FERC Order Appears to Weaken Mobile-Sierra Protection for Contract and Tariff Provisions

On May 17, 2013, the Federal Energy Regulatory Commission found that its generic findings in its regional transmission planning order, Order No. 1000, were sufficient to overcome the Mobile-Sierra prohibition against the alteration of contract terms unless they seriously harm the public interest. ISO New England Inc., 143 FERC ¶ 61,150 (2013). This conclusion may signal a weakening, under certain circumstances, of the previously high standard for overcoming the Mobile-Sierra presumption of justness and reasonableness. The apparent departure from Commission precedent was significant enough to prompt two Commissioners"”Moeller and Clark"”to submit separate dissents on that sole issue.

The notable Mobile-Sierra conclusion arose in the context of the Commission's order accepting compliance filings by the ISO New England ("ISO-NE") and the Participating Transmission Owner Administrative Committee (together, the "Filing Parties"). The compliance filings responded to Order No. 1000's regional transmission planning requirements and were, in relevant part, intended to remove the federal rights of first refusal ("ROFR") from the ISO-NE Transmission Operating Agreement ("TOA"). Though the Commission found that the ROFR was a "prescription of general applicability," to which the Mobile-Sierra does not necessarily apply, the Commission had previously exercised its discretion to grant Mobile-Sierra protection to the provision, as requested by the Filing Parties. In the May 17 Order, the Commission was then faced with the question of whether the Filing Parties' removal of the ROFR provisions violated the Mobile-Sierra prohibition against unilateral alteration of contract terms. The Commission found that it did not, further finding that this conclusion was supported by "the reasons the Commission gave in Order No. 1000 for eliminating federal rights of first refusal, [which are] legally sufficient to make a public interest finding." It was appropriate, the Commission reasoned, to rely on these generic public interest findings to permit the unilateral abrogation of the ISO-NE ROFR provisions for the following two reasons:

  • The Commission made similar generic public interest findings in the 1996 Order No. 888, which requires public utilities to provide open access to their transmission systems. In that earlier proceeding, the Commission determined it was necessary and appropriate to make generic public interest findings so that utilities could alter their filed tariffs to comply with the fundamental regulatory changes brought about in the order. Order No. 888 was later affirmed by federal courts. Just as in Order No. 888, the changes required by Order No. 1000 were intended to remove barriers to competition; the removal of the ROFR "supports a competitive regulatory regime."
  • Further, in Order No. 1000, the Commission "explained the particularized manner in which federal rights of first refusal harm the public interest and how their removal mitigates the harm." The Commission found that removal of the ROFR provisions was "at the core" of Order No. 1000 and was "essential to meeting the demands of changing circumstances facing the electric industry."

In his dissent, Commissioner Moeller disagreed that the generic findings in Order No. 1000 were sufficient to overcome the Mobile-Sierra protection of contract provisions. Commissioner Clark has dissented in other recent Order No. 1000 compliance filing approvals. See, e.g., Midwest Independent Transmission System Operator, Inc., 142 FERC ¶ 61,215 (2013). His dissent here was stronger still: "[T]he order today has reduced the heightened Mobile-Sierra standard to little more than the ordinary just and reasonable standard that was already used to support Order No. 1000." The Order No. 1000 findings did not demonstrate "extraordinary circumstances where the public will be severely harmed" that the Supreme Court has held to be necessary to overcome the Mobile-Sierra presumption. The Commission order is available here. The relevant Mobile-Sierra discussion begins at paragraph 133.