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Energy & Environment

Supreme Court Takes Antitrust Case Stemming From California Energy Crisis

At issue, whether customers can sue energy companies under state antitrust law.

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The Supreme Court will decide whether a group of energy companies – including subsidiaries of Houston-based Dynegy — can be sued under state antitrust laws. The case focuses on the illegal manipulation of natural gas prices during California’s energy crisis more than a decade ago.

The justices said they will hear an appeal from American Electric Power, Duke Energy, and other natural gas traders, arguing that federal law precludes state law claims.

“If the defendants are successful, then you have one less policeman on the beat,” says Darren Bush, an expert on antitrust law at the University of Houston Law Center. “You don’t have private plaintiffs. You may not have states enforcing their own antitrust laws. All you have is the Federal Energy Regulatory Commission. And that means, given limitations in terms of resources and in terms of watchdogs, there’s less to fear and perhaps greater opportunity to engage in market manipulation.”

A federal district court sided with the gas traders. But the 9th U.S. Circuit Court reversed the decision, saying retail buyers of natural gas could go forward with their lawsuit. Natural gas customers say the companies falsely reported data to industry trade publications, leading to higher gas prices. The High Court will hear the case in the fall.