FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CALIFORNIA PUBLIC UTILITIES

COMMISSION,

Petitioner,

MIRANT AMERICAS ENERGY

MARKETING, LP; NEVADA POWER

COMPANY; SIERRA PACIFIC POWER

COMPANY; CITY OF SEATTLE; CITY

OF GLENDALE; MIECO, INC.,

Intervenors,

and

CITY OF GLENDALE, CALIFORNIA,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 01-71934

FERC No.

EL00-000, et al.

OPINION

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA , Attorney General,

Petitioners,

No. 01-71944
2 CALIFORNIA PUC V. FERC

NEVADA POWER COMPANY; SIERRA

PACIFIC POWER COMPANY; CITY OF

SEATTLE; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

NRG POWER MARKETING, INC.;

PUBLIC UTILITY DISTRICT NO. 2 OF

GRANT COUNTY, COMMISSION OF

THE STATE OF CALIFORNIA; PORT OF

SEATTLE, WASHINGTON; CITY OF

TACOMA, WASHINGTON; THE

PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General; EL

PASO MERCHANT ENERGY L.P.;

SACRAMENTO MUNICIPAL UTILITY

DISTRICT; MIRANT AMERICAS

ENERGY MARKETING, LP; MIRANT

CALIFORNIA, LLC; MIRANT DELTA,

LLC, MIRANT POTRERO, LLC;

DYNEGY POWER MARKETING, INC.;

EL SEGUNDO POWER LLC, LONG

No. 02-70219
CALIFORNIA PUC V. FERC 3

BEACH GENERATION, LLC;

CABRILLO POWER I, LLC; CABRILLO

POWER II, LLC; PORTLAND

GENERAL ELECTRIC COMPANY;

PACIFICORP; TRANSMISSION

AGENCY OF NORTHERN CALIFORNIA

(TANC); NORTHERN CALIFORNIA

POWER AGENCY, PUBLIC SERVICE

COMPANY OF NEW MEXICO; CORAL

POWER, L.L.C., CONSTELLATION

POWER SOURCE; CORAL POWER,

L.L.C.; CONSTELLATION ENERGY

COMMODITIES GROUP, INC.;

CALIFORNIA INDEPENDENT SYSTEM

OPERATOR CORPORATION; SALT

RIVER PROJECT AGRICULTURAL

IMPROVEMENT AND POWER

DISTRICT; CA STATE ASSEMBLY;

PACIFIC GAS & ELECTRIC COMPANY,

Intervenors,

PORT OF SEATTLE; CITY OF TACOMA;

THE PEOPLE OF THE STATE OF

CALIFORNIA; CITY OF SAN DIEGO;

CA STATE ASSEMBLY,

Petitioners-Intervenors,

NEVADA POWER COMPANY; SIERRA

PACIFIC POWER COMPANY; CITY OF

SEATTLE,

Intervenors,
4 CALIFORNIA PUC V. FERC

CITY OF PASADENA,

Petitioner-Intervenor,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

CALIFORNIA PUBLIC UTILITIES

COMMISSION,

Petitioner,

SOUTHERN CALIFORNIA EDISON

COMPANY; THE PEOPLE OF THE

STATE OF CALIFORNIA, EX REL.

XAVIER BECERRA, Attorney

General; CITY OF TACOMA,

WASHINGTON; PORT OF SEATTLE

WASHINGTON,

Petitioners-Intervenors,

PORTLAND GENERAL ELECTRIC

COMPANY; AVISTA CORPORATION;

EL PASO MERCHANT ENERGY L.P.;

CORAL POWER, L.L.C.; NORTHERN

CALIFORNIA POWER AGENCY;

AVISTA ENERGY, INC.; MORGAN

STANLEY CAPITAL GROUP, INC.;

No. 02-71426
CALIFORNIA PUC V. FERC 5

MERRILL LYNCH CAPITAL SERVICES

INC.; DUKE ENERGY NORTH

AMERICA, LLC, DUKE ENERGY

TRADING AND MARKETING, LLC,

(COLLECTIVELY, “DUKE ENERGY”);

