Court Opinion

ID: 7854875
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:42:04.796542+00
Date Added: 2024-06-11T16:29:39.312906
License: Public Domain

MIKVA, Circuit Judge,
with whom
Circuit Judges ROBINSON and EDWARDS join, dissenting:
In the seven years since the Federal Energy Regulatory Commission (FERC) determined, with apparent finality, that the municipal preference embodied in the Federal Power Act, 15 U.S.C. § 791a et seq. (1982), applies to relicensing proceedings, this case has been beset by an unusual and extended series of twists and turns, confounding the parties as well as this court. In permitting FERC to overrule its prior holding and apply its new interpretation retroactively to petitioner Clark-Cowlitz Joint Operating Agency (Clark-Cowlitz), this court today adds its own contribution to the tortuous unfolding of this case. The majority’s conclusions are marred at every step by skewed articulation of the facts and warped application of the law. The court today manages in one opinion to do violence to principles of preclusion, retroactivity, and statutory interpretation. I dissent.
I.
A. Retroactivity Doctrine and Administrative Adjudications
The largest part of the court’s opinion is devoted to its finding that FERC’s applica*77tion of its reversal of field to the parties in Pacific Power & Light Co., 25 F.E.R.C. (CCH) ¶ 61,052, reh’g denied, 25 F.E.R.C. (CCH) ¶ 61,290 (1983) (“Merwin”), was consistent with principles of retroactivity. The court begins its analysis by citing a “general principle” that retroactive application of a new interpretation announced in an agency adjudication is favored, and prospective application is permissible only if necessary to avoid a “manifest injustice.” Majority opinion (Maj. op.) at 1081. There is no such general principle under the law. Courts reviewing an agency’s attempt to retroactively apply a new policy announced in an administrative adjudication must make an independent determination whether “the inequity of retroactive application [is] counterbalanced by sufficiently significant statutory interests.” Retail, Wholesale & Dep’t Store Union v. NLRB, 466 F.2d 380, 390 (D.C.Cir.1972). This determination incorporates neither a presumption of retroactive application nor a presumption of prospective application. Rather, as the Supreme Court has made clear, it involves a straight-word balancing test in which the ill effect of retroactive application is weighed against the damage to the statutory design caused by prospective application. See SEC v. Chenery, 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947). It is highly inappropriate for this court to transform this test by adjusting the scales in favor of retroactive application. Moreover, the “manifest injustice” test to which the court refers comes from Thorpe v. Housing Authority of the City of Durham, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969), a case that is completely inapposite. In Thorpe, the Court found that it would not be manifestly unjust for the agency to apply a new standard that already had been established at the time of the proceeding. The equities are far sharper, and the legal test quite different, when an agency seeks to apply a new standard to the parties to the very adjudication in which the reversal is announced.
As the majority recognizes, the seminal case fixing the law of the circuit for retroactive application of agency adjudications is Retail, Wholesale & Dep’t Store Union v. NLRB, 466 F.2d 380 (D.C.Cir.1972). In Retail, Wholesale, this court refused to give retroactive effect to a new rule adopted in the course of a National Labor Relations Board adjudication. The court listed five factors which courts must put into the balance in determining whether a decision should have retroactive effect:
(l)whether the particular case is one of first impression, (2) whether the new rule represents an abrupt departure from well established practice or merely attempts to fill a void in an unsettled area of law, (3) the extent to which the party against whom the new rule is applied relied on the former rule, (4) the degree of the burden which a retroactive order imposes on a party, and (5) the statutory interest in applying a new rule despite the reliance of a party on the old standard.
Retail, Wholesale, 466 F.2d at 390. These considerations provide in the context of agency adjudication a way to attend to the principal concerns of retroactivity analysis —“lack of notice and the degree of reliance on former standards.” Id. at 390 n. 22. The Retail, Wholesale test attempts to reconcile the interests of the litigants with the overall public interest in effectuation of a statutory scheme: retroactive application is appropriate only if the court is satisfied that the prejudice to parties who justifiably relied on the previous standard is outweighed by the need to advance the statutory purpose which the new rule will serve. See McDonald v. Watt, 653 F.2d 1035, 1045 (5th Cir.1981); Sierra Club v. EPA, 719 F.2d 436, 468 (D.C.Cir.1983).
