Exhibit 4 

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 1

of 25
1

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Exelon Corporation

Complainant,

 v.

Pacific Gas & Electric Co.,

Respondent.

)

)

)

)

)

)

)

)

)

)

Docket No. EL19-36-000

REQUEST FOR REHEARING OF PACIFIC GAS AND ELECTRIC COMPANY

Pursuant to Section 313 of the Federal Power Act, 16 U.S.C. § 825l(a), and Rule 713 of 

the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (“the 

Commission”), 18 C.F.R. § 385.713, Pacific Gas and Electric Company (“PG&E”) submits this 

Request for Rehearing of the Commission’s Order on Petition for Declaratory Order and 

Complaint1 in the above-captioned docket.

RESERVATION OF RIGHTS

On January 29, 2019, PG&E, along with PG&E Corporation, as debtors and debtors in 

possession, each commenced a voluntary case (the “Chapter 11 Cases”) under Chapter 11 of Title 

11 of the United States Code (11 U.S.C. § 101 et seq.) (the “Bankruptcy Code”) in the United 

States Bankruptcy Court for the Northern District of California and an adversary proceeding 

 1

Exelon Corporation v. Pacific Gas and Electric Company, 166 FERC ¶ 61,053 (2019) (“Order”).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 2

of 25
2

against the Commission.

2

 In that adversary proceeding, PG&E and the Commission are litigating 

the issue of whether the Bankruptcy Court has exclusive jurisdiction under Section 365 of the 

Bankruptcy Code over debtors’ decisions to assume or reject wholesale power contracts. 

PG&E believes strongly that the Bankruptcy Court is the exclusive forum to resolve a legal 

question, such as this, that arises under the Bankruptcy Code. PG&E has therefore moved under 

11 U.S.C. § 105 to enjoin the Commission, and any other party, from taking action that would 

interfere with PG&E’s rights as a debtor under the Bankruptcy Code. PG&E also claims in that 

proceeding that the Bankruptcy Code’s automatic stay provision, 11 U.S.C. § 362, prevents the 

Commission, or any other party, from undertaking or continuing any “action or proceeding” 

against PG&E as a debtor in bankruptcy. Under section 362(a) of the Bankruptcy Code, the filing 

of a bankruptcy petition “operates as a stay, applicable to all entities,” of “the commencement or 

continuation, including the issuance or employment of process, of a judicial, administrative, or 

other action or proceeding against the debtor that was or could have been commenced before the 

commencement of the case under [the Bankruptcy Code], or to recover a claim against the debtor 

that arose before the commencement of the [bankruptcy] case” and “any act to obtain possession 

of property of the estate or of property from the estate or to exercise control over property of the 

estate.” 11 U.S.C. § 362(a)(1), (3). 

On January 28, the Commission issued the Order and, under the Federal Power Act, 

PG&E’s rehearing application is due within 30 days. Bankruptcy Code Section 108(b), 11 U.S.C. 

§ 108(b), however, extends the time for a debtor to file pleadings such as this to up to 60 days after 

 2 PG&E Corp. v. FERC (In re PG&E Corp.), Ch. 11 Case No. 19-30088, 19-30089, Adv. Pro. No. 19-

03003 (Bankr. N.D. Cal. 2019).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 3

of 25
3

filing of the bankruptcy petition.3

 Accordingly, PG&E would have until 60 days after January 29, 

2019 to submit this rehearing request—a conclusion shared by the Commission.4 Nevertheless, to 

avoid any argument that a failure to file a rehearing request within 30 days represents an 

acquiescence to the Order or otherwise waives PG&E’s rights, PG&E is filing this request for 

rehearing today. 

By filing this request, PG&E in no way waives its rights under Section 105 of the 

Bankruptcy Code, or its position that Section 362(a) of the Bankruptcy Code automatically stays 

any proceedings commenced against PG&E before the Commission, and that no further action is 

permitted by any party or by the Commission in such proceedings. PG&E reserves all of its rights 

asserted in the adversary proceeding in the Bankruptcy Court, including its right to seek 

enforcement of the automatic stay.

INTRODUCTION

The Bankruptcy Code gives debtors the right to reject “any executory contract” that does 

not fall within a category specified in the Code.5

 The debtor’s right to reject, which the Supreme 

 3 Section 108(b) provides that the debtor may “file any pleading, demand, notice, or proof of claim or loss, 

cure a default, or perform any other similar act,” when the fixed period for doing so “has not expired before 

the date of the filing of the petition.” The debtor “may only file, cure, or perform, as the case may be, 

before the later of (1) the end of such period, or . . . (2) 60 days after the order for relief.” The filing of a 

petition for bankruptcy “constitutes entry of an ‘order for relief’ within the meaning of the statute.” 

Seawinds Ltd. v. Nedlloyd Lines, B.V., 80 B.R. 181, 187 (N.D. Cal. 1987), aff’d, 846 F.2d 586 (9th Cir. 

1988).

4 On February 6, 2019, counsel for PG&E and the Commission entered a joint stipulation in PG&E Corp. 

v. FERC (In re PG&E Corp.), Ch. 11 Case Nos. 19- 30088, 19- 30089, Adv. Pr. No. 19-03003 (Bankr. N.D. 

