FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THE PEOPLE OF THE STATE OF

CALIFORNIA, EX REL. KAMALA D.

HARRIS, ATTORNEY GENERAL;

PUBLIC UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA;

SOUTHERN CALIFORNIA EDISON CO.,

Petitioners,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

CARGILL POWER MARKETS, LLC; EL

PASO MARKETING COMPANY, LLC;

EXELON GENERATION COMPANY,

LLC; IDACORP ENERGY SERVICES

COMPANY; IDAHO POWER

COMPANY; TALEN MONTANA, LLC;

TALEN ENERGY MARKETING, LLC;

PUBLIC SERVICE COMPANY OF

COLORADO; SHELL ENERGY NORTH

AMERICA (US), L.P.; TRANSCANADA

ENERGY LTD.,

Respondents-Intervenors.

No. 13-71276

FERC No.

EL01-10-076
2 STATE OF CALIFORNIA V. FERC

THE CITY OF SEATTLE,

WASHINGTON,

Petitioner,

PORTLAND GENERAL ELECTRIC

COMPANY; DYNEGY POWER

MARKETING; MPS MERCHANT

SERVICES, INC; MPS CANADA CORP.,

Intervenors,

v.

FEDERAL ENERGY REGULATORY

COMMISSION,

Respondent,

TALEN MONTANA, LLC; TALEN

ENERGY MARKETING, LLC;

TRANSALTA ENERGY MARKETING

(US), INC.; TRANSALTA ENERGY

MARKETING (CALIFORNIA), INC.; EL

PASO MARKETING COMPANY, LLC,

Respondents-Intervenors.

No. 13-71487

FERC No.

EL01-10-076

OPINION

On Petition for Review of an Order of the

Federal Energy Regulatory Commission

Argued and Submitted

June 16, 2015—San Francisco, California

Filed December 17, 2015
STATE OF CALIFORNIA V. FERC 3

Before: Sidney R. Thomas, Chief Judge, and M. Margaret

McKeown and Richard R. Clifton, Circuit Judges.

Opinion by Judge McKeown

SUMMARY*

Federal Energy Regulatory Commission 

The panel denied a petition for review from a decision of

the Federal Energy Regulatory Commission (“FERC”) with

respect to petitioners’ claim that the Mobile-Sierra

presumption, which requires FERC to presume that the rate

set in a freely negotiated wholesale-energy contract was just

and reasonable, cannot apply to the spot sales at issue; and

dismissed evidentiary challenges for lack of jurisdiction.

The panel held that there was jurisdiction to review

FERC’s decision to employ the Mobile-Sierra presumption

in the class of contracts at issue because, pursuant to the

inquiry in Steamboaters v. FERC, 759 F.2d 1382 (9th Cir.

1985), the test for final action under the Federal Power Act

was met. The panel held that it lacked jurisdiction to consider

the individual evidentiary restrictions raised in these cases

because they were interim rulings whose consequences could

not be determined with any finality at this juncture.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
4 STATE OF CALIFORNIA V. FERC

The panel held that FERC reasonably applied the MobileSierra presumption to the class of contracts at issue in these

cases.

COUNSEL

Kevin J. McKeon (argued), Judith D. Cassel, Whitney E.

Snyder, Hawke McKeon & Sniscak LLP, Harrisburg,

Pennsylvania; Kamala D. Harris, Attorney General of

California, Mark Breckler, Chief Assistant Attorney General,

Martin Goyette, Senior Assistant Attorney General, San

Francisco, California; David M. Gustafson, Deputy Attorney

General, Oakland, California, for Petitioner People of the

State of California ex rel. Kamala D. Harris, Attorney

General.

Candace J. Morey, Sarah R. Thomas, Public Utilities

Commission of the State of California, San Francisco,

California; Paul B. Mohler, Law Offices of Paul B. Mohler,

PLC, Washington, D.C., for Petitioner Public Utilities

Commission of the State of California.

