Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-03-01285/USCOURTS-caDC-03-01285-0/pdf.json

Parties Involved:
California Power Exchange Corporation
Intervenor
Constellation Energy Commodities Group, Inc.
Intervenor
Federal Energy Regulatory Commission
Respondent
Pacific Gas and Electric Company
Intervenor
Powerex Corp.
Petitioner
Southern California Edison Company
Intervenor

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 10, 2006 Decided July 18, 2006

No. 02-1367

CONSTELLATION ENERGY COMMODITIES GROUP, INC.,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

CALIFORNIA POWER EXCHANGE CORPORATION, ET AL.,

INTERVENORS

Consolidated with

03-1285, 05-1094, 05-1154

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

David C. Frederick argued the cause for petitioners

Constellation Energy Commodities Group, Inc., Powerex Corp.,

and supporting intervenors. With him on the briefs were Scott

H. Angstreich, Paul W. Fox, Andrea M. Kearney, Ronald N.

Carroll, John T. Stough, Jr., Kevin M. Downey, Charles V.

Garcia, James C. Beh, Jeffrey M. Jakubiak, Robert C.

McDiarmid, Daniel I. Davidson, and Lisa G. Dowden.

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Richard L. Roberts argued the cause for petitioner Southern

California Edison Company and intervenor Pacific Gas and

Electric Company. With him on the briefs were Catherine M.

Giovannoni, Melanie J. Teplinsky, Stephen E. Pickett, Michael

D. Mackness, Julie A. Miller, Mark D. Patrizio, Joseph H.

Fagan, and Stan Berman. Paul B. Mohler entered an

appearance.

Lona T. Perry, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on the

brief were John S. Moot, General Counsel, and Robert H.

Solomon, Solicitor.

David C. Frederick, Scott H. Angstreich, Paul W. Fox,

Andrea M. Kearney, and Ronald N. Carroll were on the brief for

intervenors in support of respondent.

Richard L. Roberts, Catherine M. Giovannoni, Melanie J.

Teplinsky, Stephen E. Pickett, Michael D. Mackness, Julie A.

Miller, Erik N. Saltmarsh, Mary F. McKenzie, Traci Bone, Mark

D. Patrizio, Joseph H. Fagan, and Stan Berman were on the

brief for intervenors California Electricity Oversight Board, et

al. in support of respondent. Arocles Aguilar, Sean H.

Gallagher, and Victoria S. Kolakowski entered appearances.

Before: GINSBURG, Chief Judge, and TATEL and GARLAND,

Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: The bankruptcy of the California

Power Exchange Corporation (the CalPX or the PX) in March

2001 gave rise to several proceedings before the Federal Energy

Regulatory Commission and to the orders before us today.

Petitioners Constellation Energy Commodities Group, Inc. and

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*

Although the parties could both buy and sell power in the

CalPX markets, we use the terms “sellers” and “purchasers” to

describe the petitioners’ roles relevant to this case.

Powerex Corporation (“the sellers”)* argue the Commission

misinterpreted the CalPX tariff to allow the PX to retain

collateral they had posted with it, and Powerex individually

challenges the Commission’s decision allowing the PX to retain

its so-called “chargeback” payments. Petitioner Southern

California Edison Company and intervenor Pacific Gas and

Electric Company (“the purchasers”) claim the Commission has

not allowed the PX to retain sufficient collateral. Because we

conclude the Commission acted reasonably in all respects, we

deny the petitions for review.

I. Background

We pick up the “long, detailed, and tortured” history of the

California energy crisis in the mid-1990s when, in an attempt to

deregulate its energy markets, the State of California created the

CalPX and the California Independent System Operator

Corporation (CAISO). Bonneville Power Admin. v. FERC, 422

F.3d 908, 911 (9th Cir. 2005). The CAISO is responsible for

managing the flow of electricity on the electric grid across the

State and runs a “spot” market for electricity. The now-defunct

CalPX ran an auction market for electricity in which participants

bought and sold power in “day-ahead” and “day-of” markets

subject to the conditions of the CalPX tariff. In particular, the

CalPx tariff required each participant to maintain with the PX

collateral sufficient to cover its outstanding liabilities from the

time “the liabilities are incurred” until “payment is billed and

settled.” CalPX Tariff § 2.2.

