[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Proposed Rules]
[Pages 79420-79421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30622]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM05-35-000]


Standard of Review for Modifications to Jurisdictional Agreements

Issued December 18, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Withdrawal of notice of proposed rulemaking and termination of 
rulemaking proceeding.

-----------------------------------------------------------------------

SUMMARY: The Commission withdraws a notice of proposed rulemaking, 
which proposed that, in the absence of specific contractual language 
enabling Commission review of proposed contractual modifications not 
agreed to by the signatories (or their successors) under a ``just and 
reasonable'' standard, the Commission would review such modifications 
under a ``public interest'' standard.

DATES: Effective Date: This withdrawal published at 71 FR 303, January 
4, 2006, will become effective January 28, 2009.

FOR FURTHER INFORMATION CONTACT: Hadas Kozlowski (Legal Information), 
Office of the General Counsel, Federal Energy Regulatory Commission, 
888 First Street, NE., Washington, DC 20426, (202) 502-8030.

SUPPLEMENTARY INFORMATION:

    125 FERC ] 61,310.
United States of America, Federal Energy Regulatory Commission.
Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

Standard of Review for Modifications to Jurisdictional Agreements; 
Withdrawal of Notice of Proposed Rulemaking and Termination of 
Rulemaking Proceeding.

Docket No. RM05-35-000

(Issued December 18, 2008.)

    1. On December 27, 2005, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) in this proceeding.\1\ For the reasons set forth 
below, we are exercising our discretion to withdraw the NOPR and 
terminate this rulemaking proceeding.
---------------------------------------------------------------------------

    \1\ Standard of Review for Modifications to Jurisdictional 
Agreements, Notice of Proposed Rulemaking, 71 FR 303 (Jan. 4, 2006), 
FERC Stats. & Regs. ] 32,596 (2005) (NOPR).
---------------------------------------------------------------------------

I. Background

    2. In the NOPR, the Commission proposed to repeal its regulation at 
18 CFR 35.1(d) and, in its place,

[[Page 79421]]

promulgate a general rule regarding the standard of review that must be 
met to justify proposed modifications to Commission-jurisdictional 
agreements under the Federal Power Act (FPA) and Natural Gas Act (NGA) 
that are not agreed to by the signatories (or their successors). The 
Commission noted that courts were divided as to whether, in the face of 
contractual silence, the Commission was required to apply the ``public 
interest'' standard of review or the ``just and reasonable'' standard 
of review to proposed modifications.\2\ The NOPR thus focused on the 
standard of review applicable to proposed changes in contracts in the 
absence of contractual language specifying the standard of review 
preferred by the parties. The NOPR did not address other issues such as 
the showing needed to satisfy the ``Mobile-Sierra presumption.'' \3\
---------------------------------------------------------------------------

    \2\ NOPR, FERC Stats. & Regs. ] 32,596 at P 8 (citing Boston 
Edison Co. v. FERC, 233 F.3d 60 (1st Cir. 2000)). The Boston Edison 
court stated that these issues would remain in a state of confusion 
until the Commission ``squarely confronted the underlying issues.'' 
Boston Edison, 233 F.3d at 68.
    \3\ Morgan Stanley Capital Group, Inc. v. Public Utility 
District No. 1 of Snohomish County, 128 S. Ct. 2733, 2739 (2008) 
(Morgan Stanley) (referring to United Gas Pipe Line Co. v. Mobile 
Gas Serv. Corp., 350 U.S. 332 (1956); FPC v. Sierra Pacific Power 
Co., 350 U.S. 348 (1956) (Mobile-Sierra)).
---------------------------------------------------------------------------

    3. The Commission, in the NOPR, proposed a regulation which 
provided that, in the absence of prescribed contractual language 
enabling the Commission to review proposed modifications to agreements 
that are not agreed to by the signatories (or their successors) under a 
``just and reasonable'' standard of review, the Commission will review 
such proposed modifications under a ``public interest'' standard of 
review. The Commission concluded that the weight of court precedent 
supported application of the ``public interest'' standard when 
evaluating proposed changes to such contracts, unless the contract 
language expressly invokes the ``just and reasonable'' standard. The 
Commission stated that this standard would promote contract certainty. 
Additionally, the Commission recognized the importance of providing 
certainty and stability in competitive electric energy markets.