Rex S. Heinke (argued), Akin Gump Strauss Hauer & Feld

LLP, Los Angeles, California; Jerry E. Rothrock, Moyers

Martin, LLP, Tulsa, Oklahoma; Gregory C. Narver, Seattle

City Attorney’s Office, Seattle, Washington, for Petitioner

City of Seattle.

David L. Morenoff, General Counsel, Robert H. Solomon,

Solicitor, Lona T. Perry (argued), Deputy Solicitor, Susanna

Y. Chu, Attorney, Washington, D.C., for Respondent Federal

Energy Regulatory Commission.
STATE OF CALIFORNIA V. FERC 5

Lawrence G. Acker, Van Ness Feldman, LLP, Washington,

D.C.; Rex Blackburn, Brian R. Buckham, Idaho Power

Company, Boise, Idaho, for Respondents-Intervenors Idaho

Power Company and IDACORP Energy Services Co.

Floyd L. Norton, IV, Morgan, Lewis & Bockius LLP,

Washington, DC, for Respondents-Intervenors Cargill Power

Markets, LLC and Public Service Company of Colorado.

Andrea J. Chambers, Katharine E. Leesman, Ballard Spahr

LLP, Washington, D.C., for Respondent-Intervenor Exelon

Generation Company, LLC.

Joseph B. Williams, Matthew D. Spohn, Ryan C. Norfolk,

Norton Rose Fulbright US LLP, Washington, D.C., for

Respondent-Intervenor El Paso Marketing Company, LLC.

Jeffrey D. Watkiss, McDermott Will & Emery, LLP,

Washington, D.C., for Respondent-Intervenor Shell Energy

North America (US), L.P.

Damien R. Lyster, Vinson & Elkins LLP, Washington, D.C.,

for Respondents-Intervenors TansAlta Energy Marketing

(U.S.) Inc. and TransAlta Energy Marketing (California) Inc.

Kenneth L. Wiseman (argued), Mark F. Sundback, Andrews

Kurth, LLP, Washington, D.C., for Rrespondent-Intervenor

TransCanada Energy Ltd.
6 STATE OF CALIFORNIA V. FERC

OPINION

McKEOWN, Circuit Judge:

These appeals are the latest in a series of petitions that

stem from the energy crisis in California and other western

states in 2000 and 2001. The key issue we consider is the

applicability of the Mobile-Sierra doctrine, which requires

the Federal Energy Regulatory Commission (“FERC”) to

“presume that the rate set out in a freely negotiated

wholesale-energy contract meets the ‘just and reasonable’

requirement” imposed by law. Morgan Stanley Capital Grp.,

Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 530 (2008).

BACKGROUND

The circumstances of the California energy crisis are

detailed in numerous cases.1 We recount only the history that

is relevant to these petitions.

After the California legislature deregulated the electricity

market in the mid-1990s, “wholesale electricity prices

skyrocketed.” Port of Seattle v. FERC, 499 F.3d 1016, 1022

(9th Cir. 2007). Average rates soared in the California and

Pacific Northwest short-term supply markets (also known as

“spot markets”). Id. at 1022–23. The spot markets in this

case were somewhat unique in the particular way that rates

were set:

1

See, e.g., Port of Seattle v. FERC, 499 F.3d 1016, 1022–26 (9th Cir.

2007); Pub. Utils. Comm’n of State of Cal. v. FERC, 462 F.3d 1027,

1036–44 (9th Cir. 2006) (“Pub. Utils. Comm’n”); Bonneville Power

Admin. v. FERC, 422 F.3d 908, 910–14 (9th Cir. 2005); Cal. ex rel.

Lockyer v. FERC, 383 F.3d 1006, 1008–11 (9th Cir. 2004) (“Lockyer”).
STATE OF CALIFORNIA V. FERC 7

Unlike the California spot market, which

operated through a centralized power

exchange using a central clearing price, the

Pacific Northwest spot market operated

through bilateral contracts negotiated

independently between buyers and sellers,

without a central clearing price. Most of these

contracts were entered into under the terms of

the Western Systems Power Pool (“WSPP”)

Agreement, a standard form contract for

electricity sales.

