Northeast Utilities v. FERC ( 1995 )


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    UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
    FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
    ____________________

    No. 94-1948

    NORTHEAST UTILITIES SERVICE COMPANY,

    Petitioner,

    v.

    FEDERAL ENERGY REGULATORY COMMISSION,

    Respondent.

    ____________________

    ON PETITION FOR REVIEW OF ORDER OF
    THE FEDERAL ENERGY REGULATORY COMMISSION
    ____________________

    Before

    Torruella, Chief Judge, ___________
    Bownes, Senior Circuit Judge, ____________________
    and Selya, Circuit Judge. _____________

    ____________________

    J.A. Bouknight, Jr., with whom David B. Raskin, Edward J. Twomey, ___________________ ________________ ________________
    Newman, Bouknight & Edgar, P.C., and Frederic Lee Klein, Assistant ________________________________ ___________________
    General Counsel, Northeast Utilities Service Company, were on brief
    for petitioner.
    Randolph Lee Elliott, Attorney, with whom Susan Tomasky, General ____________________ _____________
    Counsel, and Jerome M. Feit, Solicitor, Federal Energy Regulatory ________________
    Commission, were on brief for respondent.


    ____________________

    May 23, 1995
    ____________________
























    BOWNES, Senior Circuit Judge. The main issue in BOWNES, Senior Circuit Judge. _____________________

    this case is whether the Federal Energy Regulatory Commission

    (FERC) complied with our mandate in Northeast Utilities ___________________

    Service Co. v. FERC, 993 F.2d 937 (1st Cir. 1993) (Northeast ____________ ____ _________

    I) and applied the "public interest" test in ordering the _

    modification of a wholesale electric power contract.

    In Northeast I we upheld FERC's decision ____________

    conditionally approving the merger of Northeast Utilities

    (NU) and the Public Service Company of New Hampshire (PSNH).

    Before us also was the objection of Northeast Utilities

    Service Company (NUSCO) to the Commission's modification of

    the rate schedules filed by NUSCO. The rate schedules were

    part of a wholesale electric power contract (the Seabrook

    Power Contract) among NU, PSNH and the State of New

    Hampshire. Under the contract each party waived its right to

    file a complaint under 206(a) of the Federal Power Act

    (FPA) concerning the specified rates. Each party also agreed

    "that in any proceeding by the FERC under Section 206 the

    FERC shall not change the rate charged under this Agreement

    unless such rate is found to be contrary to the public

    interest." FERC was not a party to the contract.

    Section 206(a) of the FPA, 16 U.S.C. 824(e)

    provides:

    Whenever the Commission, after a
    hearing had upon its own motion or upon
    complaint, shall find that any rate,
    charge, or classification, demanded,


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    observed, charged, or collected by any
    public utility for any transmission or
    sale subject to the jurisdiction of the
    Commission, or that any rule, regulation,
    practice, or contract affecting such
    rate, charge, or classification is
    unjust, unreasonable, unduly
    discriminatory or preferential, the
    Commission shall determine the just and
    reasonable rate, charge, classification,
    rule, regulation, practice, or contract
    to be thereafter observed and in force,
    and shall fix the same by order.


    Invoking its power under 206(a), the Commission

    examined the terms and conditions of the Seabrook Power

    contract. FERC found that the contract might unduly

    discriminate against entities not parties to it and that

    there was no genuine arms-length bargaining because the

    agreement was negotiated at a time when NU and PSNH were

    about to merge and assume identical interests. It ordered

    NUSCO to make three changes in the contract to bring it

    within the "just and reasonable" standard of 206(a): (1)

    delete the automatically adjusting rate-of-return-on-equity

    provision; (2) reduce the current rate-of-return-on-equity

    used to derive the rate for Seabrook power; and (3) submit

    for Commission review an initial estimate of the cost of

    decommissioning the Seabrook Power Plant, which is an atomic

    energy facility. The reduction order (2) on the current rate

    of return in equity was not appealed.