Cal. Feb. 6, 2019), attached here as Exhibit A, stating that the time requirement for filing this rehearing 

request was controlled by 11 U.S.C. § 108(b). PG&E is grateful to the Commission and its counsel for 

joining this stipulation. Out of caution, however, PG&E has elected to comply with the shorter deadline in 

16 U.S.C. § 825l(a) for the reasons stated above.

5 11 U.S.C. § 365(a) (emphasis added).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 4

of 25
4

Court has described as “vital to the basic purpose of a Chapter 11 reorganization,”6 is subject only 

to the approval of the bankruptcy court. Although the Commission’s Order in this proceeding 

purports to “give effect”7 to the Bankruptcy Code, it does no such thing. If sustained, the principle 

of concurrent jurisdiction announced in the Order would destroy the debtor’s right to reject 

executory contracts and override the process Congress created for exercising that right. 

The Commission’s theory of concurrent jurisdiction rests on its assertion that rejection 

“alters the essential terms and conditions of the contract and the filed rate.”8

 Nowhere in the Order 

does the Commission explain which “essential terms and conditions of the contract” are altered by 

rejection. But, whatever the Commission might have meant, it mischaracterizes the legal effect of 

rejection. As the Bankruptcy Code states plainly, rejection is an election to breach a contract.9

 

Like any other breach, rejection does not abrogate or rescind the contract and does not release 

either party from the contract’s terms. The “essential terms and conditions of the contract” –

including the price, quantity, and period of performance – continue to be in effect in unaltered 

form because they are the basis for damages owed by the party in breach. As the Commission has 

recognized many times, where contract damages are based on the terms of the contract, there is no 

alteration of the filed rate.10

 6 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984).

7 Order at P 25.

8 Order at P 26.

9 11 U.S.C. § 365(g).

10 See, e.g., USGen New England, Inc., 118 FERC ¶ 61,172 at P 26 & n.22 (2007).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 5

of 25
5

STATEMENT OF ISSUES AND SPECIFICATIONS OF ERROR

Pursuant to Rule 713(c)(2), 18 C.F.R. § 385.713(c)(2), PG&E presents the following 

statement of issues and identification of errors:

1. The Commission erred by asserting jurisdiction under the Federal Power Act in 

a manner that directly conflicts with the debtor’s right of rejection established 

in the plain language of the later-enacted Bankruptcy Code. 11 U.S.C. § 365(a); 

In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004); NLRB v. Bildisco & Bildisco, 

465 U.S. 513, 522–23 (1984); Cal. Elec. Oversight Bd. v. Calpine Energy 

Services, L.P., 114 FERC ¶ 61,003 (2006).

2. The Commission erred by failing to explain its conclusion that rejection “alters 

the essential terms and conditions of the contract and the filed rate” or even to 

identify the “essential terms and conditions” to which the Commission referred. 

BNP Paribas Energy Trading v. FERC, 743 F.3d 264, 266 (D.C. Cir. 2014) (the 

Commission must offer an “intelligible explanation” for its decision); NextEra 

Desert Center Blythe, LLC v. FERC, 852 F.3d 1118, 1123 (D.C. Cir. 2017).

3. The Commission erred by asserting that rejection “alters the essential terms and 

conditions of the contract and the filed rate” when settled law establishes that 

rejection is no more than a breach of contract and, as such, does not alter the 

contract terms. Relatedly, the Commission erred by failing to reconcile its 

decision with its own precedent establishing that there is no alteration of the 

filed rate so long as damages are based on the contract terms. 11 U.S.C. 

§ 365(g); In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004); USGen New 

England, Inc., 118 FERC ¶ 61,172 at P 26, n.22 (2007); Thompkins v. Lil’ Joe 

Records, Inc., 476 F.3d 1294 (11th Cir. 2007) (“‘[r]ejection has absolutely no 

effect upon the contract’s continued existence; the contract is not cancelled, 

repudiated, rescinded, or in any other fashion terminated.’”). 

4. The Commission erred by treating rejection of an executory contract in 

bankruptcy, which “constitutes a breach of . . . contract,” 11 U.S.C. § 365(g), 

differently than the Commission treats breach of contract outside the 

bankruptcy context. Such disparate treatment indicates discrimination against 

the bankruptcy debtor, which bankruptcy law forbids. See, e.g., FCC v. 

NextWave Pers. Commc’ns Inc., 537 U.S. 293, 300-302 (2003) (applying 11 

U.S.C. § 525(a)).

5. The Commission failed to explain or even acknowledge the departure from its 

precedent in California Electricity Oversight Board, 114 FERC ¶ 61,003 

(2006), in which it reached a conclusion that is the opposite of the one in the 

order at issue here. Ramaprakash v. FAA, 346 F.3d 1121, 1125 (D.C. Cir. 2003) 

(“An agency’s failure to come to grips with conflicting precedent constitutes 

‘an inexcusable departure from the essential requirement of reasoned decision 

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 6

of 25
6

making.’”) (quoting Columbia Broad. Sys. v. FCC, 454 F.2d 1018, 1027 (D.C. 

Cir. 1971)); Williston Basin Interstate Pipeline Co. v. FERC, 165 F.3d 54, 65 

(D.C. Cir. 1999).

6. The Commission erred by requiring universal approval of every proposal to 

reject a contract when far less disruptive means are available to protect the 

Commission’s jurisdiction. Allied Local and Regional Mfrs. Caucus v. U.S. 

EPA, 215 F.3d 61, 80 (D.C. Cir. 2000) (“To be regarded as rational, an agency 

must also consider significant alternatives to the course it ultimately chooses.”); 

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48–

51 (1983).

7. The Commission erred because, as applied to purchasers of electricity, its 

theory of concurrent jurisdiction relies on authority the Federal Power Act does 

not provide: the authority to command purchasers to buy and accept physical 

delivery for electric power. 16 U.S.C. §§ 824d, 824e; Atlantic City Elec. Co. v. 