Id. at 1023 (citation omitted). These rates became the subject

of an investigation before FERC.

Under the Federal Power Act (“FPA”), the rates charged

by a public utility must be “just and reasonable, and any such

rate or charge that is not just and reasonable is hereby

declared to be unlawful.” 16 U.S.C. § 824d(a). Section 206

of the FPA gives FERC the authority, on its own initiative or

upon filing of a complaint, to investigate whether a particular

rate is “just and reasonable.” Port of Seattle, 499 F.3d at

1023. If FERC finds a rate “unjust, unreasonable, unduly

discriminatory or preferential,” it must determine a just and

reasonable rate and order that rate to be “observed and in

force.” Id. (citing 16 U.S.C. § 824e(a)). FERC may also

order sellers to pay refunds to those entities that bought

energy at the unlawful rate. Id. (citing 16 U.S.C. § 824e(b)). 

Such refunds are limited to a fifteen-month period following

the “refund effective date,” a date established by FERC that

may be no earlier than the filing of the complaint nor later

than five months after the filing. 16 U.S.C. § 824e(b). FERC

may not order any refunds for the period before the refund

effective date. Port of Seattle, 499 F.3d at 1023.
8 STATE OF CALIFORNIA V. FERC

The petitioners here challenge several FERC orders that

were issued following our remand in Port of Seattle. In Port

of Seattle we reviewed several challenges to FERC’s denial

of refunds to wholesale buyers of electricity that purchased

energy in the Pacific Northwest spot market at unusually high

prices. We explained that FERC erred by initially excluding

from the refund proceeding purchases made by the California

Energy Resources Scheduling (“CERS”) division of the

California Department of Water Resources, and that FERC

abused its discretion by denying potential relief for

transactions involving energy that was ultimately consumed

in California. Id. at 1022, 1032–34.

We also held that FERC’s failure to consider evidence of

market manipulation was arbitrary and capricious. Id. at

1034–36. It appeared that “Pacific Northwest sellers were

apparently involved in Enron’s manipulation” of western

energy markets.” Id. at 1035. As a consequence, FERC had

to “consider the possibility that the Pacific Northwest spot

market was not . . . functional and competitive.” Id. On

remand, FERC was instructed to examine the evidence of

market manipulation “in detail and account for it in any

future orders regarding the award or denial of refunds in the

Pacific Northwest proceeding.” Id. at 1035–36. If the record

was not sufficient to inform a reasoned decision, we noted

that FERC may “find it necessary to call for additional

fact-finding.” Id. at 1036.

After the remand, FERC proceeded to plan evidentiary

hearings. See Puget Sound Energy, Inc. v. All Jurisdictional

Sellers of Energy, 137 FERC ¶ 61,001 (Oct. 3, 2011). For the

first time in the history of this proceeding, FERC took the

position that it would invoke the Mobile-Sierra doctrine,

under which the rates set forth in “short-term bilateral power
STATE OF CALIFORNIA V. FERC 9

sales contracts” like these would be presumptively just and

reasonable. Id. at paras. 20–21. The presumption could only

be avoided or overcome if specific criteria were met, such as

“where it can be shown that one party to a contract engaged

in such extensive unlawful market manipulation as to alter the

playing field for contract negotiations.” Id.

Adoption of the Mobile-Sierra presumption carried

implications for the scope of evidence that FERC intended to

permit in the proceeding. Electricity buyers would need to

“demonstrate that a particular seller engaged in unlawful

market activity in the spot market and that such unlawful

activity directly affected the particular contract or contracts

to which the seller was a party.” Id. at para. 21. “[G]eneral

allegations of market dysfunction” would be insufficient to

avoid or overcome the presumption. Id. FERC explained

that parties could submit evidence of several specific

violations that might entitle them to refunds: (1) violation of

the WSPP Agreement; (2) violation of the terms of a specific

bilateral contract underlying a particular purchase of

electricity; or (3) certain other violations identified in a

previous FERC case. Id. at paras. 18–19.

