A purchaser of electricity foolishly entered into a contract whereby the supplier of electricity could charge an initial rate lower than its filed rates, i.e., lower than the rates filed with the relevant regulatory authority that approved a filed rate.
After the initial rate period expired, the contract provided that the supplier could charge higher rates. After the initial rate period expired, the supplier in fact charged higher rates.
The purchaser sued. It asserted several grounds. On one of them, that the supplier allegedly breached its implied duty of good faith and fair dealing, a panel of the Second Circuit held that there was no bad faith as a matter of law. The parties contracted for an initial rate that was lower than the filed rate that the supplier was allowed to charge. That meant there was no breach of the implied covenant of good faith and fair dealing, according to the panel deciding Connecticut law. Richards v. Direct Energy Serv's, LLC, 915 F.3d 88, 98-100 (2d Cir. 2019).
Their reasoning as to the supplier's higher rates after the initial rate period expired is, with all due respect, circular at best. The panel ruled that in its view the supplier obviously exercised its discretion in good faith to charge higher rates. They pointed to evidence that other suppliers charged those high rates, and rejected the evidence that the higher rates were higher than the approved rates that the supplier could charge if it had followed the regulator's rulings.
Seriously. That's what they said.
On remaining counts, the same panel unhesitatingly applied the filed rate as a defense to the supplier's liability for its charges.
So, in this Second Circuit panel's view, there was no filed rate, until there was. Regardless of the filed rate, there was no bad faith here, they said.
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