PACIFIC GAS & ELECTRIC COMPANY;

PACIFICORP; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

M-S-R PUBLIC POWER AGENCY;

MODESTO IRRIGATION DISTRICT;

CITY OF REDDING, CALIFORNIA;

CITY OF SANTA CLARA,

CALIFORNIA; DYNEGY POWER

MARKETING, INC., EL SEGUNDO

POWER LLC, LONG BEACH

GENERATION LLC, CABRILLO

POWER I LLC, AND CABRILLO

POWER II LLC (COLLECTIVELY,

“DYNEGY”),

Respondents-Intervenors.
6 CALIFORNIA PUC V. FERC

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioners-Intervenors,

AVISTA CORPORATION;

COGENERATION ASSOCIATION OF CA

(CAC), NEVADA INDEPENDENT

ENERGY COALITION (NIEC) AND

COGENERATION COALITION OF WA

(CCW); CALIFORNIA INDEPENDENT

SYSTEM OPERATOR CORPORATION;

PORTLAND GENERAL ELECTRIC

COMPANY; DYNEGY POWER

MARKETING, INC.; EL SEGUNDO

POWER; CABRILLO POWER;

CABRILLO POWER II LLC; MORGAN

STANLEY CAPITAL GROUP, INC.;

MODESTO IRRIGATION DISTRICT;

CITY OF SANTA CLARA,

CALIFORNIA; AVISTA ENERGY;

PUGET SOUND INVESTMENT GROUP;

THE CITY OF LOS ANGELES

DEPARTMENT OF WATER AND

POWER; CORAL POWER, L.L.C.;

MIRANT AMERICAS ENERGY

MARKETING, LP, MIRANT CA, LLC,

MIRANT DELTA, LLC, AND MIRANT

No. 02-72136
CALIFORNIA PUC V. FERC 7

POTEREO, LLC (COLLECTIVELY,

“MIRANT”; TRANSCANADA ENERGY

LTD.; NORTHERN CALIFORNIA

POWER AGENCY; CITY OF TACOMA,

WASHINGTON; PORT OF SEATTLE

WASHINGTON; PACIFICORP;

PACIFICORP; SALT RIVER PROJECT

AGRICULTURAL IMPROVEMENT AND

POWER DISTRICT; CITY OF REDDING,

CALIFORNIA; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

METROPOLITAN WATER DISTRICT OF

SOUTHERN CALIFORNIA,

Respondent-Intervenor.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner-Intervenor,

SALT RIVER PROJECT

AGRICULTURAL IMPROVEMENT AND

No. 02-72488
8 CALIFORNIA PUC V. FERC

POWER DISTRICT; PACIFICORP;

MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 02-72548

SAN DIEGO GAS & ELECTRIC

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

No. 02-72585
CALIFORNIA PUC V. FERC 9

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

CALIFORNIA PUBLIC UTILITIES

COMMISSION,

Petitioner,

PORT OF SEATTLE WASHINGTON;

MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 03-74471

PORTLAND GENERAL ELECTRIC

COMPANY,

Petitioner,

MODESTO IRRIGATION DISTRICT;

CITY OF SANTA CLARA; CITY OF

REDDING; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; TRANSCANADA

ENERGY; CALIFORNIA PUBLIC

No. 03-74647
10 CALIFORNIA PUC V. FERC

UTILITIES COMMISSION; SOUTHERN

CALIFORNIA EDISON COMPANY;

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; PACIFIC GAS &

ELECTRIC COMPANY; THE PEOPLE OF

THE STATE OF CALIFORNIA, EX REL.

XAVIER BECERRA, Attorney General;

NORTHERN CALIFORNIA POWER

AGENCY; PORT OF SEATTLE; TUCSON

ELECTRIC POWER COMPANY;

PACIFICORP; EL PASO MERCHANT

ENERGY L.P.; CONSTELLATION

ENERGY COMMODITIES GROUP, INC.;

MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

No. 03-74729
CALIFORNIA PUC V. FERC 11

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-70564

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; MIECO, INC.,

Intervenors,

v.

