate commerce and ensuring
that rates in that market are "just and reasonable." See 16 U.S.C.
§§ 824(b)(1), 824d(a). In executing that charge, FERC has
delegated authority to nonprofit organizations, including
independent system operators (ISOs), to manage auctions for
wholesale electricity in the various regional markets across the
country. Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1292
(2016). ISO New England (ISO-NE) oversees the markets for
wholesale electricity in the New England region and administers
two auctions for wholesale electricity that are relevant to this
appeal: a same-day auction and a next-day auction to satisfy LSEs'
short-term and near-term demand for electricity. In both auctions,
ISO-NE accepts orders from LSEs designating the amount of energy
they need at a given time. Power generators then submit bids
2 A "[s]ale of electric energy at wholesale" is a "sale of
electric energy to any person for resale." 16 U.S.C. § 824(d).
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indicating the amount of electricity they can produce at those
times and the price they are willing to charge for it. ISO-NE
accepts those bids from lowest to highest until demand is
satisfied. The price of the last accepted bid is the "clearing
price," which sets the price paid to all the generators whose bids
were accepted.
Approximately half of New England's electricity is
generated from natural gas power plants. As a result, bids from
natural gas generators usually set the clearing price for wholesale
electricity, which then drives the retail prices charged by LSEs
to retail consumers. FERC does not oversee the retail sale of
electricity. See FERC v. Elec. Power Supply Ass'n, 136 S. Ct.
760, 766 (2016) ("[T]he law places beyond FERC's power, and leaves
to the States alone, the regulation of 'any other sale' -- most
notably, any retail sale -- of electricity." (citing 16 U.S.C.
§ 824(b))).
* * *
B.
In Breiding, we held that the filed-rate doctrine
insulated from challenge in a private antitrust lawsuit the
defendants' alleged use of no-notice contracts to restrict supply
in the Algonquin pipeline transmission capacity market. 939 F.3d
at 52–56. "The filed-rate doctrine is 'a set of rules that . . .
revolve[s] around the notion that . . . utility filings with the
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regulatory agency prevail over . . . other claims seeking
different rates or terms than those reflected in the filings with
the agency.'" Id. at 52 (second and third omissions in original)
(quoting Town of Norwood v. FERC, 217 F.3d 24, 28 (1st Cir. 2000)).
It is "a form of deference and preemption, which precludes
interference with the rate setting authority of an administrative
agency, like FERC." Id. (quoting Wah Chang v. Duke Energy Trading
& Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir. 2007)). Significant
here, it applies not only to traditional service rates but also to
"ancillary conditions and terms included in [a FERC-approved]
tariff." Id. (alteration in original) (quoting Town of Norwood v.
New Eng. Power Co., 202 F.3d 408, 416 (1st Cir. 2000)).
While the district court in Breiding determined that it
was FERC's seal of approval on the downstream (relative to the
defendants' alleged failure to release excess capacity) ISO-NE
market prices that insulated the defendants' behavior from
challenge under the antitrust laws in a district court, see id. at
51–53, we questioned that reasoning and explicitly did not endorse
it, see id. at 53–56. Relying on our previous decision in Town of
Norwood, 202 F.3d 408, we confirmed that upstream anticompetitive
activity that indirectly affects a downstream, FERC-approved
tariff is not categorically protected by the filed-rate doctrine
applicable to the downstream activity. See Breiding, 939 F.3d at
53. We instead turned our attention to the activity that was
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alleged to have been anticompetitive and asked whether that
behavior itself had been sanctioned by FERC, id. at 53–55, focusing
on a description of the conduct provided by plaintiffs there as
follows:
(1) "Eversource and Avangrid possess a large
number of 'no-notice' contracts for natural
gas transmission capacity along the Algonquin
Pipeline"; and (2) "Eversource and Avangrid
regularly reserved more pipeline capacity than
they knew they needed and then, at the last
minute, cancelled portions of their
reservations" without "releas[ing] that
capacity, so that others could take advantage
of it."
Id. at 54 (alteration in original) (quoting the Breiding
complaint). Reviewing the regulations at issue, we saw that "FERC
requires operators of interstate natural gas pipelines like the
Algonquin Gas pipeline to provide '"no-notice" transportation
service' to ensure that LDCs are able to meet unexpected demand."
