MBO Cooperative Client Prevails in Contract Complaint

On June 12, 2009, the United States Court of Appeals for the District of Columbia Circuit upheld the Federal Energy Regulatory Commission's ruling in favor of Arkansas Electric Cooperative Corporation in a contract dispute with Entergy Arkansas, Inc. Miller, Balis & O'Neil, P.C. represented AECC in both the FERC and court proceedings.

The dispute centered the interpretation of a contract between AECC and Entergy that the parties executed in 1977. Pursuant to the agreement, AECC and Entergy integrated their generation resources, and Entergy controls the scheduling and dispatch of the resources. The rate, if any, that AECC must pay Entergy for power under the contract depends on the availability of AECC's own resources and whether, in fact, such resources are used to serve AECC's needs. In 2004, Entergy unilaterally changed its billing practices. It began charging AECC a premium rate for energy supplied during periods in which Entergy experienced operating constraints on its transmission system. Previously, Entergy only applied the premium rate if the AECC units themselves were physically incapable of meeting AECC's requirements.

MBO attorneys represented AECC in a complaint proceeding before FERC, alleging that Entergy's new interpretation was improper. FERC found that the contract did not permit Entergy to charge the premium rate due to constraints on its own system. Entergy appealed to the D.C. Circuit.

The court agreed with FERC that AECC's interpretation was more reasonable. It further found that this interpretation was buttressed by the long-standing course of performance of the parties under the contract. "We cannot agree," the court explained, "that the only plausible way to interpret the contract is precisely the opposite from the way Entergy itself interpreted it for more than 23 years." The court therefore upheld FERC's decision.

The court's decision is captioned as Entergy Services, Inc. v. FERC, No. 07-1343 (D.C. Cir. June 12, 2009). MBO principal Sean T. Beeny argued the case for AECC.