United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 20, 2010 Decided November 5, 2010

No. 06-1403

MAINE PUBLIC UTILITIES COMMISSION,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL, ET

AL.,

INTERVENORS

Consolidated with 06-1427, 07-1193

On Remand from the United States Supreme Court

John S. Wright, Assistant Attorney General, Office of the

Attorney General for the State of Connecticut, argued the cause

for petitioners. With him on the brief were Michael C.

Wertheimer, Assistant Attorney General, Jesse S. Reyes,

Assistant Attorney General, Office of the Attorney General for

the Commonwealth of Massachusetts, Vasiliki Karandrikas,

Lisa Fink, and Robert A. Weishaar Jr.
2

Donald J. Sipe and Jonathan G. Mermin were on the brief

for intervenor Industrial Energy Consumer Group in support of

petitioners.

Robert H. Solomon, Solicitor, Federal Energy Regulatory

Commission, argued the cause for respondent. With him on the

brief were Thomas R. Sheets, General Counsel, and Lona T.

Perry, Senior Attorney.

John N. Estes III argued the cause for intervenors Entergy

Nuclear Generation Company, LLC, et al. in support of

respondent. With him on the brief were John L. Shepherd Jr.,

Christopher C. O'Hara, David Talmage Musselman, Aaron

James Bullwinkel, Neil L. Levy, David G. Tewksbury, and Tim

W. Muller.

Sherry A. Quirk, Monica M. Berry, and Raymond W.

Hepper were on the brief for intervenor ISO New England Inc.

in support of respondent.

Before: ROGERS and GARLAND, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

Opinion for the court filed by SILBERMAN, Senior Circuit

Judge.

SILBERMAN, Senior Circuit Judge: These consolidated

petitions for review are before us once again. The Maine Public

Utilities Commission and the Attorneys General of Connecticut

and Massachusetts, representing energy customers, challenged

FERC’s approval of a settlement agreement that redesigned New

England’s electricity capacity market. Although we rejected

most of petitioners’ challenges, we granted their petition

regarding the argument that the settlement agreement’s MobileSierra provision – which requires FERC to adjudicate
3

challenges to rates resulting from an auction procedure arising

out of the settlement agreement under the Mobile-Sierra public

interest standard – deprived non-settling parties of their rights

under the Federal Power Act to challenge rates under the

statute’s presumably more searching “just and reasonable”

standard. See Me. Pub. Utils. Comm’n v. FERC, 520 F.3d 464,

477 (D.C. Cir. 2008) (per curiam). We held that the MobileSierra doctrine could not apply to rate challenges brought by

non-parties to the settlement agreement. See id. The Supreme

Court granted certiorari on this general issue and reversed. See

NRG Power Mktg., LLC v. Me. Pub. Utils. Comm’n, 130 S. Ct.

693, 696-97 (2010). It identified, however, two questions

concerning the Mobile-Sierra provision that had been raised

before, but not ruled on by, us, and remanded those issues for

our consideration. See id. at 701. Because the Commission

failed to address those issues in the challenged orders, we now

remand the orders to FERC. 

I

This case has characteristics of a chameleon; it has changed

its colors – and its shape – at each stage of the proceedings. As

we have previously explained, the basic dispute relates to New

England’s electrical capacity market, in which an electricity

provider purchases an option to buy electricity from a generator

rather than purchasing the electricity directly. That market had

been beset by problems, including a supply of capacity that was

barely sufficient to meet the region’s demand, and FERC,

electricity generators, electricity purchasers, and power

customers engaged in several attempts to resolve those issues. 

See Devon Power LLC, 115 FERC ¶ 61,340, at 62,315 (2006). 

In response to their attempts, FERC required the New England

Independent System Operator, the entity operating the electricity

transmission system in New England, to develop a new market

mechanism that set prices separately by geographic sub-region. 
4

Under this new mechanism, prices would be highest in the

regions with the most severe capacity shortages, encouraging

new entries to the market. See Devon Power LLC, 107 FERC 

¶ 61,240, at 62,022 (2004). This mechanism proved extremely

controversial, and FERC apparently established settlement

procedures to allow all affected parties to develop a different

market mechanism. After four months of negotiations, a

settlement was reached, which FERC approved. See Devon

Power LLC, 115 FERC at 62,306.

