Microsoft Word - 7 - Hirsh (Note) (PPW) (1) (1) HIRSH - NOTE 6/13/2021 8:42 PM NOTE CREATURES OF CONGRESS COLLIDE: DEFENDING FERC’S RATEMAKING AUTHORITY IN ELECTRIC UTILITY BANKRUPTCIES Megan Hirsh* In the recent PG&E and FirstEnergy bankruptcies, the Ninth and Sixth Circuits were faced with a difficult issue that has created confusion and uncertainty for electric utility debtors: does the Federal Energy Regulatory Commission (FERC) have jurisdiction concurrent with the bankruptcy courts to decide whether an electric utility debtor can reject power purchase agreements (PPAs) under § 365 of the Bankruptcy Code? The answer has billion-dollar implications for renewable generation companies that depend on the stability of long-term PPAs and for electric utilities, which increasingly are filing for Chapter 11 bankruptcy due to competition from alternative energy sources and natural disasters. This Note explores this issue in four parts. First, it provides an overview of the debtor’s rejection power, the applicable energy law, and the factual and procedural contexts in which this issue recently arose. In the next two parts, it resolves doctrinal confusion by analyzing the relevant cases and identifying the heightened standard for rejection of PPAs that the circuit courts have universally endorsed. Finally, it argues * J.D. 2021, Columbia Law School; B.A. and B.S. 2018, University of Florida. Many thanks to Pascual Oliu for helping me develop this topic, Professor Edward Morrison for his guidance and support at every stage, Professor Ronald Mann for reviewing an earlier version of this Note and providing valuable insights, the staff of the Columbia Business Law Review, especially Nolan Anderson and Taylor Sutton, for the excellent feedback and time they spent preparing this Note for publication, and Eric Nyman for his unconditional love and support throughout all my endeavors. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 297 that—absent FERC’s approval—rejection should not relieve electric utility debtors of their public rate obligations. I. Introduction ................................................................ 298 II. Background ................................................................. 301 A. The Debtor’s Rejection Power ............................... 302 B. Applicable Energy Law ......................................... 304 1. The Regulation of Energy Markets ................. 304 2. The Federal Power Act and FERC’s Traditional Rate Authority ............................ 306 III. Overview of the FirstEnergy and PG&E Bankruptcies ............................................................... 313 A. The Bankruptcies .................................................. 314 1. Competition from Natural Gas and Renewables and the FirstEnergy Bankruptcy ..................................................... 314 2. Enhanced Risk of Natural Disasters and the PG&E Bankruptcy ................................... 316 B. Circumstances of the Disputes .............................. 318 1. FirstEnergy’s Power Purchase Agreements and the Inter-Company Power Agreement .... 319 2. PG&E’s Power Purchase Agreements ............ 321 IV. Resolving Doctrinal Confusion ................................... 324 A. The Filed-Rate Doctrine and Its Implications ...... 325 1. The Filed-Rate Doctrine .................................. 325 2. The Implications of the Filed-Rate Doctrine... 330 B. Rejecting Wholesale Power Rates in Bankruptcy 331 1. Bildisco and the Argument Against Creating Doctrinal Exceptions to the Debtor’s Rejection Power................................ 332 2. Applying a Heightened Rejection Standard to PPAs ........................................................... 336 3. Reconciling Mirant and Calpine .................... 338 V. Rejection Should Not Relieve the Debtor of its Regulatory Rate Obligations ..................................... 340 A. The Debtor-in-Possession Must Comply with Its Public Rate Obligation ........................................ 341 B. The Bankruptcy Code Requires FERC To Approve Any Rate Changes ............................................... 343 HIRSH – NOTE 6/13/2021 8:42 PM 298 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 C. The Bankruptcy Court’s Authority Is Limited by Article III and the Supreme Court’s Bankruptcy Doctrine ............................................................... 344 1. Constitutional Limits on the Authority of the Bankruptcy Court To Decide Non- Bankruptcy Issues .......................................... 345 2. Doctrinal Limits on the Bankruptcy Court’s Power .............................................................. 347 VI. Conclusion .................................................................... 349 I. INTRODUCTION The Federal Energy Regulatory Commission (FERC) and the bankruptcy courts both serve distinct and important public interests, and they rarely collide. Congress created FERC—which was originally called the Federal Power Commission (FPC)—in the 1920s as a “small federal agency that controlled hydropower dams.”1 In the 1930s, Congress passed the Federal Power Act (FPA), which greatly expanded the agency’s authority by charging the agency with the regulation of wholesale electricity markets.2 As the regulator of wholesale energy markets, FERC oversees energy prices, which are typically set by power purchase agreements (PPAs) between electric utilities and various energy producers.3 Bankruptcy courts, on the other hand, trace their history back much further. In the United States, the federal bankruptcy system is rooted in the Constitution, which gave Congress the power to establish federal bankruptcy law.4 The 1 What Is FERC?, PBS: FRONTLINE, https://www.pbs.org/wgbh/pages/ frontline/shows/blackout/regulation/ferc.html#:~:text=When%20FERC%20 was%20established%20in,refunds%20for%20overcharges%20to%20ratepa yers [https://perma.cc/JBW6-3MQD] (last visited Nov. 17, 2020). 2 See id. 3 For an overview of the energy markets, see infra Section II.B.1. 4 U.S. CONST. art. I, § 8, cl. 4 (authorizing Congress “[t]o establish . . . uniform Laws on the subject of Bankruptcies throughout the United States”). The Framers gave Congress the bankruptcy power ostensibly because they believed it was “intimately connected with the regulation of commerce.” THE FEDERALIST No. 42, at 208 (James Madison) (Terence Ball, ed. 2003). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 299 Bankruptcy Act of 1898 established the foundation of a bankruptcy system that endured, making the U.S. district courts the courts of bankruptcy with original jurisdiction and providing the Supreme Court and courts of appeals with appellate jurisdiction.5 FERC’s and the bankruptcy courts’ jurisdictions rarely overlap because utilities rarely file for bankruptcy.6 With little precedent for determining the appropriate role for FERC in electric utility bankruptcies, two recent cases that reached the Sixth and Ninth Circuit Courts of Appeals—FirstEnergy7 and PG&E8—revealed the uncertainties that exist for litigants in these massive bankruptcies.9 The text of the Bankruptcy Code 5 Bankruptcy Act of 1898, FED. JUD. CTR. (on file with the Columbia Business Law Review), https://www.fjc.gov/history/timeline/bankruptcy- act-1898 (last visited Nov. 17, 2020). 6 See infra note 44 and accompanying text. 7 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431 (6th Cir. 2019). In April 2018, FirstEnergy Solutions and some of its affiliates (collectively referred to as FirstEnergy) filed for Chapter 11 bankruptcy protection after competition from renewables and natural gas sources undercut the economics of its nuclear and coal plants. See infra Section III.A.1. FirstEnergy sought to reject eight long-term PPAs. See David Henry, FirstEnergy Nuclear, Coal Plant Units File for Bankruptcy Protection, REUTERS, https://www. reuters.com/article/us-firstenergy-bankruptcy/firstenergy-nuclear-coal- plant-units-file-for-bankruptcy-protection-idUSKCN1H81GX [https://perma.cc/WY62-MTNR] (last updated Apr. 1, 2018, 3:49 PM). 8 Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n, 829 F. App’x 751 (9th Cir. 2020). In January 2019, California’s largest electric utility—Pacific Gas and Electric Corporation (PG&E)—filed for Chapter 11 bankruptcy protection after state fire regulators linked five destructive wildfires to the utility’s electric network. See Ivan Penn, Peter Eavis & James Glanz, How PG&E Ignored Fire Risks in Favor of Profits, N.Y. TIMES, (March 18, 2019), https://www.nytimes.com/interactive/2019/03/18/business/pge-california- wildfires.html [https://perma.cc/D7Q5-ED75]. Current California legal standards result in more financial risk for electric utilities as wildfires become more frequent. See Peter Eavis & Ivan Penn, The Struggle To Control PG&E, N.Y. TIMES, (Feb. 13, 2019), https://www.nytimes.com/ 2019/02/13/business/energy-environment/pge-wildfire-bankruptcy- control.html [https://perma.cc/J9VP-77Y7]. 9 At the time of its filing, PG&E’s bankruptcy represented one of the largest bankruptcies in U.S. history and possibly the largest electric utility bankruptcy ever. See Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n HIRSH – NOTE 6/13/2021 8:42 PM 300 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 does not contemplate electric utility bankruptcies.10 Yet utilities are dominated by federal and state regulation, making these reorganizations uniquely complex.11 And to make matters worse, there is an apparent conflict between FERC’s and the bankruptcy courts’ interpretations of their respective authorities under the FPA and the Bankruptcy Code to approve rejection of PPAs.12 While FERC thinks that it and the bankruptcy courts have concurrent jurisdiction to decide whether an electric utility should be able to reject wholesale PPAs, bankruptcy courts have argued that their jurisdiction to allow rejection of PPAs is exclusive.13 This has led to confusion among the federal courts over whether FERC’s ratemaking authority must be preserved during the pendency of electric utility reorganizations.14 Outside of bankruptcy, FERC has primary jurisdiction over any unilateral attempt to modify or abrogate (In re PG&E Corp.), No. 19-03003, 2019 WL 2477433, at *1 (Bankr. N.D. Cal. June 12, 2019), vacated, 829 F. App’x 751. 10 See Theodore Eisenberg, Bankruptcy in the Administrative State, LAW & CONTEMP. PROBS., Spring 1987, at 3, 9 (“Bankruptcy law deals with these regulation-dominated industries through a mixture of express exclusion from coverage by bankruptcy law, of highly specific interaction, and of nearly complete silence. . . . [U]tilities illustrate the theme of silence.”). 11 See id. at 12. 12 Compare NextEra Energy, Inc. v. Pac. Gas & Elec. Co., 167 F.E.R.C. (CCH) ¶ 61,096, para. 1 (May 1, 2019) (“[FERC] and bankruptcy courts have concurrent jurisdiction to review and address the disposition of wholesale power contracts sought to be rejected through bankruptcy”), with PG&E Corp. v. Fed. Energy Regul. Comm’n (In re PG&E Corp.), 603 B.R. 471, 476 (Bankr. N.D. Cal. 2019) (stating that “FERC must be stopped” and holding that FERC did not have concurrent jurisdiction with the bankruptcy court), vacated sub nom. Pac. Gas & Elec., 829 F.App’x 751. 13 Id. 14 See, e.g., Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 519 (5th Cir. 2004) (holding that bankruptcy courts have exclusive jurisdiction to rule on rejection without FERC’s involvement); Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 446 (6th Cir. 2019) (holding that FERC and the bankruptcy courts have concurrent jurisdiction, but also that bankruptcy courts occupy a “primary or superior” position); Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 30 (S.D.N.Y. 2006) (holding that FERC has exclusive jurisdiction). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 301 PPAs that set wholesale rates.15 Section 365 of the Bankruptcy Code, however, provides that debtors-in- possession have the ability to reject any executory contract with the bankruptcy court’s approval.16 This Note argues that the courts should not allow electric utilities to evade their regulator by rejecting wholesale PPAs in bankruptcy. Part II offers background on the debtor’s rejection power, FERC’s ratemaking authority, and the factors that brought these in conflict in the FirstEnergy and PG&E bankruptcies. Part III examines the agreements that FirstEnergy and PG&E sought to reject, and Part IV explores the relevant federal precedent. Finally, Part V offers a functional assessment of what should follow from the rejection of wholesale PPAs in bankruptcy and argues that even if bankruptcy courts have exclusive jurisdiction to approve these rejections, bankruptcy judges and federal judges should not allow electric utilities to exploit the rejection power to effectively evade their regulator in bankruptcy. II. BACKGROUND This Part provides background on the complex legal landscape that led to confusion among the federal courts over whether FERC should have a say when the bankruptcy courts are considering debtors’ attempts to reject PPAs. Section II.A 15 See 16 U.S.C. § 824(b), (d)–(e) (2018). Under the filed-rate doctrine, the courts cannot—in the first instance—allow a party to abrogate or modify rates that have been filed with and approved by an agency. See Montana- Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 251–52 (1951) (“Petitioner cannot separate what Congress has joined together. It cannot litigate in a judicial forum its general right to a reasonable rate, ignoring the qualification that it shall be made specific only by exercise of the Commission’s judgment, in which there is some considerable element of discretion. It can claim no rate as a legal right that is other than the filed rate, whether fixed or merely accepted by the Commission, and not even a court can authorize commerce in the commodity on other terms.” (emphasis added)). 16 See 11 U.S.C. § 365(a) (2018) (“[T]he trustee, subject to the court’s approval, may assume or reject any executory contract or unexpired lease of the debtor.”). HIRSH – NOTE 6/13/2021 8:42 PM 302 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 details the applicable bankruptcy law—the debtor’s “rejection power.” Section II.B then describes the applicable energy law, including sections 205 and 206 of the FPA and the Mobile- Sierra doctrine. A. The Debtor’s Rejection Power Bankruptcy is attractive to many financially distressed corporations because § 365 of the Bankruptcy Code (the rejection provision) mitigates the harm that results from a debtor breaching underperformed contracts.17 The rejection power may be appealing for electric utility debtors,18 who are often burdened by expensive, long-term PPAs because these agreements are challenging to modify or abrogate outside of bankruptcy.19 Section 365 of the Bankruptcy Code provides the debtor- in-possession with the power to either “assume” or “reject” executory contracts.20 Although the Bankruptcy Code does not define the term “executory contract,” most courts adopt the view that a contract is executory when the “obligation[s] of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach.”21 Under the 17 See id. 18 While a debtor may not file a bankruptcy petition merely to exploit a provision of the Bankruptcy Code, if the filing also serves some other “valid bankruptcy purpose,” there is no problem with debtors filing for the “tactical litigation advantage” of the rejection power. See NMSBPCSLDHB, L.P. v. Integrated Telecom Express, Inc. (In re Integrated Telecom Express, Inc.), 384 F.3d 108, 119–20 (3d Cir. 2004). 19 For a discussion of utility debtors’ financial challenges, see infra Section II.B.2. 20 See 11 U.S.C. § 365(a). 