of the federal power the core of the taste and the arguments you will hear today is statutory section two old one one the federal power which introduces part to the act in part is that the provisions of this part shall apply to the transmission of electric energy in interstate commerce and to the sale of statute that we are talking about today does three things first its status that part two shall not apply to government utilities second it's tests that it shall not be deemed to apply which is a rule of construction and a limitation and the interpretation of the statute by e f e r c and third i trial not apply unless tax provision make specific reference to government utilities which is congress way of saying that if conditions in markets change conditions in the industry change  congress will reserve to itself the right to deal with those changes and that is reflected in the statute and quite clearly the provisions of revise contracts of public the phillies and their rates and charges and in specified limited circumstances to order public utilities to make refund the term public utility is essentially a form of jurisdictional shorthand and acted by congress it is defined in the act as a person who owns or operates facilities subject to the jurisdiction of that we don't have direct regulatory authority over powered sales by public utilities which doesn't tails the language of the statute you just read and then the commission goes on to say something to the effect but because we have authority to regulate wholesale rates in interstate commerce and because our regulation includes them as a player in this market we're not directly regulating them we're simply saying if you want to play in this pond you have to abide by our rules that in effect is a way to sidestep the language of the statute but why isn't that one to which we regulating the sales of the government utilities when it says that it can change the sales contracts in certain markets in every instance we deal with here e requirements in part two of the act do you do you read that the remedy they invoke is one of an actual refund as opposed to simply rejiggering the diction outside part two they are regulating sales that hypothetically speaking doesn't your construction allow public utilities if they chose not talking about contract actions that might arise those are not before the court we are talking about whether f a r c and if you order against government utilities based on relationship between government companies and investor owned utilities in the electric due to utility industry in this country has been one of constant debates and tension going back to before the waterpower act of one nine hundred twenty s when there was a struggle over how much government owned dams should be allowed to sell  th the the argument has always been balanced on claims that it's not a level playing field that is how it has gone congress in hundred thirty five struck a particular balance when an act in parts two and three of the federal power and that balance included this very categorical in plainly defined provision section two zero one that but in doing that it seems from the legislative history that given the time frame that nobody really contemplated these government utilities selling power interstate commerce of the nature that we are confronted here today would you agree with that i'm not quite sure honored and the reason is that the legislative history was interactive against a background of long debate about government the mid twenty's president hoover vetoed a proposal to build dams that muscle shoals because he thought the government shouldn't be in utility business but two years later in is there anything that indicates the congress intended to give government utilities a license to manipulate the market or to obtain windfalls or to do things which the regulated utilities were plainly not permitted to utilities all in the same way so the answer is judgment humans question i think is that this history clearly shows that congress simply did not want to give the commissioners of the federal power commission now they have the r c a jurisdiction over government utilities i know it's very hard to actually say no there is no remedy here to regulation over the government utilities but that would slow down as a matter of practice or reality to the government which hillary's well you used the word any because first of all government utilities when they sell power well they don't sell it under the federal power act they obviously make contracts selling every sale is a contract so discriminatory and that transactions had occurred while it was in fact they ordered it ordered the public utility members to make refunds but expressively said quite clearly we of course have stiction to order the government utility members of this pool to make refunds that he's a matter for the courts to consider in analyzing the contract and eventually the regulation of the transmission requirement revenue requirement itself it's a little bit like  natural gas companies and in some ways other than natural gas companies the first two of those specially mirror what is available to for under the federal power act and going back to the supreme court decision on which u t c is predicated it seemed to me the supreme court was saying you could take each one of those phrases and each one can be an independent jurisdictional hook for the commission and so even though the commission couldn't regulate what we call here government entity gas dollars said that they could sweep their man through that big you're it's fiction  transportation so the question then becomes if you look at the the partly mirror provisions of the two acts why wouldn't the same rationale apply to the  where they can regulate the sale of electric energy wholesale interstate commerce well let me let me