No. 04-72162
12 CALIFORNIA PUC V. FERC

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

CALIFORNIA INDEPENDENT SYSTEM

OPERATOR CORPORATION,

Intervenor,

PORT OF SEATTLE WASHINGTON;

AVISTA ENERGY INC.; CALIFORNIA

ELECTRICTY OVERSIGHT BOARD;

DYNEGY POWER MARKETING, INC.,

EL SEGUNDO POWER LLC, LONG

BEACH GENERATION LLC,

CABRILLO POWER I LLC, AND

CABRILLO POWER II LLC

(COLLECTIVELY, “DYNEGY”),

Applicants-Intervenors.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Petitioner,

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; PORT OF

SEATTLE; MIECO, INC.,

Intervenors,

v.

No. 04-72169
CALIFORNIA PUC V. FERC 13

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

CALIFORNIA INDEPENDENT SYSTEM

OPERATOR CORPORATION,

Intervenor,

PORT OF SEATTLE WASHINGTON;

CORAL POWER, L.L.C.; AVISTA

ENERGY INC.; PUGET SOUND

ENERGY, INC; CALIFORNIA

ELECTRICTY OVERSIGHT BOARD;

DYNEGY POWER MARKETING, INC.,

EL SEGUNDO POWER LLC, LONG

BEACH GENERATION LLC,

CABRILLO POWER I LLC, AND

CABRILLO POWER II LLC

(COLLECTIVELY, “DYNEGY”),

Applicants-Intervenors.

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

No. 04-72210
14 CALIFORNIA PUC V. FERC

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

CALIFORNIA INDEPENDENT SYSTEM

OPERATOR CORPORATION,

Intervenor,

DUKE ENERGY NORTH AMERICA,

LLC, DUKE ENERGY TRADING AND

MARKETING, LLC, (COLLECTIVELY,

“DUKE ENERGY”); SOUTHERN

CALIFORNIA EDISON COMPANY,

(EDISON); PORT OF SEATTLE

WASHINGTON; CORAL POWER,

L.L.C.; AVISTA ENERGY, INC.;

CALIFORNIA ELECTRICTY

OVERSIGHT BOARD; DYNEGY POWER

MARKETING, INC., EL SEGUNDO

POWER LLC, LONG BEACH

GENERATION LLC, CABRILLO

POWER I LLC, AND CABRILLO

POWER II LLC (COLLECTIVELY,

“DYNEGY”),

Applicants-Intervenors.
CALIFORNIA PUC V. FERC 15

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-72539

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-72756
16 CALIFORNIA PUC V. FERC

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-73242

THE PEOPLE OF THE STATE OF

CALIFORNIA; XAVIER BECERRA,

Attorney General,

Petitioners,

MIECO, INC.,

Intervenor,

 v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-73259
CALIFORNIA PUC V. FERC 17

CALIFORNIA PUBLIC UTILITIES

COMMISSION; CALIFORNIA

ELECTRICITY OVERSIGHT BOARD,

Petitioners,

PORT OF SEATTLE, WASHINGTON;

MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-73405

THE PEOPLE OF THE STATE OF

CALIFORNIA; XAVIER BECERRA,

Attorney General,

Petitioners,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-73491
18 CALIFORNIA PUC V. FERC

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners-Intervenors,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General; AVISTA

ENERGY INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

MARKETING INC.; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

DYNEGY POWER MARKETING, INC.;

MODESTO IRRIGATION DISTRICT;

NORTHERN CALIFORNIA POWER

AGENCY; CALIFORNIA INDEPENDENT

SYSTEM OPERATOR CORPORATION;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Respondents-Intervenors.