21 Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 MINN. L. REV. 439, 460 (1973); see also Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652, 1658 (2019) (“A contract is executory if ‘performance remains due to some extent on both sides.’” (quoting NLRB v. Bildisco & Bildisco, 465 U.S. 513, 522 n.6 (1984))). Some courts have suggested that when the only performance remaining is the payment of money there is no executory contract. See, e.g., Lubrizol Enters. v. Richmond Metal Finishers, 756 F.2d 1043, 1046 (4th Cir. 1985) (“[I]f Lubrizol had owed RMF nothing more than a duty to make fixed payments or cancel specified HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 303 Code, the debtor-in-possession can reject any executory contract, subject to some limited statutory exceptions.22 The bankruptcy court then has discretion to approve the rejection,23 but it typically applies a relaxed business judgment standard that is highly deferential to the debtor, allowing rejection whenever it is in the interest of the debtor and its creditors.24 In Mission Product Holdings v. Tempnology, the Supreme Court recently emphasized that when a debtor rejects an executory contract, the non-breaching party has the same rights that it would have in the event of a breach outside of bankruptcy.25 In addition, the debtor’s “breach” is deemed to have occurred before the filing of the bankruptcy petition.26 This means the non-breaching party has a prepetition, unsecured claim against the debtor. The non-breaching party is placed “in the same boat as the debtor’s unsecured creditors, who in a typical bankruptcy may receive only cents on the dollar.”27 In an electric utility bankruptcy, if the utility debtor rejects agreements to purchase wholesale power under the rejection provision, the supplier will have a prepetition, unsecured claim against the debtor. The supplier’s unsecured claim will be for damages in an amount that would compensate them at the filed rate.28 But if utilities are like other debtors, their indebtedness under the agreement, the agreement would not be executory as to Lubrizol.”). 22 See 11 U.S.C. § 365. 23 See id. § 365(a). 24 See, e.g., Grp. of Inst. Invs. v. Chi., Milwaukee, St. Paul & Pac. R.R. Co., 318 U.S. 523, 550 (1943) (“[T]he question whether a [contract] should be rejected . . . is one of business judgment.”). 25 Mission Prod. Holdings, 139 S. Ct. at 1657–58 (“A rejection breaches a contract but does not rescind it. And that means all the rights that would ordinarily survive a contract breach . . . remain in place.”). The non- breaching party can either elect to continue the contract or refuse to perform further. 13 RICHARD A. LORD, WILLISTON ON CONTRACTS § 39:32, Westlaw (database updated Nov. 2020). 26 11 U.S.C. § 365(g)(1). 27 Mission Prod. Holdings, 139 S. Ct. at 1658. 28 See 24 LORD, supra note 25, § 64:6 (“It is sometimes said that the law regards a breach of contract as in effect a destruction of the contract by HIRSH – NOTE 6/13/2021 8:42 PM 304 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 unsecured creditors will probably only receive a fraction of that rate. On the other hand, if the debtors assume the agreements, the obligations will get priority to be paid in full as administrative obligations.29 B. Applicable Energy Law This Section provides a brief overview of the structure of the energy industry and the traditional regulatory scheme for the industry. It explains the applicable provisions of the FPA and the relevant administrative rules that have guided courts’ interpretations of FERC’s jurisdiction. 1. The Regulation of Energy Markets Utilities are regulated by both state and federal agencies. At first, state and local public utility commissions (PUCs) were the sole regulators of traditional public utilities.30 But as electricity markets began to cross state lines, the resulting regulatory gap required that the federal government get involved with regulating interstate electricity sales.31 In the wrongdoer, for which the law substitutes a cause of action for damages in favor of the injured party, and that, therefore, the appropriate measure of damages is the value of the contract.”). 29 2 WILLIAM L. NORTON III, NORTON BANKRUPTCY LAW AND PRACTICE § 46:27, Westlaw (database updated Oct. 2020) (“If an executory contract or unexpired lease is assumed after the case is commenced, the assumption creates a new administrative obligation[.]”); 11 U.S.C. § 507(a)(1)(C) (establishing that administrative obligations have first priority to be paid). “[A]n assumed obligation is [also] a postpetition obligation that is not discharged, and which therefore continues to be an obligation of the reorganized debtor.” 2 NORTON, supra, § 46:27. 30 See DAVID P. TUTTLE ET AL., THE HISTORY AND EVOLUTION OF THE U.S. ELECTRICITY INDUSTRY 3 (2016), https://energy.utexas.edu/sites/ default/files/UTAustin_FCe_History_2016.pdf [https://perma.cc/LGV6- 2MWJ] (“To protect customers from monopolistic prices, electricity rates started to be regulated first by municipal, then by state governments.”). 31 See Pub. Utils. Comm’n v. Attleboro Steam & Elec. Co., 273 U.S. 83, 90 (1927) (concluding that states cannot regulate the sale of electricity interstate). The so-called “Attleboro gap” resulted from the Attleboro case. Without any federal regulatory regime, the Attleboro gap left interstate sales of electricity unregulated. See LINCOLN L. DAVIES ET AL., ENERGY LAW AND POLICY 331 (2018). In 1935, Congress closed the gap by enacting the HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 305 response, the FPA created the FPC, which was charged with overseeing the federal regulation of interstate transmission and wholesale sales of electricity.32 The wholesale and retail markets are the two basic electric power markets. States regulate retail markets, and FERC regulates wholesale markets.33 The wholesale market consists of the initial sales of electricity produced by generators for resale.34 The buyers then “step-down” the voltage of the electricity and resell it to local customers.35 These resales constitute the retail market, which is governed exclusively by state PUCs.36 This Note is focuses on the rejection of wholesale PPAs by large electric utility debtors. Traditional electric utilities (like PG&E and FirstEnergy) were once completely vertically integrated,37 meaning that the three main segments of the electricity production and delivery system (generation at the power plant, high voltage transmission—including “stepping up” and “stepping down” the voltage of electricity—and distribution of the stepped down lower voltage electricity to the consumer)38 were all operated by one utility. Since vertically integrated utilities FPA. Id. (“Part II of the Federal Power Act, adopted in 1935, eventually sought to fill [the Attleboro gap], granting the FPC authority to regulate wholesale sales of electricity and drawing bright lines around which parts of the electricity industry the federal and state governments regulate.”). 32 See 16 U.S.C. § 792 (2018) (“A commission is created and established to be known as the Federal Power Commission[.]”); see also id. § 824(a) (declaring that the Commission’s regulatory authority extends to “the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce”). 33 DAVIES ET AL., supra note 31, at 284 34 Id. 35 See Electricity Explained: How Electricity Is Delivered to Consumers, U.S. ENERGY INFO. ADMIN., https://www.eia.gov/energy explained/electricity/delivery-to-consumers.php [https://perma.cc/9Q7X- ADDQ] (last updated Oct. 22, 2020) (“Transformers at substations increase (step up) or reduce (step down) voltages to adjust to the different stages of the journey from the power plant on long-distance transmission lines to distribution lines that carry electricity to homes and businesses.”). 36 DAVIES ET AL., supra note 31, at 284. 37 See TUTTLE ET AL., supra note 30, at 2. 38 See Electricity Explained: How Electricity Is Delivered to Consumers, supra note 35. HIRSH – NOTE 6/13/2021 8:42 PM 306 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 could exercise monopoly power to the disadvantage of customers, price regulation was justified. Today, as then, the government provides traditional, regulated electric utilities with exclusive sales territories and economic stability in exchange for allowing FERC to set prices.39 2. The Federal Power Act and FERC’s Traditional Rate Authority FERC requires traditional utilities to submit tariffs— including the prices, terms, and conditions of providing energy—for regulatory oversight.40 Section 824d(a) of the FPA grants FERC the power to ensure that “[a]ll rates . . . made . . . or received by any public utility . . . subject to the jurisdiction of [FERC] . . . are just and reasonable.”41 And under § 824e(a), FERC has the authority to modify a filed rate upon finding that it is “unjust, unreasonable, unduly discriminatory or preferential.”42 FERC traditionally determined “just and reasonable” rates on the basis of the “cost-of-service,” aiming to “replicate the outcome a competitive market would produce, by examining utilities’ costs . . . and then allowing the company to earn a ‘reasonable’ return on its investment.”43 This regulatory system ensured that traditional utilities were able to recover their costs of service, and for much of the twentieth century it kept electric utilities out of bankruptcy.44 39 DAVIES ET AL., supra note 31, at 289–90. 40 See FED. ENERGY REGUL. COMM’N, FY 2014 CONGRESSIONAL PERFORMANCE BUDGET REQUEST 11–12 (2013), https://www.ferc.gov/sites/ default/files/2020-04/fy14-budg.pdf [https://perma.cc/HQS7-JUZ2]. 41 16 U.S.C. § 824d(a) (2018). 42 Id. § 824e(a). 43 DAVIES ET AL., supra note 31, at 380 (emphasis deleted). 44 In the 1930s, fifty-three utility holding companies filed for bankruptcy. Bonnie Robinson, In re Blackacre Power and Light: The Bankruptcy of a Public Utility, 50 ALB. L. REV. 641, 641 n.3 (1986) (citing DOUGLAS W. HAWES, UTILITY HOLDING COMPANIES § 2.04 (1985)). The utility industry experienced widespread financial distress when the Great Depression exacerbated problems that resulted from bad practices associated with large, convoluted utility holding companies. See id. Many of the problems that led to industry disaster were either attributable to the Great Depression or corrected by the Public Utility Holding Company Act HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 307 Beginning in the early 1980s, however, state PUCs began denying rate recovery where the utility’s assets were not “used and useful,” increasing risk and uncertainty in the industry.45 Without the opportunity for relief from ratepayers for failed investments in nuclear power, several financially-distressed utilities were pushed toward bankruptcy46 despite the advantages gained from vertical integration. Many utilities are no longer vertically integrated. The generation segment is increasingly competitive and decentralized,47 which has created more financial risk for traditional, vertically integrated utilities. In the 1980s and of 1935, which Congress enacted in the wake of the crisis. See id. Indeed, after the bankruptcies of the 1930s, over fifty years passed before another utility filed for bankruptcy. See id. at 641. 45 See Phillip L. Poirier, Jr., Cancelled Utility Plant and Traditional Ratemaking Theories: Are Either Used and Useful?, 22 SAN DIEGO L. REV. 669, 692–94 (1985); Robinson, supra note 44, at 642 n.6 (explaining that Indiana law prevented the Wabash Valley Power Association “from charging ratepayers for the costs of a plant not in service” (citing Nicholas D. Kristof, Chapter 11 for Indiana Electricity Group, N.Y. TIMES, May 24, 1985, at D3); In re Pub. Serv. Co. of N.H., 88 B.R. 521, 532 (Bankr. D.N.H. 1988) (“One of the principal causes of Public Service’s financial difficulties has been the effect of [a New Hampshire statute], which excludes investment in construction work in progress from retail rate base until the construction is completed and the plan is operating and prohibits recovery of investment in cancelled or abandoned plants.”). 46 In 1988, the Public Service Company of New Hampshire (Public Service) became the first electric utility to file for bankruptcy in over 50 years. See In re Pub. Serv. Co. of N.H., 88 B.R. at 522. Public Service was one of several electric utilities that encountered financial distress in the 1980s after state PUCs determined that they could not recover for “overexpensive, incomplete, and possibly unnecessary nuclear power plants” that were ultimately cancelled. See Robinson, supra note 44, at 641 & n.4, 642 n.6. 47 See DAVIES, supra note 31, at 27 (“Over time, regulators have increasingly treated electricity generation and, to some extent, certain aspects of transmission and distribution, as capable of supporting competitive markets.”). HIRSH – NOTE 6/13/2021 8:42 PM 308 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 1990s, FERC48 and state PUCs49 began encouraging this competition. After the 1970s energy crisis, Congress enacted the Public Utility Regulatory Policies Act of 1978 (PURPA) . . . to promote the development of new generating facilities and to conserve the use of fossil fuels. Because the traditional utilities controlled the transmission lines and were reluctant to purchase power from nontraditional facilities, PURPA directed FERC to promulgate rules requiring utilities to purchase electricity from qualifying cogeneration and small power production facilities.50 PURPA disrupted the monopoly market structure by enabling certain nontraditional wholesale sellers, like renewable energy companies, to compel traditional public utilities to purchase their generation capacity and energy.51 Then, in 1996, FERC issued Order No. 888, requiring all transmission- owning public utilities to offer access to their transmission lines “on the same or comparable basis, and under the same or comparable terms and conditions, as the transmission provider’s uses of its system.”52 Thus, the utilities that dominated transmission no longer could discriminate against outside generators, eliminating a barrier to entry in the 48 See Wholesale Competition in Regions with Organized Electric Markets, 119 F.E.R.C. (CCH) ¶ 61,306, para. 15 (advance notice June 22, 2007) (“Beginning in the 1980s, the Commission allowed independent power producers to sell electric energy at wholesale at negotiated rates instead of the traditional cost-based rates.”). 49 See FRANCISCO FLORES-ESPINO ET AL., COMPETITIVE ELECTRICITY MARKET REGULATION IN THE UNITED STATES 10 (2016), https://www.nrel.gov/docs/fy17osti/67106.pdf [https://perma.cc/78X6- 2GT2]. 50 New York v. F.E.R.C., 535 U.S. 1, 9 (2002) (internal quotation marks omitted) (quoting Fed. Energy Regul. Comm’n v. Mississippi, 456 U.S. 742, 751 (1982)). 51 Id. 52 Promoting Wholesale Competition Through Open Access Non- Discriminatory Transmission Services by Public Utilities, 61 Fed. Reg. 21,540, 21,548 (May 10, 1996) (codified at 18 C.F.R. § 35.28 (2019)) (internal quotation marks omitted) (quoting Am. Elec. Power Serv. Corp., 67 F.E.R.C.(CCH) ¶ 61,168, 61,490 (May 11, 1994)). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 309 generation segment. And in the twenty-first century, natural gas and renewable generation sources (in the forms of wind and solar) are increasingly cost competitive with traditional generation sources.53 The prospect of more competitive wholesale generation markets also ushered in an era of deregulation,54 which has created even more financial risk for traditional, vertically integrated utilities. In 1988, FERC began considering “market-based” rate proposals in wholesale markets.55 The market-based model suggests that the market itself should set the price of wholesale electricity. It is rooted in the theory that—in a sufficiently competitive market—the market price should be more efficient than the administratively- established price.56 Under the market-based model, if FERC determines that there is enough competition in the market, a market-based tariff is filed, and the suppliers are free to independently negotiate contracts with buyers.57 As long as the parties comply with FERC’s established rules for market- based rates, any contract that a supplier enters into under its market-based authority is presumptively “just and 53 See BRUCE USHER, RENEWABLE ENERGY: A PRIMER FOR THE TWENTY- FIRST CENTURY 17, 21 (2019). 