The key feature of the settlement agreement is the Forward

Capacity Market, which entails annual auctions that set the rates

for electricity “capacity” (the option of buying a quantum of

power). In these auctions, which are held three years in advance

of when capacity is needed, electricity providers buy capacity at

a standard rate, and must purchase enough capacity to maintain

the reliability of the electricity grid. See id. As noted, the

settlement agreement provided that challenges to the resulting

auction rates – whether brought by a settling party, a nonsettling party, or the Commission – would be “adjudicated under

the highly-deferential Mobile-Sierra ‘public interest’ standard

rather than the usual ‘just and reasonable’ standard” of the

Federal Power Act. Me. Pub. Utils. Comm’n, 520 F.3d at 469.

It should be noted that, at the outset of this litigation, it was

common ground among all parties that the normal statutory “just

and reasonable” standard was a different standard than the

“public interest” standard. This belief no doubt was shaped by

the eponymous cases of the Mobile-Sierra doctrine, in which the

Supreme Court addressed the Commission’s authority to modify

rates set by contract. In United Gas Pipe Line Co. v. Mobile

Gas Service Corp., 350 U.S. 332 (1956), the Court held that

under the Natural Gas Act, a utility could not abrogate a lawful

contract with a purchaser merely by filing a new rate. 350 U.S.

at 336-37. And in Federal Power Commission v. Sierra Pacific
5

Power Co., 350 U.S. 348 (1956), it applied Mobile to the

Federal Power Act, and confronted the question of how the

Commission evaluates when a contract rate is just and

reasonable. 350 U.S. at 352-53. The Court held that a utility

that had entered into a contract setting rates could not

subsequently seek a greater return by asserting the contract rate

was inadequate to meet the just and reasonable standard. See id.

at 354-55. It could only escape that rate if the utility could show

the “public interest” was jeopardized – which apparently meant

the utility faced something close to insolvency, the rate created

an excessive burden for consumers, or the rate was unduly

discriminatory. See id. We subsequently extended that hurdle

symmetrically to challenges brought by purchasers, in addition

to challenges brought by sellers. See Potomac Elec. Power Co.

v. FERC, 210 F.3d 404-05 (D.C. Cir. 2000). 

It appeared to us that application of the Mobile-Sierra

doctrine was a form of estoppel, i.e., a contracting party was not

at liberty – short of extraordinary circumstances – to avoid its

negotiated contract rate. And therefore we framed the MobileSierra issue in our previous opinion as whether “the

Commission [may] approve a settlement agreement that applies

the highly-deferential ‘public interest’ standard to rate

challenges brought by non-contracting third parties.” Me. Pub.

Utils. Comm’n, 520 F.3d at 477. FERC’s orders had been

somewhat ambiguous as to why the Commission decided it

could impose the Mobile-Sierra standard on non-settling parties. 

But we found no need to parse FERC’s various explanations,

because we concluded that the Commission could not approve

the settlement agreement’s Mobile-Sierra clause that bound nonsettling parties.

Then, before the Supreme Court, the ground shifted. Three

months after we issued our original opinion in this case, the

Supreme Court decided Morgan Stanley Capital Group Inc. v.
6

Public Utility District No. 1 of Snohomish County, 128 S. Ct.

2733 (2008), which held that the Mobile-Sierra public interest

standard was only an application of the just and reasonable

standard to contract, not a different standard. 128 S. Ct. at 2740. 

In light of that decision, the Court took certiorari in this case to

answer a single question: whether “Mobile-Sierra’s

public-interest standard appl[ies] when a contract rate is

challenged by an entity that was not a party to the contract.” 

NRG Power Mktg., LLC, 130 S. Ct. at 698 (internal quotation

marks omitted). The Court, therefore, shifted the focus of the

case from the settlement agreement to the nature of the auction

rates resulting from the settlement agreement.

Following the Supreme Court’s lead, the parties presented

arguments about whether Mobile-Sierra applied only to contract

rates. Maine Public Utilities Commission and its allies,

respondents before the Supreme Court, squarely contended for

the first time (undoubtedly in light of Morgan Stanley) that the

auction rates were not contract rates (a point that they had not

specifically made before, except by adopting an argument in an

intervenor’s brief). Petitioners before the Supreme Court, who

had been intervenors defending the settlement agreement before

us, now argued (again surely influenced by Morgan Stanley) that

the rates were contract rates. And FERC, for its part, took a

third position: the rates were not contract rates, yet it

nevertheless had authority to approve the Mobile-Sierra clause

as a matter of its discretion. 

