(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
The Mobile-Sierra Doctrine: A Return to Its Statutory Roots
The 9th Circuit’s Snohomish and PUC decisions rationalize what has been a confusing, conflicted area of law.
24 Improprieties at the contract-formation stage undermine the basis for Mobile-Sierra just as surely as does a Memphis clause.
The 9th Circuit’s Snohomish and PUC decisions provide an opportunity for the courts, the commission, and the energy bar to rationalize what has been a confusing, conflicted area of law. As the 9th Circuit correctly perceived, the surest way through the thicket of contradictory case law is to return to the language of the statute. Under the FPA, all jurisdictional rates must be just and reasonable, and any person may file a complaint seeking modification of an unjust and unreasonable rate. Mere unprofitability to one of the contracting parties is insufficient to render an existing contract unjust and unreasonable, 25 and contracting parties can waive by agreement their own rights to seek contract modifications. But nothing in the FPA permits contracting parties to foist undue burdens on non-parties or allows them to foreclose nonparties and the commission from rectifying contracts that are unjust and unreasonable as to others. The commission’s obligation to ensure just and reasonable rates is indefeasible, and Mobile-Sierra “in no way impairs” it. 26
1. Public Utils. Dist. No. 1 of Snohomish Cty., Wash. v. FERC , 471 F.3d 1053 (9th Cir. 2006) ( Snohomish); Pub. Utils. Comm’n of Cal. v. FERC , 474 F.3d 587 (9th Cir. 2006) ( PUC).
2. See United Gas Pipe Line Co. v. Mobile Gas Serv. Corp. , 350 U.S. 332 (1956) (Mobile); FPC v. Sierra Pac. Power Co. , 350 U.S. 348 (1956) ( Sierra).
3. Richmond Power & Light v. FPC , 481 F.2d 490, 493 (D.C. Cir. 1973).
4. Papago Tribal Util. Auth. v. FERC , 723 F.2d 950, 954 (D.C. Cir. 1983) ( Papago).
5. See Notice of Proposed Rulemaking, Standard of Review for Modifications to Jurisdictional Agreements , 71 Fed. Reg. 303 (Jan. 5, 2006), IV F.E.R.C. Stat. & Regs. ¶ 32,596, P 4 (“Although not clearly defined, the ‘public interest’ standard of review has been held to be higher or stricter than the ‘just and reasonable’ standard of review.”); Papago at 954.
6. Hon. Joseph T. Kelliher, Market Manipulation, Market Power, and the Authority of the Federal Energy Regulatory Commission , 26 Energy L. J. 1, 1 & n.1 (2005) (quoting NAACP v. FPC , 520 F.2d 432, 438 (D.C. Cir. 1975)).
7. NAACP v. FPC , 520 F.2d at 438.
8. Atlantic Ref. Co. v. Pub. Serv. Comm’n of N.Y. , 360 U.S. 378, 388 (1959). Nor may the commission idly allow unjust and unreasonable rates to persist through inaction. The FPA “does not permit [the commission] to act as an umpire blandly calling balls and strikes for adversaries appearing before it; the right of the public must receive active and affirmative protection…” Scenic Hudson Pres. Conference v. FPC , 354 F.2d 608, 620 (2nd Cir. 1965); see also Entergy Inc. v. Pub. Serv. Comm’n , 539 U.S. 39, 41 (2003) (“FERC must ensure that wholesale rates are ‘just and reasonable’”); NAACP v. FPC , 425 U.S. 662, 666, 668