Opinion
03 Civ. 3754 (RCC).
June 27, 2003.
OPINION ORDER
I. Introduction
Before the Court is NRG Power Marketing, Inc.'s ("Plaintiff's") motion for injunctive relief. Plaintiff, a subsidiary of NRG Energy, Inc., ("the Debtor") seeks a preliminary injunction: (1) enjoining the Connecticut Attorney General, Connecticut Public Utility Control ("Connecticut Utility"), and Connecticut Light Power ("Connecticut Light") from initiating any new proceedings before the Federal Energy Regulatory Commission ("FERC") concerning a Standard Offer Service Wholesale Sales Agreement, dated October 29, 1999 ("the Agreement"); (2) permitting Plaintiff to cease performance under the Agreement, effective retroactive to June 2, 2003; and (3) declaring that any requirement for Plaintiff to comply with any final exercise of FERC's regulatory jurisdiction shall be stayed pending the completion of final review of such regulatory action by a court of competent jurisdiction.
For the following reasons, Plaintiff's motion is dismissed because the Court lacks subject matter jurisdiction to grant such relief.
II. Background
On October 29, 1999, Plaintiff and Connecticut Light entered into a four-year power sales agreement that required Plaintiff to provide a fixed amount of energy to Connecticut Light at a fixed price from January 1, 2000 until December 31, 2003. See Second Am. Compl. ¶ 11. Shortly after service began under the Agreement, a dispute arose between Plaintiff and Connecticut Light as to which entity was liable for certain congestion charges. On August 13, 2002, Plaintiff notified Connecticut Light that it had failed to pay certain amounts due under the Agreement and therefore was in default. Id. ¶ 17. In addition, Plaintiff informed Connecticut Light that pursuant to the terms of the Agreement, it was required to cure the alleged default within thirty days. Id. Although Connecticut Light never cured the default, Plaintiff continued to provide service.
This dispute is currently the subject of an ongoing federal litigation in the District of Connecticut.
On May 14, 2003, Plaintiff notified Connecticut Light that it intended to terminate the Agreement, effective May 19, 2003 at midnight, because Connecticut Light remained in default. Id. ¶ 18. Later that same day, the Debtor, on behalf of certain of its affiliates, including Plaintiff, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Id. ¶ 20.
Simultaneous with the Chapter 11 filing, Plaintiff moved the U.S. Bankruptcy Court for the Southern District of New York for an order under section 365(a) of the Bankruptcy Code authorizing the Plaintiff to reject the Agreement and to cease performance under it as early as May 19, 2003. Id. ¶ 21-22.
Responding to Plaintiff's May 14, 2003 notice of termination for default, on May 15, 2003 the Connecticut Attorney General and Connecticut Utility petitioned FERC to stay Plaintiff's termination of the Agreement. Id. ¶ 26. The FERC issued an Order on May 16, 2003 stating it had "insufficient time to evaluate" the effects of the proposed cessation of service prior to Plaintiff's proposed termination date of May 19, 2003. Id. ¶ 28; see Richard Blumenthal, Attorney General of the State of Connecticut, 103 FERC ¶ 61, 188 (2003), ¶ 8. Accordingly, FERC stated that pending further notice from it, without limitation, Plaintiff was "to continue to provide service to [Connecticut Light] pursuant to the rates, terms and conditions of [the Agreement]." Id. p. 4. The FERC also set a ten-day deadline for filing protests and interventions and indicated that FERC would take action as expeditiously as possible. See id. ¶ 8.
On May 22, 2003, seven days after the Connecticut Attorney General and Connecticut Utility initiated the FERC action, the bankruptcy court issued a written order granting Connecticut Light relief from the automatic stay provision of the Bankruptcy Code. The bankruptcy court therefore permitted Connecticut Light to intervene and participate in the FERC proceeding. See Order Granting Connecticut Light Relief from Stay to Intervene in Proceedings Before FERC, Nollan Decl., Ex. A.
