In the past, the bankruptcy courts and the Federal Energy Regulatory Commission (“FERC”) have been involved in a power struggle with one another. Congress has granted bankruptcy courts exclusive authority to allow debtors to reject executory contracts in chapter 11 reorganization cases. Additionally, Congress has granted FERC authority to govern over utility entities’ filed-rates, which are sometimes contained in executory contracts. It is in this intersection, regarding executory contracts containing filed-rates, where the power struggle between the two exists.
An executory contract is a contract where both parties still have material obligations to perform under the contract. Filed-rates may be contained in executory contracts. Under the filed-rate doctrine, a federally regulated seller of natural gas, oil, and energy is prohibited from charging rates higher than those filed with FERC. FERC is an independent agency within the Department of Energy that regulates the interstate transmission of electricity, natural gas, and oil.
Most recently, the U.S. Court of Appeals for the Fifth Circuit held that FERC cannot interfere with the bankruptcy court’s power to permit the rejection of executory contracts. While the Fifth Circuit’s approach to this issue dominates, one jurisdiction has held that during a chapter 11 case, debtors additionally need FERC’s approval to reject an executory contract containing a filed-rate.
This article analyzes whether the bankruptcy courts and FERC share parallel jurisdiction to permit rejection of a debtor’s executory contract containing a filed-rate. Part I explains Congress’s delegation of power between the bankruptcy courts and FERC regarding executory contracts and the filed-rate doctrine, and explores the intersection between the courts and FERC. Part II examines the competing views of the issue and explains the public interest considerations concerning the intersection of the bankruptcy courts and FERC.