54 Regulation of the public utility industry was justified because the market was dominated by regional monopolies. See supra text accompanying notes 37–39. So when the generation segment became more competitive, the justification for price regulation weakened. 55 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, 71 Fed. Reg. 33,102, 33,102 (proposed June 7, 2006) (to be codified at 18 C.F.R. pt. 35) (“In 1988, the Commission began considering proposals for market-based pricing of wholesale power sales.”). 56 See DAVIES ET AL., supra note 31, at 380–81. Before allowing a seller to engage in market-based pricing, FERC conducts a market-power analysis to determine whether (1) the seller and its affiliates lack (or have adequately mitigated) market power in generation and transmission; (2) the seller will not erect barriers to entry; and (3) there is no evidence involving the seller or its affiliates of affiliate abuse or reciprocal dealing. 18 C.F.R. § 35.37(b), (e). 57 See Morgan Stanley Cap. Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 538 (2008) (“[W]hen a seller files a market-based tariff . . . contracts no longer need to be filed with FERC (and subjected to its investigatory power) before going into effect.”). HIRSH – NOTE 6/13/2021 8:42 PM 310 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 reasonable” and is treated the same as a traditional filed tariff.58 Some critics of market-based pricing contend that the scheme violates the FPA since FERC does not review each contract to ensure that the rates are “just and reasonable.”59 Market-based rates do not, however, free suppliers from regulation.60 FERC engages in ongoing oversight of market- based rate authorizations and market conditions.61 For example, sellers with market-based rate authority are required to file post-transaction electric quarterly reports containing specific information about contracts and transactions.62 FERC may also institute a § 824e “proceeding to revoke a seller’s market-based rate authorization if it determines that the seller may have gained market power since its original” authorization.63 Therefore, the advent of 58 See Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, 72 Fed. Reg. 39,904, 40,013 (July 20, 2007). 59 Cf., e.g., Jim Rossi, Lowering the Filed Tariff Shield: Judicial Enforcement for a Deregulatory Era, 56 VAND. L. REV. 1591, 1622–24 (2003) (discussing the limits of FERC’s authority). Although the courts have generally held that market-based pricing does not contravene the FPA, the Supreme Court has explicitly refused to express an opinion on the lawfulness of the market-based model. Morgan Stanley Cap. Grp., 554 U.S. at 538 (“We have not hitherto approved, and express no opinion today, on the lawfulness of the market-based-tariff system, which is not one of the issues before us.”). 60 See Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 455–56 (6th Cir. 2019) (Griffin, J., concurring in part and dissenting in part). 61 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, 72 Fed. Reg. at 39,906 (“[T]he Commission, through its ongoing oversight of market-based rate authorizations and market conditions, may take steps to address seller market power or modify rates.”). 62 Id. at 40,019; see also Electric Quarterly Reports, 18 C.F.R. § 35.10b (2019); FED. ENERGY REGUL. COMM’N, ELECTRIC QUARTERLY REPORT FILING REQUIREMENTS GUIDE 4 (2017), https://www.ferc.gov/docs-filing/eqr/eqr- requirements-guide.pdf [https://perma.cc/XXL2-T933]. 63 Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, 72 Fed. Reg. at 40,019; see also 16 U.S.C. § 824e(a) (2018) (permitting the Commission to hold a hearing “upon its own motion”). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 311 market-based rate regulation did not eliminate FERC’s oversight, though it did substantially reduce it. Indeed, the Mobile-Sierra doctrine limits FERC’s power to allow parties to modify the rates established by privately- negotiated PPAs.64 The doctrine is named for a pair of 1956 Supreme Court cases involving the Mobile Gas Service Corporation (Mobile)65 and the Sierra Pacific Power Company (Sierra).66 Mobile entered into a contract to purchase natural gas from United Gas.67 Sierra entered into a contract to purchase electricity from PG&E.68 Both contracts were approved by the FPC.69 And both suppliers later instituted FPC proceedings, seeking to raise prices above the contract rate.70 The FPC denied United Gas’s request but not PG&E’s.71 But in both cases, the Court prevented the suppliers from unilaterally modifying the contractual rates.72 64 Morgan Stanley Cap. Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 545–46 (2008) (holding that the Mobile-Sierra doctrine applies even when FERC did not initially review the rate for reasonableness, as when a seller has market-based rate authority). 65 350 U.S. 332 (1956). 66 350 U.S. 348 (1956). 67 Mobile, 350 U.S. at 336. 68 Sierra Pac. Power Co., 350 U.S. at 352. 69 Id.; Mobile, 350 U.S. at 336. 70 Sierra Pac. Power Co., 350 U.S. at 352; Mobile, 350 U.S. at 336. The doctrine applies to both natural gas and electricity contracts even though FERC’s jurisdiction over the contracts is derived from different statutes. Sierra Pac. Power Co., 350 U.S. at 350–51 (“The pertinent provisions of the [FPA] are §§ 205(c), (d), and (e), and 206(a), which are substantially identical to §§ 4(c), (d), and (e), and 5(a), respectively, of the Natural Gas Act.”). In addition, although United Gas and PG&E were both suppliers, the courts have applied the Mobile-Sierra doctrine where the buyer is the party requesting modification from FERC. See Morgan Stanley Cap. Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 548 (2008) (“The standard for a buyer’s challenge must be the same, generally speaking, as the standard for a seller’s challenge: The contract rate must seriously harm the public interest.”). 71 Compare Mobile, 350 U.S. at 347, with Sierra Pac. Power Co., 350 U.S. at 353–55 (remanding to the FPC). 72 See Sierra Pac. Power Co., 350 U.S. at 355 (“When § 206(a) is read in the light of this purpose, it is clear that a contract may not be said to be either ‘unjust’ or ‘unreasonable’ simply because it is unprofitable to the public utility.”); Mobile, 350 U.S. at 347 (“From our conclusion that the HIRSH – NOTE 6/13/2021 8:42 PM 312 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 In doing so, the Court found that such modification was not justified under the “unjust, unreasonable, or unduly discriminatory” standard set out in the FPA.73 The Court unanimously agreed that the purpose of the FPA is to protect the public interest.74 When an electric utility seeks relief for its own “improvident bargain,” FERC’s “sole concern . . . [is] whether the rate is so low as to adversely affect the public interest—as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.”75 Thus, outside of bankruptcy, utilities cannot get out of their agreements to buy or sell power unless it would threaten their ability to provide their services. “The courts have largely come to the conclusion that [FERC] has less authority to modify rates set by contract, as compared to unilaterally-filed tariff rates, when the contract is the result of arm’s length negotiations between sophisticated parties of equal bargaining power, unless the contract indicates otherwise.”76 The Mobile-Sierra public interest standard is stringent. As Judge Posner explained: [I]f a power company makes a contract that turns out to be disadvantageous to it but does no harm to the broader public, a regulatory commission has no business bailing the company out. It’s a big boy; it took Natural Gas Act gives a natural gas company no power to change its contracts unilaterally, it follows that the new schedule filed by United was a nullity[.]”). 73 See DAVIES ET AL., supra note 31, at 322. 74 Sierra Pac. Power Co., 350 U.S. at 355 (“[T]he purpose of the power given the Commission by § 206(a) is the protection of the public interest, as distinguished from the private interests of the utilities[.]”). 75 Id. 76 John M. White, The Federal Power Act’s Double Standard: Unwinding the Mobile-Sierra Doctrine after Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1, 61 AM. U. L. REV. 677, 677 (2012) (emphasis deleted). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 313 a risk; the risk materialized; . . . there is no occasion for regulatory intervention.77 In “a number of cases involving the Mobile-Sierra doctrine,” the D.C. Circuit, for example, “has repeatedly emphasized the importance of contractual stability,” establishing a heavy presumption in favor of preserving PPAs. 78 In sum, the market-based rate system and the Mobile- Sierra doctrine have reduced FERC’s authority over privately negotiated PPAs. Sellers with market-based rate authority are free to enter into PPAs without FERC approval and FERC cannot allow modification of the rates established by market- based PPAs unless doing so would satisfy the stringent public interest standard. Thus, if a utility is burdened by overpriced PPAs, it may prefer to reorganize in bankruptcy, where it has the power to reject executory contracts. III. OVERVIEW OF THE FIRSTENERGY AND PG&E BANKRUPTCIES Before analyzing the relevant circuit court decisions, this Part briefly offers factual context, with attention to the FirstEnergy and PG&E bankruptcies.79 In the twenty-first century, utility bankruptcies are more common.80 As the generation segment becomes increasingly competitive and regulators take a step back, several electric utilities have looked to the bankruptcy courts for relief. At the same time, 77 MISO Transmission Owners v. Fed. Energy Regul. Comm’n, 819 F.3d 329, 335 (7th Cir. 2016). 78 See Potomac Elec. Power Co. v. Fed. Energy Regul. Comm’n, 210 F.3d 403, 409 (D.C. Cir. 2000). 79 For a more in-depth discussion of this issue in the context of earlier electric utility bankruptcies (Mirant and Calpine), see Michael Kohler, Note, The Ambit of FERC Jurisdiction Over Electricity Contracts During Insolvency: Bankruptcy Jurisdiction and the “Just and Reasonable” Directive, 104 COLUM. L. REV. 1947, 1955–59 (2004) and William Wallander et al., Energy Restructuring and Reorganization, 10 TEX. J. OIL, GAS & ENERGY L. 1, 71–75 (2014). 80 USHER, supra note 53, at 145–46 (describing the failures of traditional power companies). HIRSH – NOTE 6/13/2021 8:42 PM 314 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 climate change is “intensifying natural disasters,”81 threatening the long-term viability of traditional, vertically integrated electric utilities.82 A. The Bankruptcies 1. Competition from Natural Gas and Renewables and the FirstEnergy Bankruptcy Competition from natural gas and renewables is now threatening the viability of traditional generation sources. As Professor Bruce Usher explains, “[t]he growth of renewable energy in the twenty-first century will create winners and losers. Incumbent fossil fuel companies risk losing trillions . . . in shareholder value; some . . . will develop strategies to join the energy transition, while the less nimble will face bankruptcy.”83 A mix of regulatory incentives and innovation enabled new generation sources (natural gas, wind, and solar) to become cost competitive with traditional generation sources (nuclear and coal).84 Cost is key in the generation segment.85 The levelized cost of electricity (LCOE) is a standard metric used to compare the costs of producing electricity from different 81 BO MACINNIS & JON A. KROSNICK, CLIMATE INSIGHTS 2020, at 1 (2020), https://media.rff.org/documents/Climate_Insights_2020 _Natural_Disasters.pdf [https://perma.cc/9Y53-7X2Z] (“According to natural scientists, climate change is intensifying natural disasters like wildfires and floods, making them increasingly devastating.”). 82 See Sarah Brody, Matt Rogers & Giulia Siccardo, Why, and How, Utilities Should Start To Manage Climate-Change Risk, MCKINSEY & CO. (Apr. 24, 2019), https://www.mckinsey.com/industries/electric-power-and- natural-gas/our-insights/why-and-how-utilities-should-start-to-manage- climate-change-risk# [https://perma.cc/ZE25-DK4D]. 83 USHER, supra note 53, at 3–4. 84 See id. at 17, 21. 85 See id. at 19 (“[B]asic economic principles, primarily cost, are the main drivers of energy transitions.”). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 315 generation sources.86 Natural gas87 and “[r]enewable energy, in the form of wind and solar power,”88 are now cost- competitive with traditional generation sources on an LCOE basis. As a result, the Energy Information Administration expects that, this century, the share of generation from nuclear and coal will continue to decrease while the share from natural gas and renewables will continue to increase.89 The declining prices of new generation sources have already reduced demand for coal-generated electricity. As Usher explains, “[t]he lower LCOE of electricity generated using advanced combined-cycle natural gas technologies encourage utilities to transition away from coal.”90 By 2016, natural gas accounted for twenty-nine percent of new energy generation built.91 Analysts expect forty-two percent of existing coal-fired capacity to retire by 2050.92 And the coal industry is already feeling the effects of reduced demand: “nearly half of all [U.S.] coal companies have gone bankrupt since 2012.”93 FirstEnergy, for example, “filed for bankruptcy . . . [after being] dragged down by its [failing] nuclear and coal plants.”94 86 Id. at 13 (“The LCOE provides an ‘apples-to-apples’ comparison of cost. The LCOE for a power plant equals the cost of building and operating the plant divided by the electrical output forecast over the life of the plant, discounted at the cost of capital required to invest in the plant.” (footnote omitted)). 87 See id. at 18. 88 See id. at 21. 89 U.S. ENERGY INFO. ADMIN., ANNUAL ENERGY OUTLOOK 2019 WITH PROJECTIONS TO 2050, at 22 (2019). The economic crisis resulting from the COVID-19 pandemic has only reduced the demand for traditional generation sources. According to Dr. Wal van Lierop, in the wake of the crisis demand for oil “will continue to decrease as low-cost renewables keep pushing the energy transition.” Wal van Lierop, After COVID-19, The Oil Industry Will Not Return to “Normal”, FORBES (Apr. 5, 2020, 7:06 PM), https://www.forbes.com/sites/walvanlierop/2020/04/05/after-covid-19-the- oil-industry-will-not-return-to-normal/ [https://perma.cc/4FTA-DTL9]. 90 See USHER, supra note 53, at 17. 91 Id. at 105. 92 U.S. ENERGY INFO. ADMIN., supra note 89, at 96. 93 USHER, supra note 53, at 145. 