FERC, 295 F.3d 1, 8 (D.C. Cir. 2002) (“if there is no statute conferring 

authority, FERC has none”); Southern Company Services, 20 FERC ¶ 61,332 

at 61,694 (1982).

ARGUMENT

I. The Commission’s Assertion of Concurrent Jurisdiction Impermissibly Conflicts 

with the Bankruptcy Code.

a. To promote reorganization and to prevent liquidation, Congress authorized 

the rejection of contracts in bankruptcy proceedings.

Although it purports to “give effect” to the Bankruptcy Code, the Order fails to confront 

what the Bankruptcy Code actually says, much less the goals Congress sought to achieve through 

the Code. The Supreme Court has summed those goals up concisely: “the policy of Chapter 11 is 

to permit successful rehabilitation of debtors.”11 Congress had important reasons to pursue this 

policy: “The fundamental purpose of reorganization is to prevent a debtor from going into 

liquidation, with an attendant loss of jobs and possible misuse of economic resources.”12

 11 Bildisco & Bildisco, 465 U.S. at 527.

12 Id. at 528 (citing H.R. Rep. No. 95-595, p. 220 (1977)).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 7

of 25
7

The authority to reject executory contracts is an integral piece of the bankruptcy process 

that Congress designed and is essential to the realization of Congress’s goal to steer debtors away 

from liquidation. As the Supreme Court explained in its most thorough examination of rejection 

in bankruptcy, “the authority to reject an executory contract is vital to the basic purpose of a 

Chapter 11 reorganization, because rejection can release the debtor’s estate from burdensome 

obligations that can impede a successful reorganization.”13 

For a Chapter 11 reorganization to succeed, many interdependent issues must be resolved 

simultaneously. Chapter 11 therefore gives the debtor-in-possession the flexibility to assume or 

reject contracts at any time until a reorganization plan is confirmed.14 The flexible authority to 

reject contracts under Chapter 11 contrasts with its less flexible counterpart under Chapter 7, 

leading the Supreme Court to observe that “this difference between the two types of proceedings 

reflects the considered judgment of Congress that a debtor-in-possession seeking to reorganize 

should be granted more latitude in deciding whether to reject a contract than should a trustee in 

liquidation.”15

In the Code, Congress also carefully delineated which types of contracts may be rejected 

and which may not. Section 365(a) of the Bankruptcy Code states that, “subject to the court’s 

approval,” a debtor “may assume or reject any executory contract or unexpired lease of the debtor” 

that is not excepted by other enumerated provisions of the Code.16 Were it not already obvious 

from the plain language of Section 365(a), the Supreme Court has held that the exceptions to 

 13 Id. 

14 11 U.S.C. § 365(d)(2); 11 U.S.C. § 1107(a) (extending rights of trustee to a debtor-in-possession under 

Chapter 11).

15 Bildisco & Bildisco, 465 U.S. at 529.

16 11 U.S.C. § 365(a) (emphasis added).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 8

of 25
8

Section 365(a) listed in the Code are the only exceptions that apply, because “Congress knew how 

to draft an exclusion . . . when it wanted to.”17

b. Wholesale power contracts may be rejected under Section 365 of the Code.

Wholesale power contracts do not fall within any category of contracts excluded from 

rejection by the Bankruptcy Code. This omission reflects a knowing choice by Congress.18 

Section 365 of the Code was enacted over four decades after the Federal Power Act and at a time 

when rate-regulated contracts prevailed across many sectors of the economy. Congress was aware 

of rate-regulated contracts, and referenced them elsewhere in the Code,19 but chose not to exclude 

them from the debtor’s right to reject.

In the Order, the Commission does not dispute that wholesale power contracts may be 

executory contracts capable of rejection pursuant to Section 365(a). Indeed, the Commission’s 

assertion of concurrent jurisdiction plainly takes that fact as a premise. The Order acknowledges 

that such contracts can be “reject[ed]” and that, in the context of a bankruptcy, the bankruptcy 

court must approve such a rejection, thereby exercising its jurisdiction under Section 365.20 

c. The Commission’s assertion of concurrent jurisdiction conflicts with the 

Bankruptcy Code.

The Commission’s statement that its Order will “give effect” to the Bankruptcy Code rings 

hollow. The Commission’s approval requirement effectively destroys the utility of Section 365(a) 

and ignores the choice Congress made regarding which types of contracts may be rejected and 

 17 Bildisco & Bildisco, 465 U.S. at 522–23.

18 Id.; see also FCC v. NextWave Pers. Commc’ns, Inc., 537 U.S. 293, 302 (2003) (“where Congress has 

intended to provide regulatory exceptions to the Bankruptcy Code, it has done so clearly and expressly.”).

19 See, e.g., 11 U.S.C. § 1129(a)(6).

20 Order at 28 (“[A] party to a Commission-jurisdictional wholesale power purchase agreement must obtain 

approval from both the Commission and the bankruptcy court to modify the filed rate and reject the contract, 

respectively.”).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 9

of 25
9

which may not. Most fundamentally, if the Commission withholds approval, the debtor cannot 

successfully reject a contract, even if the bankruptcy court approves. The debtor is thus deprived 

of the right granted it by Section 365 (to “reject any executory contract”) and the approval process 

provided by Section 365 (“subject to the court’s approval”). Even in cases where the Commission 

ultimately approves the rejection, the debtor would be deprived of the flexibility provided by 

Section 365 to assume or reject a contract “at any time before the confirmation of a [reorganization] 

plan”21 – a flexibility described by the Supreme Court as reflecting the “considered judgment of 

Congress” to afford the debtor “latitude” to reject contracts in the Chapter 11 context.22 This 

interference with the bankruptcy process was described well by the Bankruptcy Court in 

FirstEnergy as “at best . . . a costly procedural delay of the final determination of the treatment 

rejection claims will receive in the bankruptcy case,” and “at worst . . . an inappropriate violation 

of the Bankruptcy Code’s priority scheme.”23 

II. The Bankruptcy Code and the Federal Power Act Can and Must Both Be Given 

Effect.

a. The Commission creates an unnecessary conflict between the two statutes by 

ignoring settled law that rejection does not alter the terms of a contract.