Relying on Morgan Stanley, the Supreme Court concluded

that the Mobile-Sierra doctrine “is not limited to challenges to

contract rates brought by contracting parties. It applies, as well,

to challenges initiated by third parties.” NRG Power Mktg.,

LLC, 130 S. Ct. at 701. And therefore it implicitly, but

necessarily, rejected our conclusion that FERC could not

approve a Mobile-Sierra clause in a settlement agreement that
7

bound non-settling parties. That is, if non-contracting parties

are bound to challenge contract rates under Mobile-Sierra, it

must be that FERC can approve a settlement agreement

requiring adjudication of any rates resulting from that settlement

agreement under Mobile-Sierra if the resultant rates are contract

rates. But the Supreme Court’s holding did not resolve this

case, because as the parties’ positions before it made clear, there

was still an open question about whether the auction rates

resulting from the settlement agreement were the type of rates

to which Mobile-Sierra applied. The Court declined to consider

this issue, reasoning that it had been “raised before, but not ruled

upon by, the Court of Appeals.” Id. The Supreme Court

therefore asked us to consider that issue in the first instance. See

id. The parties now present on remand the same arguments

deployed in the Supreme Court.1

* * *

It is necessary to describe this jurisprudential Kabuki dance

to deal both with a jurisdictional issue, as well as with the

merits. The intervenors defending the settlement agreement

(although not FERC) contend that we lack jurisdiction to

consider petitioners’ argument that the auction rates are not

1

 One of the most contentious issues in this case was the status

of the “transition payments” paid to electricity generators to cover the

three-year gap between the first auction and the time when the

capacity purchased in that auction is provided. See Me. Pub. Utils.

Comm’n, 520 F.3d at 469. The settlement agreement obligated FERC

to adjudicate challenges to these payments under Mobile-Sierra as

well. Although petitioners argue that applying Mobile-Sierra to the

transition payments violates their rights under the Federal Power Act,

because the last payments were made on June 1, 2010, petitioners can

no longer challenge them, mooting this argument. See L.A. County v.

Davis, 440 U.S. 625, 631 (1979). Petitioners appeared to concede as

much at oral argument. See Oral Arg. Recording at 22:16-20.
8

contract rates to which Mobile-Sierra can apply because

petitioners did not make that precise argument before FERC –

only intervenors opposing the settlement did. And our cases are

quite clear that generally we do not have jurisdiction under the

Federal Power Act to consider an argument not raised by a

petitioner before FERC; an intervenor cannot fill the

jurisdictional gap. See, e.g., Platte River Whooping Crane

Critical Habitat Maint. Trust v. FERC, 876 F.2d 109, 113 (D.C.

Cir. 1989); see also 16 U.S.C. § 825l(b).

It would be rather anomalous at this point for us to hold that

we lacked jurisdiction to consider the issues the Supreme Court

has explicitly remanded to us. Moreover, given the shifts in the

parties’ positions – including FERC’s – as well as the

unanticipated change in the Supreme Court’s Mobile-Sierra

jurisprudence, it might be thought overly technical to bar

petitioners’ argument. But it is unnecessary to consider these

factors. Intervenors, in asserting that petitioners did not raise

the precise argument that the auction rates are not contract rates

before FERC, are slicing the salami too thinly. After all,

petitioners did argue before FERC that the Mobile-Sierra

provision in the settlement agreement “deprives non-settling

parties of their rights under Section 206 of the Federal Power

Act,” an argument that applies whether or not the auction rates

are regarded as contract rates.2

 Interestingly, FERC, when

presented with intervenors’ more precise formulation that the

2

 For this reason, intervenors’ alternative argument that

petitioners waived their non-contract rate argument in their opening

brief is without merit. In that brief, as before FERC, petitioners

asserted that the settlement agreement deprives them of their statutory

rights. See Petitioners’ Opening Brief at 51-54. We cannot imagine

an argument would be specific enough to satisfy section 825l(b), yet

not satisfy our prudential requirement that a party raise an argument

in its opening brief. 
9

auction rates were not contract rates, said “[w]e also reject

[intervenors’] contention that market rules and tariffs are not

contracts to which Mobile-Sierra can apply,” yet ambiguously

also said that “tariffs have been held to be analogous to

contracts.” Devon Power LLC, 117 FERC ¶ 61,133, at 61,727

(2006). The Commission apparently did not see intervenors’

contention that the auction rates were not contract rates as

separate from petitioners’ general challenge to the Mobile-Sierra

clause because it never actually resolved the former question,

which likely explains why FERC did not join the jurisdictional

objection.