According to FERC, a market-wide remedy would be

inappropriate because the Pacific Northwest spot market

operated solely through bilateral contracts. Id. at para. 24.

These contracts distinguished the transactions from those

conducted byCalifornia’s centralized power exchange, which

operated through central clearing prices instead of negotiated

contracts.

The California Parties and Seattle requested rehearingand

challenged FERC’s invocation of the Mobile-Sierra

presumption and the scope of permissible evidence. A
10 STATE OF CALIFORNIA V. FERC

request for expedited treatment of the requests for rehearing

initially went unanswered by the agency, and the proceeding

continued. FERC set a schedule for parties to present

contract-specific refund claims as a part of settlement

procedures.

While the requests for rehearing remained pending and

settlement activity proceeded, FERC further addressed the

Mobile-Sierra presumption and the scope of the Pacific

Northwest proceeding in another order. Drawing on Morgan

Stanley, which FERC cited to support its invocation of the

Mobile-Sierra presumption, FERC clarified that refund

claimants may overcome the presumption “by presenting

evidence that a particular contract rate imposes an excessive

burden on consumers or seriously harms the public interest.” 

141 FERC ¶ 61,248 at paras. 1, 12–15 (Dec. 21, 2012). 

FERC acknowledged that it had spawned confusion regarding

the scope of the proceeding, but claimed that it had not

intended to modify the law as summarized in Morgan

Stanley. 141 FERC ¶ 61,248, at paras. 12–14.

FERC eventually denied the requests for rehearing and

reaffirmed its application of the Mobile-Sierra presumption. 

143 FERC ¶ 61,020 at para. 13 (Apr. 5, 2013). It also

reaffirmed the limits it imposed on the scope of permissible

evidence. Id. at para. 23. These petitions for review

followed.

While these petitions were pending before us, the FERC

proceeding marched on. Phase I of the proceeding was

directed to whether the parties made a sufficient showing to

avoid or overcome the Mobile-Sierra presumption with

respect to their particular contracts and whether they were

entitled to modification of their contracted rates. If
STATE OF CALIFORNIA V. FERC 11

necessary, Phase II would address refund methodology. 

Following an initial decision on Phase I, 146 FERC ¶ 63,028

(Mar. 28, 2014), FERC then ruled on exceptions to the

decision, 151 FERC ¶ 61,173 (May 22, 2015). FERC

affirmed some of the Administrative Law Judge’s (“ALJ”)

rulings and reversed others, ultimately remanding with

instructions to the ALJ to make additional findings. Id. at

para. 3.

ANALYSIS

I. JURISDICTION

We first address our jurisdiction over these petitions. 

Seattle and the California Parties characterize their MobileSierra challenge as purely legal and ripe for immediate

review. According to FERC, the refund orders are not final

reviewable actions. We disagree with both sides in part.

Our jurisdiction is governed by Section 313(b) of the

FPA. 16 U.S.C. § 825l(b) (providing for review in the United

States Court of Appeals of “an order issued by the

Commission”). “Although section 313(b) is not limited on its

face to final orders,” we have joined other circuits in the view

that “review under section 313(b) is limited to orders of

definitive substantive impact, where judicial abstention would

result in irreparable injury to a party.” Steamboaters v.

FERC, 759 F.2d 1382, 1387 (9th Cir. 1985) (citing Papago

Tribal Util. Auth. v. FERC, 628 F.2d 235, 238 (D.C. Cir.

1980) (“Papago”)). Under Steamboaters, we ask first

“whether the order is final; second, whether, if unreviewed,

it would inflict irreparable harm on the party seeking review;

and third, whether judicial review at this stage of the process
12 STATE OF CALIFORNIA V. FERC

would invade the province reserved to the discretion of the

agency.” Id. at 1387–88.

