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Bankruptcy Judge: FERC "Must Be Stopped", FERC Lacks Jurisdiction Over PG&E Contracts Rejection

June 10,2019

A U.S. bankruptcy judge ruled that FERC exceeded its authority when FERC declared that FERC would have "concurrent" jurisdiction over any PPAs that Pacific Gas & Electric may seek to reject in its bankruptcy

FERC, prior to a bankruptcy filing by PG&E, ruled that, "this Commission and the bankruptcy courts have concurrent jurisdiction to review and address the disposition of wholesale power contracts sought to be rejected through bankruptcy."

PG&E has not yet sought to reject any PPAs in its bankruptcy proceeding

Dennis Montali, a judge for the United States Bankruptcy Court Northern District Of California San Francisco Division blasted FERC's ruling, writing in a decision that, "FERC, despite its denial, has chosen to interfere with bankruptcy courts’ decisions. Without statutory or supreme court authority to support its position, it in fact 'presumes to sit in judgment' and second-guess -- no overrule -- decisions of the bankruptcy court."

"To deal with what it correctly identifies as unsettled law with different court interpretations (one circuit court, one district court and one bankruptcy court now on direct appeal to another circuit court) FERC purports to settle the law by announcing its own interpretation of bankruptcy law and decree something found nowhere in the statute it interprets. This is not the way that unsettled law is to be developed. That is the role of the courts," Montali wrote

"To this court, FERC’s decision was not only unauthorized, but has and continues to have the effect of undermining the function of the bankruptcy court in its role of ensuring that the goals and purposes of bankruptcy law and policy are properly served and properly executed. Despite FERC’s lip service to what it describes as 'concurrent jurisdiction' to carry out differing and perhaps competing policies, the effect of its decision guts and renders meaningless the bankruptcy court’s responsibilities in this area of the law," Montali wrote

"For this reason, FERC must be stopped and the division and balance of power and authority of the two branches of government restored. Accordingly, and for the reasons that follow, the court declares FERC’s decision announcing its concurrent jurisdiction unenforceable in bankruptcy and of no force and effect on the parties before it. If necessary in the future it will enjoin FERC from perpetuating its attempt to exercise power it wholly lacks," Montali wrote

"FERC has acted outside of its statutory authority. Its decisions before bankruptcy were advisory in nature, have no impact on anyone; once the bankruptcy cases were filed they presented an immediate conflict with the Bankruptcy Code and can be challenged and dealt with in this court," Montali wrote

"Nothing in the FPA or the Bankruptcy Code grants FERC concurrent jurisdiction with this court over Section 365 motions to reject executory contracts covering federal power matters," Montali wrote

"In sum, the three FERC decisions discussed here were not the actions of a power regulator carrying out its statutory duties to police rates, terms and conditions of power contracts, and enforcing the filed-rate doctrine. To be blunt, they were unauthorized acts of the power regulator executing a power play (to use a hockey term) to curtail the role of the court acting within its authorized and exclusive role in these bankruptcy cases. Those decisions can not be applied or honored here," Montali wrote

"Debtors are entitled to this court’s declaratory judgment that (1) FERC does not have concurrent jurisdiction over its decision to permit Debtors to reject (or assume) executory contracts under Section 365; and (2) that the FERC Denial and its two prior rulings described above are of no force and effect and are not binding on Debtors in these cases. Nothing will happen here until either of the Debtors moves to reject an executory PPA and the affected counterparty opposes that motion. At that time the court will consider the merits of any such motion and if consideration implicates public policy interests as well as reorganization goals, those interests can be considered as part of the higher standard for the rejection decision," Montali wrote

FERC   California   PG&E   Pacific Gas & Electric  

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