Beginning in the summer of 2000 many purchasers’

liabilities skyrocketed due to the increased rates they paid for

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*

The refund period began 60 days after the rates were first

challenged as unjust and unreasonable and ended when the

Commission began “constraining prices” in the power markets. See

San Diego Gas & Elec. Co. v. Sellers of Energy and Ancillary Serv.

into Markets Operated by the [CAISO] & the [CalPX], 96 F.E.R.C. ¶

61,120, at 61,502, 61,504 (2001).

power. Bonneville, 422 F.3d at 912. San Diego Gas and

Electric Company, a purchaser in the CalPX market, filed a

complaint with the Commission alleging these rates were unjust

and unreasonable, in violation of 16 U.S.C. § 824d(a). See San

Diego Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs.

into Markets Operated by the [CAISO] & the [CalPX], 93

F.E.R.C. ¶ 61,294, at 61,983 (2000). The Commission

investigated, agreed, and “condition[ed] continued approval of

market-based rates on the seller agreeing to refund” any amount

it had charged in excess of the maximum just and reasonable

rate from October 2, 2000 to June 20, 2001 (the refund period).*

Id. at 61,999, 62,010-11; Powerex Corp. v. Cal. Power Exch.

Corp., 102 F.E.R.C. ¶ 61,328, at 62,121 (2003) (Powerex

Order).

Edison and PG&E were unable, however, under state law,

to pass on to their retail customers the increased rates they had

paid for power purchased through the PX. As a result, the two

companies together defaulted on more than a billion dollars of

debt to the PX and others. Pac. Gas & Elec. Co. v. Cal. Power

Exch. Co., 95 F.E.R.C. ¶ 61,020, at 61,041 (2001) (2001

Chargeback Order). The CalPX then sought to recover the

unpaid amounts under the “chargeback” provision of its tariff,

“an allocation mechanism intended to allow the PX to recover

the uncollected receivables of a defaulting PX debtor” from the

other, non-defaulting participants. Powerex Order, 102

F.E.R.C. at 62,120 n.3.

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Several participants balked at the demand made by the

CalPX and turned to the Commission for relief. In April 2001,

the Commission concluded that charging other participants in

order to satisfy PG&E’s and Edison’s debts would “cause

virtually all PX participants to default.” 2001 Chargeback

Order, 95 F.E.R.C. at 61,045. The Commission therefore

directed the PX to: “(1) rescind all chargeback actions related to

PG&E’s and SoCal Edison’s liabilities; and (2) refrain from

taking any future chargeback action related to” those liabilities

until the Commission had ruled on other complaints related to

the bankruptcy. Id. at 61,046.

Meanwhile, in March 2001, the CalPX had filed for

bankruptcy protection under Chapter 11 of the Bankruptcy

Code, 11 U.S.C. §§ 101, et seq., and the following month

suspended operations in its markets. Constellation Power

Source, Inc. v. Cal. Power Exch. Corp., 100 F.E.R.C. ¶ 61,124,

at 61,482 (2002) (Constellation Order). In 2002 Constellation

filed a complaint with the Commission seeking release of the

collateral it had posted with the CalPX pursuant to § 2.2 of the

CalPX tariff. Constellation maintained its liabilities to the PX

had been “billed and settled” -- the precondition in § 2.2 for the

release of collateral -- when it paid its last invoice for debts

incurred in the markets that closed in 2001. Allowing the PX to

keep the collateral, Constellation argued, would convert the

collateral “into a guaranty of payment” for any liability the

Commission might assign Constellation as a result of the refund

proceedings, thus contravening both the “CalPX’s tariff and the

Commission policy” against requiring guaranties for refunds.

Id.

The Commission denied Constellation’s complaint, holding

that, “given the numerous ongoing contested proceedings

regarding the transactions that occurred in the PX markets,” the

“final billing and settlement” of Constellation’s liabilities had

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“not yet taken place.” Id. at 61,486. The agency reasoned:

[We are] ... faced with circumstances that were not

contemplated when the Commission approved the

‘billed and settled’ provision of the CalPX tariff. The

CalPX is no longer operating and therefore cannot

adjust future bills when outstanding liabilities are

finally determined ....