94 Will Wade, Coal Unit at Center of Trump Bailout Bid To Shut 19 Months Early, BLOOMBERG (Aug. 9, 2019, 11:29 AM) (on file with the HIRSH – NOTE 6/13/2021 8:42 PM 316 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 Before FirstEnergy filed for bankruptcy, it sought relief from the federal government.95 FERC, however, rejected a proposed rule to subsidize the uncompetitive plants.96 Although the Ohio legislature subsequently passed legislation that requires ratepayers to subsidize some of the state’s coal and nuclear plants,97 many of the utility’s other plants are still in financial distress. While FirstEnergy was in bankruptcy, for example, it shut down its Bruce Mansfield coal power plant, citing economic distress.98 2. Enhanced Risk of Natural Disasters and the PG&E Bankruptcy Natural disasters pose an existential threat to the electric utility industry. Rising sea levels threaten energy infrastructure in coastal communities.99 The U.S. Department Columbia Business Law Review), https://www.bloomberg.com/news/ articles/2019-08-09/firstenergy-solutions-to-shut-coal-fired-plant-19- months-early. 95 Andrew Scurria & Becky Yerak, FirstEnergy Generation Units File for Bankruptcy After Seeking Federal Bailout, WALL ST. J. (Apr. 1, 2018, 12:01 PM), https://www.wsj.com/articles/firstenergy-generation-units-file- for-bankruptcy-after-seeking-federal-bailout-1522598514 [https://perma.cc/Y6WT-MYV6]. 96 Camila Domonoske, Federal Regulator Rejects Energy Department’s Bid To Prop up Coal, Nuclear, NPR (Jan. 9, 2018, 12:00 PM), https://www.npr.org/sections/thetwo-way/2018/01/09/576742270/federal- regulator-rejects-energy-departments-bid-to-prop-up-coal-nuclear [https://perma.cc/VGL4-JKQQ]. 97 See OHIO REV. CODE ANN. §§ 3706.40–.65 (West 2019). Ohio’s public utilities commission “determine[s] the proper rate design for recovering or remitting the prudently incurred costs related to a legacy generation resource” subject to a cap. Id. § 4928.148(A)(2); see also id. § 4928.01(A)(41) (“‘Legacy generation resource’ means all generating facilities owned directly or indirectly by a corporation that was formed prior to 1960 by investor- owned utilities[.]”). 98 Paul J. Gough, Bruce Mansfield Deactivation Begins, PITTSBURGH BUS. TIMES, https://www.bizjournals.com/pittsburgh/news/2019/11/08/bruce -mansfield-deactivation-begins.html [https://perma.cc/9ZEH-DKY2] (last updated Nov. 8, 2019, 8:35 AM). 99 Storms leave energy infrastructure vulnerable to wind damage, flood damage, fuel supply issues, and evacuations and shutdowns. See HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 317 of Energy estimates that climate change will increase hurricane storm-surge exposure for power plant assets by up to sixty-seven percent.100 Utilities must account for the enhanced risk of natural disaster to avoid financial disaster. California utilities are financially vulnerable to climate change risk also because they can be held strictly liable when their power lines spark destructive wildfires.101 From 1972 to 2018, the annual burned area of California increased 405%.102 The effects of climate change (i.e., increased temperatures, earlier snowmelt, and more intense summer droughts) exacerbate wildfire damage.103 And utility powerlines sparked at least eight of the twenty most destructive fires in Brody et al., supra note 82 (“In the United States, nine nuclear-power plants are located within two miles of the ocean.”). 100 See JAMES BRADBURY, MELISSA ALLEN & REBECCA DELL, U.S. DEPT. OF ENERGY, CLIMATE CHANGE AND ENERGY INFRASTRUCTURE EXPOSURE TO STORM SURGE AND SEA-LEVEL RISE 3 (2015) (comparing 1992 exposure to projected 2060 exposure). 101 CAROLYN KOUSKY, KATHERINE GREIG & BRETT LINGLE, FINANCING THIRD PARTY WILDFIRE DAMAGES: OPTIONS FOR CALIFORNIA’S ELECTRIC UTILITIES 2 (2019), https://riskcenter.wharton.upenn.edu/wp- content/uploads/2019/02/Financing-Third-Party-Wildfire-Damages- Options-for-Californias-Electric-Utilities.pdf [https://perma.cc/Q9SC- 76TN] (“Under a unique legal regime in the state of California (inverse condemnation), electric utilities are held strictly liable for property damage associated with any wildfire where utility infrastructure is found to have been a significant cause of ignition, even if the utility was not negligent in their risk management actions.”). 102 A. Park Williams et al., Observed Impacts of Anthropogenic Climate Change on Wildfire in California, 7 EARTH’S FUTURE 892, 896 (2019). 103 See JOHN J. MACWILLIAMS, SARAH LA MONACA & JAMES KOBUS, COLUMBIA CTR. ON GLOB. ENERGY POL’Y, PG&E: MARKET AND POLICY PERSPECTIVES ON THE FIRST CLIMATE CHANGE BANKRUPTCY 6 (2019). Climate change dries out “fuel”—trees, shrubs, etc.—causing fires to spread faster and leading to more damage. Jill Cowan, Are Wildfires Cause by Utilities or Climate Change? Yes, N.Y. TIMES (Oct. 23, 2019), https://www.nytimes.com/2019/10/23/us/wildfires-utilities-climate- change.html [https://perma.cc/QU2J-TV2X]. HIRSH – NOTE 6/13/2021 8:42 PM 318 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 California’s history.104 Six of these fires have occurred since 2015.105 The wildfire liability faced by PG&E prompted the utility to file for bankruptcy in 2019.106 PG&E’s bankruptcy was a wake-up call for the electric utility industry. While the main concern for utilities was once regulatory risk, they must now “worry about sudden, and potentially unexpected, impacts to their core assets and liabilities.”107 Although PG&E may be considered “the first climate change bankruptcy,” it probably will not be the last.108 B. Circumstances of the Disputes When PG&E and FirstEnergy filed for bankruptcy, both utilities were burdened by long-term PPAs that they had entered into at a time when renewable energy was low in supply and high in demand.109 As renewable generation sources proliferated, however, these long-term agreements became highly overpriced.110 In addition, FirstEnergy sought to reject an overpriced inter-company power agreement (ICPA).111 While outside of bankruptcy the utilities would 104 GABRIEL PETEK, LEGIS. ANALYST’S OFF., ALLOCATING UTILITY WILDFIRE COSTS: OPTIONS AND ISSUES FOR CONSIDERATION, 2019-20 Sess., at 4 (Cal. 2019). 105 Id. 106 The Associated Press, PG&E: California Utility Firm Files for Bankruptcy After Deadly 2018 Wildfires, GUARDIAN (Jan. 29, 2019, 3:15 PM) (on file with the Columbia Business Law Review), https://www.the guardian.com/us-news/2019/jan/29/pge-bankruptcy-california-wildfires- utilities#:~:text=PG%26E%3A%20California%20utility%20firm%20files% 20for%20bankruptcy%20after%20deadly%202018%20wildfires,- This%20article%20is&text=PG%26E%20cited%20hundreds%20 of%20lawsuits,planned%20to%20file%20for%20bankruptcy. 107 Russell Gold, PG&E: The First Climate-Change Bankruptcy, Probably Not the Last, WALL ST. J. (Jan. 18, 2019, 9:00 AM) (on file with the Columbia Business Law Review), https://www.wsj.com/articles/pg-e- wildfires-and-the-first-climate-change-bankruptcy-11547820006. 108 Id. 109 See infra note 139 and accompanying text (discussing the change in the price of renewable energy). 110 See infra note 139 and accompanying text. 111 See infra notes 121–22 and accompanying text. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 319 have had a very hard time getting out of these purchase agreements,112 FirstEnergy and PG&E maintained that, as debtors-in-possession, they were entitled to reject all money- losing purchase agreements under section 365 of the Bankruptcy Code.113 1. FirstEnergy’s Power Purchase Agreements and the Inter-Company Power Agreement During bankruptcy, FirstEnergy sought to reject eight long-term renewable energy purchase agreements.114 FirstEnergy entered into three of these agreements to comply with an EPA consent decree.115 It entered into the other five agreements to meet various state renewable energy credit (REC) requirements for businesses in the retail power industry.116 According to FirstEnergy, since the time it entered into the PPAs (between 2003 and 2011), three changes in the market rendered the agreements money-losing at the time of its bankruptcy filing: 112 See supra Section II.B.2. 113 11 U.S.C. § 365 (2018). 114 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 437–38 (6th Cir. 2019). With an effective capacity of 75 megawatts, FirstEnergy’s eight PPAs accounted for only 0.75% of its overall capacity and less than 0.04% of the regional market. Id. at 437 n.2. Although the PPAs were for a total gross capacity of 500 megawatts, the effective capacity was only 75 megawatts because of the intermittency of renewable energy. Id. at 437. FirstEnergy anticipated losing $46 million per year on the eight PPAs. Id. 115 See Objection & Rsrv. of Rts. of Krayn Wind LLC to Motion for Entry of an Ord. Authorizing FirstEnergy Sols. Corp. and FirstEnergy Generation, LLC to Reject Certain Energy Conts. as of Petition Date at 2– 3, FirstEnergy Sols. Corp. v. Fed. Energy Regul. Comm’n (In re FirstEnergy Sols. Corp.), No. 18-50757, 2018 WL 2315916 (Bankr. N.D. Ohio May 18, 2018), aff’d in part, rev’d in part and remanded, 945 F.3d 431. 116 See In re FirstEnergy Sols. Corp., 945 F.3d at 437. “RECs are . . . paper certificates that represent each [megawatt-hour] of renewable energy sold.” U.S. ENV’T PROT. AGENCY, EPA CLEAN ENERGY-ENVIRONMENT TECHNICAL FORUM 1 (2008), https://www.epa.gov/sites/production/ files/2016-03/documents/background_paper_3.pdf [https://perma.cc/GM8J- DNLH]. HIRSH – NOTE 6/13/2021 8:42 PM 320 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 (1) [FirstEnergy’s] retail electricity sales were much greater, so its REC requirements were correspondingly greater; (2) the supply of RECs was more limited, so [FirstEnergy] was compelled to enter long-term contracts to get enough RECs at an agreeable price; and (3) electricity prices were much higher and were expected to remain high.117 Crucially, Ohio’s REC requirements are tied to retail sales.118 FirstEnergy claimed that it was planning to sell off its retail business and that once it fully exited that business at the conclusion of its reorganization, it would “have no need for any RECs.”119 It also maintained that even without these RECs it would “continue to obtain more than enough power to supply its retail customers and already ha[d] on its balance sheet an excess number of RECs, sufficient to satisfy state regulatory requirements for at least the next three years.”120 Basically, FirstEnergy claimed it sought to reject these renewable energy purchase agreements because it no longer needed the power. FirstEnergy was also party to an ICPA, “pursuant to which [FirstEnergy] and . . . other power companies ha[d] both the right and obligation to purchase power from” the Ohio Valley Electric Corporation (OVEC).121 Before FirstEnergy filed for bankruptcy, OVEC asked FERC to find that FirstEnergy’s “then-anticipated breach of the ICPA . . . ‘would amount to a termination of [FirstEnergy’s] purchase obligation in violation of the filed rate doctrine and the ICPA.’”122 117 In re FirstEnergy Sol. Corp., 945 F.3d at 437. 118 See OHIO REV. CODE ANN. § 4928.643 (West 2019). States only have jurisdiction over the retail market and therefore cannot impose emissions requirements on the basis of a utility’s sales in the wholesale market. See supra note 33 and accompanying text. 119 Complaint for Declaratory Judgment, Preliminary & Permanent Injunction Against the Fed. Energy Regul. Comm’n at 12, In re FirstEnergy Sols. Corp., 2018 WL 2315916. 120 Id. 121 In re FirstEnergy Sol. Corp., 2018 WL 2315916, at *3. 122 Id. at *4. For a discussion of the filed-rate doctrine and its implications, see infra Section IV.A. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 321 Then, right after FirstEnergy filed for bankruptcy, it filed an adversary proceeding against FERC seeking a declaratory judgment and injunctive relief preventing FERC from interfering with the bankruptcy court’s jurisdiction to consider motions to reject the PPAs.123 The Northern District of Ohio Bankruptcy Court held that the automatic stay applied to the FERC proceeding124 and decided that a preliminary injunction was justified.125 Both parties appealed to the Sixth Circuit, which affirmed in part and reversed in part, holding that the injunction “was overly broad” and the standard for deciding whether to allow rejection of PPAs “was too limited.”126 The Sixth Circuit’s decision became the settled law in that circuit when the parties’ certiorari deadline passed in March 2020.127 2. PG&E’s Power Purchase Agreements In anticipation of PG&E filing for bankruptcy, two of PG&E’s suppliers—NextEra and Exelon—petitioned FERC for an order declaring that PG&E may not “abrogate, amend, or reject in a bankruptcy proceeding any rates, terms and conditions of its wholesale [PPAs] . . . without first obtaining approval from the Commission under FPA sections 205 and 206.”128 NextEra is the largest utility holding company in the United States.129 it owns two utility companies in Florida and the world’s largest wind and solar energy generation 123 Id. at *1. 124 Id. at *6. 125 Id. at *19. 126 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 437 (6th Cir. 2019). 127 In re FirstEnergy Sols. Corp. was decided on December 12, 2019. Id. at 432. Per Supreme Court Rule 13, parties have ninety days to file “a petition for a writ of certiorari to review a judgment in any case . . . entered by . . . a United States court of appeals.” Sup. Ct. R. 13. 128 See NextEra Energy, Inc. v. Pac. Gas & Elec. Co., 166 FERC ¶ 61,049, para. 1 (Jan. 25, 2019); Exelon Corp. v. Pac. Gas & Elec. Co., 166 FERC ¶ 61,053, para. 1 (Jan. 28, 2019). 129 See Company Overview, NEXTERA ENERGY, http://www.investor .nexteraenergy.com/company-overview [https://perma.cc/5TUT-DSU4] (last visited Nov. 20, 2020). HIRSH – NOTE 6/13/2021 8:42 PM 322 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 company.130 Several of NextEra’s subsidiaries sold wind and solar energy to PG&E under various PPAs pursuant to its market-based rate authority.131 Exelon is a holding company that owns transmission and distribution systems and generation companies.132 One of its generation companies, AV Solar Ranch 1, sold its entire output to PG&E under a PPA.133 When FERC issued orders on NextEra’s and Exelon’s petitions, PG&E had not actually filed for bankruptcy, let alone rejected or assumed any executory contracts.134 In both orders, FERC found that it had concurrent jurisdiction with the bankruptcy courts to “review and address the disposition of wholesale power contracts sought to be rejected.”135 When PG&E filed for bankruptcy, it immediately brought an adversarial proceeding against FERC, seeking a motion for a preliminary injunction against the agency.136 As a result, the bankruptcy court issued a “declaratory judgment that (1) FERC d[id] not have concurrent jurisdiction over its decision to permit Debtors to reject (or assume) executory contracts under Section 365; and (2) that the FERC . . . rulings [were] of no force and effect and [were] not binding on Debtors in these cases.”137 NextEra and Exelon had reason to believe that PG&E intended to reject their agreements. In a court filing, PG&E 130 Id. 131 NextEra, 166 FERC ¶ 61,049, para. 2. 132 See America’s Leading Energy Provider, EXELON, https://www. exeloncorp.com/company/about-exelon [https://perma.cc/J4TK-5V55] (last visited Nov. 20, 2020). 133 Exelon, 166 FERC ¶ 61,053, para. 2. 134 FERC issued orders on the NextEra and Exelon petitions on January 25, 2019 and January 28, 2019 respectively. See id.; NextEra, 166 FERC ¶ 61,049. PG&E filed for bankruptcy on January 29, 2019. The Associated Press, supra note 106. 135 Exelon, 166 FERC ¶ 61,053, para. 25; NextEra, 166 FERC ¶ 61,049, para. 31. 136 Debtors’ Motion for Preliminary Judgment & Memorandum of Points and Auths. in Support at 1–2, PG&E Corp. v. Fed. Energy Regul. Comm’n (In re PG&E Corp.), 603 B.R. 471 (Bankr. N.D. Cal. 2019) (No. 19- 03003), vacated sub nom. Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n, 829 F. App’x 751 (9th Cir. 2020). 137 In re PG&E Corp., 603 B.R. at 490. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 323 estimated that its approximately 387 PPAs were worth over $42 billion.138 And its long-term PPAs to procure renewable energy resources (such as those with NextEra and AV Solar Ranch 1) were uniquely attractive candidates for rejection. As PG&E itself explained in its motion for the bankruptcy court to issue a preliminary injunction against FERC: Many of the Utility’s PPAs are long-term contracts to procure renewable energy resources, which the Utility entered into to satisfy renewable energy requirements set by the State of California. These contracts obligate the Debtors to purchase energy at rates that are significantly higher rates than are currently available to their competitors. 139 In September 2019, however, PG&E decided to assume all of its existing PPAs in its first plan of reorganization.140 The agreements can still be “voluntarily modified,” which some of the counterparties have already agreed to.141 Despite proposing to retain all existing PPAs, PG&E chose to appeal the bankruptcy court’s decision, which suggested that it still had an interest in rejecting these agreements.142 FERC and PG&E agreed that the cases became moot on July 1, 2020 “when the bankruptcy court confirmed a reorganization plan requiring PG&E to assume, rather than reject, the contracts at issue.”143 But on August 14, 2020, the Ninth Circuit heard oral argument on the question of whether 138 Debtor’s Motion for Preliminary Judgment & Memorandum of Points and Auths. in Support, supra note 136, at 16. 139 Id. (emphasis added) (citation omitted). 140 See Keith Goldberg, PG&E Pledge Won’t End FERC-Bankruptcy Court Tug of War, LAW360 (Sept. 13, 2019, 8:07 PM), https://www.law360. com/articles/1198527/pg-e-pledge-won-t-end-ferc-bankruptcy-court-tug-of- war [https://perma.cc/WZY7-ATJN]. 141 Julian Spector, PG&E Pledges To Keep All Power Purchase Agreements Despite Bankruptcy, GTM: (Aug. 9, 2019), https://www.greentechmedia.com/ articles/read/pge-pledges-to-keep-all- power-purchase-agreements-but-some-already-took-a-h [https://perma.cc/H9GX-ZZJ9]. 142 Goldberg, supra note 140. 143 Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n, 829 F. App’x 751, 755 (9th Cir. 2020). HIRSH – NOTE 6/13/2021 8:42 PM 324 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 the court should vacate FERC’s orders asserting its concurrent jurisdiction over the PPAs in bankruptcy.144 The Ninth Circuit issued a Memorandum Order on October 7, 2020, vacating all three underlying orders—the two FERC orders and the bankruptcy court order—under the Munsingwear doctrine.145 IV. RESOLVING DOCTRINAL CONFUSION Informed by the legal background in Part II and factual background in Part III, this Part clarifies the existing doctrine concerning the role for FERC in determining whether an electric utility should be allowed to reject PPAs in bankruptcy. FERC clearly has jurisdiction when an electric utility seeks to modify or abrogate a wholesale PPA outside of bankruptcy.146 But when an electric utility seeks to do the same in the bankruptcy context, the answer is less clear. In the 2004 and 2019 bankruptcies of Mirant Corporation and FirstEnergy Solutions Corporation, the Fifth and Sixth Circuits, respectively, held that the bankruptcy courts had either “exclusive” or “primary” jurisdiction to approve debtors’ rejections of wholesale PPAs under section 365 of the Bankruptcy Code.147 But in the bankruptcy of Calpine Corporation, the Southern District of New York agreed with FERC that the courts should defer to the agency on this issue.148 Section IV.A will first detail the filed-rate doctrine, which typically governs the termination of a PPA outside 144 See id. at 751. 145 See id. at 755 (“Munsingwear holds that ‘[w]hen a case becomes moot on appeal, the “established practice” is to reverse or vacate the decision below with a direction to dismiss.’” (alteration in original) (quoting NASD Disp. Resol., Inc. v. Jud. Council of Cal., 488 F.3d 1065, 1068 (9th Cir. 2007)). 146 See infra Section IV.A.1 (discussing the filed-rate doctrine). 147 Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 519–20 (5th Cir. 2004); Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 452– 53 (6th Cir. 2019). 148 Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 37–38 (S.D.N.Y. 2006). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 325 bankruptcy. Section IV.A also considers the argument that the courts should apply the doctrine in bankruptcy. Section IV.B. then considers how the courts have resolved the rejection issue in the bankruptcy context. A. The Filed-Rate Doctrine and Its Implications This Section explains why FERC has exclusive jurisdiction to decide whether a debtor should be allowed to breach or terminate a PPA outside bankruptcy. Under the traditional regulatory system, filed rates have the force of law149 and an attempt by an electric utility to unilaterally modify or abrogate a PPA would be quite challenging. Outside of bankruptcy, if a utility’s modification or abrogation of these agreements resulted in any change to the filed rate, then under the long-standing filed-rate doctrine, the courts would defer to FERC. 1. The Filed-Rate Doctrine The filed-rate doctrine has long protected FERC’s jurisdiction over interstate rate regulation.150 The doctrine emerged outside of the energy law context in the nineteenth century as part of a program to regulate railroads.151 Originally enacted in 1887, the Interstate Commerce Act required motor common carriers to publish their rates with the Interstate Commerce Commission (ICC) and prohibited 149 Courts have gone so far as to say the filed-rate is to be treated as though it were a statute. See, e.g., Nw. Pub. Serv. Co. v. Montana-Dakota Utils. Co., 181 F.2d 19, 22 (8th Cir. 1950), aff’d, 341 U.S. 246; Bos. Edison Co. v. Fed. Energy Regul. Comm’n, 856 F.2d 361, 372 (1st Cir. 1988); cf. also Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th Cir. 1998) (“A tariff filed with a federal agency is the equivalent of a federal regulation[.]” (first citing Lowden v. Simonds-Shields-Lonsdale Grain Co., 306 U.S. 516, 520 (1939); then citing W. Union Int’l, Inc. v. Data Dev., Inc., 41 F.3d 1494, 1496 (11th Cir. 1995); and then citing MCI Telecomms. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 387 (8th Cir. 1992))). 150 See Montana-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 251–52 (1951) (applying the filed-rate doctrine to protect FERC’s primary jurisdiction over interstate rate regulation for the first time). 151 Maislin Indus., U.S. v. Primary Steel, Inc., 497 U.S. 116, 138 (1990) (Stevens, J., dissenting). HIRSH – NOTE 6/13/2021 8:42 PM 326 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 carriers from deviating from those rates.152 The Court established the filed-rate doctrine to preserve the ICC’s primary jurisdiction over the reasonableness of published rates.153 The filed-rate doctrine also is not limited to “rates” as in prices charged: courts have applied the doctrine not only to prices but also to the terms and conditions approved by regulators, such as service quality terms included in tariffs.154 The filed-rate doctrine emerged from primary jurisdiction doctrine. Under primary jurisdiction doctrine, the Court has long held “that in cases raising issues of fact not within the conventional experience of judges or . . . requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over.”155 The doctrines rest on the premise that, given the agencies’ 152 Id. at 120 (majority opinion). 153 The filed-rate doctrine also is not limited to “rates” as in prices charged: courts have applied the doctrine not only to prices but also to the terms and conditions approved by regulators, such as service quality terms included in tariffs. SCOTT HEMPLING, REGULATING PUBLIC UTILITY PERFORMANCE 318 (2013) (“The . . . ‘filed-rate doctrine’ . . . . applies also to ‘the services, classifications, charges, and practices included in the rate filing.’” (quoting E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027, 1040 (9th Cir. 2007))); see also Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 462 (6th Cir. 2019) (Griffin, J., concurring in part and dissenting in part) (“[T]he concept of a filed rate includes much more than merely the price of power, and FERC’s authority to enforce filed-rate obligations extends much further than setting that price.”); Rossi, supra note 59, at 1593. 154 HEMPLING, supra note 153, at 318 (“The . . . ‘filed-rate doctrine’ . . . . applies also to ‘the services, classifications, charges, and practices included in the rate filing.’” (quoting E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027, 1040 (9th Cir. 2007))); see also Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 462 (6th Cir. 2019) (Griffin, J., concurring in part and dissenting in part) (“[T]he concept of a filed rate includes much more than merely the price of power, and FERC’s authority to enforce filed-rate obligations extends much further than setting that price.”); Rossi, supra note 59, at 1593. 155 Far E. Conf. v. United States, 342 U.S. 570, 574 (1952); see also Great N. Ry. Co. v. Merchs. Elevator Co., 259 U.S. 285, 291 (1922) (“Whenever a rate, rule or practice is attacked as unreasonable or as unjustly discriminatory, there must be preliminary resort to the Commission. . . . To determine what rate, rule or practice shall be deemed reasonable for the future is a legislative or administrative function.”). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 327 expertise over the rates they set, the courts should not, in the first instance, allow parties to abrogate or modify rates that have been filed with and approved by rate-setting agencies like the ICC and FERC. And if a court finds that a rate is unjust or unreasonable on appeal from the agency proceeding, it “will remand to [the agency] for . . . review and reexamination of the rate.”156 The filed-rate doctrine does not bar litigants from ever seeking judicial review of FERC action. It just creates an issue of timing. The doctrine simply means that “when an agency and a court have concurrent jurisdiction, a court may abstain to allow the agency to first address the matter.”157 As Justice Stephen Breyer explained in his partial concurrence in Pharmaceutical Research & Manufacturers of America v. Walsh: No fixed formula exists’ for the doctrine’s application. Rather, the question in each instance is whether a case raises ‘issues of fact not within the conventional experience of judges,’ but within the purview of an agency’s responsibilities; whether the ‘limited functions of review by the judiciary are more rationally exercised, by preliminary resort’ to an agency ‘better equipped than courts’ to resolve an issue in the first instance[.]158 And while the agency’s decision does get substantial deference, it is not determinative for the court that has stayed its proceedings.159 156 DAVIES ET AL., supra note 31, at 320. 157 PETER L. STRAUSS ET AL., GELLHORN & BYSE’S ADMINISTRATIVE LAW: CASES AND COMMENTS 1417 (Robert C. Clark et al. eds., 12th ed. 2018) (describing the primary jurisdiction doctrine). 158 Pharm. Rsch. & Mfrs. of Am. v. Walsh, 538 U.S. 644, 673 (2003) (Breyer, J., concurring in part and concurring in the judgment) (citation omitted) (first quoting United States v. W. Pac. R.R. Co., 352 U.S. 59, 64 (1956); and then quoting Far E. Conf. v. United States, 342 U.S. 570, 574– 75 (1952)). 159 Cf. Port of Bos. Marine Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 68 (1970) (describing the primary jurisdiction doctrine as a means of “rout[ing] [a] threshold decision as to certain issues to the agency”). HIRSH – NOTE 6/13/2021 8:42 PM 328 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 In Montana-Dakota Utilities Co. v. Northwestern Public Service Co., the Supreme Court determined that the filed-rate doctrine protected the FPC’s jurisdiction over filed wholesale power rates.160 In that case, Montana-Dakota Utilities Company sued the Northwestern Public Service Company, claiming that “Northwestern . . . overcharged and underpaid for wholesale power.”161 The district court found that the previous wholesale rates were unreasonable and awarded Montana-Dakota damages to make up the difference.162 The Supreme Court disagreed and held that, by awarding damages, the district court imposed on the FPC’s exclusive jurisdiction: [T]he right to a reasonable rate is the right to the rate which the utility files or fixes, and . . ., except for review of the [FPC’s] orders, the courts can assume no right to a different one on the ground that, in its opinion, it is the only or the more reasonable one. 163 The Court did not completely rid the judiciary of the authority to reverse a regulator’s rate decision if the decision is unlawful.164 But as the D.C. Circuit has explained, any effort of the courts to award damages to compensate utilities for unreasonable rates would “undermine the Commission’s primary jurisdiction by bringing the court into the adjudication of the lawfulness of rates in advance of administrative consideration.”165 If a court finds that a rate is unreasonable, it must remand to FERC to determine the reasonable rate. Outside of bankruptcy, the filed-rate doctrine 160 Montana-Dakota Utils. Co. v. Pub. Serv. Co., 341 U.S. 246 (1951). 161 HEMPLING, supra note 153, at 305–06. 162 Id. 163 Montana-Dakota Utils. Co., 341 U.S. at 251–52. 164 See HEMPLING, supra note 153, at 306 (“The [filed-rate] doctrine prohibits the court from setting a rate (or awarding damages based on the court’s view of the appropriate rate). But it does not prevent the court from reversing a regulator’s rate decision if the decision is unlawful.”). 165 Papago Tribal Util. Auth. v. Fed. Energy Regul. Comm’n, 628 F.2d 235, 242 (D.C. Cir. 1980) (internal quotation marks omitted) (quoting S. Ry. Co. v. Seaboard Allied Milling Corp., 442 U.S. 444, 460 (1979)). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 329 thus empowers FERC by giving it primary jurisdiction to determine what constitute just and reasonable rates. Many suppliers have market-based rate authority, enabling them to set rates freely according to market conditions.166 But the rates are all still filed with FERC.167 And outside of bankruptcy, FERC has primary jurisdiction over any unilateral attempt to modify or abrogate these rates.168 Thus, the courts treat the privately-negotiated rate as the filed rate and defer to FERC. Although some energy law scholars have called the filed- rate doctrine into question—particularly because of the proliferation of market-based tariffs—the federal courts have continued to apply it.169 As the First Circuit held in Town of Norwood v. New England Power, “it is the filing of the tariffs, and not any affirmative approval or scrutiny by the agency, that triggers the filed-rate doctrine.”170 Under the current market-based model, the rates are still filed with FERC. As a result, while some scholars may contend that the filed-rate doctrine is less justified when rates are set freely in a competitive market, this position is not rooted in the current law. 166 See supra text accompanying notes 54–63. 167 Utilities with market-based tariffs must file electric quarterly reports with FERC containing a summary of the “contractual terms and conditions” in every effective service agreement for “all jurisdictional services.” FED. ENERGY REGUL. COMM’N, supra note 62, at 4; see also Electric Quarterly Reports, 18 C.F.R. § 35.10b (2019). 168 See, e.g., Pub. Util. Dist. No. 1 of Grays Harbor Cty. Wash. v. IDACORP Inc., 379 F.3d 641, 651 (9th Cir. 2004) (“[W]hile market-based rates may not have historically been the type of rate envisioned by the filed- rate doctrine, we conclude that they do not fall outside of the purview of the doctrine.”). 169 Motion of Energy L. Scholars for Leave To File Brief as Amici Curiae in Support of Petitioner at 8 n.3, Pac. Gas & Elec. Co. v. Fed. Energy Reg. Comm’n, 829 F.App’x 751 (9th Cir. 2020) (Nos. 19-71615, 19-16833 & 19-16834). 