    After summarizing the Mobile-Sierra "public _____________

    interest" doctrine as explicated in Papago Tribal Authority ________________________


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    v. FERC, 723 F.2d 950, 953 (D.C. Cir. 1983), cert. denied, ____ _____ ______

    467 U.S. 1241 (1984), we quoted the holding of the Commission

    that it had

    authority under the public interest
    standard to modify a contract where: it __
    may be unjust, unreasonable, unduly ________________________________
    discriminatory or preferential to the
    detriment of purchasers that are not
    parties to the contract; it is not the _______________
    result of arm's length bargaining; or it _________________________________________
    reflects circumstances where the seller _________________________________________
    has exercised market power over the _________________________________________
    purchaser. __________

    Northeast I, 993 F.2d at 961. We also pointed out the ____________

    interpretation given to the holding by the Administrative Law

    Judge ("ALJ"):

    The Commission made clear that in the
    particular circumstances surrounding the
    Seabrook contract, it retains power--
    through the "public interest" language--
    to make modifications under the
    traditional just and reasonable and
    nondiscrimination standards.

    Id. ___

    We found that the standard enunciated by the

    Commission and applied by the ALJ, "conflates the 'just and

    reasonable' and 'public interest' standards, thereby

    circumventing the Mobile-Sierra doctrine." Id. We stated _____________ ___

    that

    the Commission was bound to follow the
    Mobile-Sierra doctrine as explicated by _____________
    Papago, and therefore should have ______
    evaluated the SPC under the public
    interest standard, not the just and
    reasonable standard.



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    Id. We remanded the issue "for reconsideration by FERC under ___

    the public interest standard." Id. at 962. ___

    It is FERC's position that on remand it

    reconsidered its previously ordered modifications of the

    Seabrook Power contract under the public interest standard

    and affirmed the orders previously issued under that

    standard.

    NUSCO contends that FERC did not comply with our

    mandate but instead created a wholly new version of the

    public interest standard which is more flexible and less

    stringent than the judicially adopted public interest

    standard.

    Standard of Review Standard of Review __________________

    Not surprisingly, the parties differ on the

    standard of review to be followed. FERC urges that we follow

    the same deferential standard as we did in our prior case:

    On review, we give great deference to the
    Commission's decision. U.S. Dep't of ______________
    Interior v. FERC, 952 F.2d 538, 543 (D.C. ________ ____
    Cir. 1992). FERC's findings of fact are
    reviewed under the "substantial evidence"
    standard of review. 16 U.S.C. 825l
    ("The finding of the Commission as to the
    facts, if supported by substantial
    evidence, shall be conclusive.").

    . . . .

    "Pure" legal errors require no deference
    to agency expertise, and are reviewed de __
    novo. Questions involving an ____
    interpretation of the FPA involve a de __
    novo determination by the court of ____
    Congressional intent; if that intent is


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    ambiguous, FERC's conclusion will only be
    rejected if it is unreasonable. Chevron _______
    USA v. Natural Resources Defense Council, ___ _________________________________
    467 U.S. 837, 842-56, 104 S. Ct. 2778,
    2781-83, 81 L.Ed. 2d 694 (1984); Boston ______
    Edison Co. v. FERC, 856 F.2d 361, 363 ___________ ____
    (1st Cir. 1988).

    Northeast I, 993 F.2d at 943-44. ___________

    NUSCO, on the other hand, plumps for the "law of

    the case" doctrine, arguing that we issued a mandate that had

    to be strictly construed and followed.

    In this circuit the "law of the case" doctrine has

    not been construed as an inflexible straitjacket that

    invariably requires rigid compliance with the terms of the

    mandate. In United States v. Connell, 6 F.3d 27, 31 (1st _____________ _______

    Cir. 1993), we noted:

    To be sure, neither the law of the case
    doctrine nor its kissing cousin, the so-
    called "mandate rule," is designed to
    function as a straitjacket. Rather,
    these are discretion-guiding principles,
    generally thought to be subject to
    exceptions in the interests of justice.

    So also we said in United States v. Bell, 988 F.2d 247, 251 _____________ ____

    (1st Cir. 1993):

    After all, the so-called "mandate rule,"
    generally requiring conformity with the
    commands of a superior court on remand,
    is simply a specific application of the
    law of the case doctrine and, as such, is
    a discretion-guiding rule subject to an
    occasional exception in the interests of
    justice.

    In Doe v. Anrig, 728 F.2d 30, 31 (1st Cir. 1984), ___ _____

    Justice Breyer, then circuit judge, reached back to Judge


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    Learned Hand and Justice Holmes for an explanation of the

    meaning of the law of the case doctrine:

    That doctrine "does not rigidly bind a
    court to its former decisions, but is
    only addressed to its good sense."
    Higgins v. California Prune & Apricot _______ ____________________________
    Grower, Inc., 3 F.2d 896, 898 (2d Cir. ____________
    1924) (L. Hand, J.). See Messenger v. ___ _________
    Anderson, 225 U.S. 436, 444, 32 S. Ct. ________
    739, 740, 56 L. Ed. 1152 (1912) (Holmes,
    J.) ("the phrase, law of the case, as
    applied to the effect of previous orders
    on the later action of the court
    rendering them in the same case, merely
    expresses the practice of courts
    generally to refuse to reopen what has
    been decided, not a limit to their
    power"). (Other citations omitted.)

