Opinion ID: 184604
Heading Depth: 3
Heading Rank: 2

Heading: Application of Mobile-Sierra Doctrine to the Mojave Service Agreements

Text: 28 Because the Mobile-Sierra doctrine applies, FERC's reformation of the Mojave contracts will be upheld only if FERC has shown that the public interest required it to intervene. See Metropolitan Edison Co. v. FERC, 595 F.2d 851, 855-56 (D.C.Cir.1979) [331 U.S.App.D.C. 243] 1979). FERC relies in part on the public interest rationale articulated in Order 636 to justify its modification of the Mojave contracts. See First Rehearing Order, 64 FERC at 61,383. But the public interest that permits FERC to modify private contracts is different from and more exacting than the public interest that FERC seeks to serve when it promulgates its rules. Compare 15 U.S.C. § 717(a) (Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest.) with Sierra Pacific, 350 U.S. at 355, 76 S.Ct. 368 (stating that 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). FERC's rulemaking authority requires only that it point to a generic public interest in favor of a proposed rule; the public interest necessary to override a private contract, however, is significantly more particularized and requires analysis of the manner in which the contract harms the public interest and of the extent to which abrogation or reformation mitigates the contract's deleterious effect. Cf. id. (permitting modification of firm contracts only if the scheme of regulation imposed is necessary in the public interest (citation and internal quotations omitted)); Papago, 723 F.2d at 954. 29 Because of these differences, more is required to justify regulatory intervention in a private contract than a simple reference to the policies served by a particular rule. The Commission, however, did not rest its reformation of the Mojave agreements on the generalized public interest goals underlying Order 636. Rather, it determined that the retention of MFV rate design would adversely affect the public interest in two ways: first, it would distort gas market pricing to the detriment of the integrated national gas sales market, Compliance Order, 62 FERC at 62,365-66; and second, it would be particularly anti-competitive because it would harm Mojave's main competitor, Kern River, in California and elsewhere. Id. at 62,366 (internal quotations and footnote omitted). The Commission also determined that to the extent that permitting both Mojave and Kern River to retain MFV pricing might mitigate the second problem, it would exacerbate the first. Because the length of their pipelines differ and they transport gas from different regions, FERC concluded that allowing Mojave and Kern River to remain on MFV would distort competition between different producing regions in the very manner that the Commission is seeking to avoid through its [Order 636] SFV policy. First Rehearing Order, 64 FERC at 61,389. 30 In its Compliance Order, the Commission not only discussed the broad public interest underlying its preference for uniform SFV pricing but also explained how Mojave's retention of some MFV-based charges would threaten the coherence of the national policy and distort the local gas market to the detriment of Mojave's competitors. See Compliance Order, 62 FERC at 62,365-66. FERC therefore satisfied its obligation to articulate supportable and reasonable explanations for how the public interest required modification of a private contract. 31