No. 04-74984
CALIFORNIA PUC V. FERC 19

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

SEMPRA ENERGY TRADING CORP.;

AVISTA ENERGY INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

MARKETING INC.; CITY OF LOS

ANGELES DEPARTMENT OF WATER

AND POWER; WILLIAMS POWER

COMPANY, INC; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-75496

CALIFORNIA PUBLIC UTILITIES

COMMISSION; CALIFORNIA

ELECTRICITY OVERSIGHT BOARD,

Petitioners,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

No. 04-75503
20 CALIFORNIA PUC V. FERC

BECERRA, Attorney General;

SEMPRA ENERGY TRADING CORP.;

AVISTA ENERGY INC.; ENRON

POWER MARKETING INC.; WILLIAMS

POWER COMPANY, INC; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Respondent-Intervenor.

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

SEMPRA ENERGY TRADING CORP.;

AVISTA ENERGY INC.; PUGET SOUND

ENERGY, INC; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

No. 04-75609
CALIFORNIA PUC V. FERC 21

MARKETING, INC.; WILLIAMS POWER

COMPANY, INC; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

TUCSON ELECTRIC POWER

COMPANY,

Intervenor,

MODESTO IRRIGATION DISTRICT,

Respondent-Intervenor,

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General; AVISTA

ENERGY INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

MARKETING INC.; WILLIAMS POWER

COMPANY, INC; MIECO, INC.,

Intervenors,

v.

No. 04-75720
22 CALIFORNIA PUC V. FERC

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

______________________________

WILLIAMS POWER COMPANY, INC;

PACIFICORP,

Applicants-Intervenors.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Petitioner,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General; AVISTA

ENERGY INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

MARKETING, INC.; WILLIAMS POWER

COMPANY, INC; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-75838
CALIFORNIA PUC V. FERC 23

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Petitioner,

MODESTO IRRIGATION DISTRICT;

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

SEMPRA ENERGY TRADING CORP.;

AVISTA ENERGY INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; ENRON POWER

MARKETING, INC.; CALIFORNIA

INDEPENDENT SYSTEM OPERATOR

CORPORATION; CITY OF LOS

ANGELES DEPARTMENT OF WATER

AND POWER; AVISTA ENERGY INC.;

WILLIAMS POWER COMPANY, INC;

SEMPRA ENERGY TRADING CORP.;

MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 04-75840
24 CALIFORNIA PUC V. FERC

CALIFORNIA PUBLIC UTILITIES

COMMISSION; CALIFORNIA

ELECTRICITY OVERSIGHT BOARD,

Petitioners-Appellants,

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General; AVISTA

ENERGY INC.; ENRON POWER

MARKETING INC.; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent-Appellee.

No. 04-76095

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 05-71761
CALIFORNIA PUC V. FERC 25

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 05-72614

THE PEOPLE OF THE STATE OF

CALIFORNIA,

Petitioner,

PORT OF SEATTLE,

Petitioner-Intervenor,

PORTLAND GENERAL ELECTRIC

COMPANY; EL SEGUNDO POWER

LLC; CALIFORNIA EDISON COMPANY,

Intervenors,

MIECO, INC.,

Intervenor,

 and

PINNACLE WEST COMPANY,

No. 05-72678
26 CALIFORNIA PUC V. FERC

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

______________________________

SOUTHERN CALIFORNIA EDISON

COMPANY,

Applicant-Intervenor.

CALIFORNIA PUBLIC UTILITIES

COMMISSION; CALIFORNIA

ELECTRICITY OVERSIGHT BOARD,

Petitioners,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 05-72954

PACIFIC GAS & ELECTRIC COMPANY,

Petitioner,

SOUTHERN CALIFORNIA EDISON

COMPANY; THE PEOPLE OF THE

No. 06-71320
CALIFORNIA PUC V. FERC 27

STATE OF CALIFORNIA, EX REL.