The Retail, Wholesale test is specifically adapted to the unique circumstances of agency attempts to retroactively apply a new policy announced in an administrative adjudication. Although the principles of retroactive application of judicial decisions serve as a general guide in the context of administrative adjudications, 4 K. Davis, Treatise on Administrative Law § 20.7, at 23 (2d ed. 1983); see Daughters of Miriam Center for the Aged v. Matthews, 590 F.2d 1250, 1259 (3rd Cir.1978), analysis of administrative decisions is colored by agen*78cies’ ability to announce new policy via either adjudication or rulemaking. On the one hand, the agency needs and enjoys considerable discretion in choosing which vehicle is the more appropriate for formulating new standards in a given case. See SEC v. Chenery Corp., 332 U.S. 194, 202-03, 67 S.Ct. at 1580 (1947). On the other hand, this flexibility means that an agency is less justified in relying upon adjudication to impose new standards of conduct retroactively, because the agency, unlike courts, has the option to promulgate a rule prospectively and thereby avoid imposing burdens on parties who have relied on the prior standard. See NLRB v. Majestic Weaving Co., 355 F.2d 854, 860 (2d Cir. 1966) (Friendly, J.); Bonfield, The Federal APA and State Administrative Law, 72 Va.L.R. 297, 330 (1986).
Several additional principles emerge from cases in which this court has reviewed agency decisions applying a new standard retroactively. First, whether a new standard should be applied is a question of law. Agencies possess no particular expertise on the issue of retroactivity, and reviewing courts in turn have “no overriding obligation of deference” to an agency’s decision to give retroactive effect to a new rule. Retail, Wholesale, 466 F.2d at 390. Second, agency decisions to apply an order retroactively must be the product of rational analysis, and “the law requires that an agency explain ... how it determined that the balancing of the harms and benefits favors giving a change in policy retroactive application.” Yakima Valley Cablevision, Inc. v. FCC, 794 F.2d 737, 746 (D.C.Cir. 1986). Third, an agency’s failure to consider the less drastic alternative of prospective application may be considered arbitrary and capricious and thus constitute grounds for reversal. Id.
B. Application
Applying the Retail, Wholesale test to the facts of this case compels the conclusion that FERC should not have applied its reversal of policy to Clark-Cowlitz. The first Retail, Wholesale factor — whether the particular rule is one of first impression — is anchored in a recognition that “the problem of retroactive application has a somewhat different aspect in cases not of first but of second impression, where an agency alters an established rule defining permissible conduct which has been generally recognized and relied on throughout the industry that it regulates.” NLRB v. Majestic Weaving Co., 355 F.2d 854, 860 (2d Cir.1966); see Retail, Wholesale, 466 F.2d at 390. Thus, when an agency already has considered' the issue and established a firm rule, a court is more likely to require prospective application of the agency’s reinterpretation. We have here a classic example of a case of second impression. As the majority observes, see Maj. op. at 1076, three years before the orders under review, the Commission convened a special declaratory proceeding for the explicit purpose of resolving the municipal preference issue. It then adopted a clearcut interpretation of section 7(a), and ordered the parties to proceed on the basis of that interpretation. This factor thus weighs squarely on the side of..prospective application.