turn to the gas tax fortune on the first because i think you can help us understand what these limits are utility owning a pipeline that would not be subject to the r c transportation jurisdiction even if it was transportation and commerce for the same reasons that you have the implied exception in the power in the united distribution case what was being transferred was the pipelines the natural gas well all you're doing is he's transferring purest fictional capacity to begin with here we have a nine years fictional claim to begin with that is a principal part of the distinction on which he  sale in the market the bad news the balance of congress struck and you know people say this is unfair why should we have a system like that that's not right and i think the only th equity it's kind of an odd one when it's hard to say the equity is whatever the statute said that is that one of its grounds for taking what i guess will call to one other point which is that two other points very quickly assuming for argument that their words were stiction here the first time that the government utilities heard about it was i'm refund your stitching was on july twenty fifth two thousand and one which was long after this proceeding began nothing in the no situation where congress has ever provided a federal agency that to demand a refund and we're talking about tens of millions of dollars for another federal agency without express congressional approval i mean that's not and p x both of which are perked jurisdictional public utilities there's no stepping beyond our found this was clearly within our pounds because we reset at a price that we always had the to offset their purchase price with any reduction resulting from our orders so if you want to call that a refund yes i'm not i don't and i'm not trying to evade the term refund right because we can't save the term r clarify for me if you think that he's saying that simply restarting the market clearing price somehow permits you to avoid making  now i'm not saying that at all what i'm saying is in these specific sort of circumstances we had a situation that was not envisioned by congress when it passed the federal power act that there's nothing in the legislative history that suggests at all that somehow governmental entity should be shielded from regulation by the commission in fact if you look the history that we provided in the committee reports it was indicated that the reason for the exemption was to protect public utilities from having to for example expand their services or you know can act with private utilities and there excuse me with governmental entities and thereby the governmental and if he would gain an advantage so from our perspective we don't to and then i guess we used in the short term governmental utility unless the provision make specific reference there to the question i have is why the reason that i started off by saying that what we did was revise the prices in a market that we regulate because from our standpoint the conflict if you will will within the statute just between the two sections two of one and two or one after and if we have jurisdiction over the wholesale sales here how do we reconcile that with the exemption and that's where we see the problem or the ambiguity existing rather than just looking at the statute individual sections in isolation without taking the whole statute together when i would wonder hundreds the commission said almost say in numerable times with very many times that we are only applying this in the specific circumstances of this case the commission has not attempted in any other situation to take jurisdiction over the governmental entity if you just happened to be in this particular system situation where we had the single price auction so that whatever the highest was rice was able to stand the rationale and i think everyone is sympathetic to it given the unintended consequences of what occurred in the california energy crisis but under the rationale of the commission it's hard for me to distinguish between this circumstance and the next one that might come along in other words what's the principle dividing line for purposes of jurisdiction and how you to two or why now i think the principle of dividing line and that will answer your question is that where there is this the only situation where this has fired is where there is a single price auction where the same price applies to all sellers so that this you have enough back to thirty percent of sellers automatically receiving the same price in a situation where the commission has determined that that price is on just an unreasonable that it applies in that situation if we don't there is no other situation to which it has ever been applied besides that i don't know any other dividing line that's the dividing line between them in a way it's a kind of circular the dividing line is this situation we never we've never been in the situation that the commission has never been in the situation where we've had a single price auction where the same price applied until this till this time previously all the other contracts  continuing on have been bilateral contracts ones that make any difference in terms of jurisdiction well because what's amazing views that as a situation where the seller and the b individually enter into an agreement and that because a queue of one app is exempt from our regulation but in the situation here we created the auction market in approved it part of that approval was that the price would be just unreasonable and that is a difference from a bilateral situation you're not when you're going when they when the governmental entities were going into exit i guess in this case or additional jurisdiction and somehow i'm having trouble linking that up with the statute other was first created the situation therefore for can take