last case of the day which is the state of california versus the federal energy regulatory commission or counsel ready good morning please the court my name is paul stein representing the petitioner state of california i'm going to reserve about three minutes of my time for rebuttal right erk the federal energy regulatory commission is blocking billions of dollars and legitimate refund claims arising out of the california energy crisis based on a fundamentally flawed assumption the assumption that rates were filed as required by rates were not filed in advance of their taking effect so they could be reviewed for reasonableness and they weren't reported for the more limited purpose of market monitoring either these statutory violations occurred during the most disastrous run up in wholesale power prices in history and the violations are ongoing section two of five states plainly that utilities must file schedules shelling all particular those kinds of tariffs give the utility unfettered pricing discretion which is precisely what the interstate commerce act and the federal power act were designed to prevent by eliminating the fi requirement under section two of five for doing precisely what the supreme court said the i c c interstate commerce commission and the f c c the federal communications commission had no authority to do like the f c c decided that requiring the filing of all rates would hinder the development of competitive markets work also like the f c c decided that requiring them to file their rates was unnecessary because competitive market forces would keep rates in check in fact contends in this case that requiring them to file their rates really wouldn't help them where they wouldn't help the agency determine if  y had the ability to exercise market power so it simply doesn't require him to file their rights well the existence of competition is not a sufficient excuse me sufficient justification well i don't know if that's true and the issue was actually never litigated at fir we haven't argued that the statute prohibits market based rates but it's going to require the filing of the actual numbers the satisfy the statutory requirement for filing how can you possibly have market based rights what you not be filing what the marketplace for it's going to be in sixty days well that may be true i think the answer is that it's first job to work out its markets in a way that the filing requirement can be complied with well but i take that an answer to be an acknowledgment of the concern i just expressed and tell me that it's her job doesn't tell me that there's any way to have a market  consistent with your theory well i think the first answer actually to that question is that's precisely what i see i in the rest of the long distance and used to be argued in the m c i case how are we going to have a competitive market here if we markets perhaps not the way markets are currently structured perhaps not the way the spot markets where sales of power last ten minutes those kinds of markets may not be feasible under the filing requirement i don't know really that's like i said i think that's first job well the state of california kind of plunged into this on its own to jump into a market based rate system voluntarily with the acts of the legislature so presumably the state of california has given given some thought to to whether the system is legal and consistent well the state of california wanted competition to drive down the price of electricity the state of california didn't ask for the violations of the quarterly reporting requirements that we've identified and i think that if he were able to order refunds retroactive refunds where rates that were market based rates were being the time they are determined getting consumers an opportunity to protest and getting the agency an opportunity to spend their way to hold a hearing i really don't know and i think that's the first job to figure out if you can't run these markets in compliance with the statute it needs to get the statute amended illustrating the filing of complaints after rates have gone into effect now a complaint after a rate has gone into effect as a very different animal than a protest to a proposed rate under section two of five complaint now in california the result of that sixty day lag was a reduction in the amount of refunds available to consumers by several billion dollars and in these in these markets more generally the result of th that no single transaction can ever be challenged under section two us next because the rates expire long before a complaint could ever be put on file first reliance on section two a  work places a lot of of emphasis on its discretion to use different rate making methodologies but that issue frankly is not before the court it's a red herring the attorney general has never argued that ferg is limited to using cost of service rate making or to any other particular type of rate making methodology attorney general is merely saying that forecast to file all rights is precisely what the supreme court said in the m c i case supreme court  competition may well be the best way of protecting consumers it may well be that consumers are adequately protected so long as the agency could intervene after the fact but the bottom line is congress  the agency is not free to ignore that that prescription you can see it thinks filings are obsolete  statute here there's no deference warranted to their interpretation of section two hundred five here under the chevron doctrine for several reasons most importantly the statute is unambiguous the price or at least allows consumers to determine how the rate will be determined there is nothing in a market based tariff that limits utilities pricing discretion they're essentially a blank check to charge any rate communications act all of those cases make clear that rates have to be filed and that the terrorists really because it says terror from the top of the piece of paper there's not a terrorist showing al them yes thank you you have about three and a half minutes thank you for your argument available or absolutely wrong so in other words there are under your your interpretation of the act even though the rates maybe i'm