II

As we noted, the Supreme Court granted certiorari to

determine whether the Mobile-Sierra public interest standard

applied to a challenge to contract rates brought by a noncontracting party. And that issue was affected decisively by

Morgan Stanley, which the Supreme Court decided after we

issued our previous opinion in this case. A freely-negotiated

contract rate, the Court held in Morgan Stanley, was

presumptive evidence that the rate was just and reasonable

because it reflected market forces. See Morgan Stanley, 128 S.

Ct. at 2739-40, 2746-47. Based on that reasoning, the Supreme

Court concluded in this case that Mobile-Sierra could apply to

a rate challenge brought by a non-contracting party. See NRG

Power Mktg., 130 S. Ct. at 701. 

We admit to being somewhat uncertain about the

implications of the Supreme Court’s opinion in our case because

although it states, following Morgan Stanley, that the public

interest standard is merely an application of the just and

reasonable standard, see id. at 700, its accurate description of

Sierra makes clear that there an examination of the disputed rate

under the just and reasonable standard would have led the
10

Commission to overturn the rate, where adjudication under the

public interest standard would not have, see id. at 699. It

therefore appears that if the Mobile-Sierra doctrine is only an

application of the just and reasonable standard – not a separate

standard – it is true only at some theoretical level. Be that as it

may, since the Supreme Court invigorated the Mobile-Sierra

doctrine, and remanded for a determination whether the auction

rates were protected against attack, either because they are

freely-negotiated contract rates or because FERC has discretion

to apply Mobile-Sierra to non-contract rates, it is obvious that

the Court is of the view that the Mobile-Sierra public interest

standard confers an advantage on a party claiming it applies. 

Doctrinal difficulties aside, we turn to the questions the

Supreme Court put to us: “[w]hether the rates at issue qualify as

‘contract rates,’ and, if not, whether FERC had discretion to

treat them analogously.” Id. at 701. FERC’s counsel now

concedes flatly that the auction rates are not contract rates, but

rather closely resemble a conventional “cost based tariff rate”

because during the Forward Capacity Market auction, a capacity

buyer is simply assessed a standard market rate. Unlike a

typical auction, then, the buyers do not agree to pay a seller a

specific price set by a voluntary bid, so therefore no voluntary

agreements develop. Nevertheless, FERC’s counsel argues that

under the logic of Morgan Stanley, the Commission always has

discretion to approve a clause that provides protection against an

attack on these rates as unjust or unreasonable by imbuing them

with the more difficult to challenge “public interest” cloak.3

Exercising that discretion is appropriate here, FERC’s counsel

believes, because the auction rates “share with freely negotiated

contracts certain market based features that tend to assure just

and reasonable rates.” Respondent’s Supplemental Brief at 13. 

3

 FERC’s brief rather confusingly refers to the public interest

standard as a stricter standard.
11

We cannot decide whether FERC’s counsel’s current

position is reasonable under the APA because it is certainly

obvious – whatever else is confusing about this case – that

FERC never articulated in its orders a rationale for its discretion

to approve a Mobile-Sierra clause outside the contract context,

or an explanation for exercising that discretion here. See Fed.

Power Comm’n v. Texaco Inc., 417 U.S. 380, 397 (1974) (“[W]e

cannot ‘accept counsel’s post hoc rationalizations for agency

action . . . .’” (quoting Burlington Truck Lines, Inc. v. United

States, 371 U.S. 156, 168-69 (1962))). However FERC justifies

its decision to approve the Mobile-Sierra clause, FERC must

explain why, if the auction rates are not contract rates, they are

entitled to Mobile-Sierra treatment. Just how do the auction

rates reflect market conditions similar to freely-negotiated

contract rates? Or does FERC base its asserted discretion on

some other ground?

For the foregoing reasons, FERC’s orders approving the

settlement agreement’s Mobile-Sierra provision are remanded

for further proceedings.

So ordered.