Justia Utilities Law Opinion SummariesArticles Posted in Bankruptcy
In re: FirstEnergy Solutions Corp.
FES distributes electricity, buying it from its fossil-fuel and nuclear electricity-generating subsidiaries. FES and a subsidiary filed Chapter 11 bankruptcy. The bankruptcy court enjoined the Federal Energy Regulatory Commission (FERC) from interfering with its plan to reject certain electricity-purchase contracts that FERC had previously approved under the Federal Power Act, 16 U.S.C. 791a or the Public Utilities Regulatory Policies Act, 16 U.S.C. 2601, applying the ordinary business-judgment rule and finding that the contracts were financially burdensome to FES. The counterparties were rendered unsecured creditors to the bankruptcy estate. The Sixth Circuit agreed that the bankruptcy court has jurisdiction to decide whether FES may reject the contracts, but held that the injunction was overly broad (beyond its jurisdiction) and that its standard for deciding rejection was too limited. The public necessity of available and functional bankruptcy relief is generally superior to the necessity of FERC’s having complete or exclusive authority to regulate energy contracts and markets. The bankruptcy court exceeded its authority by enjoining FERC from “initiating or continuing any proceeding” or “interfer[ing] with [its] exclusive jurisdiction,” given that it did not have exclusive jurisdiction. On remand, the bankruptcy court must reconsider and decide 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.” View "In re: FirstEnergy Solutions Corp." on Justia Law
In re: Energy Future Holdings
After initiating Chapter 11 bankruptcy proceedings, Debtors entered into an Agreement: NextEra would acquire Debtors’ 80% interest in Oncor, the largest electricity transmission and distribution system in Texas, for approximately $9.5 billion. The Agreement obligated Debtors to pay NextEra $275 million if NextEra did not ultimately acquire Debtors’ interest in Oncor and Debtors either sold to someone else or otherwise emerged from bankruptcy, with several exceptions. If the Public Utility Commission of Texas (PUCT) did not approve the merger, payment would not be triggered if the Agreement was “terminated . . . by [NextEra] . . . and the receipt of PUCT Approval (without the imposition of a Burdensome Condition) [wa]s the only condition . . . not satisfied or waived in accordance with this Agreement.” About a year after approving the Agreement, and after PUCT expressed concern about the condition, the bankruptcy court granted a motion for reconsideration and disallowed the Termination Fee in the event that the PUCT declines to approve the transaction and, as a result, the agreement is terminated, regardless of whether the Debtors or NextEra subsequently terminates the agreement. Were it not for that order, NextEra would be entitled to the $275 million. The Third Circuit affirmed, rejecting NextEra’s arguments that the motion was untimely and, alternatively, that the motion should have been denied on the merits because the termination fee provision, as originally drafted, was an allowable administrative expense under 11 U.S.C. 503(b). View "In re: Energy Future Holdings" on Justia Law
Lyda v. City of Detroit
In 2013, the City of Detroit filed for chapter 9 bankruptcy protection, facing problems “run[ning] wide and deep”—including the affordable provision of basic utilities. In 2014, plaintiffs, customers, and the purported representatives of customers, of the Detroit Water and Sewerage Department (DWSD), filed an adversary proceeding, based on DWSD’s termination of water service to thousands of residential customers. Citing 42 U.S.C. 1983 and the Supreme Court holding in Monell v. Department of Social Services, plaintiffs sought injunctive relief. The Sixth Circuit affirmed dismissal. Section 904 of the Bankruptcy Code explicitly prohibits this relief. Whether grounded in state law or federal constitutional law, a bankruptcy court order requiring DWSD to provide water service at a specific price, or refrain from terminating service would interfere with the City’s “political [and] governmental powers,” its “property [and] revenues,” and its “use [and] enjoyment of . . . income-producing property,” 11 U.S.C. 904. Plaintiffs’ due process and equal protection claims were inadequately pled. View "Lyda v. City of Detroit" on Justia Law
N. New England Tel. Operations LLC v. Pub. Utils. Comm’n
In 2008, the Public Utilities Commission approved a merger between FairPoint Communications-NNE (FairPoint) and Verizon Maine (Verizon). The merger order committed FairPoint to expanding DSL availability in Maine to certain percentages within certain periods of time. The merger order incorporated an amended stipulation presented by FairPoint and other parties. Approximately twenty months later, FairPoint filed for Chapter 11 bankruptcy. The Commission agreed to reduce FairPoint's ultimate broadband buildout obligations from ninety percent addressability to eighty-seven percent. Fairpoint subsequently notified the Commission that it had expanded broadband buildout to the level of eighty-three percent. The Commission disagreed, concluding that FairPoint had used the wrong measure of addressability and therefore overstated its results. At issue on appeal was how "addressability" would be measured when calculating FairPoint's broadband buildout commitments in Maine. The Supreme Court affirmed, holding (1) the merger order was an order of the Commission and not a consent decree, and therefore, the Commission did not err by failing to interpret the merger order in a manner consistent with the intent and understanding of the parties to the stipulation; and (2) the Commission did not err in its definition of "addressability." View "N. New England Tel. Operations LLC v. Pub. Utils. Comm'n" on Justia Law
Stoebner v. Consumers Energy Company, et al.
Plaintiff, in these related appeals, was the Trustee in the Chapter 7 bankruptcy cases of LGI Energy Solutions, Inc. and LGI Data Solutions Company, LLC, which were in the business of providing utility-management and billing services to restaurants and other customers. These consolidated appeals involved seven adversary proceedings by the Trustee to avoid payments made by LGI Energy to defendant utilities prior to the bankruptcy. The Trustee contended that such payments were preferential and/or fraudulent transfers under the Bankruptcy Code and applicable state law. The Bankruptcy Court granted summary judgment in favor of defendants based on its conclusion that the payments they received for the utilities were not an asset of either debtor. The court held that the bankruptcy court's ruling was inconsistent with Minnesota law and Eighth Circuit precedent. If a trust or agency relationship was intended to be created by the agreements between LGI Energy and its customers, then defendants were nevertheless required to prove that LGI Energy honored that relationship and treated the funds accordingly. Therefore, the court reversed and remanded. View "Stoebner v. Consumers Energy Company, et al." on Justia Law
Reedsburg Util. Comm’n v. Grede Foundries, Inc.
The Wisconsin smelting plant owed more than $1.3 million in delinquent utility charges to the local municipal utility when it filed for Chapter 11 bankruptcy. Months later, despite the automatic stay, the utility implemented a process pursuant to sections 66.0809 and 66.0627, Wisconsin Statutes and local ordinance, under which unpaid utility bills become a lien against the property. The bankruptcy court and district court found that none of the exceptions to the automatic stay applied to the debt, which constituted more than one-third of the utility's operating revenue. The Seventh Circuit affirmed, holding that no exception to the stay applied. The utility did not obtain a pre-petition security interest in the plant property by providing service or billing. The utility bills were not a tax or special assessment. View "Reedsburg Util. Comm'n v. Grede Foundries, Inc." on Justia Law