The majority concludes that “inasmuch as Merwin was the first proceeding in which FERC announced its reinterpretation, the first Retail, Wholesale factor points in favor of retroactive application.” Maj. op. at 1082. This conclusion is, simply put, baffling. The majority flatly misinterprets the use of the term “first impression” in Retail, Wholesale. Of course Merwin was the first proceeding in which FERC announced its reversal; retroactivity analysis assumes that the decision at issue changed the law. See Retail, Wholesale, 466 F.2d at 389 (retroactivity analysis permits courts to determine whether to grant or deny retroactive force to newly established rules). Thus, the first factor does not look to whether the very decision at issue had ever been articulated before; such an inquiry would make the first factor meaningless. Rather, the court was inquiring whether the agency had previously decided the underlying issue and was now seeking to depart from its previous resolution. Moreover, the court cited the very language from the Supreme Court’s opinion in Chenery which the majority concedes *79contains “the more typical understanding of the term [first impression] as referring to situations in which an agency confronts an issue that it has not resolved before.” Maj. op. at 1082 n. 6. Finally, the court in Retail, Wholesale noted that it was reviewing “not a case of first, but of second impression.” Retail, Wholesale, 466 F.2d at 390 (emphasis added). The majority thus has indulged in a tendentious and utterly fanciful rewriting of this part of the Retail, Wholesale opinion.
The second Retail, Wholesale factor requires the court to determine “whether the new rule represents an abrupt departure from well established practice or merely attempts to fill a void in an unsettled area of law.” Retail, Wholesale, 466 F.2d at 390. If the new rule falls into the former category rather than the latter, it impinges on the “principal concern of [retroactivity analysis] — lack of notice and the degree of reliance on former standards.” Id. n. 22. The Commission’s about-face in Merwin falls more naturally into the first category rather than the second. Unlike the agency in Chenery, in which retroactive application was allowed, FERC was not “filling in the interstices of the Act.” 332 U.S. at 202, 67 S.Ct. at 1580. Rather, as in Retail, Wholesale, in which retroactive application was refused, it was announcing a 180-degree turnaround from a prior clear standard. See Retail, Wholesale, 466 F.2d at 391. The Commission previously had given careful consideration to the issue — conducting an unprecedented full day of oral argument — and then determined unanimously that the municipal preference applies to relicensing proceedings. The majority points out that only three years elapsed in this case between the agency’s initial determination and its subsequent reversal, whereas the interval in Retail, Wholesale was seven years.. Besides the fact that the difference in intervals is hardly dramatic, the majority’s position falsely equates “well established” with “longstanding.” The firmness of a precedent may, but need not, be connected to its longstandingness. Indeed, the majority’s assumption that more recent precedent is somehow “soft” is inimical to the rule of law. In this case, the question had been conclusively settled when the Commission announced a sudden and complete reversal of field. Thus, the second factor also cuts in favor of prospective application.
The third Retail, Wholesale factor is the extent of Clark-Cowlitz’s reliance on the Commission’s decision in City of Bountiful, Utah, 11 F.E.R.C. (CCH) ¶ 61,337 (June 27, 1980), reh’g denied, 12 F.E.R.C. (CCH) 1161,179 (Aug. 21, 1980) If Bountiful”). This third factor also counsels in favor of prospective application. The majority concludes that Clark-Cowlitz could only have reasonably relied on the prior interpretation until May of 1983, when the Solicitor General revealed FERC’s dissatisfaction with the result in Bountiful. Such a degree of reliance admittedly would be modest, although not impalpable. However, Clark-Cowlitz’s reliance reasonably extended considerably beyond May of 1983. To see why this is so, it is necessary to fill in somewhat the majority’s statement of facts, which omits a few critical details that demonstrate that Clark-Cowlitz’s reasonable reliance on the Bountiful decision was significant.
In its unanimous decision in Bountiful, the Commission included an order that all pending relicensing applications “go forward in light of this declaratory order.” 11 F.E.R.C. (CCH) 1161,337 at 61,736. In accord with the Commission’s directive, Clark-Cowlitz filed in October of 1980 the first of two motions requesting a hearing on the Merwin license. The Commission also specifically declined to postpone the hearing pending judicial review of Bountiful. See J.A. 289. Thus, although the majority discounts them, Clark-Cowlitz’s preliminary efforts after the successful resolution of Bountiful were certainly in reasonable reliance on (indeed, mandated by) the Bountiful decision, and in fact they enabled Clark-Cowlitz to become the first (and, given subsequent events, the only) municipal applicant to proceed to a hearing in a competitive relicensing proceeding.
