United States: District Of Massachusetts Reaffirms Broad Defense Of Filed Rate Doctrine

Last Updated: July 9 2019
Article by John Shope and Kevin Chen

An important legal doctrine for companies that buy and sell in regulated markets is the "filed rate" doctrine, which limits legal challenges to rates determined by regulators such as the Federal Energy Regulatory Commission or the Federal Communications Commission. A recent decision by the District of Massachusetts illustrates the potential breadth of the doctrine.

By way of background, two class action lawsuits filed in the District of Massachusetts alleged that Eversource and Avangrid systematically abused their influence in the natural gas transmission market in violation of federal and state antitrust laws. According to the plaintiffs, Eversource and Avangrid subsidiaries regularly reserved more natural gas transmission capacity than they needed and refused to release excess capacity in the secondary market or did so without enough time for the pipeline space to be resold to others. The plaintiffs alleged that this practice unnecessarily limited the gas supply, artificially increased the commodity market price for natural gas, and inflated wholesale electricity prices in New England.

The first case, a class action filed on behalf of New England retail electricity consumers, was dismissed in September 2018 by U.S. District Judge Denise Casper of the District of Massachusetts. Breiding v. Eversource Energy, 44 F. Supp. 3d 433 (D. Mass. 2018). In her decision in that case, Judge Casper focused in part on the retail consumers' lack of antitrust standing, asserting that they were "not competitors or customers in the natural gas transmission market allegedly restrained by [Eversource and Avangrid's] anticompetitive conduct." Id. at 452. However, Judge Casper suggested that wholesale electricity purchasers might be proper plaintiffs to bring a suit of this kind. See id. at 455–56.

Yet just this month, Judge Casper dismissed a separate class action brought by wholesale electricity purchasers for essentially the same alleged conduct. PNE Energy Supply LLC v. Eversource Energy, No. 18-11690, 2019 U.S. Dist. LEXIS 95764 (D. Mass. June 7, 2019). As in Breiding, the court held that the plaintiffs failed to meet antitrust standing requirements. Indeed, Judge Casper apparently disavowed the notion that wholesale purchasers were proper plaintiffs to sue Eversource and Avangrid, finding that such purchasers are not customers or competitors in the excess gas transportation capacity market—the market in which the alleged misconduct actually occurred. Id. at *30–31.

As in Breiding, Judge Casper also held that PNE's claims were barred by the filed rate doctrine, which requires that "utility filings with the regulatory agency prevail over . . . other claims seeking different rates or terms than those reflected in the filings with the agency," Town of Norwood, Mass. v. FERC, 217 F.3d 24, 28 (1st Cir. 2000). According to court, whether or not FERC's regulatory authority necessarily extends to the excess gas transportation capacity release market, that secondary gas transportation capacity market is "bookended" by the primary gas transportation capacity and wholesale electricity markets, both of which are regulated by FERC. 2019 U.S. Dist. LEXIS 95764, at *20. Moreover, the court stated that it cannot "second guess" or "set aside" wholesale electric rates approved by FERC through the ISO-New England auction process, since the filed rate doctrine "prohibits" a court from analyzing "the difference between wholesale electric rates during the class period and hypothetical rates that would have been charged but for Defendants' conduct." Id. at *25–27 (citing Wah Chang v. Duke Energy Trading & Mktg., LLC, 507 F.3d 1222, 1226 (9th Cir. 2007)).

PNE may be subject to challenge. The district court's "bookend[ing]" theory of the filed rate doctrine is arguably consistent with analogous Ninth Circuit cases. See, e.g., Woolsey v. J.P. Morgan Ventures Energy Corp., 691 Fed. Appx. 308 (9th Cir. 2017); Public Util. Dist. No. 1 of Snohomish Cty. v. Dynegy Power Mktg., Inc., 384 F.3d 756 (9th Cir. 2004). But this understanding is not inevitable. Although the defendants' alleged misconduct occurred within a FERC-approved framework, FERC has not affirmatively approved the alleged conduct such that the ultimate resulting rates should obviously be considered "filed." Moreover, this broad conception of the filed rate doctrine effectively immunizes utility companies from antitrust claims in the courts, even when the alleged misconduct occurred outside of FERC's explicit jurisdiction—a far-from-uncontroversial result.

The First Circuit has hinted that it shares a broad reading of the doctrine. See Town of Norwood v. New England Power Co., 202 F.3d 408, 416 (1st Cir. 2000) ("While the termination charge is not a traditional 'rate' for continuing service, the filed rate doctrine sweeps more broadly and governs ancillary conditions and terms included in the tariff."). However, the court has not directly addressed the issue—yet. Judge Casper's earlier Breiding decision is currently on appeal, and its outcome surely will influence any future appeal by PNE. If the First Circuit decides to affirm Breiding, it will join the Ninth Circuit in providing sweeping protections for utility companies against antitrust challenges in the courts.

That is not to say that a broad filed rate doctrine gives utility companies free rein to engage in anticompetitive practices. Within the energy sector, FERC has authority to investigate unlawful conduct pursuant to complaint or by its own motion. See 16 U.S.C. §§ 825e–825f (2012). For example, following the California energy crisis of the early 2000s, FERC investigations led to billions of dollars in settlements with Western energy companies. See Addressing the 2000–2001 Western Energy Crisis, Federal Energy Regulatory Commission (Mar. 15, 2012). With respect to the allegations against Eversource and Avangrid, however, FERC issued a press release in February 2018 stating that a "staff inquiry . . . revealed no evidence of anticompetitive withholding of natural gas pipeline capacity," so the Commission would "take no further action on the matter." News Release, FERC Staff Inquiry Finds No Withholding of Pipeline Capacity in New England Markets, Federal Energy Regulatory Commission (Feb. 27, 2018). A broad filed rate doctrine therefore relies entirely on FERC to hold bad actors accountable, leaving injured parties without recourse when the Commission declines to exercise its enforcement discretion.

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