Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527 (2008)
Primary Holding
Under the Mobile-Sierra doctrine, the Federal Energy Regulatory Commission (FERC) must presume that a rate set in a freely negotiated wholesale-energy contract is just and reasonable, and this presumption can only be overcome if FERC finds that the contract seriously harms the public interest.
In the case of Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, the Supreme Court ruled that when energy companies negotiate contracts for selling electricity, those rates are generally considered fair unless there’s strong evidence that they harm the public. This matters because it helps ensure that energy companies can set prices through agreements without constant government interference, which can lead to more stable energy prices for consumers. If you’re involved in a situation where energy rates are being challenged, this case is relevant because it sets a high standard for proving that a negotiated rate is unfair.
AI-generated plain-language summary to help you understand this case
In *Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County*, the dispute arose from the interpretation of the Mobile-Sierra doctrine, which pertains to the regulation of wholesale electricity contracts under the Federal Power Act (FPA). The case involved Morgan Stanley Capital Group Inc. and American Electric Power Service Corporation as petitioners against Public Utility District No. 1 of Snohomish County, Washington. The core issue was whether the presumption that a negotiated contract rate is just and reasonable applies only after the Federal Energy Regulatory Commission (FERC) has had an opportunity to review the contract without that presumption, and whether this presumption imposes a high barrier for challenges by electricity purchasers. The procedural history of the case began with the Ninth Circuit Court of Appeals, which reviewed the application of the Mobile-Sierra doctrine in the context of the contracts in question. The appeals court's decision prompted the petitioners to seek certiorari from the Supreme Court, leading to the Court's review of the questions regarding the presumption of just and reasonable rates in negotiated contracts and the implications for both sellers and purchasers in the wholesale electricity market. The relevant background context includes the FPA's framework for regulating electricity sales in interstate commerce, which allows for both tariff-based rates and bilateral contracts between utilities and electricity purchasers. The FPA mandates that all wholesale-electricity rates must be just and reasonable, and it provides mechanisms for the FERC to investigate and suspend rates if necessary. The Mobile-Sierra doctrine establishes a presumption that rates set in freely negotiated contracts meet this requirement, but this presumption can be challenged if it is shown that the contract seriously harms the public interest.
Whether the Mobile-Sierra doctrine's presumption that a freely negotiated wholesale-energy contract meets the "just and reasonable" requirement applies only when the Federal Energy Regulatory Commission has had an initial opportunity to review the contract rate without the presumption, and whether this presumption imposes the same high bar to challenges by purchasers of wholesale electricity as it does to challenges by sellers.
The judgment is reversed.
- Court
- Supreme Court
- Decision Date
- February 19, 2008
- Jurisdiction
- federal
- Case Type
- landmark
- Damages Awarded
- N/A
- Data Quality
- high
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