Electric transmission owners, like any other company, often deal with an array of tort claims. But their unique position under federal regulation equips them with powerful tools to build a robust defense against such claims. A recent decision by the Wisconsin Court of Appeals has confirmed this stance.
In the case of Bahr v. Am. Transmission Co., the court reaffirmed that a negligence claim couldn’t proceed against American Transmission Company LLC because of the limitation of liability clause in the Midcontinent Independent System Operator Inc.’s federal tariff. Similar liability-limiting provisions exist across many other regional transmission organizations and independent system operators.
The decision emphasizes the need for transmission owners to evaluate early on whether negligence or other claims against them may be preempted by Federal Energy Regulatory Commission tariffs. The Bahr case, for example, involved an allegation that ATC had neglected to sufficiently mark certain facilities, leading to a horrific helicopter crash. The facilities in question belonged to ATC’s electric transmission system, although they didn’t transmit electricity.
ATC is a member of MISO, whose tariff states that no member that is a transmission owner will be liable, whether based on tort or otherwise, to any third party for any damages resulting from any service under the tariff. The FERC approved this limitation of liability provision in 2005, striking a balance between lower rates for all consumers and limited recovery for some.
According to the court, these tariff provisions are, in essence, federal regulations, and any state laws conflicting with federal regulations are preempted. The court ruled that ATC’s seamless maintenance of the wires associated with the helicopter crash fell within the tariff’s limitation and were “associated” with ATC’s service of transmitting electricity.
This stands, even though the wires didn’t transmit electricity, and despite the plaintiffs’ argument that ATC’s supposed failure to visibly mark the wires had no correlation to providing electrical service to customers. The court disagreed, explicitly citing the tariff’s broad language and explaining that “ATC only maintains the wires at issue for the purpose of providing the service of transmitting electricity to its customers.”
Although this case concerned a transmission owner in MISO, many regional transmission organizations and independent system operators also hold similar limitation of liability clauses as a part of their FERC tariffs. These provisions may preempt a vast number of claims, including ordinary negligence actions. For instance, the Wisconsin court lauded a Pennsylvania state court decision that dealt with a nearly identical limitation of liability provision in PJM Interconnection LLC’s tariff.
The Wisconsin court’s decision underscores that claims that may seem far removed from the federal regulatory space might still be preempted by federal tariffs. Hence, it is crucial to ascertain whether the limitation of liability clause may come into play early on in a dispute, or if the claim conflicts with anything in the regulated entity’s tariff.
If the limitation of liability clause doesn’t apply, it is still possible for causes of action to be inconsistent with the filed rate doctrine, which precludes claims that conflict with a tariff or would alter a party’s rights as defined by a tariff.
The case details are as follows: Bahr v. Am. Transmission Co., Wis. Ct. App., No. 2022AP2189, 11/8/23.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.