XAVIER BECERRA, Attorney General,

Petitioners-Intervenors,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

TUCSON ELECTRIC POWER

COMPANY; PACIFICORP,

Respondents-Intervenors,

______________________________

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; WILLIAMS

POWER COMPANY, INC;

CONSTELLATION ENERGY

COMMODITIES GROUP, INC.;

PORTLAND GENERAL ELECTRIC

COMPANY; AVISTA ENERGY INC.;

CONSTELLATION ENERGY

COMMODITIES GROUP, INC.; ENRON

POWER MARKETING, INC.; CITY OF

SEATTLE, WASHINGTON; MIDWAY

SUNSET COGENERATION COMPANY,

Applicants-Intervenors.
28 CALIFORNIA PUC V. FERC

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General,

Petitioner,

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner-Intervenor,

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

PACIFIC GAS & ELECTRIC COMPANY;

AVISTA ENERGY; THE CITY OF LOS

ANGELES DEPARTMENT OF WATER

AND POWER; ENRON POWER

MARKETING INC.; PORTLAND

GENERAL ELECTRIC COMPANY;

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD; MIECO, INC.,

Intervenors,

v.

MODESTO IRRIGATION DISTRICT; THE

CITY OF SANTA CLARA; CITY OF

REDDING,

Respondents-Intervenors.

No. 06-71642
CALIFORNIA PUC V. FERC 29

CALIFORNIA PUBLIC UTILITIES

COMMISSION; CALIFORNIA

ELECTRICITY OVERSIGHT BOARD,

Petitioners,

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner-Intervenor,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 06-72006

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioner,

PACIFIC GAS & ELECTRIC COMPANY;

CORAL POWER, L.L.C..; MIECO, INC.,

Intervenors,

and

CALIFORNIA ELECTRICITY

OVERSIGHT BOARD,

No. 06-72195
30 CALIFORNIA PUC V. FERC

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 08-74306

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SAN DIEGO

No. 08-74834
CALIFORNIA PUC V. FERC 31

GAS & ELECTRIC COMPANY;

SOUTHERN CALIFORNIA EDISON

COMPANY,

Petitioners,

SACRAMENTO MUNICIPAL UTILITY

DISTRICT; CITY OF PASADENA,

CALIFORNIA; MIECO, INC.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; SOUTHERN

CALIFORNIA EDISON COMPANY;

PACIFIC GAS & ELECTRIC COMPANY,

Petitioners,

MIECO, INC.,

Intervenor,

v.

No. 09-71953
32 CALIFORNIA PUC V. FERC

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; SOUTHERN

CALIFORNIA EDISON COMPANY;

PACIFIC GAS & ELECTRIC COMPANY,

Petitioners,

MIECO, INC.,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 09-71961

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

No. 10-71708
CALIFORNIA PUC V. FERC 33

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

MIDWAY SUNSET COGENERATION

COMPANY,

Intervenor,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 11-71542
34 CALIFORNIA PUC V. FERC

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 12-70406

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 12-70407
CALIFORNIA PUC V. FERC 35

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. XAVIER

BECERRA, Attorney General;

CALIFORNIA PUBLIC UTILITIES

COMMISSION; PACIFIC GAS &

ELECTRIC COMPANY; SOUTHERN

CALIFORNIA EDISON COMPANY,

Petitioners,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent.

No. 12-71034

On Petition for Review of an Order of the

Federal Energy Regulatory Commission

Argued and Submitted March 22, 2017

San Francisco, California

Filed April 21, 2017

Before: Sidney R. Thomas, Chief Judge, and M. Margaret

McKeown and Richard R. Clifton, Circuit Judges.

Opinion by Chief Judge Thomas
36 CALIFORNIA PUC V. FERC

SUMMARY**

Federal Energy Regulatory Commission

The panel granted in part, and denied in part, a petition

for review brought by various entities challenging the Federal

Energy Regulatory Commission (“FERC”)’s calculation of

certain refunds arising out of the California energy crisis in

2000 and 2001.

The panel held that FERC did not act arbitrarily or

capriciously in its construction of tariffs, and denied the

petition as to the question of whether refunds should be netted

hourly or across the entire refund period. FERC found that in

order to calculate the total refund shortfall resulting from

Bonneville Power Administration v. FERC, 422 F.3d 908 (9th

Cir. 2005), the California Independent System Operator

Corporation should net sales and purchases over hourly

intervals. FERC applied the same rationale to the California

Power Exchange Corporation (“Cal-PX”), and directed it to

perform its final refund netting purchases and sales over

hourly intervals to reflect the period during which the

obligation was incurred.