jurisdiction something about that logic just doesn't sit right in line of congressional specificity well if you are if you create another market that is also subject to manipulation and rigging and various other things does that mean then for can say well we created this it didn't work out and the only way we can correct it is to take jurisdiction where we previously had none that's seems to be the logic and unless i'm missing something well i there's there are several answers to that but the one that i would turn to first would be that it's the same situation that i think you'll find when you read the u d c case in effect the commission created the cap capacity release program there and there was no problem in the capacity release program so it doesn't have to be a situation that we create a program that doesn't work we thought that the california program would work and in fact it worked very well for a couple of years before things went south but so it isn't the fact that we see problems and therefore we assert jurisdiction it's that  case i think you missed the ball stand in the exactly the same position that the court consider them to be exempt from the ask so i would i would look at it from that aspect right we effectuated those rates what we said was look this is our market implicit in our market if you will is that the rates can not be above i just in reasonable level when you came into this market you knew that for control that market that we had established it that it was subject to our regulations and you knew that the rates could not be any higher than a just and reasonable level because that's what our statutory mandate is when you put all those things together what the commission was saying was look just because your governmental entity doesn't put you outside of that you were subject to the same condition and part of that condition is that you can get no more than just just a reasonable level and if that requires you to make refunds so be it  because we keep saying the same thing that i'm having trouble getting to the bottom of the authority don't the governmental utilities participate you know they've also participated in markets that wouldn't necessarily be a single price auction market correct correct and in those markets also for granulate it's reasonable and just right and correct well not in those particular situations there on a parallel analysis do we open the box and basically say once work is regulating wholesale rates as long as you choose to play in that market then you play by their complete authority no i don't think so at all what i think the difference is because in all those other markets the there are really no sales because they're all bilateral contracts and in this situation i'm starting to keep coming back to the same point but it's a single priced auction that is run by the i i think the commission views it as a jurisdictional difference in the sense that the only way the iso p x markets could be could be run were subject to our regulation in their gross subject to the federal power act and and in the other situation where you have bilateral contract you don't have the same degree of regulation because of the two zero one now situation market it didn't run the market at all in that situation each of the individual math members had theirs their separate tariff so that if you were going from here to there you would have let's just say five different tariffs that you might have to enter to get that you get your power from one side to the other and say three of those were jurisdictional and three of those were governmental entities that the commission never regulated the governmental entity tariffs and map because there was no central market so what the commissions did and maybe this helps out to answer your your question that it buys it went through in parse each of those agreements and said look the the three that are burke your sticks you know public utilities we have the authority to regulate and the other there was only one but in my hypothetical there are two governmental energy tariffs we did not regulate those that's a different situation again from a single prices are actually market where unlike mapi i showing p x were actually running we wrote parts of the federal power act under purpose and actually defined i think electric utilities to include what we call municipal utilities so my since then and they have the opportunity to kind of set things right in terms of how the utility market has evolved shouldn't shouldn't we give some credence to the fact that they think they could have amended this many coming back to the repeated references in the commission's orders that it was in this specific circumstances presented here and restructuring in california did not occur until nine hundred ninety six and i think with congress i think in general you can say that as bad as we are with market based rates and retroactively regulating them congress has even been further behind us many times i mean it's it would when be amazing or surprising but it's not necessary ordinary that congress is ahead of the curb and saying oh gee well california is going to have restructuring you know for five years maybe we say the first thing that you should look at is what is the fundamental purpose of the federal power act which is the protection of consumers against exploitation starting from that  i would sit down and go through the provisions and i would see if there was let's not say conflict but let's say there's some disagreement or you could read in her visions one of two different ways i would say read it to you no way that will further that fundamental purpose of the federal power act and i know how and how would you if you had to write it up how to ask you to do it first i'm only going to say i'm only smiling because i think the commission did that and it's that's