II. Discussion

    4. There is no longer a need for a rulemaking regarding the default 
standard of review, as the Supreme Court has addressed the law in this 
area. Since issuance of the NOPR, the United States Supreme Court has 
addressed the Mobile-Sierra doctrine in Morgan Stanley. The Court held 
that the Mobile-Sierra doctrine is a presumption that rates initially 
set in a freely negotiated contract meet the statutory just and 
reasonable requirement of the FPA.\4\ The Court explained that 
``parties could contract out of the Mobile-Sierra presumption by 
specifying in their contracts that a new rate filed with the Commission 
would supersede the contract rate,'' but otherwise ``the Mobile-Sierra 
presumption remains the default rule.'' \5\
---------------------------------------------------------------------------

    \4\ Id. at 2737; accord id. at 2746.
    \5\ Id. at 2739; cf. Public Util. Dist. No. 1 v. FERC, 471 F.3d 
1053, 1075 (9th Cir. 2006),aff'd and remanded sub nom., Morgan 
Stanley Capital Group, Inc. v. Public Utility District No. 1 of 
Snohomish County, 128 S. Ct. 2733 (2008).
---------------------------------------------------------------------------

    5. Because the Supreme Court in Morgan Stanley has since addressed 
the default standard, the Commission concludes that it is no longer 
necessary to adopt the regulation proposed in the NOPR. The Commission 
therefore withdraws the NOPR and terminates this rulemaking proceeding.
    The Commission orders:
    The Notice of Proposed Rulemaking is hereby withdrawn and Docket 
No. RM05-35-000 is hereby terminated.

    By the Commission. Commissioners Kelly and Wellinghoff 
concurring with a separate joint statement attached.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    United States of America, Federal Energy Regulatory Commission.

Standard of Review for Modifications to Jurisdictional Agreements

Docket No. RM05-35-000

(Issued December 18, 2008.)

    Kelly and Wellinghoff, Commissioners, concurring:
    This order terminates the rulemaking proceeding on the standard of 
review for modifications to jurisdictional agreements, withdrawing the 
Notice of Proposed Rulemaking (NOPR) that the Commission issued in 
2005. This order states that, since the issuance of the NOPR, the 
United States Supreme Court addressed the Mobile-Sierra doctrine, 
including the default standard of review, in Morgan Stanley.\6\ As a 
result, the majority finds that there is no longer a need for a 
rulemaking regarding the default standard of review.
---------------------------------------------------------------------------

    \6\ Morgan Stanley Capital Group, Inc. v. Public Utility 
District No. 1 of Snohomish County, 128 S. Ct. 2733 (2008) (Morgan 
Stanley).
---------------------------------------------------------------------------

    We agree that the rulemaking proceeding on the standard of review 
for modifications to jurisdictional agreements should be terminated. 
However, we believe that in reaching that conclusion, it is appropriate 
to recognize not only the Morgan Stanley decision, but also the U.S. 
Court of Appeals for the District of Columbia Circuit's recent decision 
in Maine Public Utilities Commission v. FERC.\7\ Because the Commission 
is bound by the rulings in Morgan Stanley and Maine PUC, we conclude 
that there is no longer a need for a rulemaking regarding the default 
standard of review.
---------------------------------------------------------------------------

    \7\ Maine Public Utilities Commission v. FERC, 520 F.3d 464, 
petition for reh'g denied, No. 06-1403, slip op. (D.C. Cir. Oct. 6, 
2008) (Maine PUC) (discussing, among other issues, the circumstances 
in which it is appropriate to apply the Mobile-Sierra presumption).
---------------------------------------------------------------------------

    For this reason, we concur with this order.
Suedeen G. Kelly,
Commissioner.
Jon Wellinghoff,
Commissioner.

 [FR Doc. E8-30622 Filed 12-24-08; 8:45 am]
BILLING CODE 6717-01-P