Three days after the decision of the Eleventh Circuit (before whom the Commission strenuously and successfully defended its *80position in Bountiful), the Merwin hearing convened. Both parties agreed that the municipal preference applied to the Merwin proceeding and focused only on the remaining statutory issue under 7(a) — whether the two entities were “equally well adapted to conserve and utilize the water resources of the region.” Joint Statement of Major Contested Issues, reprinted in J.A., at 298-300. Clark-Cowlitz’s efforts at this hearing therefore also were taken in reliance on Bountiful. The Administrative Law Judge concluded that the two applicants were equally well adapted to conserve and utilize the region’s water resources. He therefore applied the municipal preference and entered an order awarding the license to Clark-Cowlitz. Pacific Power immediately appealed to the Commission on the ground that it was the superior candidate and therefore deserved the license notwithstanding the municipal preference.
To this point the Merwin controversy had been an unremarkable outgrowth of the Commission’s original decision in Bountiful; with Clark-Cowlitz having gone a fair way towards securing the license, however, the case began to take on unusual convolutions. The Commission had undergone a substantial change in personnel following the 1980 election. Three days before the AU’s decision in Merwin, the reconstituted Commission met in secret session. See Clark-Cowlitz Joint Operating Agency v. FERC, 798 F.2d 499 (D.C. Cir.1986). As the Commission later revealed, at that closed meeting a majority of the Commissioners registered disagreement with their predecessors’ decision in Bountiful. They voted to ask the Solicitor General to recommend that the Supreme Court grant the private utilities’ pending petitions for certiorari and remand the case to the Commission. See Brief for the Federal Energy Regulatory Commission on Petitions for a Writ of Certiorari at 8, Utah Power & Light Co. v. FERC, 463 U.S. 1230, 103 S.Ct. 3573, 77 L.Ed.2d 1415 (1983), reprinted in J.A. 106, at 107. A principal reason for this request was the Commission’s conviction that if certiorari were denied, the Bountiful decision would be binding as to applicants who participated in Bountiful under principles of res judicata. See id., J.A. at 106-07. The Solicitor did not comply precisely with the Commission’s request. Instead, he urged the Supreme Court to remand the case to the Eleventh Circuit for reconsideration in light of “intervening circumstances” — to wit, the fact that “a majority of the Commissioners, four of whom were appointed after the issuance of [Bountiful ], expressed their disagreement with the Commission’s earlier position in these orders.” Id., J.A. at 106. The Supreme Court, however, denied certiorari. See Utah Power & Light Co. v. FERC, 463 U.S. 1230, 103 S.Ct. 3573, 77 L.Ed.2d 1415 (1983).
The denial of certiorari might have appeared to quiet any potential argument against granting Clark-Cowlitz a license to operate the Merwin Project. A majority of the Commission, however, decided to continue to pursue its opposition to the municipal preference. In its review of the ALJ’s decision in Merwin, the Commission, in a 3-2 decision, simply overruled Bountiful. 25 F.E.R.C. (CCH) 11 61,052 (Oct. 7, 1983). Although the majority obscures this vital fact, the Commission’s volte-face was completely unforeshadowed: the Bountiful interpretation had never been challenged during the course of the Merwin litigation, the parties had not briefed it, and the Commission had given no indication that the issue might even be open for reconsideration.
The above scenario differs materially from that obtaining in other proceedings in which a rule, is changed. Normally parties will be on notice that the previous interpretation is subject to revision in that proceeding; any reliance on the old standard in the party’s litigation efforts therefore would be unreasonable. Here, however, the parties had no notice that FERC considered Bountiful to be open for reconsideration in Merwin and thus reasonably proceeded on the assumption that the municipal preference applied. Moreover, the Commission’s request for certiorari only made it more reasonable to rely on Bountiful, because the Commission had indicated that the mu*81nicipal preference certainly would apply to pending relicensing proceedings if the Court denied the application, as it did. Thus, under the unusual facts of this case, Clark-Cowlitz’s efforts during the course of the Merwin proceeding must also be counted as part of its reasonable reliance on the Commission’s decision in Bountiful.
