A new twist on an old doctrine.
Stephen L. Teichler is the head of the Duane Morris energy practice group. Contact him at SLTeichler@duanemorris.com. Ilia Levitine is an energy partner at Duane Morris.
The D.C. Circuit once observed that the Mobile-Sierra doctrine is “refreshingly simple”: “Rate filings consistent with contractual obligations are valid; rate filings inconsistent with contractual obligations are invalid.” In fact, however, the doctrine has become incredibly nuanced and complex over time.
Since the late 1950s, the courts and the Federal Energy Regulatory Commission (FERC) have struggled with the appropriate standard for reviewing initiatives that may abrogate the terms of bilateral contracts providing for wholesale sales of natural gas and electricity. Heretofore, the prescriptions of the Mobile-Sierra doctrine could be overcome only upon a showing that the “public interest” required existing agreements to be changed by regulatory fiat. The heart of this standard was that the requisite showing could not be made easily by either the commission or the party requesting a contract modification. Now, the 9th Circuit Court of Appeals has rewritten the rules.