Filed: Aug. 09, 2004
Latest Update: Apr. 11, 2017
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 8-9-2004 Utilimax.com Inc v. PPL Energy Plus LLC Precedential or Non-Precedential: Precedential Docket No. 03-3339 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "Utilimax.com Inc v. PPL Energy Plus LLC" (2004). 2004 Decisions. Paper 375. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/375 This decision is brought to you for free and o
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 8-9-2004 Utilimax.com Inc v. PPL Energy Plus LLC Precedential or Non-Precedential: Precedential Docket No. 03-3339 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "Utilimax.com Inc v. PPL Energy Plus LLC" (2004). 2004 Decisions. Paper 375. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/375 This decision is brought to you for free and op..
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Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
8-9-2004
Utilimax.com Inc v. PPL Energy Plus LLC
Precedential or Non-Precedential: Precedential
Docket No. 03-3339
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"Utilimax.com Inc v. PPL Energy Plus LLC" (2004). 2004 Decisions. Paper 375.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/375
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova
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PRECEDENTIAL (Filed : August 9, 2004)
UNITED STATES COURT OF ___________
APPEALS FOR THE THIRD CIRCUIT Brian J. Fruehling, Esq. (Argued)
___________ Fruehling & Stevens
66-68 Main Street
No. 03-3339 P. O. Box 476
___________ Madison, NJ 07940
UTILIMAX.COM, INC., James K. Fruehling, Esq. (Argued)
Appellant, Fruehling & Stevens
66-68 Main Street
vs. P. O. Box 476
Madison, NJ 07940
PPL ENERGY PLUS, LLC; PPL Counsel for Appellant
CORPORATION; ABC CORPS. 1-10;
JOHN DOES 1-10,
___________ James R. Atwood, Esq. (Argued)
Covington & Burling
APPEAL FROM THE UNITED 1201 Pennsylvania Avenue, N.W.
STATES DISTRICT COURT FOR THE Washington, DC 20004
EASTERN DISTRICT OF
PENNSYLVANIA John G. Harkins, Jr., Esq.
Harkins Cunningham
(D.C. No. 02-cv-07160) 2005 Market Street
2800 One Commerce Square
District Judge: The Honorable Philadelphia, PA 19103
Anita B. Brody Counsel for Appellees
___________
___________
ARGUED MARCH 11, 2004
OPINION OF THE COURT
BEFORE: SLOVITER and NYGAARD, ___________
Circuit Judges.
and SHADUR,* District Judge.
NYGAARD, Circuit Judge.
In this appeal, Utilimax argues that
*Honorable Milton I. Shadur, Senior the District Court erred when it dismissed
District Judge for the United States its claims against PPL Energy Plus, LLC
District Court for the Northern District of and PPL Energy Corporation (collectively
Illinois, sitting by designation.
“PPL”) based on the filed rate doctrine. contract with an entity that could supply it
We will affirm the District Court’s order. with capacity, or it could purchase its
needed capacity in an auction market.
I.
Both the contractual and auction market
A. The Regulatory Scheme options were regulated by FERC and
authorized by PJM Interconnection, the
The factual underpinnings of this
FERC-established regional wholesale
suit involve the wholesale and retail
electricity market that coordinated the
electrical energy markets in Pennsylvania.
buying, selling and delivery of wholesale
The wholesale market for electrical energy
electricity.
is regulated by the Federal Energy
Regulatory Commission (“FERC”). See In the PJM daily auction market,
Federal Power Act, 16 U.S.C. §§ 791a- which is the market relevant to this appeal,
828c. One of FERC’s duties is to set “‘just entities with excess capacity were able to
and reasonable’” wholesale electric rates. sell capacity credits to retail suppliers
See 16 U.S.C. §§ 824d, 824e. During the seeking to meet their daily obligations.
period relevant to this appeal, FERC Those sellers offered their excess capacity
utilized a market-based rate to determine at a price they set – a “sell offer.” The
the cost of wholesale electricity. Under retail suppliers purchasing capacity credits
this scheme, any retail supplier of made an offer to purchase capacity by
electricity in Pennsylvania had to have placing a bid called a “buy bid.” Once all
sufficient capacity1 to provide one day’s the sell offers and buy bids were placed,
worth of the electrical energy to those PJM set the market-clearing price by
customers the retail supplier had ranking all sell offers and buy bids and
contracted to serve. determining at what price the next sell
offer is equal to or less than the next buy
A retail supplier could satisfy its
bid. Once the market-clearing price was
capacity obligations in one of two ways. It
set, sellers who offered energy at or below
could cover its retail contractual obligation
that price received the market-clearing
by having the ability to generate its own
price and buyers who bid at or above that
electrical energy. Alternatively, it could
price paid it to obtain the capacity they
purchase capacity credits from other
need.
entities. If the retail supplier chose to
purchase energy to satisfy its capacity A regulatory penalty for failing to
obligations, it again had two general meet capacity obligations added an
choices. It could enter into a bilateral additional dimension to this auction
mechanism. If a retail supplier of
electricity failed to meet its capacity
1. obligations for a given day, it then had to
Capacity refers to the retail supplier’s
pay a penalty (the “capacity deficiency
ability to generate electrical energy.