When two Federal statutes are “capable of co-existence . . . absent a clearly expressed 

congressional intention to the contrary,” they must be read “to regard each as effective”24 and to 

avoid irreconcilable conflicts between them.25 The Commission has created an irreconcilable 

 21 11 U.S.C. § 365(d)(2).

22 Bildisco & Bildisco, 465 U.S. at 529.

23 In re FirstEnergy Solutions Corp., 2018 WL 2315916 at *12 (Bankr. N.D. Ohio 2018) (“FirstEnergy”).

24 Morton v. Moncari, 417 U.S. 535, 551 (1974).

25 Watt v. Alaska, 451 U.S. 259, 266–67 (1981) (“We must read the statutes to give effect to each if we can 

do so while preserving their sense and purpose.”).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 10

of 25
10

conflict between the Federal Power Act and the Bankruptcy Code, because the Commission asserts 

that its authority under the Federal Power Act means that a debtor may not exercise its right to 

reject contracts in the manner prescribed by the Bankruptcy Code. This conflict is entirely 

avoidable. Indeed, the text of the Bankruptcy Code itself supplies the reading that allows the two 

statutes to be reconciled perfectly: rejection of a contract does not require Commission approval 

because it is a breach of the contract, not a change in its terms. This reading has been embraced 

by the only appellate court to have ruled on this issue,26 and is also the position the Commission 

itself had taken from 2006 until recently.

Section 365(g) of the Code provides that rejection of an executory contract by a debtor 

“constitutes a breach of such contract.”27 Like any other breach, rejection does not change the 

terms of the contract, but relies on and continues to give effect to those terms in order to determine 

the amount owed in damages. As the Department of Justice explains in its Civil Resource Manual 

in discussing executory contracts in bankruptcy, “[r]ejection does not extinguish the contract. It 

merely constitutes a breach of the contract, and the terms of the contract still control the 

relationship of the parties.”28 Courts universally endorse the same reasoning. See Thompkins v. 

Lil’ Joe Records, Inc., 476 F.3d 1294, 1306 (11th Cir. 2007) (“‘[r]ejection has absolutely no effect 

upon the contract’s continued existence; the contract is not cancelled, repudiated, rescinded, or in 

any other fashion terminated.’”) (quoting In re Drexel Burnham Lambert Group, 138 B.R. 687, 

708 (Bankr. S.D.N.Y. 1992)); In re Onecast Media, Inc., 439 F.3d 558, 563 (9th Cir. 2006) 

(“rejection of an executory contract in accordance with applicable provisions of the Bankruptcy 

 26 In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004) (“Mirant”). 

27 11 U.S.C. § 365(g).

28 Department of Justice, Civil Resource Manual § 60, available at https://www.justice.gov/jm/civilresource-manual-60-executory-contracts-bankruptcy. 

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 11

of 25
11

Act is not the equivalent of rescission”) (quoting In re Murphy, 694 F.2d 172, 174 (8th Cir. 1982)); 

In re Columbia Gas Sys., Inc., 50 F.3d 233, 239 n.8 (3rd Cir. 1995) (“Rejection . . . is equivalent 

to a nonbankruptcy breach.”); In re Mitchell, 249 B.R. 55, 58 (Bankr. S.D.N.Y. 2000) (“[I]t now 

appears to be well-settled that rejection does not terminate an executory contract . . . or necessarily 

avoid the rights of the non-debtor party under the contract”); In re Fitch, 174 B.R. 96, 100 (Bankr. 

S.D. Ill. 1994) (“rejection of an executed contract neither adds to nor detracts from a claim for

payment under the contract or the estate’s liability for such payment.”).

For the same reasons, rejection does not implicate the filed rate doctrine. As with any other 

breach, the damages owed by the debtor are calculated using the terms of the contract and so give 

effect to those terms. As the U.S. Court of Appeals for the Fifth Circuit explained in Mirant,

29

“[a] motion to reject an executory power contract is not a collateral attack upon that contract’s 

filed rate because that rate is given full effect when determining the breach of contract damages.”30

The rejection of a contract in bankruptcy is entirely different from the abrogation of a 

contract under Section 206 of the Federal Power Act. When the Commission abrogates a contract 

under Section 206, both parties are freed from their remaining obligations. The Commission has 

itself explained this distinction. In California Electricity Oversight Board,

31 the Commission 

embraced the Fifth Circuit’s conclusion in Mirant and stated that the Commission would “follow 

that authority.”32 The Commission further explained that “rejection of an executory contract 

constitutes a breach of contract, not approval to terminate it under section 205 of the FPA.”33 The 

 29 378 F.3d 511 (5th Cir. 2004).

30 Id. at 522.

31 114 FERC ¶ 61,003 (2006).

