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FERC Revisits Order 888

Fortnightly Magazine - March 15 1997

In Order 888 the FERC had said that contracts containing Mobile-Sierra clauses could be reformed on a case-by-case basis. On rehearing, the commission affirmed that public utilities (the sellers in rate contracts that contain Mobile-Sierra clauses) can apply to amend their contracts to recover stranded costs without having to make a public interest showing that such cost recovery should be permitted. Utilities will bear the burden of proving they had a "reasonable expectation" of continuing to serve the departing customer after the contract term. If the utilities seek to modify provisions not relating to stranded costs, they will have the burden of showing the provisions are contrary to the public interest.

Customers may file to amend Mobile-Sierra contracts. However, the customer must demonstrate the provisions they wish to modify no longer are "just and reasonable." Customers also can file to terminate the contracts. The FERC reaffirmed its conclusion that customers seeking to end or shorten a contract will remain liable to provisions allowing stranded-cost recovery by the supplying utility.

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