Under these unusual circumstances, the Commission

finds that retaining the collateral is in the public

interest because [the Commission is] enforcing the

terms of the tariff to assure that all market participants

meet their outstanding obligations and the ultimate

CalPX creditors are paid.

Id.

Constellation petitioned for rehearing, reiterating the

arguments raised in its complaint and pointing out the

Commission had not addressed its alternative proposal that the

PX release all but the amount of collateral necessary to cover the

refunds still pending. See Constellation Power Source, Inc. v.

Cal. Power Exch. Corp., 100 F.E.R.C. ¶ 61,380, at 62,697

(2002) (Constellation Rehearing Order). The Commission

accepted Constellation’s alternative proposal and ordered the

CalPX to release all but $10 million of Constellation’s collateral

-- a “conservative estimate” of the amount needed “to cover

[Constellation’s] potential refund liability.” Id.

Edison and PG&E then each petitioned for further

rehearing. Both argued that, because the CalPX’s accounts were

“subject to many ongoing controversies,” $10 million might not

cover the refunds for which Constellation ultimately could be

found liable. Constellation Power Source, Inc. v. Cal. Power

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Exch. Corp., 111 F.E.R.C. ¶ 61,147, at 61,778 (2005)

(Constellation Second Rehearing Order). The Commission

rejected their petitions, explaining that it had “t[aken] into

account the fact that potential refunds may increase” and “used

the most conservative estimates” before determining that $10

million would be sufficient. Id. at 61,778-79.

Powerex also joined the fray, filing a complaint with the

Commission seeking from the CalPX (1) the release of its

collateral, and (2) the return of the chargeback payments it had

made when PG&E and Edison defaulted. Powerex Order, 102

F.E.R.C. at 62,121. In March 2003 the Commission concluded,

as it had in the Constellation Order, that Powerex’s liabilities

were not yet “billed and settled” because the refund proceedings

were not complete. Id. at 62,124. In contrast to its decision in

the Constellation Rehearing Order, however, the Commission

refused to order the CalPX to release any of Powerex’s collateral

because it could not determine “whether Powerex’s collateral

exceeds its potential refund liability.” Id. at 62,123.

As for the chargeback payments, the Commission deferred

consideration of Powerex’s request pending resolution of the

petitions for rehearing of the 2001 Chargeback Order. See id.

at 62,124. In October 2004 it determined the return of all

chargeback funds “should wait until a final computation” in the

refund proceedings: “In the event that there is a shortfall of

payments due from sellers, the shortfall may need to be

allocated such that a seller with chargebacks that are being held

by the PX[] may not be entitled to the entire amount previously

paid.” Pac. Gas & Elec. Co. v. Cal. Power Exch. Corp., 109

F.E.R.C. ¶ 61,027, at 61,114 (2004 Chargeback Order). The

Commission explained that, although some participants had paid

their chargebacks in cash, others had “paid” by accepting

reduced payments of monies due from the CalPX; the latter

group could not be “reimbursed” until the PX’s accounts were

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settled. Only by waiting until the refund proceedings were

complete, therefore, could the Commission ensure the two

groups “w[ould] be treated similarly.” Id. at 61,114 n.30.

Powerex petitioned for rehearing. The Commission

rejected its claims but clarified that the chargeback funds would

be retained “only until the individual PX account of the PX

participant that made a chargeback payment is resolved in the

Refund Proceedings”; “the chargeback funds held by the PX are

not to be used to make up any general shortfall” caused by

another participant’s default. Coral Power, L.L.C. v. Cal. Power

Exch., 110 F.E.R.C. ¶ 61,288, at 62,108 (2005) (2005

Chargeback Order). Constellation, Powerex, and Edison each

petition for review of one or more of the Commission’s orders.

II. Analysis

Both sellers argue the Commission’s interpretation of the

CalPX tariff is unreasonable and contrary to precedent; Powerex

also challenges the Commission’s orders denying the release of

its chargeback funds. As intervenors in the case brought by

Edison, the sellers challenge Edison’s standing and defend the

Commission’s release of Constellation’s collateral.