Before proceeding with the Steamboaters inquiry, we

underscore that the petitions raise two types of issues. The

petitioners’ threshold question is whether FERC properly

invoked the Mobile-Sierra presumption. This challenge does

not implicate the scope of admissible evidence; the objection

is to the use of the Mobile-Sierra doctrine to shape the

proceeding at all. We think of this issue as a facial

applicability question: Did FERC appropriately invoke the

Mobile-Sierra presumption under these circumstances?2

Petitioners also challenge the restrictions that FERC imposed

on the evidentiary proceeding. They want to be allowed to

introduce evidence of, among other things, reporting

violations, violations of obligations under the Uniform

Commercial Code and state contract law, and violations by

sellers that were not parties to the challenged contracts. We

think of this issue as a question of the scope of the evidentiary

proceeding.

With regard to the facial applicability issue, the criteria of

Steamboaters are satisfied. FERC’s decision to adopt the

presumption in the context of short-term spot market

2 We note that the question of whether Mobile-Sierra applies at all

admits of both a facial applicability analysis and a contract-specific, asapplied analysis that is more appropriate in individual proceedings before

the agency. This distinction becomes relevant when we turn to the legal

question of whether FERC’s interpretation of the “just and reasonable”

standard is permissible. FERC’s application ofthe Mobile-Sierra doctrine

to a class of contracts may be reasonable even if it becomes unreasonable

when individual parties to a proceeding produce evidence that undermines

the presumption.
STATE OF CALIFORNIA V. FERC 13

contracts has been definitively resolved, and we therefore

have jurisdiction to review this final agency decision.

In order after order, FERC has not budged from its

position. FERC’s response that the decision is not final,

because the parties can overcome the presumption, begs the

question. Unless the presumption applies, there is no legal

hurdle to overcome. The petitioners challenge only the facial

applicability of the Mobile-Sierra presumption in a particular

class of cases, not how FERC will apply it in the specific

proceedings before it.3 As to the facial applicability question,

FERC has made a final decision that plainly “affects the legal

positioning of the parties.” City of Fremont v. FERC,

336 F.3d 910, 914 (9th Cir. 2003).

The practical consequence of not accepting review at this

stage is that, if FERC is wrong about the applicability of the

Mobile-Sierra doctrine, the remaining proceedings will be

predicated on a faulty legal ground. As in City of Fremont,

the Mobile-Sierra presumption “will be treated as a

benchmark” and petitioners face “the uphill task” to

overcome it in their individual proceedings. Id. at 914. 

These proceedings, which have multiplied and taken years to

arrive at this stage, are no ordinary proceedings. To refrain

from reviewingFERC’sfacial applicabilitydetermination and

introduce a risk, however slight, that FERC would change its

invocation of Mobile-Sierra, would be to ignore the greater

risks to the parties in these ongoing proceedings. We take to

heart that “[t]he reviewability of an order must . . . be

3 To the extent that they challenge individualized determinations under

the Mobile-Sierra doctrine, those determinations have not yet been made

and there would be no final agency action to review.
14 STATE OF CALIFORNIA V. FERC

determined by reference to its practical function and

consequences.” Papago, 628 F.2d at 239.

Finally, the issue presents a legal question capable of

resolution by this court in a way that does not invade the

agency’s province. Deciding this pure legal issue in no way

interferes with FERC’s discretion to accept evidence in

rebuttal in the remaining proceedings. See Cal. Dep’t of

Water Res. v. FERC, 361 F.3d 517, 520 (9th Cir. 2004);

Papago, 628 F.2d at 238. “[I]mmediate review of the

Commission’s determination will not disrupt the continuing

proceeding, nor will it raise the danger of multiple appellate

proceedings concerning identical issues.” Papago, 628 F.2d

at 245.

We thus conclude that the test for final action under the

FPA is met and that we have jurisdiction to review FERC’s

decision to employ the Mobile-Sierra presumption in the

class of contracts at issue here.

