Faculty research cited in Supreme Court decision involving California

University Park, Pa. -- Research by Seth Blumsack, an assistant professor of energy policy in the College of Earth and Mineral Sciences, was cited in a recent Supreme Court decision upholding contracts between electric utilities and generators in the western U.S. signed during California's electricity market crisis of 2000-2001.

The case, Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., centered on whether the long-term contracts signed when California had extensive blackouts and market-based prices had skyrocketed were "just and reasonable" -- criteria set out but not defined by the 1935 Federal Power Act.

In writing the majority (5-2) opinion, Justice Antonin Scalia rejected the finding of the Court of Appeals for the Ninth Circuit that the manipulation of California's electrical market had tainted the negotiation atmosphere so much that the contract prices could not be presumed to meet that "just and reasonable" standard.

But the Supreme Court upheld the circuit court decision to remand the case to the Federal Energy Regulatory Commission for review of those contracts. FERC has jurisdiction over most contracts involving wholesale power markets.

Published in Energy Law Journal, Blumsack's research examines the track record of the Regional Transmission Organizations (RTOs) created through electricity restructuring to manage the nation's electrical grids by integrating multiple utilities. From his research, Blumsack concluded that the goals of RTO formation were never clearly defined nor were a sufficient number of performance metrics employed to judge the success of both RTOs and restructuring.

The Supreme Court cited Blumsack's article as an example of the significant changes brought about by restructuring and RTOs, as the institutions which California had set up to oversee its electric grid shared some similarities with RTOs.

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Last Updated March 19, 2009