The purchasers argue the Commission’s decision releasing

all but $10 million of Constellation’s collateral (1) conflicts with

the CalPX tariff, (2) is not supported by substantial evidence,

and (3) conflicts with Commission precedent. As intervenors in

the case brought by the sellers, the purchasers argue the sellers

lack standing and their petitions are moot; the purchasers also

support on their merits the Commission’s decisions allowing the

PX to retain the sellers’ collateral and Powerex’s chargeback

funds.

The Commission maintains several arguments raised by the

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sellers are jurisdictionally barred because they were not raised

before the agency. In the alternative, the Commission defends

its orders on their merits. 

As always, we will set aside a decision of the Commission

only if it is arbitrary and capricious or otherwise contrary to law.

Envtl. Action, Inc. v. FERC, 939 F.2d 1057, 1061 (D.C. Cir.

1991). Because we conclude the Commission rationally

interpreted and implemented the CalPX tariff, we do not disturb

the orders under review.

A. Justiciability

As stated, Edison and the sellers challenge each other’s

standing to petition for review. The facts relevant to standing,

however, are not in dispute; rather, each side impugns the legal

significance of the facts marshaled by the other in support of its

standing.

First, Edison and PG&E claim that, because the

Commission approved the sellers’ requests to offset against their

eventual refund obligations the costs they incur to keep their

collateral posted with the PX, the sellers’ petitions are moot and

they lack the injury in fact necessary to support their standing,

see Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

The sellers reply that the “posting costs are not the only source

of ... injury from the [PX’s] retention of their collateral”;

because “credit pledged in one market cannot be utilized

productively in other markets,” their business opportunities are

limited.

Our caselaw makes clear the sellers’ claims are justiciable:

A “present injurious effect on [a petitioner’s] business

decisions,” Rio Grande Pipeline Co. v. FERC, 178 F.3d 533,

540 (D.C. Cir. 1999), is a cognizable injury in fact and presents

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a live controversy within the “case or controversy” limitation of

Article III of the Constitution of the United States. See Fund for

Animals, Inc. v. Hogan, 428 F.3d 1059, 1065 (D.C. Cir. 2005).

For their part, the sellers argue Edison lacks standing

because its alleged injury -- the release of Constellation’s

collateral will “make it more difficult ... to recover refunds from

Constellation” -- is speculative and not imminent. See

Defenders of Wildlife, 504 U.S. at 560 (requiring that injury be

“actual or imminent, not ‘conjectural’ or ‘hypothetical’”).

Edison responds with decisions from two sister circuits holding

the loss of an interest in collateral constitutes an immediate

injury in fact. See In re Paxton, 440 F.3d 233, 236 (5th Cir.

2006); Motorola Credit Corp. v. Uzan, 388 F.3d 39, 55 (2d Cir.

2004).

We agree with Edison that the increased risk of nonrecovery inherent in the reduction of collateral securing a debt

of uncertain amount is sufficient to support its standing. As

detailed below, Constellation’s ultimate liability to the PX has

not been settled, and Edison claims that, without access to the

released collateral, it lacks the security of repayment guaranteed

to participants by § 2.2 of the CalPX tariff. Cf. Bankers Trust

Co. v. Old Republic Ins. Co., 959 F.2d 677, 682 (7th Cir. 1992)

(victim of “insured’s tort” has “legally protectable interest” in

tortfeasor’s policy even before he has obtained judgment upon

claim). In these circumstances, and considering Edison’s

legitimate interest in obtaining redress for any unjust or

unreasonable rates it paid, we conclude its claimed interest in

the collateral satisfies the standing requirements of Article III.

B. The Sellers’ Petitions

Section 2.2 of the CalPx tariff, the proper interpretation of

which is in dispute, provides in relevant part:

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Each PX Participant shall maintain sufficient collateral

to cover its aggregate outstanding liabilities in the DayAhead and Day-Of Markets to and from the PX

between cash clearing cycles or during the period in

which the liabilities are incurred and when payment is

billed and settled.

CalPX Tariff § 2.2. Our review of the Commission’s

interpretation of a filed tariff is analogous to our review of the

agency’s interpretation of a statute it administers. See Chevron,

U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,

842-43 (1984). First, we determine whether the tariff is

ambiguous; if it is not, then the Commission must adhere to its

plain meaning. FPL Energy Marcus Hook, L.P. v. FERC, 430

F.3d 441, 446 (D.C. Cir. 2005). If the tariff is ambiguous,

however, then we defer to the Commission’s interpretation so

long as it is reasonable, regardless whether it seems to us the

best interpretation. Williams Natural Gas Co. v. FERC, 3 F.3d

1544, 1551 (D.C. Cir. 1993). 