    Under the circumstances, we will review the actions

    of FERC under the usual deferential standard, but always

    keeping in mind the restraints imposed on FERC by the terms

    of our mandate and the "law of the case" doctrine.

    The Case Law The Case Law ____________

    We think it necessary to revisit the Mobile-Sierra _____________

    doctrine, which represents the Supreme Court's attempt to

    strike a balance between private contractual rights and the

    regulatory power to modify contracts when necessary to

    protect the public interest. We start with United Gas Co. v. ______________

    Mobile Gas Corp., 350 U.S. 332 (1956). The issue in Mobile ________________ ______

    was, "whether under the Natural Gas Act . . . a regulated

    natural gas company furnishing gas to a distributing company

    under a long-term contract may, without the consent of the

    distributing company, change the rate specified in the


    -7- 7













    contract simply by filing a new rate schedule with the

    Federal Power Commission." Id. at 333-34 (statutory citation ___

    omitted). The facts can be summarized as follows. Mobile

    Gas Service (Mobile) was a distributor of natural gas to

    users (domestic and industrial) in Mobile, Alabama. Mobile

    obtained its gas from United Gas Co. (United). In 1946 the

    Ideal Cement Company (Ideal) decided to build a cement plant

    in the city if it could be assured gas supplied at a

    sufficiently low rate. Mobile agreed to supply Ideal with

    gas for ten years at 12 cents per MCF (thousand cubic feet).

    Before entering into the contract with Ideal, Mobile obtained

    from United a ten-year contract to supply gas to Mobile for

    resale to Ideal at the rate of 10.7 cents per MCF. This was

    a substantially lower rate than other gas furnished by

    United. This contract was filed with the Federal Power

    Commission and with its approval, became a part of United's

    filed schedule of rates and contracts. In June of 1953,

    United, without the consent of Mobile, filed new rate

    schedules with the Commission purporting to increase the rate

    on gas to be sold by Mobile to Ideal to 14.5 cents per MCF.

    Id. at 335-36. ___

    The Court held that the Natural Gas Act did not

    give natural gas companies the right to change their rate

    contracts unilaterally. Id. at 337. The Court noted that ___

    the Act "evinces no purpose to abrogate private rate



    -8- 8













    contracts as such." Id. at 338. It pointed out that the ___

    public interest was protected by the supervision of the

    individual rate contracts filed with the Commission. Id. at ___

    339. The Court explained its rationale as follows:

    Our conclusion that the Natural Gas
    Act does not empower natural gas
    companies unilaterally to change their
    contracts fully promotes the purposes of
    the Act. By preserving the integrity of
    contracts, it permits the stability of
    supply arrangements which all agree is
    essential to the health of the natural
    gas industry. Conversion by consumers,
    particularly industrial users, to the use
    of natural gas may frequently require
    substantial investments which the
    consumer would be unwilling to make
    without long-term commitments from the
    distributor, and the distributor can
    hardly make such commitments if its
    supply contracts are subject to
    unilateral change by the natural gas
    company whenever its interests so
    dictate. The history of the Ideal
    contract furnishes a case in point. On
    the other hand, denying to natural gas _______________________
    companies the power unilaterally to _________________________________________
    change their contracts in no way impairs _________________________________________
    the regulatory powers of the Commission, _________________________________________
    for the contracts remain fully subject to _________________________________________
    the paramount power of the Commission to _________________________________________
    modify them when necessary in the public _________________________________________
    interest. The Act thus affords a ________
    reasonable accommodation between the
    conflicting interests of contract
    stability on the one hand and public
    regulation on the other.

    Id. at 344 (emphasis added). ___

    We make two observations. First, the obvious, that

    the facts of Mobile are quite different from those in the ______

    case at bar. The issue here is not whether one party to a



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    rate contract filed with FERC can effect a rate change

    unilaterally, but the standard to be used by FERC in

    examining electric power contracts filed with it. Our second

    observation is that nowhere in the Supreme Court opinion is

    the term "public interest" defined. Indeed, the Court seems

    to assume that the Commission decides what circumstances give

    rise to the public interest.