When it comes to the scope of the evidentiary proceeding,

however, the challenged orders are preliminary and lack

“definitive substantive impact.” Steamboaters, 759 F.2d at

1387; see also FPC v. Metro. Edison Co., 304 U.S. 375,

383–84 (1938) (noting that “affording opportunity for

constant delays. . .for the purpose of reviewing mere

procedural requirements or interlocutory directions” would

“do violence” to the FPA); Cities of Anaheim v. FERC,

723 F.2d 656, 660 (9th Cir. 1984) (stating that “procedural

orders” are not reviewable). The orders do not have the

requisite “definitive character dealing with the merits of a

proceeding before the Commission” to support review under

Section 313(b) of the FPA. ASARCO, Inc. v. FERC, 777 F.2d
STATE OF CALIFORNIA V. FERC 15

764, 771 (D.C. Cir. 1985) (quoting Metropolitan Edison Co.,

304 U.S. at 384) (emphasis added).

For instance, FERC has already shifted course on the

“shape” of the proceeding in a way that suggests some

elements of its orders may not be sufficiently final for review. 

In October 2011, FERC articulated what evidence it would

permit. 137 FERC ¶ 61,001 (Oct. 3, 2011). More than a year

later, in December 2012, FERC refined its statement of the

scope of the proceeding, acknowledging that confusion had

resulted from the prior order. 141 FERC ¶ 61,248 (Dec. 21,

2012). Significantly, it appears that despite arguments raised

by the petitioners, at least some evidence of bad faith may

have been admitted in the Phase I proceeding.

While some harm might flow from proceeding under a

flawed evidentiary framework, see City of Fremont, 336 F.3d

at 914, the same risk stems from any order setting boundaries

for a hearing. It is not enough to overcome the lack of

finality of these orders on the scope of the evidentiary

proceedings. The final order that results from the remand

hearing will be reviewable and, indeed, will admit of more

effective review of the evidentiary decisions since the court

will be able to review all of the evidence taken together. The

individual evidentiary restrictions challenged here are classic

interim rulings whose consequence cannot be determined

with any finality at this juncture.

Judicial review of the evidentiary issues thus “properly

follows the conclusion of the proceeding.” Papago, 628 F.2d

at 240; see also Cities of Anaheim, 723 F.2d at 661. In

contrast, an interim or midstream determination on the scope

of the evidentiary proceeding would invite the “disruptive

consequences of judicial interference” and “bring[] the courts
16 STATE OF CALIFORNIA V. FERC

into the adjudication of the lawfulness of rates in advance of

administrative consideration.” Papago, 628 F.2d at 242

(quoting S. Ry. Co. v. Seaboard Allied Milling Corp.,

442 U.S. 444, 460 (1979)); see also Delmarva Power &Light

Co. v. FERC, 671 F.2d 587, 595 (D.C. Cir. 1982) (warning

against intruding on FERC’s province where “the facts

bearing on the interpretation of [filings and orders] are

unclear and disputed, and these facts will bear heavily on

determining whether the statute was violated”).

“Under the rule in Steamboaters, the fact that one part of

an agency order remains pending before the agency does not

deprive this court of jurisdiction to review a discrete issue

that has been definitively resolved by the agency.” Cal.

Dep’t of Water Res., 361 F.3d at 520. We therefore exercise

jurisdiction only as to the issue of whether FERC erred by

invoking the Mobile-Sierra doctrine and hold that we lack

jurisdiction to review FERC’s evidentiary orders.