rate” or “CDR”). During the time period
2
relevant to this appeal, the FERC- CDR for its excess energy either by
approved CDR was $177.30/MW-day. offering it for sale in the daily auction
This penalty was doubled on days when market at the CDR price or by simply
there was an overall shortage of available collecting CDR revenues from any retail
capacity. supplier that failed to meet its capacity
obligations. According to Utilimax, PPL
The revenue from the CDR was
engaged in these practices during the first
given by PJM to entities that had unused
quarter of 2001. As a result of this
excess capacity and had made that capacity
conduct, CDR revenues during that quarter
available to the PJM. Thus, in essence, the
were $11,767,541, compared to CDR
penalty system forced deficient retail
revenues of $1,000 or less during the
suppliers of electricity to purchase their
fourth quarter of 2000. PPL received
needed capacity from entities with
almost all of the CDR revenues for the
available excess capacity at the CDR.
first quarter of 2001.
B. Utilimax and PPL’s roles in the
Utilimax claims that PPL’s actions
electrical energy market and the
violated § 2 of the Sherman Act, §§ 1 and
complained of conduct.
3 of the Clayton Act and various
Utilimax was a retail supplier of Pennsylvania state laws. The District
electricity that was licensed to purchase Court dismissed Utilimax’s complaint
electrical energy in the wholesale market because it found that the filed rate doctrine
and resell that energy to end-users of barred the claims.
electricity in Pennsylvania. Utilimax was
II.
not capable of generating its own
electricity and, therefore, had to purchase We have jurisdiction over this
sufficient capacity to meet its capacity appeal under 28 U.S.C. § 1291 and
obligations. During the relevant period of exercise de novo review over the District
time, it used the PJM daily auction market Court’s decision to dismiss Utilimax’s
as its primary method for satisfying its complaint pursuant to Federal Rule of
capacity obligations. Civil Procedure 12(b)(6). Mariana v.
Fisher, 338 F.3d 189, 195 (3d Cir. 2003).
PPL is both a retail supplier of
electricity and a seller of electricity in the The filed rate doctrine, and its
wholesale market. According to exceptions, are central to this appeal. That
Utilimax’s complaint, during the first doctrine bars antitrust suits based on rates
quarter of 2001 PPL was the only entity that have been filed and approved by
that had excess capacity available that federal agencies. In re Lower Lake Erie
Utilimax could purchase to satisfy its Iron Ore Antitrust Litig., 998 F.2d 1144,
capacity obligations. Thus, under the 1157-58 (3d Cir. 1993); Keogh v. Chicago
regulatory system described above, PPL & N.W. Ry. Co.,
260 U.S. 156, 162-63
was able to ensure that it received the (1922). The doctrine operates to bar both
3
federal antitrust actions and state law competitor exception to the filed rate
claims. See Arkansas Louisiana Gas Co. doctrine exists because “competitors are
v. Hall, 453 U.S. 571, 580 (1981). Under not the intended beneficiaries of that rule
the filed rate doctrine, a plaintiff may not of public utility regulation.” 610 F.2d
sue the supplier of electricity based on 1114, 1121 (3d Cir. 1979). Based on this
rates that, though alleged to be the result of reason, we refused to apply the filed rate
anticompetitive conduct, were filed with doc trine to bar the suit o f a
the federal agency responsible for communications company’s competitor
overseeing such rates. See Montana- based on the company’s actions in
Dakota Utils. Co. v. N. W. Pub. Serv. Co., formulating a tariff and in customer
341 U.S. 246, 251-52 (1951). service. Id. at 1122. Similarly, in Lower
Lake Erie, we held that the railroads’
Utilimax is claiming that PPL
competitors were not precluded by the
exerted undue market influence over the
filed rate doctrine from suing the railroads
wholesale capacity market and, as a result,
for their antitrust activities. Lower Lake
was able to charge excessive rates for its
Erie, 998 F.2d at 1161.
capacity. Those rates, though allegedly
excessive, were the result of PPL’s Utilimax claims that because it
temporary monopolistic position in the competes with PPL in the retail energy
wholesale capacity market that was supply market, it is a competitor and,
established and approved by FERC and therefore, the filed rate doctrine does not
PJM. Other than a brief and unconvincing prevent its antitrust claims. PPL argues
argument that PPL violated the “sound that while Utilimax is a competitor of PPL
utility practices” and “good faith” in the retail electrical energy market, it is a
requirements of PJM, Utilimax makes no customer in the wholesale market and it is
claim that PPL charged rates that were not PPL’s actions in the wholesale market that
in conformity with the requirements of the Utilimax is alleging were anticompetitive.
FERC and PJM -approved market model. Thus, we must determine whether
Thus, absent an exception, the filed rate Utilimax is suing as a competitor of PPL
doctrine precludes Utilimax’s claims or as a customer.
against PPL.