In the three years between the Commission’s proclamations in Bountiful and Merwin, Clark-Cowlitz relied on the established standard to a' degree unique among the many municipal suitors for expiring licenses. Clark-Cowlitz was the only municipal applicant to proceed to hearing in a competitive relicensing proceeding. The municipality’s efforts to get the Commission to schedule a hearing, as well as the two-year course of the Merwin proceeding, entailed a substantial outlay of time and money. Clark-Cowlitz participated in voluminous discovery, engaged experts in several fields, prepared memoranda and four briefs (none of which addressed the supposedly settled municipal preference issue), and presented its case in prehearing conferences and the actual hearing before the ALT. This reliance was significant, especially for a municipal applicant of limited resources. The third Retail, Wholesale factor therefore cuts distinctly in favor of prospective application.
The degree of burden which the retroactive order imposes on Clark-Cowlitz, the fourth Retail, Wholesale factor, also counsels in favor of prospective application. Clark-Cowlitz is a municipal corporation formed for the express purpose of seeking the Merwin license. Deprivation of that license — the effect of applying the Commission’s order retroactively — is therefore quite a severe hardship for the municipality. It thwarts the single purpose which is quite literally Clark-Cowlitz’s raison d’etre.
The first four factors, which gauge the litigants’ personal interest in not being judged under a newly announced standard, thus present a fairly compelling case for prospective application. Although there is room for reasonable disagreement as to the force of some of these factors in the instant case, the important point, which the majority fails to recognize, is that whatever the impact of the first four factors, retroactive application is appropriate only if the court finds that the first four factors are counterbalanced by the fifth factor — the statutory interest in applying a new rule. “Unless the burden of imposing the new standard is de minimis, or the newly discovered statutory design compels its retroactive application, the-principles which underlie the very notion of an ordered society, in which authoritatively established rules of conduct may fairly be relied upon, must preclude its retroactive effect.” Retail, Wholesale, 366 F.2d at 392. See id. at 390 (“courts have not infrequently declined to enforce administrative orders when in their view the inequity of retroactive application has not been counterbalanced by sufficiently significant statutory interests.”); see also Sierra Club v. EPA, 719 F.2d 436, 468 (D.C.Cir.1983), cert. denied, 468 U.S. 1204, 104 S.Ct. 3571, 82 L.Ed.2d 870 (1984) (“The statutory interest in applying the new rule despite individual reliance is, of course, the crucial consideration in the context of requiring an agency to apply one of its rules retroactively.”). In this case, the majority makes no such finding, nor could it, because there is no statutory interest in retroactive application.
Normally, of course, assuming a new interpretation is not unfaithful to the statutory scheme, there will be some statutory interest in retroactive application, and the court must weigh that interest against the ill effects of retroactivity. See Chenery, 332 U.S. 194, 203, 67 S.Ct. 1575, 1580, 95 L.Ed. 1995 (1947). In this respect, however, as in so many others, this case is a true rara avis. The current statutory scheme specifically disavows any interest in denying Clark-Cowlitz the benefit of the municipal preference. With the Electric Consumers’ Protection Act, Congress has amended the Federal Power Act so as to remove the municipal preference from all pending relicensing proceedings with one explicit exception: the Merwin project. See 100 Stat. 1243 § 11. Congress has pointedly informed us, with truly unusual specificity, that it has no preference one way or the other as to whether Clark-Cowl*82itz receives the. benefit of the municipal preference. Thus, retroactive application of the Commission’s decision in Merwin could not possibly advance any statutory benefit to offset the considerable harm it would do to Clark-Cowlitz. Cf. Mullins v. Andrus, 664 F.2d 297, 304 (D.C.Cir.1980) (no statutory objectives to be served where new statutory machinery is in place). Moreover, in this respect, as in respect to its degree of reliance, Clark-Cowlitz is unique among the many municipalities that participated in Bountiful.