Id. (citing Order No. 636, 57 Fed. Reg. at 13,286). Accordingly,
the Algonquin tariff allows an LDC to
increase its deliveries up to the [Maximum
Daily Delivery Obligation] at any Primary
Point(s) of Delivery, up to the [Maximum
Hourly Transportation Quantity] during any
Hour, and up to the [Maximum Daily
Transportation Quantity], or to decrease its
deliveries. Provided that all of the
operational conditions specified in Section 5
of this rate schedule (the "Section 5
Conditions") are met, Algonquin shall consent
to such increase or decrease in deliveries,
thereby nullifying any daily scheduling or
hourly scheduling penalty that would otherwise
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be applicable pursuant to Section 23 of the
General Terms and Conditions.
Id. (alterations in original) (quoting Algonquin Gas Transmission,
LLC Tariff, pt. 5, Rate Schedule AFT-E, § 4.3). Similarly, an LDC
"may release all or a part of its capacity under an Existing
Service Agreement," but nothing requires it to do so. Id. (quoting
Algonquin Gas Transmission, LLC Tariff, pt. 6, Capacity Release,
§ 14.2).
Putting these allegations and the tariff together, we
determined that
neither defendant is alleged to have engaged
in any conduct other than that allowed by
Algonquin's detailed and reasonably
comprehensive FERC-approved tariff. FERC, in
conformity with its broader regulatory scheme,
expressly declined to require direct
purchasers to release excess capacity in
recognition of the fact that direct purchasers
facing variable demand for natural gas might
need to retain that capacity to ensure
reliability.
Id. (citing Order No. 636, 57 Fed. Reg. at 13,269). Because FERC
expressly required that LDCs be allowed to purchase excess capacity
and not release it, at their discretion, we determined that "[t]he
filed-rate doctrine prohibit[ed] us from questioning that reasoned
judgment." Id. at 55.
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II.
A.
The question before us is simply whether Breiding's
logic also applies to this lawsuit. We begin our analysis with
the most obvious difference between Breiding and this case: the
plaintiffs. On issues of antitrust standing, see, e.g., Lorenzo
v. Qualcomm Inc., 603 F. Supp. 2d 1291, 1300–01 (S.D. Cal. 2009),
including the application of federal direct purchaser
requirements, see Ill. Brick Co. v. Illinois, 431 U.S. 720, 728–
29 (1977), the different positions occupied in the chain of sales
that link plaintiffs to the alleged wrongdoers can make a
difference. But because Breiding did not rest on such
considerations, the parties' differing status similarly makes no
difference to the outcome here.
B.
We consider next the challenged conduct. Examination of
PNE's complaint confirms that it seeks to impose antitrust
liability for the exact same conduct at issue in Breiding: The
alleged overscheduling and withholding of transmission capacity
under defendants' contracts with Algonquin pursuant to Algonquin's
FERC-approved tariff. Mining its own complaint for tidbits and
inferences that do not appear to have been featured in Breiding,
PNE nevertheless contends that we can fairly view the defendants'
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conduct as something more than what we considered in Breiding for
two reasons.
First, PNE argues that the challenged activity took the
form of a "refus[al] to deal" in the so-called short-term secondary
capacity market, a market not alleged in Breiding and not regulated
by the FERC tariff. Second, it argues that the defendants
manipulated a price index, the Algonquin Citygate Price, which
manipulation PNE contends differs from failing to release excess
capacity. We address each of these arguments in turn.
1.
PNE contends that Breiding does not control because
Breiding focused "solely on Defendants' use of no-notice
contracts," while PNE focuses on what defendants "refused" to do
in the short-term "Secondary Capacity Market." Instead of simply
failing to release the excess transportation capacity to the
primary capacity market, PNE argues, the defendants could have
sold their extra capacity in this secondary market, either by
itself or bundled with any excess natural gas to be transported.
But the claim in Breiding was precisely that the defendants
"reserved excess capacity . . . without using or reselling it."
Breiding, 939 F.3d at 49 (emphasis added). "[R]efusing to sell,"
as PNE chooses to label the behavior, is just another way of saying
"without . . . reselling." And the Breiding plaintiffs claimed as
well the same target of the alleged refusal to sell: increased
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wholesale natural gas prices, which in turn resulted in higher
electricity prices. Id. In both cases, the pivotal challenged
conduct was the alleged over-reserving of and then failure to
release gas transportation rights exercised under the defendants'
contracts with the Algonquin pipeline, the terms of which were
specifically allowed by FERC. Because we found the balancing of
competition and reliability of natural gas supply, given the
market's limited transmission capacity, to be within the "bull's-
eye of FERC's regulatory aims," id. at 55, we saw no reason to
allow a jury in a private antitrust action to second-guess FERC's
approach.