just some discriminatory and prohibited by the federal power act the way you've constructed that there is no effective r just use that exact statement point out why i think the statute absolutely acknowledges that there will be periods of time where there will be rates that are no longer just a reasonable and that there will not be refunds for that and that sixty day time lag i'm i believe it is it is certainly recent there's no question about that but it's also important for this court i think to recognize that courts have affirmed our market based rate  we are investigating now whether there were illegal actions taken by the sellers we will actually not want to refunds but to disgorge profits of course we're also acting to order refunds in the e l o d s ninety five state would otherwise seek by way of this discord absolutely doing that right now there are a number of investigations going on and the commission is looking at whether it will discourage profits that were illegally gained and rate does have to be filed with our commission and so the public interest fully aware of what has been charged and each and every member of the public including the buyers can say wow that person got a completely different rate than me on the same  the remedy matter i mean i just want to point out our discretion is so broad concerning remedies and did act to remedy the violation here in the right violation was not complying with our filing requirements and ordered filings to occur they have occurred and the refund issue is will be addressed in is being addressed me l o l cash ninety five it is so limited that basically you're allowing millions of dollars of overcharging to occur well you dividual wholesale power suppliers filed a collective grief is intervening and it was agreed between the lines generators who also file a separate collective body that one group would on the presumption that the utility has monopoly power the market rate rest prior determination by for at the time the market faced rate tariff he's proposed that s another question but i think that's the real world world in fact just let me let me turn to that in both the statutory terms in real terms real world terms we have two parts of the statute section two hundred five which deals market based rate tariff in conjunction with the requirement for the filing of the quarterly reports that's the two zero five c requirement and the status reports to contain those reports contain the detail the who's told to whom i mean who bought at what price and other details they are supposed to be transaction specific the violation for found here that reports were not transaction specific they had been aggregated but in examining that problem very carefully looked at at the situation and the terms of refunds for violation of the quarterly reporting requirement weren't proper and once through the four factors there was no showing that the violation resulted in one just an unreasonable price and it was consistent with prior precedent they distinguish washington water power because washington water power it was a case in waited two years to complain about quarterly reports going back to january two thousand and one he didn't he didn't file a complaint until march nineteenth two thousand and two this was after  had clearly indicated that market based rates were filed rates in its order of july two thousand and five two thousand and one opening up massey refund proceeding which is actually in par before this court in the court's docket number zero one seven one zero five one proceedings and that docket have been suspended in order to give the california parties an opportunity to abuse evidence before for  first of all a market based tariff is not just another form of a rate schedule that shows all rates it's a rate schedule that shows no rates at all by design it shows no rates at all consumer to come in and challenge the proposed rate perhaps get the rate suspended or even made effective subject to refund that fundamental remedy has been written out in the statute i first realized after the fact the utility comes in and puts on a showing demonstrating or purporting to demonstrate that it lacks market power theoretically consumers have an opportunity to come in and argue that the utility doesn't have market power have market power therefore it's not our economic theory their weights they charge will be just unreasonable as a matter of economic logic they cannot charge excessive rates because they'll lose business go out of business well the supreme court said that may be true reliance on the competitive market may be the best way to protect consumers we might be better off if there were no statute whatsoever regulating the communications market reason is that when a cost base rate is filed a price is filed the consumer can come in and he knows what the price is going to be and can challenge the reasonableness of that price  authority to go back in time and order refunds financially set the rate at the level it would have been had the formula been filed a market based tariff is a blank slate there is no standard market based tariff that limits sellers pricing discretion it's impossible to demonstrate a violation of the market by base tariffs by arguing even for example that they charge ten million dollars  your first theory that would not be a violation of the market based tariffs it might be a reason for revoking the seller's market based rate tariff going forward but that wouldn't help consumers who are stuck with a ten million dollar megawatt hour charge is there i just want to one last point about the discourse when a process remedy that for the first council mentioned a minute ago that's not a great refund the remedy that congress guaranteed consumers is a potential refund under section two of five of the federal power act if you we're talking about billions of dollars in rate refunds should be available here billions for settling discords one of profit claims for less than pennies on the dollar if there were a filed ra in force in the iso n p s markets to go back in time and make all sellers return anything they collected in excess of the file great but that's not what for is doing here it's going after