125 FERC ¶ 61,310 

UNITED STATES OF AMERICA 

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. 

EFFECTIVE DATE: This withdrawal will become effective [Insert Date 30 days after 

publication in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT:

 

Hadas Kozlowski (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 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 

Docket No. RM05-35-000 

WITHDRAWAL OF NOTICE OF PROPOSED RULEMAKING AND 

TERMINATION OF RULEMAKING PROCEEDING 

(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. 

I. Background

2. In the NOPR, the Commission proposed to repeal its regulation at 18 C.F.R. 

§ 35.1(d) and, in its place, 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 

 

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). 
Docket No. RM05-35-000 - 2 - 

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

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. 

 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)). 
Docket No. RM05-35-000 - 3 - 

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

 

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. 

 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). 
Docket No. RM05-35-000 - 4 - 

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. 

( S E A L ) 

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.

1

 As a result, the majority finds that there is no longer a need for 

a rulemaking regarding the default standard of review. 

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.

2

 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. 

 

 For this reason, we concur with this order. 

______________________________ ______________________________ 

Suedeen G. Kelly Jon Wellinghoff 

Commissioner Commissioner 

 1 Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1 of 

Snohomish County, 128 S. Ct. 2733 (2008) (Morgan Stanley). 

2 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).