Specifically, as we noted in Breiding, release of
capacity into this secondary market is expressly regulated by FERC
through 18 C.F.R. § 284.8, which contains a detailed set of
requirements for how and when a shipper may, "by choice," release
capacity, including bidding requirements and other contractual and
regulatory guarantees. See 939 F.3d at 50 (quoting Tenn. Gas
Pipeline Co., 102 FERC ¶ 61,075, 61,119 (2003)). In other words,
how and under what terms a shipper is to release any capacity falls
precisely within FERC's regulatory purview. As we discuss below,
see infra Part II.D., FERC has issued an order determining that
market-based rates for short-term capacity releases are just and
reasonable. Promotion of a More Efficient Capacity Release Market,
123 FERC ¶ 61,286, ¶ 31 (June 19, 2008) (noting further that FERC
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is "not relying solely on competition to ensure just and reasonable
prices" but is rather "maintaining the rate cap on pipeline
services that will provide the same protection for capacity release
transactions as it now does for pipeline negotiated rate
transactions"). Such an order does not transfer from FERC to the
federal courts oversight of whether this market is functioning in
a manner that makes for just and reasonable rates.
PNE argues that, because "no rate limitation applies"
under the regulations to certain capacity releases at issue here,
these transactions fall outside of FERC's purview. See 18 C.F.R.
§ 284.8(b)(2). But this provision was added as part of FERC's
determination that it would use market rates to satisfy the
requirement that capacity release transactions are just and
reasonable. See Promotion of a More Efficient Capacity Release
Market, 73 Fed. Reg. 72,692-01, at 72,963 (Dec. 1, 2008) (noting
that, "in order to enhance the efficiency and effectiveness of the
secondary capacity release market," FERC lifted "the maximum rate
ceiling on secondary capacity releases of one year or less"). In
other words, unlike wellhead sales, for example, releases of
capacity still fall within FERC's jurisdiction, and a market-based
system is simply the mechanism that FERC has opted to use to secure
just and reasonable rates. It does not follow, therefore, that
this market is "unregulated." To the contrary, noting its
continued "[o]versight" of capacity releases, FERC stated it "will
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entertain complaints and respond to specific allegations of market
power on a case-by-case basis if necessary. Furthermore, the
Commission directs staff to monitor the capacity release program
. . . using all available information." Promotion of a More
Efficient Capacity Release Market, 123 FERC at ¶ 56. And it will
"require[] informational postings of capacity release transactions
[to] provide transparency and facilitate the filing of complaints
if circumstances warrant." Id. ¶ 31.
Reframing and seeking to supplement the foregoing
"refusal" to deal theory as distinguishing this case from Breiding,
PNE also argues that the Breiding plaintiffs made no allegations
regarding other possible economic activity in the secondary
capacity market, instead "focusing solely" on the "no-notice
contracts" in the primary capacity market. The Breiding
plaintiffs, PNE contends, did not mention everything else
defendants did not do that restricted supply in the gas
transmission market: "[E]nter[] into bilateral agreements where
they sold their excess capacity without releasing it, or bundle[]
their capacity with gas and s[ell] it on the spot market; or . . .
s[ell] gas that they had stored locally without requiring pipeline
access."
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The allegations in the complaint that PNE claims support
this theory are sparse at best,3 but taking them as true and drawing
reasonable inferences in PNE's favor, we find no rescue for PNE's
claim. Two of these economic activities allegedly eschewed by
defendants actually hinged on reselling capacity on the pipeline,
so fail for the reasons already stated. The last allegedly
eschewed activity -- not selling locally stored gas -- fares no
better. The complaint contains no allegations that any such
hoarding of physical gas has meaningful anticompetitive effects
independent of any transmission capacity constraints. PNE's
allegations center on the theory that whatever excess gas exists
in the New England energy market cannot be utilized because the
Algonquin pipeline often sits underfilled due to defendants'
failure to release capacity. There is no claim that gas for which
unreserved transmission capacity exists is being withheld from the
market. Nor is there any claim that defendants have market power
in the physical natural gas market. Indeed, no party to whom
defendants have allegedly refused to sell any such gas has joined
the complaint in this case.
3 The extent of such allegations is that "[t]he relevant
natural gas market is the 'secondary capacity market' which
includes the spot market for the sale of natural gas and the
related 'excess capacity release' market for gas transmission
services (i.e., incorporating the excess capacity release market
and other short-term capacity transactions, whether bundled with
the physical commodity or not)."