the situation that i've said several times and i say that the commission said many times was that in these specific circumstances the way to read the act is to fulfill that purpose draw the line there and that preserves remember there are whole whole bunch of other things that you have to have like we have accounting rules we have reporting rules we have re filing rules that governmental entities are not being asked to do as a result  this we're not regulating any of their other sales they're bilateral deals so that's how i think the commission tried to write it up and that's how i would respectfully suggest  it's quite a departure from both the tradition and history and i think i can i don't disagree at all and i would just point you to this court's opinion in the california power change case where the commission in the act taste real limited in entire care if we had never done that in the history of the of the federal power act and he actually came in and said you can't do that it's same thing  the history and we said we have to do that that is the only way that we can stop what we saw one of the concerns structural problems in the market and so this court said it may be unprecedented but that doesn't mean you shouldn't do it in this situation when it's presented to you remember and we've said this in our brief that the federal power act didn't and in one thousand thirty five this interpretation is ongoing it's a dynamic act and situations change the act has to change in the commission's regulation has to change to fit it and that's what we're trying to do here as well and you switch gears for a second if if in fact it turned out that for didn't have the kind of jurisdiction that has some sort of here do you agree that there is an alternate remedy an effective alternate remedy in terms of contract or not remember this one of the things that the commission has been maybe excoriated it's too strong a word but remember we started with structural changes prospected plea and then we went back to refunds we were challenged on that we're being challenge now because we're taking too long in these refunds the refund case isn't finished if we go through all of that and then we have to go through contracts that may not result in anything quite frankly but there may be there are some remedy some point in the future by i'm not holding my breath unless you have any other questions maybe i could say that for tomorrow service clearing houses in which buyers and sellers choose to come to the market and agree to be bailed by the terms of those market rule centralized clearing house market anywhere in the country that includes public attitudes because you would have a large percentage of the market that would be exempt from the very rules of the market operates on your now section two the one  has issued orders requiring on jurisdictional entities to show cause why they should not have to pay refunds for charging more than the maximum amount permitted under capacity release programs and purchase even order refunds in one circumstance and it i have to stop there because it seemed to me lately got on to this a little bit before about whether they were resetting the market price and that's why i asked mr lane and as i heard him that might be available under three zero nine are different than those that might be available under two of the six correct ok so it seems to me that we're not arguing authority to implement final grade schedules and the general authority stems from its general administrative authority it's not on your section to us next then it would have a party to abide by the terms of the trade schedule a must be construed in accordance with its purpose and its purpose is to protect consumers if there is perceived to be a tension and have tension must be resolved in a way  your honor or to ask the number of question might be an then reasonable rate and they also with then also be subject to further jurisdiction in that case there are other i know some markets elsewhere in the country but the teeth act is that they must have brought themselves to the it's not really in the nature of the market structure alone that gives the jurisdiction in other words because there's variations on the thing that make up the market as a whole instead you go back to the public interest in the other issues that you provided for with the authority to just not maximum prices and if necessary refunds for sales that are made in some hot market it's not the auction that's critical it's the recovery of prices too was thankful clearing chevron one also has to keep in mind the rule of brown and williamson tobacco case in which the f d a for very good public interest reasons not to and as they have however gone ahead and they have terminated investigations on the grounds that they haven't found anything they are arguing that our challenges are moot when finally i'd like to talk about the effect of the agreement has the power prospect of lead to revise of those rules and whatever those rules are that kicks in the contract what we're talking about here is for power to revise the contract if i can use  public utility vive they couldn't agree on price in terms so they went to the much admired public utility c n asked them public utilities that the price and public utility she institute over to your right shoulder on the southwest corner turn right proceed to the next stop sign the institutes on your right i'm sure you're all getting this to turn right it's stop sign go slightly downhill keeping to your right down to the parking lot the south side of institute building park in any available space and walk around the building from the building and enter through the main doors because you've kept all of these complicated things in this aspect of this case in your head and i know you can keep those directions and i want to also of