On June 2, 2003, following two days of hearings, the bankruptcy court found that the money-losing character of the Agreement satisfied the business judgment standard for rejection of an executory contract under 11 U.S.C. § 365. See Order Authorizing Rejection of Standard Offer Service Wholesale Agreement, Cantor Certification, Ex. M. Although the bankruptcy court approved the rejection of the Agreement, it declined to enjoin FERC or to vacate the FERC Order requiring Plaintiff to continue to provide service under the Agreement. Thus, the bankruptcy court instructed Plaintiff that it "must seek an order from the [FERC] to vacate that order or to take such other steps down [at FERC] as it thinks are appropriate." In re NRG-PMI Energy, Inc., Case No. 03-13024, Hearing Transcript (Bankr. S.D.N.Y. June 2, 2003), at 136-37.
On June 4, 2003, Connecticut Light filed a Notice of Appeal of the bankruptcy court's decision contending that the bankruptcy court: (1) lacked jurisdiction to issue its order authorizing rejection of the Agreement, (2) applied the wrong standard in evaluating the Rejection Motion and (3) erroneously concluded that rejection of the Agreement would benefit Plaintiff's estate. See Notice of Appeal, Nollan Decl., Ex. C.
Plaintiff then moved this Court for declaratory and injunctive relief. Plaintiff requested that it be permitted to cease performance under the Agreement in light of the bankruptcy court's order authorizing rejection despite, and in contravention to, FERC's May 16th Order requiring Plaintiff's continued compliance with the Agreement.
Following the filing of Plaintiff's motion in this Court, on June 25, 2003 FERC issued a second Order that required Plaintiff to provide service to Connecticut Light, pursuant to the Agreement. See Richard Blumenthal, Attorney General of the State of Connecticut, 103 FERC ¶ 61, 344 (2003), ¶¶ 57, 68. In its June 25th Order, FERC first concluded that it possessed jurisdiction and was therefore not required to forego its regulatory responsibilities because Plaintiff had filed for bankruptcy. See id. ¶¶ 45, 53. Second, FERC concluded that pending its final determination of whether Plaintiff's proposed termination of the Agreement is consistent with the public interest, Plaintiff is "require[d] . . . to comply with the rates, terms and conditions of [the Agreement]." Id. ¶ 68. Finally, because FERC determined that it lacked a sufficient record to determine whether Plaintiff had public interest grounds for abrogating the Agreement, it established procedures for the submission of information regarding the public interest issue. Id. ¶ 66.
III. Discussion
In sum, Plaintiff's motion concerns the interrelationship of bankruptcy and federal energy regulatory laws and whether the proper authority to address the issues raised here is a federal district court or FERC — with a subsequent appeal of a FERC order lying with a court of appeals.
Since 1935, Congress determined that "the business of . . . selling electric energy for ultimate distribution is affected with a public interest . . . and that Federal regulation of . . . the sale of such energy at wholesale in interstate commerce is necessary in the public interest. . . ." 16 U.S.C. § 824(a). Given Congress's determination, under the Federal Power Act ("FPA"), FERC has exclusive jurisdiction over "the sale of electric energy at wholesale in interstate commerce." 16 U.S.C. § 824(b), (d); see also Nanthala Power Light v. Thornburg, 476 U.S. 953, 963 (1986). Further, the FPA vests in FERC the exclusive authority to pass upon the reasonableness of the structure, terms and conditions pertaining to the sale and distribution of wholesale electric rates. See FPA §§ 201, 205 and 206, 16 U.S.C. § 824, 824d and 824e. Here, the Agreement between Connecticut Light and Plaintiff is a wholesale power contract. The Agreement therefore falls within the FPA's purview, and hence, FERC's exclusive jurisdiction. Accordingly, the FPA has vested FERC as the authority that may alter the terms of the Agreement. See Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 471 (1981); see also Maine Public Serv. Co. v. Fed. Power Comm'n, 579 F.2d 659 (1st Cir. 1978).