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2.
PNE next argues that the defendants manipulated the
Algonquin Citygate Price index and that such manipulation somehow
makes the filed-rate doctrine inapplicable. But the manipulation
described in the complaint centers on the defendants' refusal to
promptly release or sell transmission capacity, which purportedly
drove up the average price of natural gas, thereby also increasing
the index price. As PNE describes the relationship, "by over-
scheduling and withholding their excess capacity, [defendants]
could drive up natural gas generators' input costs." In other
words, "[d]efendants knew that by driving up the price of natural
gas in the unregulated spot market they drove up the Algonquin
Citygate Price and the corresponding bids submitted by gas-powered
generators in the electricity auction." This is but another way
of saying that defendants drove up prices by not releasing pipeline
capacity.
C.
Taking a different tack, PNE argues that the tariff
itself includes a clause that allows PNE to bring an antitrust
claim to enforce the tariff. The clause in question, Section 17,
states only that "all terms and provisions contained or
incorporated [in this tariff], and the respective obligations of
the parties thereunder, are subject to valid laws, orders, rules
and regulations of duly constituted authorities having
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jurisdiction." We see nothing in this language granting PNE any
right to enforce the tariff. PNE cites only a case under the
Federal Communications Act (FCA), which contains a clause allowing
private parties to recover damages from common carriers who violate
the FCA. See Brown v. MCI WorldCom Network Servs., Inc., 277 F.3d
1166, 1169–72 (9th Cir. 2002) (construing 47 U.S.C. §§ 206-207).
PNE ignores more pertinent authority to the contrary. See
California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 852 (9th
Cir.) (holding that "substantive provisions of the tariff" are "an
area reserved exclusively to FERC, both to enforce and to seek
remedy"), opinion amended on denial of reh'g, 387 F.3d 966 (9th
Cir. 2004); see also Pub. Util. Dist. No. 1 v. Dynegy Power Mktg.,
Inc., 384 F.3d 756, 762 (9th Cir. 2004) (same, citing Lockyer).
Compare 47 U.S.C. § 207 ("Any person claiming to be damaged by any
common carrier subject to the provisions of [the FCA] . . . may
bring suit for the recovery of the damages for which such common
carrier may be liable under the provisions of this chapter, in any
district court of the United States of competent
jurisdiction . . . ."), with 15 U.S.C. § 717s ("Whenever it shall
appear to [FERC] that any person is engaged or about to engage in
any acts or practices which constitute or will constitute a
violation of the provisions of this chapter, or of any rule,
regulation, or order thereunder, it may in its discretion bring an
action in the proper district court . . . to enjoin such acts or
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practices . . . ."), 15 U.S.C. § 717l (noting that government
parties may bring complaints to FERC), and 15 U.S.C. § 717m
(granting FERC power to investigate violations of the NGA). With
respect to criminal antitrust enforcement, for example, the NGA
specifically states that FERC "may transmit such evidence as may
be available concerning such acts or practices or concerning
apparent violations of the Federal antitrust laws to the Attorney
General, who, in his discretion, may institute the necessary
criminal proceedings." Id. § 717s(a).
Nor does PNE explain how this clause grants jurisdiction
to review tariff terms, rather than confirming that the tariff
does not eliminate the obligation to comply with the many laws
whose application does not run afoul of the filed-rate doctrine.
Moreover, this clause is not some unique feature of this particular
tariff. Its usage has dated back at least to the 1950s and has
been referenced in several FERC rulings. See, e.g., Tenn. Gas
Pipeline Co., 60 FERC ¶ 61,261 (1992); United Gas Pipe Line Co.,
47 FERC ¶ 61,285 (1989); San Diego Gas & Elec. Co., 42 FERC ¶ 63,011(1988); Columbia Gas Transmission Corp., 25 FERC ¶ 61,460 (1983).
See generally Pan Am. Petroleum Corp. v. Cities Serv. Gas Co., 182
F. Supp. 439, 441 (D. Kan. 1958). We find it unlikely that FERC
has been inadvertently invalidating through a backdoor its own
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exclusive power to enforce the NGA's and Code of Federal
Regulations' prohibitions or the terms of its approved tariffs.4
D.
