Supreme Court Holds Third Parties to Public Interest Standard

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The U.S. Supreme Court has affirmed once again the protections afforded to wholesale energy contracts under the Mobile-Sierra Doctrine. In a decision issued on January 13 in NRG Power Marketing v. Maine Public Utilities Commission, the Supreme Court held that the application of the Mobile-Sierra Doctrine does not depend on who is seeking to modify a wholesale contract. The Court held that the Doctrine applies to challenges by non-contracting parties, including consumers, advocacy groups, state utility commissions, and elected officials, as well as the contracting parties.

The Supreme Court’s decision arose from an appeal of a 2006 Federal Energy Regulatory Commission (FERC) order approving a settlement that established how ISO New England (ISO-NE) would secure generation capacity. Based on the settlement terms, ISO-NE would procure capacity through forward capacity auctions that would set the price for annual capacity three years into the future. In addition, the settlement established a transition payment that existing generation resources would receive as ISO-NE phased into the new program. ISO-NE would spread the resulting rates and transition payments from the forward capacity auctions across New England utilities. In order to protect the rate structure agreed to by 97 of the 115 parties involved, the settlement stated that any challenges to the settlement, including the auction rates and transition payments, would be subject to the public interest test.

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