Addressing a $5 million deficit in the Cal-PX settlement

clearing account that resulted from a transfer of funds from

the settlement clearing account to the operating account in

March 2001, the panel held that FERC acted arbitrarily and

capriciously in allocating the refund only to net buyers and

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
CALIFORNIA PUC V. FERC 37

not to all market participants. The panel granted the petition

as to this issue.

COUNSEL

Stan Berman (argued) and Eric Todderud, SidleyAustin LLP,

Seattle, Washington; Mark D. Patrizio and Joshua S.

Levenberg, Pacific Gas and Electric Company; for Petitioner

Pacific Gas and Electric Company.

Candace J. Morey; Arocles Aguilar, General Counsel; San

Francisco, California; as and for Petitioner Public Utilities

Commission of the State of California.

Kevin J. McKeon, Judith D. Cassel, and Whitney E. Snyder,

Hawke McKeon & Sniscak LLP, Harrisburg, Pennsylvania;

Danette E. Valdez, Supervising Deputy Attorney General;

Martin Goyette, Senior Assistant Attorney General; Mark

Breckler, Chief Assistant Attorney General; Office of the

Attorney General, San Francisco, California; for Petitioners

People of the State of California ex rel. Xavier Becerra,

Attorney General.

Richard L. Roberts and Catherine M. Giovannoni, Steptoe &

Johnson LLP, Washington, D.C.; Russell C. Swartz, J. Eric

Isken, and Russell A. Archer, Southern California Edison

Company, Rosemead, California; for Petitioners Southern

California Edison Company.

Beth Guralnick Pacella (argued), Deputy Solicitor; Robert H.

Solomon, Solicitor; Max Minzner, General Counsel;

Washington, D.C., for Respondent Federal Energy

Regulatory Commission.
38 CALIFORNIA PUC V. FERC

OPINION

THOMAS, Chief Judge:

This petition for review returns to us as part of a long

series of administrative cases arising out of the California

energy crisis in 2000 and 2001, the background of which we

have described in detail in earlier opinions.1 This petition

requires us to determine whether the Federal Energy

Regulatory Commission (“FERC” or “Commission”) acted

arbitrarily or capriciously in calculating certain refunds.

We review FERC decisions to determine whether they are

“arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law.” Pac. Gas & Elec. Co. v. FERC,

373 F.3d 1315, 1319 (D.C. Cir. 2004) (citing 5 U.S.C.

§706(2)(A); Sithe/Indep. Power Partners v. FERC, 165 F.3d

944, 948 (D.C. Cir. 1999)). “FERC must be able to

demonstrate that it has made a reasoned decision based upon

substantial evidence in the record.” Id. (quoting N. States

Power Co. v. FERC, 30 F.3d 177, 180 (D.C. Cir. 1994)). The

Court also must ensure that FERC “articulate[s] a satisfactory

explanation for its action including a rational connection

between the facts found and the choice made.” Id. (alteration

in original) (quoting Motor Vehicle Mfrs. Ass’n of the U.S.,

Inc. v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 (1983)).

1

See, e.g., MPS Merch. Servs., Inc. v.FERC, 836 F.3d 1155, 1160

(9th Cir. 2016); Cal. ex rel. Harris v. FERC, 809 F.3d 491, 496–98 (9th

Cir. 2015); Pub. Utils. Comm’n of State of Cal. v. FERC, 462 F.3d 1027,

1036–45 (9th Cir. 2006); Bonneville Power Admin. v. FERC, 422 F.3d

908, 911–14 (9thCir. 2005); Cal. ex rel. Lockyer v. FERC, 383 F.3d 1006,

1008–11 (9th Cir. 2004).
CALIFORNIA PUC V. FERC 39

We grant the petition in part and deny it in part.