PNE finally suggests that we revisit our conclusion in
Breiding that the filed-rate doctrine applies to the defendants'
capacity-reserving decisions, see 939 F.3d at 55–56, in light of
the fact that FERC does not affirmatively approve those precise
decisions, see id. at 50. PNE relies for this argument on Keogh
v. Chicago & Northwestern Railway Co., 260 U.S. 156 (1922), and
Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571 (1981), and this
suggestion is cogently set forth in detail in the amicus brief
filed by the Open Markets Institute. In a nutshell, this argument
points out that, by defaulting to the market-based rates in lieu
of cost-of-service rate-making, FERC has eliminated a
justification for the filed-rate doctrine and increased the
importance of ensuring that the pertinent markets are functioning
properly. See generally Alfred E. Kahn, Deregulatory
Schizophrenia, 75 Calif. L. Rev. 1059 (1987). And as California's
experience in its 2000 and 2001 energy crisis demonstrated, there
4 As we noted in Breiding, FERC did conduct an investigation
and determined that the no-notice contracts had not been
anticompetitively abused. See 939 F.3d at 55 (citing News Release:
FERC Staff Inquiry Finds No Withholding of Pipeline Capacity in
New England Markets, Fed. Energy Regulatory Comm'n (Feb. 27, 2018),
https://www.ca1.uscourts.gov/sites/ca1/files/citations/18-1995_
BreidingvEversourceCitedURL.pdf).
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is substantial evidence that FERC has been slow to recognize market
defects that create opportunities to exploit market power. See,
e.g., Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1
of Snohomish Cnty., 554 U.S. 527, 553–55 (2008) (remanding to FERC,
which had conducted only a summary analysis, for a more searching
review as to whether alleged market manipulation had undermined
the market factors that justify the use of the Mobile-Sierra
presumption and might have led to supracompetitive prices). In
this instance, too, FERC's brief and conclusory statement
regarding its own investigation of the charges in this suit, see
supra note 4, leaves one less-than-assured that FERC has been
rigorous and thorough in filling the arguable enforcement gap
created by the filed-rate doctrine.
At base, though, a market-based rate or tariff term
allowed by FERC under its rate-setting authority is still a rate
approved by FERC, albeit with a rate-setting measure (the market)
other than cost-of-service to achieve the requisite assurance that
the rate is just and reasonable. See E. & J. Gallo Winery v.
EnCana Corp., 503 F.3d 1027, 1035–43 (9th Cir. 2007) (discussing
the transition from cost-of-service rate-making to market-based
rates in the natural gas market and finding the doctrine applicable
to market-based rates because the same underlying rationale of
deference and preemption applies to both rate-setting mechanisms).
So at the core of its argument, PNE contends that FERC's use of
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this alternative tool for disciplining the behavior of FERC-
regulated entities renders these entities essentially not FERC-
regulated, such that rates deemed just and reasonable by FERC may
nevertheless be punished as unreasonable in private civil damage
actions. Given that Congress allowed the use of market-based rates
without eliminating the filed-rate doctrine, see 15 U.S.C.
§ 717c(a), (c) (instructing FERC to declare only "just and
reasonable" rates lawful); Mobil Oil Expl. & Producing Se. Inc. v.
United Distrib. Cos., 498 U.S. 211, 224 (1991) ("[T]he just and
reasonable standard does not compel the Commission to use any
single pricing formula in general or vintaging in particular."),
and given that Congress in the wake of the California energy crisis
enacted remedial legislation that also contained no such provision
limiting the doctrine's applicability or, as in the FCA, allowing
enforcement in federal district courts, see Energy Policy Act of
2005, Pub. L. No. 109–58, 119 Stat. 594, we see no license to
embark on such a substantial change of course from that marked out
by precedent. None of this is to say that FERC has necessarily
been diligent in ensuring that the markets it allows to set rates
are themselves always properly functioning, a prerequisite for the
assumption that the rates produced are just and reasonable. See
Mont. Consumer Counsel v. FERC, 659 F.3d 910, 919 (9th Cir. 2011)
(citing La. Energy & Power Auth. v. FERC, 141 F.3d 364, 365 (D.C.
Cir. 1998)) (noting that "it is not unreasonable for FERC to
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presume that rates will be just and reasonable" where "sellers do
not have market power or the ability to manipulate the market
(alone or in conjunction with others)"). Rather, it is to say
that complaints to this effect need be raised with FERC and
Congress, not with a jury, at least as we understand the law to
now be.
III.
For the foregoing reasons, we affirm the decision of the
district court dismissing the complaint for failure to state a
claim.5
5 "[T]he filed-rate doctrine applies with equal force to
state-law challenges." Breiding, 939 F.3d at 56. PNE raises no
argument to the contrary.
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