Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) enables troubled enterprises to be restructured, so that they can operate successfully in the future. Under section 365 of the Bankruptcy Code, a debtor in possession may reject a contract subject to bankruptcy court approval. The Federal Energy Regulatory Commission (“FERC”), however, has “exclusive jurisdiction” over the transmission of electric energy in interstate commerce, including power purchase agreements (“PPAs”). Accordingly, there is a dispute as to whether the rejection of a PPA is subject to bankruptcy court or FERC approval.
This memorandum addresses how courts have addressed the conflict between FERC and the bankruptcy courts. If a utility company files for bankruptcy, FERC’s exclusive jurisdiction over the modification of filed contracts could be interpreted to be preemptive over the bankruptcy court’s exclusive jurisdiction to authorize the rejection of an executory contract. In reconciling these statutes two theories have formed between the courts. Part I examines the Exclusive Jurisdiction Theory, where courts are even further divided as to whether it is the FERC or the bankruptcy court that has exclusive jurisdiction. Part II discusses the Concurrent Jurisdiction Theory.