32 Id. at P 11.

33 Id. at P 13 (emphasis in original).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 12

of 25
12

Commission contrasted “a section 205 proceeding” in which “the issue is whether a party can 

terminate its obligations and thereafter have no liability to its counterparty” with a rejection 

motion in which “there is no request by [the debtor] to terminate its obligations and thereafter be 

free of liability.”34

When there is a material breach of contract, it is common for performance under the 

contract to cease and for the party in breach to pay damages. The cessation of performance after 

breach does not mean the contract has been abrogated or rescinded. The terms of the contract still 

bind the parties and provide the basis for the calculation of damages. On this point, the court in 

Calpine35 was mistaken. In Calpine, the court tried to explain away the fact that rejection 

represents a breach of contract by distinguishing between a “run-of-the-mill contract dispute” and 

one that entails “a complete cessation of performance.”36 But the court failed to address the 

obvious fact that many “run-of-the-mill” breaches also result in a complete cessation of 

performance. See, e.g., Restatement (Second) of Contracts § 237. The Calpine court also did not 

consider, let alone distinguish, the substantial body of bankruptcy law holding that rejection does 

not abrogate a contract.37

 34 Id. (emphasis in original).

35 337 B.R. 27 (S.D.N.Y. 2006).

36 Id. at 36.

37 See cases cited supra pp. 9 - 10.

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 13

of 25
13

b. The Order is inconsistent with Commission precedent in breach of contract 

actions that arise outside of bankruptcy. 

The Commission also failed to explain why it believes the filed rate doctrine applies 

differently to a breach of contract that arises in the bankruptcy context than it does to a breach that 

arises outside bankruptcy. The court in FirstEnergy considered this question and aptly observed: 

If Plaintiffs were solvent and simply stopped making payments 

under the [agreements], the counterparties could not reasonably 

argue that Plaintiffs had somehow modified or abrogated those 

agreements; they would seek damages for the breaches of those 

contracts . . . under the terms of the contracts as written. Those 

breaches would lead to claims. If the Plaintiffs then filed 

bankruptcy, the claims would become claims against the estate. 

Treatment of those claims are governed by the Bankruptcy Code, 

including the confirmation of a reorganization plan in chapter 11, 

and the economic reality of the debtor’s estate. Rejection has 

exactly the same effect (breach) and the same result (a claim against 

the estate).38

When a breach of contract arises outside bankruptcy, the Commission does not hold that 

the party in breach must seek Commission approval to cease performance and pay damages. 

Instead, applying the Arkla test,39 the Commission routinely declines to assert jurisdiction over 

contract actions that center on determining breach and damages,40 including where the breach may 

 38 FirstEnergy, 2018 WL 2315916 at *17.

39 Ark. La. Gas Co. v. Hall, 7 FERC ¶ 61,175, at 61,322 (1979) (“Arkla”) (explaining that whether “the 

Commission should assert jurisdiction over contractual issues otherwise litigable in state courts, depends 

. . . on three factors . . . : (1) whether the Commission possesses some special expertise which makes the 

case peculiarly appropriate for Commission decision; (2) whether there is a need for uniformity of 

interpretation of the type of question raised by the dispute; and, (3) whether the case is important in relation 

to the regulatory responsibilities of the Commission”).

40 See Southern Md. Elec. Coop. v. J.P. Morgan Ventures Energy Corp., 155 FERC ¶ 61,164 at P 23 (2016) 

(“the Commission does not have special expertise in the area of determining damages for claimed breaches 

of contract, and the Commission has generally left this issue to be decided in court.”); Southwest Power 

Pool, Inc., 150 FERC ¶ 61,091 at P 10 (2015) (“in past cases, the Commission has generally left to state 

court proceedings the interpretation of terms and conditions of contracts that relate to contractual damages 

and ordering of damages for breaches of contract.”).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 14

of 25
14

result in complete cessation of performance under the contract.41 Given that rejection in 

bankruptcy is just another name for an election to breach a contract, the Commission has failed to 

explain why it treats a contract breach as implicating the filed rate doctrine in one context but not 

the other.

Indeed, such disparate treatment indicates exactly the kind of discrimination against 

debtors that bankruptcy law expressly forbids. See, e.g., FCC v. NextWave Pers. Commc’ns Inc., 

537 U.S. 293, 300-02 (2003) (applying 11 U.S.C. § 525(a) and citing Perez v. Campbell, 402 U.S. 

637 (1971)). Regardless of “valid regulatory motive[s],” id. at 301, the Commission may not harm 

or discriminate against a party because that party is involved in bankruptcy proceedings or has not 

paid a debt dischargeable in bankruptcy. Treating a breach of contract outside bankruptcy one 

way and a breach of contract in the context of a bankruptcy proceeding a different way does just 

that.

III. The Commission Failed to Explain its Conclusion that Rejection Alters the Essential 

Terms and Conditions of the Contract and the Filed Rate.

The Order devotes much of its discussion to legal principles that are not in dispute. It is 

inarguable that the Commission has broad and exclusive jurisdiction over wholesale ratemaking 

and that the filed rate doctrine serves to protect that jurisdiction. What the Commission leaves 

unexplained, however, is why it believes the filed rate doctrine applies to the rejection of contracts 

in bankruptcy in the first place. The critical sentence comes in Paragraph 26 of the Order, where 

 41 See Portland Gen. Elec. Co., 72 FERC ¶ 61,009, 61,020 – 61,022 (1995) (concluding that a state court 

action involving termination of a long-term contract did not warrant the Commission’s jurisdiction so long 

as the case did not “challenge the reasonableness of any rate on file with FERC, or make claims based on 

the FPA”); PPL Elec. Util. Corp., 92 FERC ¶ 61,057 (2000); Southern Cal. Edison Co., 85 FERC ¶ 61,023 

(1998), reh’g denied 85 FERC ¶ 61,389 (1998) (declining to assert jurisdiction in a case where one party 

sought to abrogate power sales agreements, explaining that “the question of whether one of the parties 

remains able to fulfill its contractual obligations . . . [is] . . . a contract question that does not involve the 

just and reasonable level of interstate wholesale power rates”).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 15

of 25
15

the Commission states: “We find that a rejection of a Commission-jurisdictional contract in a 

bankruptcy court alters the essential terms and conditions of the contract and the filed rate; thus, 

this Commission’s jurisdiction is implicated, and our approval is required.” But nowhere does the 

Commission identify the “essential terms and conditions of the contract” altered by rejection. 