    We next examine the other leg of the Mobile-Sierra _____________

    doctrine, FPC v. Sierra Pacific Power Co., 350 U.S. 348 ___ __________________________

    (1956), which came down on the same day as Mobile and was ______

    also written by Justice Harlan. In Sierra, the Court, for ______

    the reasons given in Mobile, held that the filing of a new ______

    rate by an electric power utility (Pacific Power Gas &

    Electric Company) and the finding of the Federal Power

    Commission that such new rate was not unlawful, could not

    change Pacific Gas' contract rate for supplying electricity

    to Sierra Pacific Power Co. Id. at 352-53. ___

    The Court addressed a second question, not present

    in Mobile, which directly involved the "public interest" ______

    doctrine. In its decision finding that the new rate was

    lawful, the Commission held that the old contract rate was

    unreasonable solely "because it yields less than a fair

    return on the net invested capital." Id. at 354-55. The ___

    Court held:

    But, while it may be that the Commission
    may not normally impose upon a public ______


    -10- 10













    utility a rate which would produce less
    than a fair return, it does not follow
    that the public utility may not itself
    agree by contract to a rate affording
    less than a fair return or that, if it
    does so, it is entitled to be relieved of
    its improvident bargain. In such circum- _______________
    stances the sole concern of the _________________________________________
    Commission would seem to be whether the _________________________________________
    rate is so low as to 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. _________________________________________
    That the purpose of the power given the
    Commission by 206(a) is the protection
    of the public interest, as distinguished
    from the private interests of the
    utilities, is evidenced by the recital in
    201 of the Act that the scheme of
    regulation imposed "is necessary in the
    public interest." When 206 (a) is read
    in the light of this purpose, it is clear
    that a contract may not be said to be
    either "unjust" or "unreasonable" simply
    because it is unprofitable to the public
    utility.

    Id. at 355 (citation omitted) (emphasis added). ___

    The holding of Sierra is clear; what justifies ______

    protective action in the public interest by the Commission

    when it is considering whether a contract rate is too low is __________________________________________________________

    where the rate might impair the financial ability of the

    utility to continue to supply electricity, force electricity

    consumers to bear an excessive burden, or be unduly

    discriminatory. This definition of what is necessary in the

    public interest was formulated in the context of a low-rate ________

    case. It was not and could not be an across-the-board

    definition of what constitutes the public interest in other


    -11- 11













    types of cases. One of the orders at issue in the case at

    bar is the submission by NUSCO to FERC of the cost of

    decommissioning the Seabrook Power Plant. The other order

    had to do with changing the rate of return-in-equity formula.

    Neither were low-rateissues inthe context ofMobile andSierra. ______ ______

    The next case directly implicated in our remand

    order is Papago Tribal Authority v. FERC, 723 F.2d 950 (D.C. _______________________ ____

    Cir. 1983), cert. denied, 467 U.S. 1241 (1984). This was _____ ______

    also a low-rate case. The facts may be summarized as

    follows. The Commission approved an increase in electric

    rates paid to the Arizona Public Service Company. The Papago

    Tribal Utility Authority objected on the ground, inter alia, _____ ____

    that its contract with Arizona did not permit unilaterally

    proposed rate changes under 205 of the Federal Power Act,

    16 U.S.C. 824(d). Id. at 951-52. At issue was the ___

    interpretation of the contract between Arizona and Papago and

    the authority of the Commission to modify it. The contract

    provided in pertinent part:

    The rates hereinabove set out in this
    Section 3 . . . are to remain in effect
    for the initial one (1) year of the term
    of this contract and thereafter unless
    and until changed by the Federal Power
    Commission or other lawful regulatory
    authority, with either party hereto to be
    free unilaterally to take appropriate
    action before the Federal Power
    Commission or other lawful regulatory
    authority in connection with changes
    which may be desired by such party.