I

After we concluded in Bonneville Power Administration

v. FERC that FERC had acted outside its jurisdiction when

ordering governmental entities/non-public utilities to pay

refunds, 422 F.3d 908, 926 (9th Cir. 2005), the Commission

vacated each of its orders in the California refund proceeding

to the extent that they ordered governmental entities/nonpublic utilities to pay refunds. San Diego Gas & Elec. Co. v.

Sellers of Energy & Ancillary Servs. (“2007 Order on

Remand”), 121 FERC ¶ 61,067, 61,352–53, 2007 WL

3047581, at *9 (2007).2 The Commission directed the

California Power Exchange Corporation (“Cal-PX”) and the

California Independent System Operator Corporation (“CalISO”) to complete refund calculations with all entities that

participated in the Cal-PX and Cal-ISO markets and not to

redo the refund calculations to remove the governmental

entities/non-public utilities. Id.

FERC agreed with the California parties (“California”)3

that energy sales and purchases should be netted before

calculating each party’s refund amount, but it found that

netting these sales and purchases over the entire refund period

could have the indirect effect of requiring governmental

2 All proceedings below share this case name. Orders will be referred

to by their year and title for the sake of brevity and to avoid confusion.

3 Petitioners the California Parties consist of the Public Utilities

Commission of the State of California; the People of the State of

California ex rel. Xavier Becerra, Attorney General; Pacific Gas and

Electric Company; and Southern California Edison Company.
40 CALIFORNIA PUC V. FERC

entities and other non-public utilities to pay refunds. 2008

Order on Rehearing and Motions for Clarification and

Accounting, 125 FERC ¶ 61,214, 62,112–13, 2008 WL

4962565, at *4–5 (2008). FERC instead found that in order

to calculate the total refund shortfall resulting from

Bonneville, Cal-ISO should net sales and purchases over

hourly intervals. Id. The Commission noted that under the

Cal-ISO Tariff, a settlement period was defined in terms of

hourly intervals, and therefore, it directed Cal-ISO to net over

hourly intervals to ensure consistency with its tariff

requirements. Id.

In a later order, FERC applied the same rationale to CalPX, whose tariff also specified hourly settlement intervals,

and directed Cal-PX to perform its final refund calculations

netting purchases and sales over hourly intervals to reflect the

period during which the obligation was incurred. 2011 Order

Accepting Compliance Filings and Providing Guidance,

136 FERC ¶ 61,036, 2011 WL 2750775, at *11 (2011).

California argues that the applicable tariffs

unambiguously require Cal-ISO and Cal-PX to net for the

entire refund period, not over hourly intervals. Although

California makes a plausible case for its interpretation, we

cannot conclude that FERC acted arbitrarily or capriciously

in its interpretation of the tariffs. Though the tariffs provide

for netting in certain situations over an interval shorter than

an hour or for netting charges over an hour and later summing

the charges over the day and over the entire month to

generate monthly invoices, nothing suggests that the netting

interval should span the entire refund period, which lasted

nine months. Similarly, FERC’s interpretation of the tariff

amendments was likewise reasonable. Cal-ISO Amendment

No. 51 and Cal-PX Amendment No. 23 segregated
CALIFORNIA PUC V. FERC 41

transactions during the refund period. The amendments did

not address calculating the total net refunds; they related only

to performing settlement reruns and invoice adjustments

(prerequisites to calculating final refunds). FERC reasonably

interpreted the amendments as inapplicable.

California also argues that FERC’s decision to net

governmental entity sales on an hourly basis departed from its

prior orders without explanation. However, the prior orders

cited do not address how the refunds should be netted; they

address cost offset allocations.

California also suggests that the result is unduly

discriminatory because hourly netting improperly permits

governmental entities and non-public utilities to receive

unlawfully excessive rates charged for sales made in one hour

(without having to repaysellers for the excessive rates), while

collecting refunds if that same entity bought power in another

hour or in a different market in that same hour. The data do

suggest some disparity. However, that is a natural

consequence of our jurisdictional decision in Bonneville.

In sum, although the tariffs are not specific on these

points, we cannot conclude that FERC acted arbitrarily or

capriciously in its construction of the tariffs.