Despite the statutory scheme created under the FPA, Plaintiff has asserted that the Court is confronted with a simple bankruptcy case that is nothing more than a dispute between two parties to a financial arrangement. In its attempt to cast its requested relief in non-regulatory terms, Plaintiff has also claimed that the relevant interests raised here are merely those of Plaintiff's creditors. In doing so, Plaintiff asserts that under the Supreme Court's decisions in NLRB v. Bildisco Bildisco, 465 U.S. 513 (1984), and FCC v. Nextwave Personal Communications, Inc., 123 S.Ct. 832 (2003), this Court possesses the authority to reject the Agreement under section 365(a) of the Bankruptcy Code despite the pending FERC action.
However, given the unique regulatory framework for the business of selling electric energy and the pending FERC proceeding, the Court lacks jurisdiction to grant Plaintiff's requested relief. As the Second Circuit stated in the context of a Federal Communications Commission proceeding, "It is for [the federal regulatory agency] to state its conditions . . . and for a court with power to review [its] decisions to say if they are arbitrary or valid." In re FCC, 217 F.3d 125, 135 (2d Cir.),cert. denied sub nom. NextWave Pers. Communications. Inc. v. FCC, 531 U.S. 1029 (2000). The Second Circuit further stated, "[the federal regulatory agency] need not defend its regulatory calculus in the bankruptcy court. . . . [I]f the decision is regulatory, it may not be altered or impeded by any court lacking jurisdiction to review it." Id.
Here, pursuant to section 313 of the FPA, codified as 16 U.S.C. § 825 l(b), actions taken by FERC are reviewable only by the federal courts of appeals. Section 313 in relevant part states:
Any party to a proceeding . . . aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the United States Court of Appeals for any circuit wherein the licensee or public utility to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia.
In sum, under the elaborate statutory scheme created by the FPA, only a federal court of appeals may exercise jurisdiction to review a FERC decision. See In re FCC, 217 F.3d at 138 (quoting Bd. of Governors v. Mcorp Fin., Inc., 502 U.S. 32, 40 (1991); see also In re Nextwave Personal Communications, Inc., 200 F.3d 43, 54 (2d Cir. 1999) (holding that "[b]ecause jurisdiction over claims brought against the FCC in its regulatory capacity lies exclusively with the federal courts of appeals . . ., the bankruptcy and district courts lacked jurisdiction to decide whether NextWave had satisfied . . . regulatory conditions placed by the FCC.").
Plaintiff may believe that it is entitled to cease performing under the Agreement given that Defendants allegedly violated the automatic stay provision of the Bankruptcy Code in initiating the FERC action and because the bankruptcy court allowed Plaintiff to reject the Agreement. However, FERC acted within its legal authority, delegated to it under the FPA, when it ordered Plaintiff to continue to comply with its obligations under the Agreement.
Indeed, were the issues before the Court not to affect FERC's regulatory authority, the Court would properly possess jurisdiction. The issue before FERC, however, is whether Plaintiff may cease performance of the Agreement given the FPA requirements adopted by Congress to protect wholesale power customers — a question that is squarely FERC's regulatory responsibility. In order to fulfill this FPA-delegated responsibility, FERC is now addressing a range of public interest concerns in light of Plaintiff s financial integrity. Thus, to the extent that Plaintiff believes that FERC erred in ordering it to perform under the Agreement, Plaintiff's appropriate remedy would be to seek review of FERC's order by a federal court of appeals. See 16 U.S.C. § 8251(a). This Court, however, is not the proper forum for Plaintiff to challenge FERC's regulatory action.
In its May 16th Order, FERC asserted that it "intended to act as expeditiously as possible in this proceeding." See 103 FERC ¶ 61, 188, ¶ 8. The Court has no doubt that FERC should, and will, continue to do precisely that. In the interest of efficiency, this Court will thus not interfere with the regulatory proceeding currently before FERC.
IV. Conclusion
For the foregoing reasons, the Court concludes that it lacks subject matter jurisdiction over this action. Therefore, Plaintiff's motion is hereby dismissed.