In a notable decision affirming the continuing vitality of the filed rate doctrine, the US Court of Appeals for the First Circuit upheld the dismissal of a $3.66 billion-dollar consumer class action brought against Eversource Energy and Avangrid, Inc. in Breiding v. Eversource Energy, No. 18-1995 (Sept. 18, 2019), which alleged manipulation of the New England energy markets. The "filed rate" doctrine prohibits collateral attacks on tariff rates, terms, and conditions established by federal and state regulatory agencies. The First Circuit's decision in Breiding v. Eversource Energy illustrates that the doctrine continues to stand as a first line of defense against antitrust claims and similar state law claims challenging conduct governed by regulator-approved tariffs.
Both Eversource and Avangrid operate electric utilities that sell services to end users in New England markets, as well as local distribution companies (LDCs) that distribute natural gas to retail consumers. The Breiding plaintiffs are a group of electricity consumers from New England states. Their lawsuit alleged that Eversource and Avangrid, acting through their LDC affiliates, strategically over-reserved transportation capacity along the Algonquin gas pipeline, the main natural gas pipeline serving New England, and then reduced their reservations late in the trading day without releasing the capacity for use by others. Plaintiffs claimed the effect of these practices was to limit the availability of transportation capacity in New England, thereby increasing the spot market price of natural gas.
Plaintiffs claimed the higher spot gas prices ultimately resulted in higher costs for gas-fired generators participating in the New England wholesale electricity markets, causing higher electricity prices that flowed through New England electricity consumers. Plaintiffs, representing a purported class of New England retail customers, claimed damages of $3.66 billion, trebled. Though the Federal Energy Regulatory Commission (FERC) has exclusive jurisdiction over wholesale electricity and natural gas transportation, plaintiffs claimed that defendants' conduct was not compelled by any FERC tariff and affected certain markets not subject to FERC's pricing regulation.
The Court of Appeals agreed with defendants that plaintiffs federal antitrust and state consumer protection claims were foreclosed by the filed rate doctrine, which the court described as set of legal rules that "revolve around the notion 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." The fundamental problem with the Breiding plaintiffs' claims was that "[a]ll of the conduct that the plaintiffs say violates federal and state law occurred in the natural gas transmission market," which is exclusively governed by FERC through tariffs regulating conduct on the Algonquin Pipeline. "Pursuant to FERC's exclusive authority to regulate natural gas transmission, FERC mandates that natural gas companies file 'schedules showing all rates and charges for any [jurisdictional] transportation or sale of natural gas.'"
The First Circuit reasoned that, in exercising its exclusive authority, FERC approved tariffs that not only permitted, but required, the very practices challenged in the suit in order to give LDCs the flexibility to serve the consumer demand for natural gas, especially on cold winter days. "FERC, in conformity with its broader regulatory scheme, expressly declined to require direct purchasers [such as defendants] to release excess capacity in recognition of the fact that direct purchasers facing variable demand for natural gas might need to retain that capacity to ensure reliability" during "peak periods." The lawsuit directly challenged decisions made by FERC in the exercise of its exclusive authority over gas transportation markets: "[M]aintaining the efficient use of limited transmission capacity falls squarely within the bull's eye of FERC's regulatory aims."
Thus, the court concluded that the filed rate doctrine "prohibits us from questioning [FERC's] reasoned judgment in this lawsuit." The filed rate doctrine thus protects the judgements of federal regulators overseeing complex markets from being disturbed by lawsuits seeking damages and injunctive relief under state and federal antitrust and consumer protection laws.
Eversource was represented in the case by Doug Green and Shannen W. Coffin of Steptoe & Johnson LLP, and John Donovan, Jr., and Chong Park of Ropes and Gray LLP.