1. The plain meaning of the tariff

The sellers first argue “the plain meaning and structure of

the CalPX tariff unambiguously establish” that the “liabilities”

for which the PX could require collateral per § 2.2 have already

been “billed and settled.” In support of this argument, the

sellers cite various other provisions of the tariff that, they claim,

by putting it in context show the plain meaning of § 2.2. The

Commission, in response, maintains the sellers’ argument is not

properly before the court because in arguing before the

Commission they “never cited ... any other provisions of the PX

tariff now cited in their brief.” See 16 U.S.C. § 825l(b) (“No

objection to the order of the Commission shall be considered by

the court unless such objection shall have been urged before the

Commission in the application for rehearing unless there is

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reasonable ground for failure so to do”).

The Commission is correct. The sellers did not make this

argument before the agency and in fact never even cited the

sections of the tariff upon which they now rely for the

interpretation of § 2.2. Accordingly, we have before us no

cognizable argument that “the period in which ... payment is

billed and settled” plainly does not remain open until the

Commission determines the sellers’ liability for refunds.

2. A reasonable interpretation

The sellers next argue the Commission’s interpretation of

the tariff “cannot be sustained because it is unreasonable.”

Specifically, they claim the Commission’s conclusion that their

accounts will not be “billed and settled” until the pending refund

proceedings are complete conflicts with “settled ... precedent”

in which the Commission has refused, absent “extraordinary

circumstances,” to require a party to provide a guaranty for

potential refund obligations. See, e.g., Distrigas of Mass. Corp.,

33 F.E.R.C. ¶ 61,406, at 61,776 (1985).

The Commission, defending its interpretation as consistent

with precedent, notes that in Distrigas and similar cases it

“denied requests for bond or escrow requirements to secure

refund obligations for rates that had been set for hearing.” Here,

in contrast, it did “not requir[e] a guaranty for the payment of

refunds, but rather enforc[ed] the terms of the PX tariff

regarding retention of collateral.” As the Commission explained

in the order under review, even after the CalPX closed its

markets it continued to issue new invoices to reflect adjustments

to and revisions of transactions dating as far back as August

2000, and “[t]he amount of Constellation’s outstanding liability

[to the CalPX was] not yet known.” Constellation Order, 100

F.E.R.C. at 61,486.

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We think the Commission’s position that the sellers’

liabilities have not yet been “billed and settled” is both

reasonable and consistent with precedent: Certainly decisions

such as Distrigas in no way precluded the parties from entering

into an agreement -- more properly from maintaining and

accepting a tariff -- that provides billing and settlement would

not take place, and consequently collateral would be required,

until any refund proceedings were complete.

Indeed, we believe the Commission reasonably concluded

the parties did just that, with the result that the sellers’ liabilities

for transactions during the refund period will not be “settled”

until the Commission determines the maximum just and

reasonable price at which they could lawfully sell power during

the refund period. Furthermore, the Commission’s

interpretation, which will help ensure “market participants meet

their outstanding obligations and the ultimate CalPX creditors

are paid,” id., is consistent with both the text of § 2.2, which

nowhere limits which liabilities must be collateralized, and the

general purpose of the provision requiring that market

transactions be secured. In sum, we believe the Commission

reasonably concluded the sellers’ total liabilities to the CalPX

had not yet been “billed and settled”; consequently it did not err

in permitting the PX to retain the sellers’ collateral. See

Williams Natural Gas Co., 3 F.3d at 1551.

3. The CAISO market

The sellers next argue the Commission, when it refused to

direct the PX to release their collateral, “violated the CalPX

tariff” by considering transactions in the CAISO market with

respect to which the sellers did not use the PX as their

scheduling coordinator. As the sellers note, § 2.2 of the tariff

requires collateral solely for obligations incurred “to and from

the PX,” and the only way in which a seller in the CAISO

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market could incur an obligation “to ... the PX” was to use the

CalPX as its scheduling coordinator.