    -12- 12













    Id. at 953. Papago, like the case before us, was an appeal ___ ______

    after a remand. In the first appeal the court held that the

    contract did not permit unilaterally effected rate increases

    under 205 of the Act. The Federal Power Commission held in

    its Order on Remand that after its first year, the contract _______________

    permitted changes under 206 of the Act on the basis of a

    just and reasonable standard. The court agreed and

    interpreted the contract as follows: "the restriction

    envisioned during the first year of the contract must allow

    rate changes required by the public interest. The scheme to

    be in effect 'thereafter' -- obviously intended to be less

    restrictive -- must therefore permit changes that are just

    and reasonable." Papago, 723 F.2d at 954. ______

    During the course of its opinion the court quoted

    the "public interest" standard from Sierra, 350 U.S. at 355. ______

    Papago, 723 F.2d at 953. The court then went on to say in ______

    dictum:

    [S]pecific acknowledgment of the
    possibility of future rate change is
    virtually meaningless unless it envisions
    a just-and-reasonable standard. The
    public interest standard is practically
    insurmountable; the Commission itself is
    unaware of any case granting relief under
    it. Future rate changes would be a dim
    prospect, hardly worthy of recognition,
    if the parties did not intend the just-
    and-reasonable standard to govern.

    Id. at 954 (citation omitted). ___





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    Papago has unfortunately been identified with the ______

    notion that the "public interest" standard of review is

    "practically insurmountable," regardless of the circumstances

    of the case. This is the misreading that NUSCO presses upon

    us as the law of the case. We do not think that Papago, read ______

    in context, means that the "public interest" standard is

    practically insurmountable in all circumstances. It all

    depends on whose ox is gored and how the public interest is

    affected.

    It should be noted that neither Mobile nor Sierra ______ ______

    stated or intimated that the "public interest" doctrine was

    "practically insurmountable." This was a gloss that the

    court in Papago put on it. In Northeast I we said that the ______ ___________

    "public interest" standard was "a more difficult standard for

    the Commission to meet than the statutory 'unjust and

    unreasonable' standard," 993 F.2d at 960. We, however, did

    not characterize the public interest standard as "practically

    insurmountable."1

    ____________________

    1. Contrary to NUSCO's suggestion at oral argument, Boston ______
    Edison v. FERC, 856 F.2d 361 (1st Cir. 1988) is not ______ ____
    controlling here. In Boston Edison, we relied in part on the _____________
    Mobile-Sierra doctrine to enforce a claims limitation clause _____________
    of a rate contract against customers who failed to timely
    protest an overcharge. We found nothing "unconscionable,
    overweening, or otherwise unreasonable" about the clause,
    even with respect to the parties to the contract. Id. at 372 ___
    (noting that the clause "enhances economic equilibrium by
    bringing certainty to the parties' dealings . . . ."). FERC
    and the customers did not, and clearly could not, argue that
    the claims limitation clause was contrary to the public
    interest. See id. at 372 n.12 ("we leave for another day the ___ ___

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    Our opinion also recognized that "[t]he most

    attractive case for affording additional protection [under

    the public interest standard], despite the presence of a

    contract, is where the protection is intended to safeguard

    the interests of third parties . . . ." Northeast I, 993 ___________

    F.2d at 961. As we explained, the Mobile-Sierra doctrine _____________

    allows FERC to modify the terms of a private contract when

    third parties are threatened by possible "undu[e]

    discrimination" or the imposition of an "excessive burden."

    Id. We invited FERC to demonstrate such a threat upon ___

    remand. See id. at 961-62 (assuming without deciding that ___ ___

    FERC's premise facts were correct, but remanding for

    evaluation of the contract under the public interest

    standard.)

    Although our opinion questioned the significance of

    the seller's market power and the lack of arms-length

    bargaining, id. at 961, it left open the possibility that ___

    these factors may so affect third parties as to warrant

    intervention even under the public interest standard. See ___

    id. ("there would seem to be little justification for the ___

    Commission stepping in on behalf of the disfavored subsidiary

    absent some threat to the public interest") (emphasis added). _________________________________________

    For all of these reasons, we reject NUSCO's argument that


    ____________________

    contours of any . . . exception" to claims limitation clauses
    based upon "public necessity").

    -15- 15













    under the law of the case the public interest standard should

    be considered "practically insurmountable" in all

    circumstances.

    The Order on Remand The Order on Remand ___________________

    We turn to FERC's explanation of how it applied the

    "public interest" doctrine on remand.

