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D.C. Circuit Upholds Federal Energy Regulatory Commission (FERC) Ruling to Apply Mobile-Sierra Doctrine to Forward Capacity Auction (FCA) Rates

On February 15, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) upheld FERC’s determination that the Mobile-Sierra doctrine applies when deciding whether a Forward Capacity Auction (FCA) rate is just and reasonable.[1] The New England Power Generators Association (NEPGA) and another group composed of the Maine Public Utilities Commission and the Attorneys General of Massachusetts and Connecticut (collectively, the State Petitioners) challenged FERC’s ruling that, although the rates resulting from the FCA are not contract rates, they warrant the Mobile-Sierra presumption. NEPGA argued that the FCA rates are contract rates and therefore must receive the presumption. The State Petitioners argued that, because the FCA rates are not contract rates, FERC cannot presume they are just and reasonable.

The D.C. Circuit held that FERC did not exceed its discretion by applying the public interest standard to FCA rates. It dismissed NEPGA’s petition for lack of standing and denied the State Petitioners’ petition upon finding that FERC’s determination was reasonable and fell within the bounds of its discretion under section 205 of the Federal Power Act. The D.C. Circuit declined to rule on whether the auction rates constituted contract rates, but it stated that “FERC offered ample reasoning in support of its position, recognizing that the auction rates exhibit many of the indicia of contract rates[.]”[2]

Future tariff changes will need to be supported by a showing that the rate will “‘adversely affect the public interest—as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory,’” in accordance with the Mobile-Sierra doctrine.[3] This ruling may require a greater showing to change wholesale electric rates in the future.


[1] New England Power Generators Ass’n v. FERC, No. 11-1422 (D.C. Cir. Feb. 15, 2013), available here.

[2] Id. at 12.

[3] Id. at 4 (quoting Fed. Power Comm’n v. Sierra Pac. Power Co., 350 U.S. 348, 355 (1956)).

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Partner

Glen S. Bernstein is a partner in Morgan Lewis's Energy Practice. Mr. Bernstein represents clients in all aspects of electric utility regulation and deregulation, with an emphasis on transmission and interconnection access, rates, and planning; independent transmission providers; electricity markets; and compliance with Federal Energy Regulatory Commission (FERC) Standards of Conduct and Codes of Conduct, affiliate transaction rules, and antimarket manipulation rules.

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Pamela C. Tsang is an associate in Morgan Lewis's Energy Practice. Attorneys in this practice counsel clients in the electric, nuclear, oil, gas, and water industries on a broad range of energy issues. We offer clients advice on domestic and international energy regulations and represent them in arbitration, in high-stakes regulatory and commercial disputes, and in litigation before state and federal courts. Our Energy Practice provides an array of services-transactional, counseling, regulatory, and litigation-to address all of our energy clients' legal needs.

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