We are not the first court to have to
Utilimax argues the District Court parse the capacity in which a plaintiff was
erred in not accepting either of the two suing. In Georgia v. Pennsylvania R.R.
pertinent exceptions to the doctrine – the Co., the State of Georgia sued the
com petit o r a n d t h e n o n - ra te defendant railroads for what it alleged to
anticompetitive activity exceptions. be a conspiracy to fix their rates “so as to
prefer the ports of other States over the
In Essential Communications
ports of Georgia.” 324 U.S. 439, 443
Systems, Inc. v. American Telephone &
(1945). Georgia sued the railroads in two
Telegraph Co., we explained that a
relevant capacities: In its parens patriae
4
capacity on behalf of its residents and as crushed and eviscerated by
the owner of a competing railroad the artificially inflated
company. Id. The Supreme Court prices set by PPL.
determined that Georgia’s real claims were
J.A. at 47.
in its parens patriae capacity, and its claim
as a compet it or w as m er ely a The only fair reading of these
“makeweight.” Id. at 450. Having so allegations is that Utilimax, as a customer
concluded, the Court went on to hold that in the wholesale electricity market, could
in its parens patriae capacity Georgia was not afford to pay the rates that PPL was
suing on behalf of Georgia citizens who able to charge because of its allegedly
were customers of the railroad. Therefore, anticompetitive conduct. The result of
based on the filed rate doctrine, it could Utilimax’s inability to buy capacity offered
not maintain its antitrust claims to the by PPL in the wholesale market was that it
extent they were seeking damages based went out of business in the retail market
on the defendant railroads’ alleged and PPL had one fewer competitor in that
conspiracy to fix rates. Id. at 453 (relying latter market. That result, however, came
on Keogh, 260 U.S. at 161-63). about because Utilimax (as a customer of
PPL) could not afford to buy capacity.
The Supreme Court in Georgia had
While the ramifications were felt in its
the benefit of the plaintiff expressly stating
competitor role, the damage to Utilimax
the two different capacities in which it was
occurred because of its status as a
suing. Here, Utilimax argues that it is
customer of PPL. As Utilimax states in its
suing only as a competitor, not as a
complaint, “[Utilimax] was required to
customer. Its complaint, however, belies
cover its capacity requirements per PJM
this argument. In describing the conduct
rules and was compelled to buy capacity
of PPL that Utilimax claims violated the
delivered by PPL under these
Sherman Act, the Clayton Act and various
anticompetitive conditions.” J.A. at 48
state laws, Utilimax alleges that PPL
(emphasis added).
exercised undue market power over the
wholesale electricity market and, as a It hardly needs stating that when an
result entity buys something from another entity
there is a customer/seller relationship for
65. Utilimax was effectively
that transaction, even if the two entities are
put out of business, as it
competitors under other circumstances.
could not operate under the
See, e.g., Montana-Dakota Utils., 341 U.S.
burden of the artificially
at 251-52 (applying the substance of the
inflated capacity prices . . .
filed rate doctrine, without calling it such,
66. Utilimax and many to a suit where the plaintiff, who was a
other [retail suppliers of competitor of the defendant in the electric
electricity] simply were utility business, was suing based on rates it
5
negotiated with the defendant to purchase wholly separate from rates, here Utilimax
electric energy and those rates were filed alleges that PPL simply positioned itself in
with and accepted by FERC’s predecessor the wholesale capacity market to be able to
commission). Based on Utilimax’s charge exorbitant rates for capacity.
allegations, it is clear that although it may Utilimax does not allege any non-rate
have been a competitor with PPL in one anticompetitive activity, but simply claims
market, it was a customer in the wholesale that PPL exploited its market position by
market. And it is PPL’s actions in that raising its rates. Therefore, Utilimax’s
latter market that form the corpus of claims are not saved from the filed rate
Utilimax’s complaint. Therefore, Utilimax doctrine by the non-rate anticompetitive
does not qualify as a competitor of PPL activity exception.
with respect to its claims, and the
III.
competitor exception to the filed rate
doctrine does not apply. For the foregoing reasons, we will
affirm the District Court’s order.
Utilimax also argues that the filed
rate doctrine should not apply because its
claims allege non-rate anticompetitive
activity on the part of PPL. In Lower Lake
Erie, several groups of plaintiffs sued
various railroad companies alleging that
those companies engaged in activities
designed to prevent a new technology from
entering the iron ore transportation market.
988 F.2d at 1154. According to the
plaintiffs, this new technology would have
allowed lower cost, non-railroad owned
docks to enter the market for transporting
iron ore from the shores of Lake Erie to
inland sites. Id. We held that even those
plaintiffs who were customers of the
railroads, and who did not therefore
qualify for the competitor exception to the
filed rate doctrine, could maintain their
suit against the railroads because their
claims rested on non-rate anticompetitive
activity. Id. at 1161.
Whereas Lower Lake Erie dealt
with the defendant railroads’ activities
related to a technological innovation
6