Given the overwhelming body of bankruptcy law explaining that rejection is an election to breach 

that does not change the terms and conditions of a contract, the Commission’s failure to explain 

the basis for its conclusion is reversible error. 

Elsewhere in the Order, the Commission makes clear that its holding does not depend on 

the particular terms of any contract, including those between PG&E and the petitioners.42 Thus, 

the Commission’s conclusion that rejection “alters the essential terms and conditions of the 

contract” must refer to essential terms and conditions that the Commission believes to exist 

generically in any wholesale power contract. There are a finite number of possibilities: the 

contract price, the duration of the contract, and the quantity of energy transacted. None of these 

terms is altered by rejection.

Rejection does not alter the price that the parties have committed to in a contract, because 

the contract price is used to calculate damages. As noted above, the Commission routinely declines 

to assert jurisdiction over contract actions where the only issues are breach and damages,43 which 

it would not do if the translation of a contract price into damages represented a change in the filed 

rate. The Commission has reached this conclusion even when the court must employ equitable 

doctrines to arrive at a figure for compensatory damages. In USGen New England, Inc., for 

 42 Order at P 26 n.58.

43 See supra notes 39-41 and accompanying text.

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 16

of 25
16

instance, an interstate pipeline customer rejected a contract in bankruptcy.44 The pipeline argued 

that the filed rate doctrine prevented the bankruptcy court from applying certain mitigation credits 

to reduce the buyer’s damages. The Commission disagreed, explaining that “[m]itigation does not 

change the filed rate; it only changes the net amount owed as an equitable remedy for the breach 

of contract.”45 Denying rehearing, the Commission re-emphasized that the filed rate doctrine did 

not apply, because “damages would be calculated starting with the filed rates.”46

Of course, an insolvent debtor may not be able to pay the full amount of contract damages 

owed (a reality that could arise before bankruptcy as well). But an insolvent debtor’s inability to 

pay has nothing to do with the contract rate used to calculate damages and, therefore, also cannot 

logically be considered a change to the filed rate. 

Rejection also neither abrogates a contract nor shortens the period of performance. If it 

did, the party in breach would be left with no remaining obligations and the non-breaching party 

would be left without compensation, which is not the law. Rather, the entire performance period 

of the contract is used, along with the price and other terms, to determine the non-breaching party’s 

expectancy under the contract and its claim for damages against the estate. 

In the Order, the Commission did not address whether it believes that rejection changes the 

contract term. But in the FirstEnergy litigation, counsel for the Commission asserted that a 

debtor’s rejection motion would “change the service period of a contract.”47 On this point, the 

 44 116 FERC ¶ 61,285 (2006), reh’g granted in part and denied in part, 118 FERC ¶ 61,172 (2007).

45 116 FERC ¶ 61,285 at P 32.

46 118 FERC ¶ 61,172 at P 26 (emphasis added).

47 Defendant’s Opp. To the Plaintiff’s Motion for a Preliminary Injunction at 13, First Energy Solutions 

Corp. v. FERC (In re First Energy Solutions Corp., et. al.), No. 18-50757 (Bankr. N.D. Ohio Apr. 30, 

2018).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 17

of 25
17

Commission should clarify what it believes would be the legal effect of the Commission 

“approval” it contemplates in Paragraph 26 of the Order. 

If the Commission believes that such an approval would “change the service period of the 

contract” – that is, by ending it – the Commission should make that view clear and explain that its 

approval would remove any further obligation for either party under the contract, as well as the 

obligation to pay damages. If it takes that view, the Commission must also acknowledge that – in 

cases where the Commission grants approval – there is no longer a reason for the bankruptcy court 

to act, because the terminated contract would no longer be an executory contract capable of being 

breached. If, on the other hand, the Commission intends that the approval contemplated in 

Paragraph 26 would leave the party in breach subject to the contract and liable for damages 

calculated based on the full contractual service period, it should state that view and conclude that 

rejection does not “change the service period” of the contract.

Rejection also does not change the quantity of electric energy that the contract requires to 

be purchased and sold. The Commission did not make this argument in the Order. But, in a brief 

filed in the Bankruptcy Court for the Northern District of California, counsel for the Commission 

claimed – changing their theory yet again – that “rejection of an executory contract would change 

the quantity of power delivered at the filed rate.”48 Rejection does not change the quantity terms 

for the same reason it does not change the price term or the contract length: the quantity term 

would be used to calculate damages. If rejection reduced or eliminated the quantity of energy the 

buyer is obligated to purchase, as counsel for the Commission suggests, no damages would be 

owed. 

 48 Brief of Defendant in Opp. to Motion for Preliminary Injunction and Motion to Dismiss, supra note 2, at 

*18.

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 18

of 25
18

IV. The Commission Failed to Consider that Less Disruptive Means Exist to Protect its 

Jurisdiction.

The Order requires that debtors seek Commission approval to reject any “Commission 

jurisdictional contract.”49 As explained above, this requirement will badly interfere with the 

bankruptcy process and, in some cases, could frustrate the debtor’s ability to reorganize 

successfully. The Commission’s proposed approach is also far broader than necessary to protect 

the Commission’s jurisdiction, as it would apply to every contract without regard to the terms of 

the contract or to whether the reviewing court had even arguably violated the filed rate doctrine. 