II. FACIAL APPLICABILITY OF THE MOBILE-SIERRA

DOCTRINE

The Mobile-Sierra doctrine takes its name from two cases

that dealt with the authority of FERC’s predecessor, the

Federal Power Commission, to determine whether rates set

bilaterally by contract (as opposed to those set unilaterally by

tariff) are just and reasonable. See United Gas Pipe Line Co.

v. Mobile Gas Serv. Corp. (“Mobile”), 350 U.S. 332 (1956);

Fed. Power Comm’n v. Sierra Pac. Power Co. (“Sierra”),

350 U.S. 348 (1956). Where it applies, the doctrine requires

FERC to presume that a contracted-for rate is “just and

reasonable” under the FPA.
STATE OF CALIFORNIA V. FERC 17

In 2008, after we decided Port of Seattle, the Supreme

Court issued Morgan Stanley, its first Mobile-Sierra decision

in decades. 554 U.S. 527. While Mobile and Sierra arose

from suits brought by regulated sellers claiming that rates

were too low, Morgan Stanley involved buyers’ challenges to

high contract rates. The Court explained that “[t]here is only

one statutory standard for assessing wholesale electricity

rates, whether set by contract or tariff—the just-andreasonable standard.” Id. at 545. Addressing the contract

context, the Court set forth the baseline rule that FERC must

“presume that the rate set out in a freely negotiated

wholesale-energy contract meets the ‘just and reasonable’

requirement imposed by law.” Id. at 530. In invoking the

presumption here, FERC cited this rule from Morgan Stanley. 

137 FERC ¶ 61,001, para. 20.

The Supreme Court emphasized that the Mobile-Sierra

presumption is justified by the particular role that contracts

play in the administrative scheme. “The regulatory system

created by the [FPA] is premised on contractual agreements

voluntarily devised by the regulated companies; it

contemplates abrogation of these agreements only in

circumstances of unequivocal public necessity.” Morgan

Stanley, 554 U.S. at 534 (quoting In re Permian Basin Area

Rate Cases, 390 U.S. 747, 822 (1968)). Where the

presumption applies, the inquiry into whether the rate is

lawful focuses on whether the contract rate “seriouslyharm[s]

the public interest.” Id. at 548.4

 

4

 The Court has since explained that “the Mobile-Sierra public interest

standard is not an exception to the statutory just-and-reasonable standard;

it is an application of that standard in the context of rates set by contract.” 

NRG Power Mktg., LLC v. Maine Pub. Utils. Comm’n, 558 U.S. 165, 168

(2010); see also Morgan Stanley, 554 U.S. at 546 (explaining the doctrine
18 STATE OF CALIFORNIA V. FERC

The petitioners argue that Morgan Stanley does not

support FERC’s decision to invoke the Mobile-Sierra

presumption with respect to contracts of the nature at issue

here. The circumstances here, according to petitioners,

render the presumption illogical because the contracts were

not freely negotiated long-term contracts with lawful prices. 

Instead, the transactions were short-term spot sales with a

high degree of pressure on buyers. Petitioners’ argument is

essentially that the FPA’s “just and reasonable” standard

should not be interpreted as impliedly incorporating the

Mobile-Sierra doctrine, as it was in Morgan Stanley. Id. at

545–46. Although it is true that the statutory language does

not clearly spell out the application of the “just and

reasonable” standard, under Chevron, we defer to FERC’s

reasonable determination that Mobile-Sierra extends to the

context of short-term spot sales. Chevron U.S.A. Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837, 843

(1984).

The mere short-term nature of these spot sale contracts

does not render FERC’s application of the Mobile-Sierra

doctrine unreasonable. Although long-term contracts may

play a special role in stabilizing the energy market (a role

spotlighted by the “turmoil in the spot market” in the 2000-

2001 energy crisis, Morgan Stanley, 554 U.S. at 539–40,

547–48), the Supreme Court has drawn the rule so that the

presumption may be invoked with regard to any contractedfor rate. Id. at 551; see also NRG Power Mktg., LLC,

558 U.S. at 168 (“The ‘venerable Mobile-Sierra doctrine’

rests on ‘the stabilizing force of contracts.’”) (quoting

provides “a definition of what it means for a rate to satisfy the

just-and-reasonable standard in the contract context—a definition that

applies regardless of when the contract is reviewed”).
STATE OF CALIFORNIA V. FERC 19

Morgan Stanley, 554 U.S. at 548). The fact that some

contracts adopted the form of the WSPP Agreement (a

FERC-jurisdictional standardized form agreement) does not

change our analysis, as the sales were still made pursuant to

contracts. After the presumption is invoked, the parties may

avoid or rebut it based on an evidentiary showing,

5

but

FERC’s baseline assumption that the presumption applies to

the contracts at issue is not unreasonable in light of Morgan

Stanley.