The majority nevertheless concludes that there is a statutory interest in retroactive application. The majority reasons that, “[withholding retroactive application would grant Clark-Cowlitz a 30-year benefit to which FERC now believes it is not entitled. The overriding Congressional interest in ensuring that the best qualified contestant (as FERC sees it) operate hydroelectric power projects, in other words, would not be fulfilled at the Merwin site for three decades.” Maj. op. at 1085 (emphasis added). But this no more than restates FERC’s decision adverse to ClarkCowlitz. It in no way speaks to Congress’ interest in having the new standard apply retroactively to Clark-Cowlitz. If the agency can simply reiterate its decision on the merits as the statutory interest in retroactive application, then the fifth Retail, Wholesale factor is meaningless. In fact, it is our province to determine whether retroactive application advances the statutory interest and in this case there is an extraordinarily clear answer in the text of the amended Federal Power Act: retroactive application of FERC’s interpretation in no way advances Congress’ statutory design.
Finally, it must be noted that the majority is not deferring to the Commission’s reasoning for applying Merwin retroactively. The Commission offered no reasoning at all. It simply applied its unanticipated reversal to Clark-Cowlitz without giving any consideration whatsoever to prospective application. Indeed, the Commission gave no thought to prospective application even though it determined to overrule Bountiful “so that the correct preference provision will be applied in future relicensing proceedings.” Merwin, 25 F.E.R.C. ¶ 61,052, at 61,177 (emphasis added). In supplying reasoning for the Commission, the majority completely ignores that “the law requires that an agency explain ... how it determined that the balancing of harms and benefits favors giving a change in policy retroactive application.” Yakima Valley Cablevision, Inc. v. FCC, 794 F.2d 737, 746 (D.C.Cir.1986). The court at the very least should reverse and remand to the agency for an explanation of its decision. On this ground alone, today’s decision is manifestly unjust.
In sum, this is a case in which “the prospectivity side of the scale [is] full and the retroactivity side empty.” McDonald v. Watt, 653 F.2d 1035, 1046 (5th Cir.1981). Moreover, the Commission did absolutely nothing to fulfill its legal obligation to explain why it opted for retroactive application. Under such circumstances, the Commission’s application of its new interpretation to Clark-Cowlitz can only be adjudged to be the type of retroactivity which is condemned by law.
The majority also rejects Clark-Cowlitz’s argument that principles of collateral estoppel dictate that it have the benefit of the municipal preference in the competition for the Merwin license. My objection to this section of the majority opinion is less with its conclusions than with its premises. In deciding that FERC did not become bound to apply the municipal preference by virtue of the Eleventh Circuit's decision in Alabama Power v. FERC, 685 F.2d 1311 (11th Cir.1982), cert. denied, 463 U.S. 1230, 103 S.Ct. 3573, 77 L.Ed.2d 1415 (1983), the court is attacking a paper tiger. The more important and interesting issue for purposes of preclusion doctrine is whether Pacific Power & Light is precluded from reaping the benefit of FERC’s volte-face by virtue of FERC’s decision in Bountiful. I conclude that Pacific Power & Light is so precluded and that Clark-Cowlitz, having once successfully litigated the municipal preference issue with respect to its pending application for the Merwin license, cannot *83now be denied the fruits of its earlier victory-
The guiding principle for application of preclusion doctrine to agency adjudications is that “res judicata applies when what the agency does resembles what a trial court does. Such a resemblance or lack of it applies to determinations of law as well as to determinations of fact.” K. Davis, 4 Administrative Law Treatise 52 (2d ed. 1983). Bountiful, it will be remembered, was a separate declaratory proceeding that progressed to final judgment. If the Bountiful declaratory proceeding had taken place in federal court, as it certainly could have, the litigants would be bound by the ultimate determination that the municipal preference applies in relicensing proceedings. That is not to say that a court— or in this case FERC — could not later, subject to the principles of stare decisis, decide to adopt the opposite view. But such a subsequent revision could not change the original outcome as to the original parties. If parties’ fates could be so put at the mercy of subsequent revision, it would decimate the policies that preclusion doctrine is designed to advance: protection from the vexation and expense of repetitious litigation, promotion of confidence in the conclusiveness of decisions, and, especially, securing of peace and repose of society. Thus, while FERC may be entitled to change its interpretation of the Federal Power Act, its ability to revise its view does not extend to undoing the preclusive effect of a declaratory order resolving a ripe controversy.
