NRG POWER MARKETING, LLC, ET AL., Petitioners, v ... - ISDA

21long-term energy contracts precisely when the needfor such contracts (and energy generally) is at itsgreatest. During times of high energy price volatility,like the Western energy crisis that spurred thelitigation in Morgan Stanley, sensible regulatorypolicies encourage long-term contracts, which allow“buyers and sellers [to] lock in prices over an extendedperiod,” and thus “hedg[e] and allocat[e] riskto specialists willing and able to take on that risk.”Nev. Power Co. & Sierra Pac. Power Co. v. EnronPower Mktg., Inc., 101 F.E.R.C. 63,031, at 65,287(Dec. 19, 2002); see Morgan Stanley, 128 S. Ct. at2743 (noting that part of FERC’s “emergency effort”to combat the crisis in the West was “to shift . . .purchases to the forward market” and to encourageinvestor-owned utilities “to enter into long-term contracts”).In a system where every contract is subject to apost-hoc challenge for “reasonableness” by a nonparty,however, buyers will be hard-pressed to findany seller willing to take such a risk. That is because,when market prices are notably high, the likelihoodthat prices will decline in the future is correspondinglygreat, and the risk of suit from customerswho become unhappy with their utilities’ long-termdeals would impose costs too high to make such salesworthwhile. The decision below, therefore, will discouragedeals at the time when the public is most inneed of a stable supply of energy. Combined withthe decreased participation of power marketers generally,and the inability to attract capital for developmentmoving forward, the consequences of theturmoil induced by the court of appeals’ bifurcatedapproach to contractual reasonableness will severely