The petitioners’ numerous other arguments are also

unconvincing. We see no reason why having notice of a

§ 206 proceeding when the contracts were formed would

render it irrational to apply the presumption. The petitioners

also overstate Lockyer, which stopped short of establishing

that sellers who fail to meet reporting requirements have

automatically charged unlawful prices so as to defeat the

presumption. 383 F.3d at 1008.

5

It is important to remember that just because the presumption has been

invoked at the beginning of a given proceeding does not mean it ultimately

will apply to that case in the end. “FERC has ample authority to set aside

a contract where there is unfair dealing at the contract formation

stage—for instance, if it finds traditional grounds for the abrogation of the

contract such as fraud or duress. In addition, if the ‘dysfunctional’ market

conditions under which the contract was formed were caused by illegal

action of one of the parties, FERC should not apply the Mobile-Sierra

presumption.” Morgan Stanley, 554 U.S. at 547 (citation omitted). FERC

cited these possibilities in its December 2012 order. 141 FERC ¶ 61,248,

at para. 7. Where the presumption is rebutted in this way, a party

challenging a rate no longer has to show that the “contract rates at issue

impose an excessive burden or seriously harm the public interest” in order

to prove that a rate is unlawful. See id. at para. 14.
20 STATE OF CALIFORNIA V. FERC

The WSPP Agreement does not contain a “Memphis”

clause6that permits parties to amend their contracts

unilaterally by complaint. The WSPP Agreement establishes

standardized terms for power transactions to which individual

terms (such as price, volume, and duration) are appended in

separate confirmation agreements. The sections identified by

petitioners do not permit unilateral amendments to

confirmation agreements or the associated contractual rates.

Finally, the factual and evidentiary issues raised by the

petitioners are more appropriately considered in the context

of eventual challenges to the scope of the evidentiary

proceedings. For example, the California Parties argue that

CERS was bullied into making purchases via these bilateral

contracts when sellers refused to sell in the usual channels. 

Seattle claims that FERC disregarded this court’s instruction

in Port of Seattle to take into account evidence of market

manipulation. These arguments relate to downstream

proceedings, such as whether the presumption can be

overcome and whether FERC’s eventual decision is based on

a proper record. These types of factual and evidentiary

matters do not speak to whether FERC properly invoked

Mobile-Sierra as a baseline, even if the evidence surrounding

these contested circumstances ultimately warrants avoidance

or rebuttal of the presumption. “[T]he mere fact that the

market is imperfect, or even chaotic, is no reason to

undermine the stabilizing force of contracts.” See Morgan

6 The name of the clause comes from United Gas Pipe Line Co. v.

Memphis Light, Gas &Water Div., 358 U.S. 103, 110–13 (1958), in which

the Supreme Court held that parties may “contract out of the MobileSierra presumption by specifying in their contracts that a new rate filed

with the Commission would supersede the contract rate.” Morgan

Stanley, 554 U.S. at 534.
STATE OF CALIFORNIA V. FERC 21

Stanley, 554 U.S. at 547–48. We thus decline to extend our

analysis to these disguised efforts to rebut the presumption as

applied to these individual parties before FERC has had an

opportunity to conclude the proceedings. We need only

decide whether FERC reasonably applied Mobile-Sierra to

the class of contracts at issue here, and we hold that FERC’s

interpretation is reasonable.

We deny the petition with respect to petitioners’ claim

that the Mobile-Sierra presumption cannot apply to the spot

sales at issue in this case and dismiss the evidentiary

challenges for lack of jurisdiction.

DENIED IN PART; DISMISSED IN PART.