170 Town of Norwood v. New Eng. Power Co., 202 F.3d 408, 419 (1st Cir. 2000) (“[I]f . . . rates were truly left to the market, with no filing requirement or FERC supervision at all, the filed rate doctrine would by its terms no longer operate.”). HIRSH – NOTE 6/13/2021 8:42 PM 330 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 In sum, outside of bankruptcy, under the filed-rate doctrine, FERC has primary jurisdiction to authorize the unilateral modification of a filed rate—even when it is set by a privately negotiated PPA—upon a finding that the rate is “unjust, unreasonable, unduly discriminatory or preferential.”171 The only wrinkle is that if the rate was set by a privately-negotiated agreement, the stringent Mobile-Sierra public-interest standard applies.172 Under the public interest standard, unilateral modification is even more difficult because it is prohibited unless “it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.”173 Applied in the context of a utility debtor’s reorganization, the Mobile-Sierra doctrine may suggest that the debtor-in-possession should only be allowed to reject the rate, terms, and conditions of their purchase agreements if doing so is necessary for a successful reorganization. 2. The Implications of the Filed-Rate Doctrine The filed-rate doctrine and the primary jurisdiction doctrine that it emerged from may reinforce the argument that the district courts should exercise their “discretionary abstention” power and grant FERC the initial authority to review issues related to the rejection—and possibly even the confirmation—of the reorganization plan. A student note by Michael Kohler addressing the jurisdictional dispute between FERC and the bankruptcy courts in the wake of the Fifth Circuit’s decision in Mirant argued that “a court’s discretionary abstention under the doctrine of primary jurisdiction would allow FERC the initial authority to approve issues related to rejection but would preserve the district court’s ultimate authority over reorganization decisions.”174 Under this theory, FERC could subsequently “decline to 171 16 U.S.C. § 824e(a) (2018). 172 See supra Section II.B.2. 173 Fed. Power Comm’n v. Sierra Pac. Power Co., 350 U.S. 348, 355 (1956). 174 Kohler, supra note 79, at 1979. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 331 exercise primary jurisdiction if rejection and confirmation merely deprive the counterparty of the benefits of its bargain but do not compromise any other regulatory goals.”175 While there is appeal to this approach under long-standing principles of energy and administrative law, it (for the most part) does not reflect the approaches that the district and circuit courts have taken to the PPA rejection issue since Kohler’s note was published in 2005. B. Rejecting Wholesale Power Rates in Bankruptcy FERC clearly has primary jurisdiction when a utility seeks to modify or abrogate a wholesale power rate outside of bankruptcy.176 But in the bankruptcy context, most of the federal and bankruptcy courts that have considered the issue have held that the bankruptcy court has exclusive jurisdiction to approve debtors’ rejections of wholesale PPAs.177 On appeal in the FirstEnergy bankruptcy, the Sixth Circuit held (in line with the Fifth Circuit in Mirant)178 that the bankruptcy court 175 Id. 176 See supra note 15 and accompanying text. 177 Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 523 (5th Cir. 2004) (holding that the bankruptcy court can grant injunctive relief to restrain FERC); Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n (In re PG&E Corp.), No. 19-03003, 2019 WL 2477433, at *18 (Bankr. N.D. Cal. June 12, 2019) (similar), vacated, 829 F. App’x 751 (9th Cir. 2020); FirstEnergy Sols. Corp. v. Fed Energy Regul. Comm’n (In re FirstEnergy Sols. Corp.), No. 18-50757, 2018 WL 2315916, at *17 (Bankr. N.D. Ohio May 18, 2018) (similar), aff’d in part, rev’d in part and remanded, 945 F.3d 431 (6th Cir. 2019); cf. also Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 446 (6th Cir. 2019) (holding that bankruptcy courts and FERC have concurrent jurisdiction, but also that bankruptcy courts still have “primary or superior” jurisdiction). But see Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 30 (S.D.N.Y. 2006) (holding that FERC has exclusive jurisdiction). 178 Mirant Corporation (Mirant) filed for bankruptcy in the summer of 2003 in the Northern District of Texas. Kohler, supra note 79, at 1955. As the purchaser, Mirant sought to reject certain overpriced power purchase agreements. Id. at 1955–56. Providing one of the key appellate precedents on the rejection issue, the Fifth Circuit held that the bankruptcy courts have exclusive jurisdiction to approve the rejection of such agreements. In re Mirant Corp., 378 F.3d at 519–20. HIRSH – NOTE 6/13/2021 8:42 PM 332 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 has jurisdiction to approve the rejections, albeit under a stricter standard than the usual, relaxed business judgment standard.179 On the other hand, in the 2006 bankruptcy of Calpine Corporation, the Southern District of New York held in favor of FERC’s jurisdiction.180 In PG&E, the Ninth Circuit never decided the jurisdiction issue on its merits.181 1. Bildisco and the Argument Against Creating Doctrinal Exceptions to the Debtor’s Rejection Power Section 365 of the Bankruptcy Code allows the rejection of any executory contract, subject to limited exceptions.182 From a textual perspective, it is evident that Congress did not intend to create an exception to § 365 for PPAs. Unlike § 362 and § 1129, § 365 does not contain a provision to accommodate the interests of the regulatory agency.183 Section 362(b)(4) contains a regulatory exception to the automatic stay.184 Section 1129(a)(6) conditions plan confirmation on regulatory approval of any rate changes.185 In addition to the other provisions that specifically contemplate agency action, the Bankruptcy Code also 179 In re FirstEnergy Sols. Corp., 945 F.3d at 452–54 (concluding that the bankruptcy court must apply a more stringent standard when deciding whether to authorize the rejection of a power purchase agreement); accord In re Mirant Corp., 378 F.3d at 522, 525 (holding that the FPA does not preempt a court’s jurisdiction to authorize the rejection of a power purchase agreement but also that the court should consider applying a more rigorous standard that takes into account the public interest). 180 In re Calpine Corp., 337 B.R. at 36 (“The Court holds that it lacks jurisdiction to authorize the rejection of the Power Agreements because doing so would directly interfere with FERC’s jurisdiction over the rates, terms, conditions, and duration of wholesale energy contracts.”). 181 See supra notes text accompanying notes 143–145. 182 See 11 U.S.C. § 365 (2018). 183 See id. 184 Id. § 362(b)(4). 185 Id. § 1129(a)(6) (permitting the confirmation of a reorganization plan only when “[a]ny governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval”). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 333 contains numerous “specific limitations and exceptions to the § 365(a) general rejection authority.”186 These exceptions include provisions prohibiting rejection of certain obligations imposed by regulatory authorities.187 One particularly salient exception is § 1113, which sets forth requirements for the assumption or rejection of collective bargaining agreements.188 The exception for collective-bargaining agreements was enacted by Congress in direct response to the Supreme Court’s first interpretation of the newly revised Bankruptcy Code in NLRB v. Bildisco & Bildisco.189 Section 1113 overturned Bildisco.190 In Bildisco, the Court held that there was no exception to the debtor’s rejection power for collective-bargaining agreements governed by the National Labor Relations Act (NLRA), citing the “statutory design of § 365(a) and” the exception in § 1167.191 The Court reasoned that Congress purposely drafted § 365(a) to limit the debtor-in-possession’s power of rejection in certain circumstances—“[y]et none of the express limitations on the debtor-in-possession’s general power under § 365(a) apply to collective-bargaining agreements.”192 In particular, § 1167 expressly exempts 186 Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 521 (5th Cir. 2004) (identifying 11 U.S.C. §§ 365(d)(5), 365(o), 1113, 1169). 187 See, e.g., 11 U.S.C. § 365(o) (requiring a trustee to assume “any commitment by the debtor to a Federal depository institutions regulatory agency . . . to maintain the capital of an insured depository institution” and granting priority to any claim of a subsequent breach of this obligation); id. § 1113 (setting forth requirements for the assumption or rejection of collective bargaining agreements); id. § 1169 (providing special treatment for the rejection of a railroad lease); id. § 365(d)(5) (describing the special conditions for deemed rejection of an air carrier’s unexpired lease of an airport terminal or aircraft gate); cf. also id. § 1110 (setting forth special requirements for the assumption of executory contracts relating to aircraft equipment and vessels). 188 Id. § 1113. 189 RONALD J. MANN, BANKRUPTCY AND THE U.S. SUPREME COURT 120– 21 (2017). 190 Id. at 121; 11 U.S.C. § 1113(c). 191 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 522 (1984). 192 Id. HIRSH – NOTE 6/13/2021 8:42 PM 334 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 collective-bargaining agreements subject to the Railway Labor Act, but (at the time) there was no similar exemption for agreements subject to the NLRA.193 From this, the Court concluded that “Congress knew how to draft an exclusion for collective-bargaining agreements when it wanted to; its failure to do so in this instance indicates that Congress intended that § 365(a) apply to all collective-bargaining agreements covered by the NLRA.”194 This reasoning in Bildisco clearly influenced the Fifth Circuit’s decision in Mirant.195 The implication of the Bildisco decision (and the subsequent enactment of § 1113 which effectively overturned the decision) is that if FERC desires an exception to the rejection power, it must look to Congress to amend the Bankruptcy Code. The Fifth Circuit reasoned along these lines in Mirant, arguing: The fact that Congress did not create an exception from § 365(a) rejection for contracts subject to FERC regulation does not appear to be an accident or oversight. It is clear from other Bankruptcy Code provisions that Congress was aware that a debtor’s bankruptcy reorganization could implicate the authority of a regulatory rate-setting commission with jurisdiction over that debtor.196 The Bildisco reasoning is not, however, perfectly applicable to the rejection of PPAs. In Calpine, the Southern District of New York rejected Mirant’s interpretation of 193 11 U.S.C. § 1167. 194 Bildisco, 465 U.S. at 522–23. 195 Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 521 (5th Cir. 2004) (“The structure of the Bankruptcy Code . . . indicates that Congress did not intend to limit the ability of utility companies to reject an executory power contract. Section 365, along with other Bankruptcy Code sections, details a number of specific limitations on and exceptions to the § 365(a) general rejection authority, including exceptions prohibiting rejection of certain obligations imposed by regulatory authorities. The Bankruptcy Code does not, however, include an exception prohibiting rejection of, or providing other special treatment for, wholesale electric contracts subject to FERC jurisdiction.” (citation omitted)). 196 Id. at 521. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 335 Bildisco and the Bankruptcy Code.197 In reaching this conclusion, the court noted that, unlike with collective- bargaining agreements, the Bankruptcy Code does not contemplate PPAs whatsoever.198 There is no exception equivalent to § 1167—i.e., one that limits the rejection of PPAs governed by one statute but not those governed by the FPA.199 Rather, PPAs are not mentioned in any provision of the Bankruptcy Code. The Southern District of New York went further, however, disputing the conventional interpretation of the Bildisco holding.200 The court described Bildisco as holding that where there is no conflict with a federal regulatory regime, a bankruptcy court should be allowed the fullest expression of its power and jurisdiction, including the power to authorize rejection, but where there is conflict, the power of the bankruptcy court must yield to that of the federal agency.201 According to the court, in electric utility bankruptcies the rejection power directly conflicts with the FPA, so Bildisco can be distinguished, and the bankruptcy court must yield to FERC.202 In sum, the courts are split on both their interpretations of the text of the Bankruptcy Code and the applicability of Bildisco. While the Fifth Circuit relied heavily on Bildisco and reasoned from the absence of an exception to the debtor’s § 365 rejection power for PPAs, the Southern District of New York concluded that other sections of the Code indicate that Congress contemplated a role for agencies during an electric utility bankruptcy. In FirstEnergy, the Sixth Circuit did not 197 Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 34 (S.D.N.Y. 2006). 198 See id. In Bildisco, the Court leaned on the existence of § 1167, which “expressly exempts collective-bargaining agreements subject to the Railway Labor Act.” 465 U.S. at 522. 199 See In re Calpine Corp., 337 B.R. at 34. 200 Id. 201 Id. (emphasis added). 202 Id. at 35–36. HIRSH – NOTE 6/13/2021 8:42 PM 336 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 discuss Bildisco, except when considering whether a heightened rejection standard was appropriate.203 2. Applying a Heightened Rejection Standard to PPAs As discussed earlier, the bankruptcy court typically applies the business judgment standard when deciding whether to approve a rejection.204 When considering whether to allow the rejection of PPAs, however, the circuit courts have consistently held that a heightened standard ought to apply.205 Applying a heightened standard to the rejection of special executory contracts is not unprecedented. In Bildisco, the Court held that “a somewhat stricter standard” than the business judgment standard should govern the bankruptcy court’s decision to allow rejection of a collective-bargaining agreement.206 Thus, when deciding whether to allow the rejection of a collective-bargaining agreement under Bildisco, the bankruptcy court balanced the equities, considering “the likelihood and consequences of liquidation for the debtor absent rejection, the reduced value of the creditors’ claims that would follow from affirmance and the hardship that would impose on them, and the impact of rejection on the employees.”207 In other words, instead of deferring broadly to the debtor’s judgment, the court needed to determine that the equities balanced in favor of rejection. Following Bildisco, the Fifth and Sixth Circuits carved out a similar exception for the rejection of PPAs. In Mirant, the Fifth Circuit found that the business judgment standard was inappropriate “because it would not account for the public interest inherent in the transmission and sale of 203 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 452–53 (6th Cir. 2019). 204 See supra notes 23–24 and accompanying text. 205 See Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 524 (5th Cir. 2004); In re FirstEnergy Sols. Corp., 945 F.3d at 454. 206 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 514, 524 (1984). 207 Id. at 527. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 337 electricity.”208 The court suggested that the district court should apply a more rigorous standard, like the one the courts apply to collective-bargaining agreements, allowing rejection only if the debtor can show that the PPA “burdens the estate, [and] that, after careful scrutiny, the equities balance in favor of rejecting” it.209 Kohler maintained that this heightened standard could not be the same as the heightened Mobile-Sierra public interest standard: “Imposition of the orthodox Mobile-Sierra ‘public interest’ standard would seem to violate Bildisco because this demanding standard would almost invariably frustrate rejection.”210 But the application of a heightened standard akin to the one that the Supreme Court outlined in Bildisco would not be without precedent, and the Sixth Circuit followed the Fifth Circuit in adopting it. In FirstEnergy, the Sixth Circuit agreed that the business judgment standard prevented the bankruptcy court from adequately considering the public interest implicated by the FPA and the harms that could result from rejection.211 Citing Mirant, the majority concluded that the bankruptcy court must consider “the impact of the rejection of these contracts on the public interest—including the consequential impact on consumers and any tangential contract provisions concerning such things as decommissioning, environmental management, and future pension obligations—to ensure that the ‘equities balance in favor of rejecting the contracts.’”212 Judge Griffin concurred with the majority’s holding on this point.213 Thus, all the circuit judges who have considered whether the business judgment rule is appropriate have 208 In re Mirant Corp., 378 F.3d at 525. 209 Id. at 525 (internal quotation marks omitted) (quoting Bildisco, 465 U.S. at 526–27). 210 Kohler, supra note 79, at 1983 n.146. 211 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 454 (6th Cir. 2019) (“We conclude that an adjusted standard best accommodates the concurrent jurisdiction between, and separate interests of, the Bankruptcy Code (court) and the FPA (FERC).”). 212 Id. (footnote omitted) (quoting In re Mirant Corp., 378 F.3d at 525). 213 Id. at 455 (Griffin, J., concurring in part and dissenting in part). HIRSH – NOTE 6/13/2021 8:42 PM 338 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 agreed that the bankruptcy courts should apply a heightened standard instead. 3. Reconciling Mirant and Calpine Despite the judges’ universal agreement that a heightened standard should apply when debtors seek to reject PPAs, as explained in Section IV.B.1, there is an apparent conflict between the Fifth Circuit’s holding in Mirant (granting the bankruptcy court exclusive jurisdiction)214 and the Southern District of New York’s decision in Calpine (granting FERC exclusive jurisdiction).215 But in Calpine and FirstEnergy, the Southern District of New York and the Sixth Circuit, respectively, argued that it may be possible to reconcile the Mirant and Calpine opinions.216 Although the Southern District of New York recognized that its decision was in “obvious conflict” with Mirant, it also maintained that even if it “appl[ied] Mirant faithfully,” it still could have found that FERC had exclusive jurisdiction.217 The court pointed to language in the Fifth Circuit’s decision distinguishing a situation in which the debtor claims that it cannot take the supplier’s electricity regardless of price because it has no use for the power (like in Mirant and FirstEnergy) from a situation in which the debtor claims that it can fulfill its purchase obligation, just at a lower rate (like in Calpine).218 The debtor’s reason for rejection is significant because a district court could take jurisdiction over the former type of breach outside of bankruptcy.219 On the other hand, if the electric utility sought to breach its PPA because it wanted a lower or higher market rate, under the filed-rate doctrine, the courts must defer to FERC.220 According to the Southern 214 In re Mirant Corp., 378 F.3d at 521–22. 215 Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 37 (“[W]hat FERC giveth, only FERC may taketh away.”). 216 Id.; In re FirstEnergy Sols. Corp., 945 F.3d at 450. 217 In re Calpine Corp., 337 B.R. at 37. 218 See id. at 37–38. 219 See In re Mirant Corp., 378 F.3d at 520. 220 See Gulf States Utils. Co. v. Ala. Power Co., 824 F.2d 1465, 1472– 74 (5th Cir. 1987). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 339 District of New York, the Fifth Circuit did not think that the outcome should differ in the bankruptcy context.221 Since Calpine was “ready and willing” to supply power at higher, competitive market prices, the Southern District of New York thought that even the Fifth Circuit would agree that rejection would constitute a collateral attack on the filed rate.222 In FirstEnergy, the Sixth Circuit identified this possible common ground between Calpine and Mirant and from it concluded that FirstEnergy was more similar to Mirant.223 The Sixth Circuit explained that even if this possible reconciliation is derived from dicta in Mirant and Calpine, it “self-distinguishes” the two cases, and since FirstEnergy did “not want the energy at all,” it was more like Mirant.224 Thus, an electric utility debtor’s intent matters when a court is determining whether the bankruptcy court can allow PPA rejection without FERC’s consent: If the debtor wants to buy (or sell) the energy at lower (or higher) market prices, then, like in Calpine, FERC may have a say. But if the debtor does not want the energy at all, then, like in Mirant and FirstEnergy, the bankruptcy court may have exclusive jurisdiction. Even assuming the Fifth and Sixth Circuits were right that the bankruptcy courts should have had exclusive or superior jurisdiction to allow rejection,225 it is still unclear whether the electric utility debtors must seek FERC’s permission to stop complying with the publicly filed rates after the bankruptcy courts allows rejection.226 The next Part argues that no matter where jurisdiction lies at the rejection stage, debtors should 221 In re Calpine Corp., 337 B.R. at 38. 222 Id. (internal quotation marks omitted). 223 See Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 450 (6th Cir. 2019). 224 Id. 225 The Fifth and Sixth Circuits agreed that this was true, at least when the utility has no need for the electricity, rather than when it is willing to accept power at competitive market prices. See supra notes 178–179 and accompanying text. 226 Rates are filed with FERC even if the parties negotiated the agreements privately pursuant to the supplier’s market-based tariff. See supra text accompanying notes 166–168. HIRSH – NOTE 6/13/2021 8:42 PM 340 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 be required to seek FERC’s approval to get out of the regulatory obligations associated with its PPAs before the bankruptcy court can approve the reorganization plan. V. REJECTION SHOULD NOT RELIEVE THE DEBTOR OF ITS REGULATORY RATE OBLIGATIONS Part IV found that all the circuit judges who have heard this issue agree that when electric utility debtors seek to reject PPAs, the bankruptcy court must apply a heightened rejection standard that accounts for the public interest,227 and it may be possible to reconcile the Fifth Circuit’s and Southern District of New York’s conflict opinions. This Part argues that, even if an electric utility debtor is allowed to reject PPAs in bankruptcy, they must continue to comply with the filed tariffs (which are public obligations that exist separate from the electric utility’s PPA obligations) until FERC says otherwise. Moreover, this conclusion may be consistent with § 1129(a)(6) of the Bankruptcy Code, which requires that any change to filed rates in a Chapter 11 reorganization plan be contingent on the regulator’s approval.228 At the very least, the limitations imposed on bankruptcy courts by Article III and principles derived from the Supreme Court’s bankruptcy doctrines suggest that the district court should withdraw its reference. 227 See In re FirstEnergy Sols. Corp., 945 F.3d at 446 (“The bankruptcy court has jurisdiction to decide whether [FirstEnergy], as a Chapter 11 debtor-in-possession, may reject the ICPA and PPA contracts, meaning that [FirstEnergy] can reject the contracts subject to proper bankruptcy court approval and FERC cannot independently prevent it.”); Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 522 (5th Cir. 2004) (“[T]here is nothing within the Bankruptcy Code itself that limits a public utility’s ability to choose to reject an executory contract subject to FERC regulation as part of its reorganization process.”). 228 11 U.S.C. § 1129(a)(6) (2018). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 341 A. The Debtor-in-Possession Must Comply with Its Public Rate Obligation Even if electric utility debtors can reject PPAs through the § 365 process, this should not release the reorganized utility from its pre-existing public rate obligations without FERC’s consent. PPAs are commonplace in the modern system of market-based energy pricing, but they have not completely replaced the traditional pricing system, which requires FERC to set the rates.229 While energy suppliers and purchasers often negotiate PPAs privately, they still must file the associated tariffs with FERC.230 And although PPAs may be executory contracts that are not exempt from § 365, the filed tariffs are more akin to regulations, and, per the FPA, electric utilities can only modify or abrogate the filed tariffs with FERC’s consent.231 Electric utilities should not be relieved of their public rate obligations in bankruptcy. As the Southern District of New York noted in Calpine, once a rate is filed with FERC, the rate has the force of law.232 Outside of the bankruptcy context, the First and Eighth Circuits have gone so far as to say that, once filed with FERC, the rate is to be treated as though it is a statute.233 “[T]he duty to perform under those contracts may be required, ‘not from the private law of contract,’ but” from the FPA and FERC’s regulations.234 In other words, the electric utility’s public rate obligations exist separate from its contractual obligations.235 229 See supra Section II.B.2 (describing the transition to the market- based pricing system). 230 See supra Section II.B.2. 231 16 U.S.C. § 824d (2018). 232 Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 33 (S.D.N.Y. 2006) (citing California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 839 (9th Cir. 2004)). 233 See supra note 149. 234 In re Calpine Corp., 337 B.R. at 33 (citing Pa. Water & Power Co. v. Fed. Power Comm’n, 343 U.S. 414, 422 (1952)). 235 See Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 456 (6th Cir. 2019) (Griffin, J., concurring in part and dissenting in part) (“Once filed with FERC, a ‘filed HIRSH – NOTE 6/13/2021 8:42 PM 342 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 Judge Griffin emphasized this point in his partial dissent in FirstEnergy, arguing that “[a] filed rate imposes public-law obligations, like a federal regulation does, and a bankruptcy court ‘could no more reject an actual regulation than it could reject the Constitution.’”236 The FPA was enacted because the Attleboro Supreme Court case left wholesale markets unregulated.237 The federal government needed to act, and so it did by enacting the FPA, believing “that the business of transmitting and selling electric energy for ultimate distribution to the public is affected with a public interest.”238 Electric utilities should not be able to take advantage of bankruptcy in order to evade these fundamental principles of energy law. There are good reasons to distinguish between the electric utility’s private contractual obligations and its public rate obligations. It is one thing for the debtor to drag creditors down with it when the creditors were foolish enough to transact with the debtor in the marketplace. It’s another thing entirely for a bankruptcy court to call a rate “unfair” or “not in the public interest” and allow the debtor to get out of its public rate obligations simply because the reorganized utility prefers to purchase energy at the current market rate. The Calpine and FirstEnergy courts seemed to agree with this when they reasoned that FERC should have a say when the debtor wants to reject its PPAs in order to obtain or sell the energy at market prices.239 rate’ becomes an obligation external to the contract, with the independent force of law.”). 236 Id. at 458 (citing FirstEnergy Sols. Corp. v. Fed. Energy Regul. Comm’n (In re FirstEnergy Sols. Corp.), No. 18-50757, 2018 WL 2315916, at *15 (Bankr. N.D. Ohio May 18, 2018), aff’d in part, rev’d in part and remanded, 945 F.3d 431)). 237 See supra note 31. 238 16 U.S.C. § 824(a) (2018). 239 See supra Section IV.B.3. HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 343 B. The Bankruptcy Code Requires FERC To Approve Any Rate Changes By its terms, § 1129(a)(6) of the Bankruptcy Code provides that any rate change is contingent on the regulator’s approval: (a) The court shall confirm a plan only if all of the following requirements are met: . . . . (6) Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval.240 It would be inconsistent with this section of the Bankruptcy Code for rejection to result in a modification or abrogation of the debtor’s public rate obligations without FERC’s approval. But § 1129(a)(6) has not received much attention from the courts, perhaps because its language “falls short of articulating a relationship between the bankruptcy court and regulatory authority.”241 In addition, in electric utility bankruptcies, the courts have resolved the rejection issue in ways that render § 1129(a)(6) inapplicable later in the bankruptcy. When courts hold that no rate change results from rejection, § 1129(a)(6) does not apply. In FirstEnergy, for example, the bankruptcy court held that the filed rate was given full effect when determining the breach of contract damages resulting from the rejection.242 FERC objected to the confirmation of FirstEnergy’s plan, citing § 1129(a)(6) and arguing that “the Plan d[id] not contain any statement that the Debtors have obtained . . . approval for any rate change, nor that any rate change is expressly conditioned on such 240 11 U.S.C. § 1129(a)(6) (2018). 241 Eisenberg, supra note 10, at 12–13 (“Indeed, the provision seems to leave to the bankruptcy court’s discretion whether to condition plan approval upon subsequent regulatory approval or to require that regulatory approval be obtained prior to bankruptcy court approval.”). 242 In re FirstEnergy Sols. Corp., 2018 WL 2315916, at *17. HIRSH – NOTE 6/13/2021 8:42 PM 344 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 approval.”243 But the bankruptcy court held that § 1129(a)(6) did not apply, because “[t]he Plan d[id] not contain any rate changes for the Debtors that would require approval of any governmental regulatory commission,” leaving FERC with no opportunity to enforce its rate authority.244 The FirstEnergy bankruptcy court’s conclusions were flawed, because they ignored that a claim for damages usually will not compensate the counterparties at the filed rate. This is because when the debtor-in-possession or trustee rejects a contract, the counterparty has a prepetition unsecured claim for damages, and unsecured creditors typically only receive “cents on the dollar” at the end of the reorganization.245 Thus, by the terms of § 1129(a)(6), when the debtor-in-possession proposes to compensate the counterparty at less than the filed rate (as it likely would since counterparties of rejected contracts are unsecured creditors) FERC’s approval should be required. And when the debtor-in-possession proposes to terminate the agreement entirely (effectively changing the rate by rendering it zero) FERC’s approval should also be required. C. The Bankruptcy Court’s Authority Is Limited by Article III and the Supreme Court’s Bankruptcy Doctrine This Note argues that the bankruptcy courts should require FERC’s authorization before allowing the debtor to modify or abrogate its rate obligation upon reorganization. But, at the very least, Article III and the Supreme Court’s existing doctrine confining the jurisdiction of the bankruptcy 243 Objection of Fed. Energy Regul. Comm’n to Confirmation of Sixth Amended Joint Plan of Reorganization of FirstEnergy Sols. Corp., et al. Pursuant to Chapter 11 of the Bankr. Code at 3, In re FirstEnergy Sols. Corp., 2018 WL 2315916. 