The Commission maintains we may not consider this

argument because the sellers failed to raise it before the agency.

Constellation, however, claims it did raise the issue in the

petition for rehearing where it argued for limited liability

“[e]ven if its potential refunds to the ISO are considered (as they

should not be).” Powerex similarly points to a footnote in its

petition for rehearing, in which it asserted that “collateral held

by the CalPX never was intended ... to operate as security for

participation in markets outside of the CalPX, such as markets

operated by the CAISO.”

Each quoted passage states a conclusion; neither makes an

argument. Parties are required to present their arguments to the

Commission in such a way that the Commission knows

“specifically ... the ground on which rehearing [i]s being

sought.” Intermountain Mun. Gas Agency v. FERC, 326 F.3d

1281, 1285 (D.C. Cir. 2003). Although each seller mentioned

the CAISO, neither claimed, either as a matter of fact or of law,

that it had not incurred liability to the PX with respect to any

transaction in the CAISO market. Absent such a claim, the

Commission had no reason to disregard the sellers’ transactions

in the CAISO market, and we cannot entertain the sellers’

belated argument to the contrary. See 16 U.S.C. § 825l(b).

4. Chargeback

Finally, Powerex contends the Commission “violated the

CalPX tariff” by allowing the PX to retain the chargeback

payments Powerex made after PG&E and Edison defaulted.

Powerex claims the tariff authorized a chargeback only to cover

the present default of another participant, whereas the

Commission is attempting to provide, by allowing the PX to

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retain the chargeback payments until the refund proceedings are

complete, security against the possibility a participant might

default in the future. The Commission explained its decision

was necessary to “assure that those who paid their chargeback

through receiving a reduced payment from the PX will be

treated similarly to those who paid the chargeback in cash[;]

both will receive a similar allocation of any shortfall,”

Chargeback 2004 Order, 109 F.E.R.C. at 61,114 n.30, and

neither will be reimbursed until refund proceedings are

complete.

Powerex urges us to reject the Commission’s invocation of

the need for equity among market participants, claiming the

Commission did not rely consistently upon that ground in its

orders. In particular, Powerex points to the Commission’s claim

in the 2005 Chargeback Order that the chargeback funds held

by the PX “may be retained only until the individual PX account

of the PX participant that made a chargeback payment is

resolved in the Refund Proceedings.” 110 F.E.R.C. at 62,108.

It is well settled that “we defer to [the Commission’s]

decisions in remedial matters” and reject the Commission’s

choice of an equitable remedy only if it lacks a “rational basis.”

Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810, 816 (D.C.

Cir. 1998). The orders in this case are not lacking. As the

Commission recognized in the 2004 Chargeback Order, those

participants that “paid” the chargeback by accepting reduced

payments from the CalPX cannot be reimbursed until the final

CalPX accounting is complete and it is clear there are no

shortfalls in the CalPX accounts to prevent full repayment. The

Commission rationally concluded those participants that paid

their chargebacks in cash should be treated in a like manner,

receiving reimbursement only after the Commission determines

there is no shortfall in their individual accounts. See

Chargeback 2004 Order, 109 F.E.R.C. at 61,114 & n.30. 

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Nor, contrary to Powerex’s argument, is there any

inconsistency between the 2004 and 2005 Chargeback Orders.

Although one could read the footnote in the 2004 Chargeback

Order (quoted above) to allow the CalPX to use one

participant’s chargeback funds to offset a shortfall caused by

another, that is by no means the only reasonable interpretation.

As the Commission suggests, the more natural reading is that the

2004 Chargeback Order simply delays reimbursement until

each participant’s account is settled and the extent of each

participant’s shortfall, if any, has been determined, thereby

treating similarly those participants that paid in cash and those

that paid by receiving reduced amounts from the PX. So

understood, the 2005 Chargeback Order clarifies, but does not

contradict, the 2004 Chargeback Order. Because the orders

consistently offer a “rational basis” for delaying reimbursement

of the chargeback payments, Koch Gateway Pipeline Co., 136

F.3d at 816, we will not disturb the orders under review. 

C. The Purchasers’ Challenges

The purchasers launch several attacks on the Commission’s

decision to release a portion of Constellation’s collateral.