In announcing this broad requirement, the Commission failed to consider that other wellestablished and less disruptive means exist to protect its jurisdiction. First, if the bankruptcy court 

were to calculate contract damages in a manner that departed from the contract rate, the 

disadvantaged party could raise the filed rate doctrine in that forum. Many litigants have protected 

the Commission’s exclusive jurisdiction over wholesale ratemaking in this manner.50 Second, if 

a legitimate concern arose that the bankruptcy court might run afoul of the filed rate doctrine, 

either party could petition the Commission for a declaratory order to resolve the question. USGen 

New England Inc. illustrates the principle.51 In that case, a bankrupt shipper rejected its contract 

with an interstate pipeline. As the case progressed, the pipeline persuaded the bankruptcy court 

that the filed rate doctrine prohibited awarding certain types of mitigation credits to offset the 

damages owed by the shipper. The shipper petitioned the Commission for declaratory relief, and 

the Commission provided guidance to the bankruptcy court that awarding the mitigation credits 

 49 Order at P 26.

50 See, e.g., Ark. La. Gas Co. v. Hall, 453 U.S. 571 (1981).

51 116 FERC ¶ 61,285 (2006).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 19

of 25
19

would not alter the filed rate. The case illustrates how, in the bankruptcy context, the Commission 

can appropriately police its jurisdiction without imposing a universal approval requirement before 

a debtor rejects any contract. Third, the Bankruptcy Code itself protects the Commission’s 

ratemaking jurisdiction by withholding the ultimate goal of the Chapter 11 process – confirmation 

of the reorganization plan – unless and until any change to the debtor’s rates has received the 

appropriate regulatory approval.52

V. The Commission Failed to Explain the Departure from its Precedent in California 

Electricity Oversight Board. 

The Order fails to explain its departure from precedent, or even acknowledge that such a 

departure has taken place.53 The Order does not explain – or even mention – the Commission’s 

decision in California Electricity Oversight Board, in which the Commission reached the opposite 

conclusion.54 In that case, the Commission discussed the Fifth Circuit’s decision in Mirant at 

length and announced its decision to follow it. The case did not arise in the Fifth Circuit 

geographically, and therefore the Commission was not bound to follow Mirant. But the 

Commission explained that it did so because it agreed with Mirant’s conclusions and because 

Mirant held the authority of a federal appellate decision: “a federal court of appeals has now 

spoken to the issue . . . and we intend to follow that authority.”55 Further, as noted above, in 

California Electricity Oversight Board, the Commission ably explained the distinction between 

 52 11 U.S.C. § 1129(a)(6).

53 Williston Basin Interstate Pipeline Co. v. FERC, 165 F.3d 54, 65 (D.C. Cir. 1999) (“It is . . . elementary 

that an agency must conform to its prior decisions or explain the reason for its departure from such 

precedent.”) (quoting Gilbert v. NLRB, 56 F.3d 1438, 1445 (D.C. Cir. 1995))

54 114 FERC ¶ 61,003 (2006).

55 Id. at P 11.

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 20

of 25
20

abrogation of a contract (which frees the parties from further obligations) and breach (which makes 

the party in breach liable for damages)56 – a distinction it no longer appears to accept.

The Commission offers no reason for the about face. In the Order, the Commission refers 

to the law in this area as “unsettled.”57 But the law is just as settled now as it was when the 

Commission decided California Electricity Oversight Board. There remains only one federal court 

of appeals to have decided this question.58 

The District Court’s decision in Calpine, issued three weeks after California Electricity 

Oversight Board, in no way absolves the Commission of its obligation to explain its departure 

from precedent. First, in California Electricity Oversight Board, the Commission made clear that 

it intended to follow the authority of the only federal court of appeals to have addressed the issue 

– a circumstance that has not changed. Second, the Order does not embrace the holding of Calpine: 

the Commission takes the view that it shares concurrent jurisdiction with the Bankruptcy Court 

and that both bodies may act on a proposed rejection, whereas Calpine held that the court lacked 

any jurisdiction over the rejection of a wholesale power contract.59 Third, the Commission 

continued to embrace the logic of California Electricity Oversight Board even after Calpine was 

decided. As explained above, USGen New England, Inc.

60 involved the rejection of a contract in 

bankruptcy. The Commission deferred the issues of contract law to the bankruptcy court, cited 

Mirant as authority, and – in direct contradiction to Calpine – determined that the filed rate 

 56 Id. at P 13.

57 Order at P 23.

58 See In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004).

59 Calpine, 337 B.R. at 29.

60 116 FERC ¶ 61,285 (2006), reh’g granted in part and denied in part, 118 FERC ¶ 61,172 (2007).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 21

of 25
21

doctrine did not apply to the facts before it because “damages would be calculated starting with 

the filed rates.”61

VI. The Commission Lacks Authority to Command a Customer to Purchase Power.

The Commission’s theory of concurrent jurisdiction exceeds its authority for another, 

independent reason: the Commission cannot order a purchaser to buy power.62 The Commission’s 

Order necessarily relies on this authority. For a buyer, an order from the Commission disapproving 

rejection would have the unavoidable consequence of forcing the buyer to take physical service 

under the contract. Nothing in the Federal Power Act gives the Commission this power.

