Posted on 09/18/2003 4:34:01 AM PDT by MeneMeneTekelUpharsin
FORT WORTH - U.S. Bankruptcy Judge Michael Lynn of Fort Worth denied federal regulators the power to force bankrupt Mirant Corp. to honor discounted contracts to deliver wholesale electricity to Washington, D.C., and its suburbs. The ruling Wednesday, which is without precedent, continues an injunction that prevents the Federal Energy Regulatory Commission from forcing Mirant to honor contracts to Potomac Electric Power Co.
Mirant of Atlanta, Ga., filed its bankruptcy case in Fort Worth in July and began taking steps to dissolve contracts. Potomac Electric asked energy regulators to intervene to prevent Mirant from abandoning long-term contracts to sell power for the Washington area at discounted prices. The case was considered more of a legal test than a serious threat that the lights would be turned off in the nation's capital. Mirant's attorneys had said in court that the company would continue to supply electricity to Potomac Power even if the contracts were ended. Lynn also made it clear that he did not intend to shut off the lights in the District of Columbia and the adjacent Maryland suburbs.
"FERC and Potomac Power have to consider the interests of tens of thousands of customers in the Washington, D.C., area, while Mirant and the court need only consider the needs of a few creditors," said attorney Jonathan Guy, representing Potomac. Lynn issued a temporary injunction Sept. 3, and on Wednesday extended the injunction past its expiration today. It was widely assumed by most in the courtroom, including Lynn, that the FERC and Potomac Power will appeal Lynn's ruling to either the U.S. District Court in Fort Worth or directly to the U.S. Court of Appeals.
"I wish that I could speed up this matter and take it directly to [U.S. Supreme Court] Justice Scalia," Lynn told FERC attorney Dennis Lane during the hearing. The Fort Worth judge also noted that there was no precedent for the kind of ruling he was to make, saying, "I wish there was a white-knight case that I could call on, but there isn't." After the ruling was issued late Wednesday afternoon, Lane declined to comment on the regulatory commission's plans.
The commission had argued that its regulatory jurisdiction over power generation and transmission should not be superseded by a bankruptcy judge or bankruptcy proceeding. But Lynn said that Mirant's contracts with Potomac Power were "just the tip of the iceberg" of a multitude of contracts held by the multistate power giant, and that removal of the right of a bankrupt company to abandon its contracts would amount to loss of ability to reorganize.
But I agree, it will be interesting to watch.
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