Constellation Second Rehearing Order, 111 F.E.R.C. at 61,778-

79. First, they claim it conflicts with “every other case on

point,” citing La Paloma Generating Co., LLC v. California

Independent System Operator Corp., 110 F.E.R.C. ¶ 61,386

(2005) (La Paloma Order); Powerex Order, 102 F.E.R.C. ¶

61,328; and PG&E Energy Trading-Power, L.P. v. California

Power Exchange Corp., 102 F.E.R.C. ¶ 61,091 (2003) (PGET

Order). Next, they argue the decision is not supported by

substantial evidence because: The Commission (1) cited no

record evidence, study, or calculation showing $10 million was

a “conservative estimate”; (2) without explanation, did not use

the mechanism in the CalPX tariff for calculating the amount of

collateral needed; and (3) disregarded evidence Edison

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presented demonstrating Constellation’s refund liabilities were

“likely to increase substantially due to ongoing litigation.”

Finally, the purchasers maintain the Commission erred in

relying upon the estimated refund figures provided by

Constellation without itself testing them.

The Commission defends its order as consistent with

precedent and supported by substantial evidence. To begin, the

Commission contends the allegedly contrary decisions cited by

the purchasers are not inconsistent with the orders challenged

here; in those decisions the Commission refused to release

collateral expressly because it was unable to determine whether

the collateral would exceed the sellers’ potential refund

liabilities -- a determination it was able to make in

Constellation’s case, as explained below. Next, the Commission

claims it provided “ample justification” for allowing the PX to

retain only $10 million of collateral. As it explained in the

Constellation Second Rehearing Order, that figure was based

upon “the most conservative estimates” of Constellation’s

refund liability, taking “into account the fact that potential

refunds may increase as a result of the proposed changes to the

refund methodology.” 111 F.E.R.C. at 61,779. Finally, the

Commission maintains it properly applied the tariff: Section 2.2

required collateral to cover outstanding liabilities, and

Constellation’s only outstanding liabilities were such refunds as

may be due the CalPX. Because the Commission conservatively

estimated those refunds to be less than $10 million, it argues, it

was consistent with the tariff to release the rest.

We do not believe the Commission erred. The allegedly

contrary decisions are, as the Commission has explained, fully

consistent with the orders in Constellation’s case. In the other

decisions the Commission either (1) was unable to calculate the

seller’s refund liability because the seller was subject to further

discovery regarding market manipulation, or (2) found the

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seller’s estimated refund liability exceeded the amount of its

posted collateral. See Powerex Order, 102 F.E.R.C. at 62,123

(refund liability uncertain because Powerex still subject to

market manipulation proceedings); PGET Order, 102 F.E.R.C.

at 61,250-51 (company’s potential refund liability “substantially

exceeds the amount of its collateral”); La Paloma Order, 110

F.E.R.C. at 62,497 (refund liability not finally determined).

Moreover, as we have long recognized, “it is within the

scope of the agency’s expertise to make ... a prediction about the

market it regulates, and a reasonable prediction deserves our

deference notwithstanding that there might also be another

reasonable view.” Envtl. Action, 939 F.2d at 1064. In this case,

the Commission explained that its decision to release a portion

of Constellation’s collateral was made after considering

Constellation’s potential refund liability under a variety of

scenarios, none of which suggested Constellation would owe

more than $4.6 million to the CalPX and the CAISO together.

Constellation Second Rehearing Order, 111 F.E.R.C. at 61,778-

79 & n.12. For a margin of safety, the Commission reasonably

required the CalPX to retain collateral worth more than double

its highest estimate of Constellation’s liability, thereby leaving

room for the increase in refund liability the purchasers are

predicting. In any event, the purchasers point to nothing in the

record suggesting the figures provided by Constellation were

erroneous or the refund required is likely to exceed $10 million.

In these circumstances we have no reason to doubt the

Commission’s considered calculation is reasonable and deserves

our deference.

III. Conclusion

As the numerous orders before us attest, the Commission

was called upon to resolve a number of complex and contested

issues in the aftermath of the CalPX bankruptcy. The petitioners

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have not demonstrated that it acted unreasonably in doing so.

For the reasons stated, therefore, the petitions for review are

Denied.

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