    We conclude that if the Commission is
    to comply with both the Mobile-Sierra _____________
    imperative to respect private contractual
    arrangements, on the one hand, and our
    statutory mandate to protect the public
    interest and ensure that rates are just
    and reasonable and not unduly
    discriminatory or preferential, on the
    other, the "public interest" standard of
    review under the Mobile-Sierra doctrine _____________
    cannot be "practically insurmountable" in
    all cases. In the "classic" Mobile- _______
    Sierra situation, for example -- when a ______
    seller utility unilaterally seeks an
    increase from a fixed-rate contract
    already on file with the Commission --
    the public interest (as opposed to the
    private interest of the party seeking the
    rate increase) only rarely is served by
    making the requested change (that is,
    granting the requested increase), and a
    strict standard is appropriate. In other
    situations, however -- when, for example,
    as here, the Commission is presented with
    an agreement for the first time and
    concludes that certain modifications to
    material rate provisions are necessary to
    protect the interests of non-parties --
    the public interest is served by making
    the modifications, and a more flexible
    standard is therefore appropriate. Based
    upon that understanding of the public
    interest standard of review under the
    Mobile-Sierra doctrine, we confirm our _____________
    previously ordered modifications to the
    Seabrook Power Contract.

    66 F.E.R.C. 61,332 at 62,076 (1994) (footnotes omitted).


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    In its order on remand, FERC has responded to our

    concerns by explaining how the disputed contractual terms may

    harm third parties to the contract. It no longer relies so

    heavily upon the possibility that the contract may favor one

    party over another. For example, the Commission found the

    automatic rate-of-return-on-equity adjustment provision

    unacceptable because third parties may ultimately bear the _____________

    burden of a rate component that does not reflect actual

    capital market conditions. Likewise, the "blank check" given

    owners of the power plant to determine the decommissioning

    costs for themselves under New Hampshire law is impermissible

    because it may be cashed at the expense of non-parties to the

    contract. See 66 F.E.R.C. 61,332 at 62,090-91. This new ___

    emphasis on harm to third parties suggests that FERC has done

    more on remand than simply substitute the words "public

    interest" for the forbidden phrase "just and reasonable."

    We end by noting the decision in Mississippi Indus. __________________

    v. FERC, 808 F.2d 1525 (D.C. Cir.), cert. denied 484 U.S. 985 ____ _____ ______

    (1987), a post-Papago case similar to the case at bar, which ______

    shows that even the court that authored Papago does not take ______

    an unduly restrictive view of the public interest standard.

    FERC had ordered that the four electric power companies

    comprising the Middle South Utilities System share the cost

    of the system's investment in nuclear energy in proportion to

    their relative demand for energy generated by the system as a



    -17- 17













    whole. FERC reallocated responsibility for investment costs

    "associated with the catastrophically uneconomical Grand Gulf

    I nuclear plant." Id. at 1528. The court turned back a ___

    jurisdictional challenge based, inter alia, on the Mobile- __________ _______

    Sierra doctrine. It held, ______

    that, in the instant case, this doctrine
    does not bar the exercise of FERC's power
    under section 206 of the FPA to reform a
    practice or contract affecting a rate
    charged by a public utility for wholesale
    service in interstate commerce.

    Id. at 1551. The court's discussion of the sweep of the ___

    Mobile-Sierra doctrine is instructive. _____________

    Finally, even if the contracts fall
    within the scope of the Mobile-Sierra _____________
    decisions, the Supreme Court has
    emphasized that the relevant agency, here
    FERC, may always reform a contract found
    to be "unlawful" or "contrary to the
    public interest," i.e., that "contracts ____
    remain fully subject to the paramount
    power of the Commission to modify them
    when necessary in the public interest."
    The Court stated in Sierra that the ______
    Commission "has undoubted power under
    206(a) to prescribe a change in contract
    rates whenever it determines such rates
    to be unlawful" and indicated three
    circumstances under which the Commission
    might conclude that a rate or a contract
    term affecting a rate could be found
    contrary to the public interest and
    therefore subject to revision: "where it
    might impair the financial ability of the
    public utility to continue its service,
    cast upon consumers an excessive burden,
    or be unduly discriminatory." Here FERC
    expressly adopted the findings of ALJ
    Liebman who found the level of
    discrimination in the [contract]
    "profound" and agreed that its impact on
    customers in Louisiana and Mississippi


    -18- 18













    would be "dramatic[]." The Commission's
    specific determination of unlawfulness
    provides the "unequivocal public
    necessity" for reformation of the
    [contract] under section 206 of the FPA.

    Id. at 1553 (footnotes omitted). ___

    We conclude that under the circumstances of this

    case FERC, on remand, gave thoughtful consideration to the

    public interest in reviewing its previously ordered

    modification of the Seabrook Power contract. We, therefore,

    deny NUSCO's petition for review and affirm FERC's order. We

    go no further. Specifically, we are not in any way

    suggesting the parameters of or limitations on the authority

    of FERC to change the contract in future rate proceedings.





























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