244 Motion of Fed. Energy Regul. Comm’n To Certify Confirmation Ord. for Direct Appeal to the U.S. Ct. of Appeals for the Sixth Cir. at 5, 2018 WL 2315916 (first alteration in original) (internal quotation marks omitted). 245 Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652, 1658 (2019). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 345 courts demand that, from the rejection stage on, the district court should withdraw the reference of the bankruptcy court and assign the initial resolution of proposed modifications to FERC.246 1. Constitutional Limits on the Authority of the Bankruptcy Court To Decide Non-Bankruptcy Issues The role for FERC in electric utility bankruptcies is complicated by the fact that bankruptcy courts are not Article III courts.247 FERC, when acting as an adjudicator, also is not an Article III tribunal.248 And although bankruptcy and FERC tribunals are housed in different branches, they are both creatures of Congress. Both the bankruptcy courts and FERC are, accordingly, confined to doing what is allowed by statute.249 It does not make sense to allow one non-Article III tribunal to strip the jurisdiction of another non-Article III tribunal where Congress does not explicitly authorize it. Thus, bankruptcy courts should not be able to “stop” FERC from exercising its jurisdiction over wholesale power rates in the public interest,250 particularly when there is no indication that this was Congress’s intent. 246 See Kohler, supra note 79, at 1949 (suggesting that abstention may solve the conflict between bankruptcy courts and FERC). 247 See Ralph Brubaker, Non-Article III Adjudication: Bankruptcy and Nonbankruptcy, with and Without Litigation Consent, 33 EMORY BANKR. DEVS. J. 11, 13 (2016). 248 FERC is an independent agency created by the FPA. See What FERC Does, FED. ENERGY REGUL. COMM’N, https://www.ferc.gov/about/what- ferc/what-ferc-does [https://perma.cc/XDU9-F3S7] (last visited Apr. 26, 2021); 16 U.S.C. § 792 (2018) (“A commission is created and established to be known as the Federal Power Commission[.]”). It answers to Congress, and “[c]ommissioners and senior staff are routinely called to testify before various committees.” See Frequently Asked Questions (FAQs) About FERC, FED. ENERGY REGUL. COMM’N, https://www.ferc.gov/about/what- ferc/frequently-asked-questions-faqs/frequently-asked-questions-faqs- about-ferc [https://perma.cc/YD2U-9RDM] (last visited Apr. 26, 2021). 249 See STRAUSS ET AL., supra note 157 , at 790. 250 The bankruptcy judge in the PG&E case declared that “FERC must be stopped.” See PG&E Corp. v. Fed. Energy Regul. Comm’n (In re PG&E Corp.), 603 B.R. 471, 476 (Bankr. N.D. Cal. 2019), vacated sub nom. Pac. HIRSH – NOTE 6/13/2021 8:42 PM 346 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 To be clear, bankruptcy courts also are not agencies. Agency interpretations of the law are granted broad deference by the federal courts.251 In contrast, bankruptcy court interpretations are subject to de novo review.252 The legislative history of the Bankruptcy Reform Act of 1978 makes clear that Congress rejected a proposal for a new bankruptcy agency.253 Although there are two federal agencies that operate in the bankruptcy arena, “[t]he Bankruptcy Code is one of the few major federal civil statutory regimes administered almost exclusively through adjudication in the courts.”254 Indeed, Article III judges have the power to withdraw cases from bankruptcy courts or refuse to refer them to the bankruptcy courts in the first instance.255 Gas & Elec. Co. v. Fed. Energy Regul. Comm’n, 829 F. App’x 751 (9th Cir. 2020). 251 See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 866 (1984) (“When a challenge to an agency construction of a statutory provision . . . really centers on the wisdom of the agency’s policy . . . the challenge must fail. In such a case, federal judges—who have no constituency—have a duty to respect legitimate policy choices made by those who do. The responsibilities for assessing the wisdom of such policy choices and resolving the struggle between competing views of the public interest are not judicial ones: ‘Our Constitution vests such responsibilities in the political branches.’” (quoting Tenn. Valley Auth. v. Hill, 437 U.S. 153, 195 (1978))). 252 Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. REV. 384, 429 (2012). 253 MANN, supra note 189, at 26–27. 254 Pardo & Watts, supra note 252, at 386 (footnote omitted). The two federal agencies are the United States Trustee (UST) and Bankruptcy Administration (BA) Programs. See id. at 394–99. The duties of the UST and BA programs “largely mirror each other,” except that the BA Program operates in Alabama and North Carolina, and the UST Program operates everywhere else. Id. at 395–97. “[M]any of these duties involve reporting or monitoring functions.” Id. at 397. In addition, “both USTs and BAs [can] raise any issue and . . . appear and be heard in any case or proceeding under the Bankruptcy Code.” Id. (citing 11 U.S.C. § 307 (2006)). 255 See 28 U.S.C. § 157(a) (2018) (“Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.” (emphasis added)); id. § 157(d) (“The district court may withdraw, in whole or in part, any case or proceeding HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 347 Withdrawal is mandatory “if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.”256 In Mirant and Calpine, the district courts withdrew the reference of the debtors’ motions to reject the FERC-regulated PPAs.257 Kohler also argued “that district courts should take on the task of supervising the relationship between bankruptcy courts and other regulatory agencies through their discretionary authority to withdraw.”258 2. Doctrinal Limits on the Bankruptcy Court’s Power The Supreme Court has consistently reaffirmed the limitations on the bankruptcy courts by confining their authority doctrinally. Professors Douglas Baird and Anthony J. Casey recently argued that three principal doctrinal strands of bankruptcy law limit the bankruptcy court’s authority.259 The first strand (coming from Butner v. United States)260 “centers on the idea that the bankruptcy forum must vindicate nonbankruptcy rights”;261 the second “focuses on the limits of bankruptcy” judges, who “must . . . limit themselves to deciding issues central to the administration of the bankruptcy process”;262 and the third suggests that the referred under this section, on its own motion or on timely motion of any party, for cause shown.”). 256 Id. § 157(d). 257 Cal Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 31 (S.D.N.Y. 2006); Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 516 (5th Cir. 2004). 258 Kohler, supra note 79, at 1949. 259 See Douglas G. Baird & Anthony J. Casey, Bankruptcy Step Zero, 2012 SUP. CT. REV. 203, 204–05 (identifying and discussing the three principal strands of the Supreme Court’s bankruptcy jurisprudence). 260 440 U.S. 48 (1979). 261 Baird & Casey, supra note 259, at 204. 262Id.; cf. also Stern v. Marshall, 564 U.S. 462, 497 (2011) (noting that a bankruptcy judge may only resolve matters “integral to the restructuring of the debtor-creditor relationship.” (internal quotation marks omitted) (quoting Langenkamp v. Culp, 498 U.S. 42, 44 (1990))). HIRSH – NOTE 6/13/2021 8:42 PM 348 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 “Court reads ambiguous provisions of the Bankruptcy Code . . . [to] narrow the range of decisions over which the bankruptcy judge may exercise her discretion—at least when the exercise of that discretion might impact non-bankruptcy rights.”263 All three of these strands support a finding that the bankruptcy court should not be able to decide unilaterally whether a reorganized electric utility can be relieved of its public rate obligations. First, Butner suggests that a debtor’s position should not change merely by happenstance of bankruptcy. Outside of bankruptcy, if an electric utility sought to breach a PPA and refused to pay the filed rate, under section 205 of the FPA and the filed-rate doctrine, the utility would need to seek relief from FERC.264 The federal courts do not allow unilateral modification or abrogation themselves under the filed-rate doctrine; they defer to FERC’s judgment, and FERC would apply the stringent public- interest standard from Mobile–Sierra.265 Thus, according to the Butner principle, an electric utility should not have a new right to evade the regulatory rate (and the high standard for modification or abrogation) merely because it has access to the rejection power by “happenstance of bankruptcy.”266 Second, the bankruptcy court should limit itself to final judgment on the issues in front of it that are central to the administration of the bankruptcy process. While renegotiating rates may be a key facet of the utility’s reorganization, it will also certainly affect energy markets in ways that directly implicate FERC’s jurisdiction. A core tenet of energy policy is contractual stability, which is why outside of bankruptcy FERC applies the stringent public-interest standard when a party seeks to unilaterally modify or 263 Baird & Casey, supra note 259, at 205 (citing RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065 (2012)). 264 See 16 U.S.C. § 824d(f) (2018). 265 As discussed supra Section II.B.2, the Mobile–Sierra doctrine established a foundational energy law principle, limiting FERC’s ability to allow unilateral modification of PPAs. 266 Butner v. United States, 440 U.S. 48, 55 (1979) (internal quotation marks omitted) (quoting Lewis v. Mfrs. Nat’l Bank of Detroit, 364 U.S. 603, 609 (1961)). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 349 abrogate a PPA.267 It is fairly obvious that the bankruptcy court would need to consider energy law when deciding whether to allow the debtor-in-possession to reject PPAs, particularly when it applies the heightened standard of rejection that requires the bankruptcy court to consider the public interest.268 And as Kohler argued in his note, FERC is better suited to “address whether and to what extent rejection will compromise existing open-access tariffs or existing market-based ratemaking authorizations.”269 Since the bankruptcy court is only charged with interpreting bankruptcy law, it cannot allow the electric utility debtor to evade FERC’s regulatory authority in contravention of the FPA. Third, to the extent that the Bankruptcy Code is ambiguous regarding the effect of rejection on regulatory rates, the Supreme Court will likely narrow the discretion of the bankruptcy judge. In RadLAX, one of the sources of this third doctrinal strain, the Court established an “avoidance presumption” that limits the bankruptcy court’s power “to alter nonbankruptcy rights or adjudicate them.”270 “If Congress intends to change . . . nonbankruptcy law, it does so explicitly.”271 Allowing utilities to change public rates unilaterally, without FERC’s approval, would give the bankruptcy court a unique power—a power unavailable to the federal courts—to alter the federal statutory and regulatory ratemaking scheme. VI. CONCLUSION The opportunity to reject burdensome long-term agreements renders bankruptcy an increasingly attractive 267 See MISO Transmission Owners v. Fed. Energy Regul. Comm’n, 819 F.3d 329, 335 (7th Cir. 2016). 268 All the circuit judges who have decided this issue agree that a more stringent standard than the business judgment standard is appropriate when deciding whether to allow a utility debtor to reject a PPA. See supra Section IV.B.2. 269 Kohler, supra note 79, at 1988. 270 Baird & Casey, supra note 259, at 226. 271 Id. HIRSH – NOTE 6/13/2021 8:42 PM 350 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 option for financially distressed electric utilities.272 But when the bankruptcy courts and FERC collide over an electric utility debtor’s attempt to reject PPAs, the statutory scheme and the doctrine is murky. This Note surveys the doctrinal landscape after the recent FirstEnergy and PG&E litigation. All the circuit judges who reached the jurisdiction question have agreed that a heightened rejection standard should apply,273 but there is disagreement about who should apply it. In the Fifth Circuit, bankruptcy courts have jurisdiction to decide without FERC’s involvement.274 In the Sixth Circuit, FERC and the bankruptcy courts have concurrent jurisdiction, but the bankruptcy courts still occupy a “position . . . primary or superior to FERC’s position.”275 The Ninth Circuit did not have a chance to decide on the jurisdiction question in the recent PG&E case, although it vacated the FERC orders asserting its jurisdiction and the bankruptcy court order asserting its jurisdiction.276 In the Southern District of New York, however, FERC has exclusive jurisdiction over the contracts.277 Among the federal courts, the common strain is that the bankruptcy court cannot allow the rejection of PPAs without taking the public interest into account. This Note also presents arguments for granting FERC the exclusive jurisdiction to decide if a debtor can abrogate or modify its public rate obligations upon exiting bankruptcy. In doing so, it pushes against the existing circuit doctrine. But even if the text of the Bankruptcy Code allows a debtor to reject (or essentially breach) its private contractual rights and obligations, it should not allow the debtor to shirks its corresponding public rate obligations upon confirmation of the 272 See supra Part II. 273 See supra Section IV.B.2. 274 Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 519 (5th Cir. 2004). 275 Fed. Energy Regul. Comm’n v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 945 F.3d 431, 446 (6th Cir. 2019). 276 Pac. Gas & Elec. Co. v. Fed. Energy Regul. Comm’n, 829 F.App’x 751, 755–56 (9th Cir. 2020). 277 Cal. Dep’t of Water Res. v. Calpine Corp. (In re Calpine Corp.), 337 B.R. 27, 30 (S.D.N.Y. 2006). HIRSH – NOTE 6/13/2021 8:42 PM No. 1:296] CREATURES OF CONGRESS COLLIDE 351 reorganization plan without its regulator’s consent. There is also support for this accommodation of FERC in § 1129(a)(6) of the Bankruptcy Code.278 To be sure, there are some other ways to accommodate FERC; these could come from either the legislature or the courts. Congress could amend the Bankruptcy Code to create an exception to § 365, as it did with collective bargaining agreements after Bildisco.279 Or, as Kohler argued (and this Note supports as an alternative to the proposed accommodation),280 litigants who have faith in the district court to decide the issue could argue that withdrawal from the bankruptcy courts is mandatory because non-bankruptcy laws are implicated to a significant degree.281 Instead, this Note argues that the bankruptcy courts should have jurisdiction over the debtors’ private contractual obligations at the rejection stage, but FERC should have exclusive jurisdiction to release the debtors from their public rate obligations before the reorganization plan can be effectuated. 278 See supra Section V.B. 279 See supra Section IV.B.1. 280 See supra Section V.C. 281 Kohler, supra note 79, at 1979.