Concerned with “the business of . . . selling electric energy,”63 the Federal Power Act gives 

the Commission authority to regulate the “sale of electric energy at wholesale.”64 Sections 205 

and 206, upon which the Commission relies here, focus exclusively on sellers and sales. Those 

sections require that sellers charge just and reasonable rates, that sellers refrain from undue 

discrimination, that sellers make certain filings and open their books and records, and so on.65 

These requirements do not apply to buyers.66 The Federal Power Act’s consistent and exclusive 

focus on sellers and sales67 is no accident. It comes from the Act’s purpose to prevent “abuses of 

 61 118 FERC ¶ 61,172 at P 26, n.22 (2007).

62 PG&E explained this limitation on the Commission’s authority in its answer. See Answer of PG&E at 8 

- 13, Docket No. EL19-36 (filed Jan. 24, 2019). The Commission, however, did not address PG&E’s 

argument in its Order.

63 16 U.S.C. § 824(a) (emphasis added). 

64 Id. at § 824(b)(1) (emphasis added).

65 Id. at §§ 824d, 824e.

66 Id.; see also Southern Company Services, 27 FERC ¶ 61,444, 61,829 (1984) (rejecting an argument based 

on a claim of undue “preference in a purchase, not a transmission or sale” and concluding that “the Federal 

Power Act does not give the Commission jurisdiction to dictate to [the buyer] who to purchase from”).

67 See E. Ky. Power Co-op, Inc. v. FERC, 489 F.3d 1299 (D.C. Cir. 2007) (the “entire thrust of Part II [of 

the FPA] is toward the seller at wholesale, not the buyer”) (alteration in original) (quoting Cal. Elec. Power 

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 22

of 25
22

market power” in “a market historically characterized by natural monopoly.”68 By contrast, the 

procurement decisions of load-serving entities, and the actions of power purchasers in general, 

have never been an area of federal concern, and the Federal Power Act has little to say about them. 

As the Commission explained in Midwest Independent Transmission System Operator, Inc., “[t]he 

Commission is charged with regulating public utility sales for resale in interstate commerce; state 

commissions regulate purchases for resale to retail customers.”69

Nothing in Sections 205 or 206 of the Federal Power Act gives the Commission authority 

to require a purchaser to purchase electricity,70 much less to take physical service rather than 

breach and pay damages. Neither the Commission nor any of the petitioners in these proceedings 

have pointed to a single example of the Commission doing so. In one case, Blumenthal v. NRG 

Power Marketing, Inc.,71 the Commission ordered a seller to specifically perform under a contract 

it had sought to reject in bankruptcy. However, the Commission’s rationale for ordering NRG to 

perform depended on NRG’s regulatory obligations as a seller, and the Commission’s mandate 

 

Co. v. FPC, 199 F.2d 206, 209 (9th Cir. 1951)); see also Prior Notice and Filing Requirements Under Part 

II of the FPA, 64 FERC ¶ 61,139, 61,986 (1993) (“The identity of the purchaser of wholesale energy or 

transmission service, whether publicly-owned or privately-owned, does not affect the Commission’s 

jurisdiction under Part II of the FPA. The identity of the seller or transmitter, however, does make a 

difference.”); Standards of Conduct for Transmission Providers, 125 FERC ¶ 61,064 at P 77 (2008) 

(restricting scope of standards of conduct regulations “to include only sales, rather than purchases” in an 

effort to “more closely match[]” the language of the Federal Power Act). 

68 Morgan Stanley Capital Group Inc. v. Pub. Util. Dist. No. 1 of Snohomish County, 554 U.S. 527, 531 

(2008); see also Market-Based Rates for Wholesale Sale of Elec. Energy, 119 FERC ¶ 61,295 at P 6 (2007) 

(“The Commission’s first and foremost duty is to protect customers from unjust and unreasonable rates . . 

. .”).

69 113 FERC ¶ 61,081 (2005) at P 53.

70 In Southern Company Services, 20 FERC ¶ 61,332, 61,694 (1982), a cooperative claimed that a utility 

had refused to purchase electricity from the cooperative for anti-competitive reasons. The Commission 

rejected the cooperative’s argument because the “gravamen of [its] complaint” was the utility’s “failure to 

purchase” and therefore the cooperative “did not state a claim for which there is a remedy under the Federal 

Power Act.”

71 103 FERC ¶ 61,344 (2003).

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 23

of 25
23

from “Congress to protect wholesale power customers.”72 Thus, neither Blumenthal nor any other 

case stands for the proposition – found nowhere in the Federal Power Act – that the Commission 

can order a buyer to take physical service under a contract.

VII. Conclusion

For the foregoing reasons, if this proceeding is permitted to proceed, the Request for 

Rehearing should be granted.

February 25, 2019 Respectfully Submitted,

/s/ Samuel Walsh

William Manheim Harris, Wiltshire & Grannis LLP

Charles R. Middlekauff 1919 M St. NW

PACIFIC GAS AND ELECTRIC COMPANY Washington, D.C. 20036

77 Beale Street (202) 730-1306

San Francisco, CA 94105 swalsh@hwglaw.com

(415) 973-6628

WVM3@pge.com Counsel for

CRMd@pge.com Pacific Gas and Electric Company

 72 Id. at P 53; see also id. at PP 58 – 59.

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 24

of 25
24

CERTIFICATE OF SERVICE

I hereby certify that I have caused an electronic copy of this Request for Rehearing to be 

served upon each person designated in the official service list compiled by the Secretary in this 

proceeding.

Dated at Washington, D.C., February 25, 2019.

/s/ Samuel Walsh

Harris, Wiltshire & Grannis LLP

1919 M St. NW

Washington, D.C. 200036

(202) 730-1306

swalsh@hwglaw.com

Case: 19-30088 Doc# 2361-4 Filed: 06/03/19 Entered: 06/03/19 17:47:43 Page 25

of 25