Ninth Circuit Issues Third in a Series of Decisions Solidifying FERC's Exclusive Jurisdiction Over Wholesale Electricity Markets

Coming on the heels of two recent opinions affirming FERC's exclusive jurisdiction over wholesale power markets, on September 10, 2004, the Ninth Circuit Court of Appeals issued its decision in Pub. Util. Dist. No. 1 of Snohomish County v. Dynegy Power Marketing, Inc., No. 03-55191, 2004 U.S. App. LEXIS 19045 (Sept. 10, 2004), affirming the dismissal of Snohomish's claims against various traders of wholesale electricity for violations of California's antitrust and unfair competition laws as preempted by federal law and barred by the filed rate doctrine.

In the wake of the California energy crisis of 2000-01, Snohomish, a utility providing electricity to consumers in Washington state, sued various generators and traders who sold electricity in the California wholesale market, for violations of the Cartwright Act (California's antitrust law) and California's Unfair Competition Law by allegedly manipulating the markets and restricting electricity supplies to create artificially high prices in the markets from which Snohomish provided power. The complaint asserted that these practices caused Snohomish to "pay prices for electricity in excess of rates that would have been achieved in the competitive market." Snohomish sought monetary relief including treble damages, and also sought injunctive relief.

The district court granted the defendants' motion to dismiss the case for lack of jurisdiction, finding Snohomish's claims were barred by field preemption, conflict preemption, and the filed rate doctrine. The district court held that the relief Snohomish sought would interfere with FERC's exclusive jurisdiction over the regulation of interstate wholesale electricity markets, and that Snohomish's claim for damages would require the district court to determine what rates would have been achieved in a competitive market.

On review, the Ninth Circuit framed "the fundamental question" as "whether, under the market-based system of setting wholesale electricity rates, FERC is doing enough regulation to justify federal preemption of state laws." The Court found that under the market-based system FERC had waived many of the requirements that applied to a cost-based system. Nonetheless, the Court reasoned that FERC continued to oversee wholesale electricity rates by reviewing and approving various documents filed by the defendants, the PX, and the ISO.

First, each seller was required to file a market-based umbrella tariff, approved by FERC only upon a...