II

The second issue in the petition for review concerns a $5

million deficit in the Cal-PX settlement clearing account that

resulted from a transfer of funds from the settlement clearing

account to the operating account in March 2001; the $5

million was used for operating expenses. The Commission

determined that the deficit was attributable to an accounting
42 CALIFORNIA PUC V. FERC

error on the part of Cal-PX and found that, given the delay in

discovering that the funds had erroneously been transferred,

it appeared unlikely that Cal-PX would “be able to determine

how, precisely, this $5 million was used, separate and apart

from other funds in the operating account during the same

period.” 2011 Order Accepting Compliance Filings and

Providing Guidance, 136 FERC ¶ 61,067, 2011 WL2750775,

at *15. Therefore, the Commission determined that the most

efficient and equitable solution was to treat the settlement

account deficit “like a refund shortfall and allocate the

shortfall among all net refund recipients in proportion to their

final refund positions.” Id. The Commission denied

rehearing of its decision, concluding that only net refund

recipients (net buyers) would be financially affected by the

reduction in the total amount of available funds and that this

approach was consistent with its decisions about how to

allocate other shortfalls. 2012 Order Denying Rehearing (II),

138 FERC ¶ 61,092, 61,398, 2012 WL 372854, at *3 (2012).

California argues that FERC should have allocated the $5

million deficit to both buyers and sellers, rather than just to

net buyers. In this respect, we are guided by Pacific Gas &

Electric, in which the D.C. Circuit concluded that FERC was

required to allocate costs across the entire market. 373 F.3d

at 1319–22. Pacific Gas & Electric involved Cal-PX

“winding up” its business affairs. Id. at 1317–18. Because

CalPX had no funding source during the wind-up period,

FERC allocated the costs of Cal-PX’s wind-up and ongoing

operations among its customers on the basis of their prior

purchases. Id. at 1318, 1320. However, the D.C. Circuit held

that “FERC’s imposition of additional charges on Cal-PX’s

customers allocated on the basis of their prior purchases

without reflection of any new jurisdictional services directly

violate[d] the filed-rate doctrine or the rule against retroactive
CALIFORNIA PUC V. FERC 43

rulemaking.” Id. at 1320. Because Cal-PX’s former

customers had already paid the filed rate for the past

jurisdictional services, any imposition of new costs based on

the previous transactions was prohibited. Id. The court also

held that FERC’s cost allocation methodology was

unreasonable because there was no connection between “the

size of [a customer’s] account balance” and the “customer’s

likely benefit from . . . [Cal-Px’s] wind-up activities.” Id. at

1321.

Here, the allocation of the shortfall is not a new charge

but is the result of Cal-PX’s accounting error. Nonetheless,

the $5 million was used for operating expenses and, as noted

in Pacific Gas & Electric, all market participants benefitted

from the continued operation of Cal-PX. Id. at 1231. 

Therefore, consistent with the treatment in Pacific Gas &

Electric, the shortfall should be allocated among all market

participants. See id.

FERC argues that its decision was consistent with prior

proceedings and, specifically, that the shortfall after

Bonneville was allocated to refund recipients based on their

final net refund positions. See 2007 Order on Remand,

121 FERC ¶ 61,067, 61,352–53, 2007 WL 3047581, at *9. 

However, allocation of the Bonneville shortfall is

distinguishable because it was a shortfall in refunds. Because

governmental entities could not be ordered to pay refunds,

there was less money to be allocated to buyers. Here, on the

other hand, the shortfall exists in the account from which

refunds will be made, but is unrelated to the refund

proceeding.

In sum, we agree with the logic employed by the D.C.

Circuit and conclude that FERC acted arbitrarily and
44 CALIFORNIA PUC V. FERC

capriciously in allocating the refund only to net buyers and

not to all market participants.

III

In conclusion, we deny the petition as to the question

whether refunds should be netted hourly or across the entire

refund period. We grant the petition as to the allocation of

the deficit in the Cal-PX settlement clearing account. Each

party shall bear its own fees and costs on appeal.

PETITION GRANTED IN PART; DENIED IN

PART.