As the majority points out, underlying the rule of issue preclusion is the principle that “one who has actually litigated an issue should not be allowed to relitigate it.” Restatement (Second) of Judgments 6 (1982). Yet Clark-Cowlitz and Pacific Power & Light did actually litigate the municipal preference issue in Bountiful. ClarkCowlitz and Pacific Power & Light were competitors in a pending relicensing hearing that was suspended to resolve the municipal preference issue in a declaratory proceeding. The two parties litigated vigorously — all the way to the Supreme Court — with the reasonable expectation it would resolve the crucial issue in their ongoing controversy. Thus, Clark-Cowlitz and Pacific Power & Light have been afforded an adequate opportunity to litigate a ripe claim before an administrative tribunal. This court therefore does violence to the principles underlying preclusion doctrine by permitting Pacific Power & Light not to be bound by the decision in Bountiful.
The majority argues in one of its footnotes that preclusion' should not apply because it was FERC, and not Pacific Power, that changed its position:
Thus, to the extent preclusion analysis is appropriate at all, it is applicable to the extent that FERC participated as a party before the Eleventh Circuit.
Maj. Op. at 1080 n. 5. FERC is the named party in the Eleventh Circuit proceedings and participated fully as it had to do. The issue of municipal preference went to final judgment, and certiorari was denied. Everybody, including FERC, Pacific Power and Clark-Cowlitz, assumed that with the denial of certiorari the issue of municipal preference was finally resolved as to ClarkCowlitz. The majority’s effort to rebut this point raises sophistry to a new pinnacle — surpassed only by the alternative position advanced by the court to justify in general the curious procedures of FERC. If we allowed preclusion, says the court, it would benefit Clark-Cowlitz over the other municipalities that participated in Bountiful — and burden Pacific Power over the other utilities involved in Bountiful. The court even cites the reason for such disparity, but gives it no weight: the passage by Congress of a law which specifically put Clark-Cowlitz and Pacific Power in a category separate from the other parties. It is appropriate that such a rebuttal to the dissent’s concerns is expressed in a footnote.
The court’s decision also will greatly undermine parties’ confidence in the valuable tool of administrative declaratory proceedings. See 5 U.S.C. § 554(e) (1982). Henceforth, parties will be justifiably concerned that such proceedings, even of the scope and effort that characterized Bountiful, may in fact be mere dress rehearsals whose result as to the parties is subject to *84complete reversal in a subsequent adjudication. The court’s result thus works a substantial disservice to both preclusion doctrine and administrative law.
II.
The question of the merits of FERC’s reinterpretation of the Federal Power Act has been rendered virtually academic by virtue of the Electric Consumer Protection Act of 1986, Pub.L. No. 99-495, 100 Stat. 1243. While carefully excepting the controversy at bar from its provision, Congress now has provided that the municipal preference will not apply to future relicensing proceedings. The majority’s analysis of the unamended Federal Power Act, however, suffers from two flaws so substantial that I must dissent from that portion of the opinion as well.
First, in upholding FERC’s new interpretation, the majority relies heavily on the distinctions between entertaining applications for a license — i.e., the process of selecting a licensee — and the process of actually issuing a license. The majority suggests that section 7(a) of the Act must be read to refer to the latter process in order to give full meaning to the statute. In fact, such a reading leaves the statute meaningless. The municipal preference obviously is intended to be used in the decision-making process as a tiebreaking device to select one licensee from among equally well-adapted candidates. It makes no sense to say that FERC can first decide to whom to award a license and then apply the municipal preference to the formal act of issuing the license. The municipal preference must come into play in determining which candidate wins the competition, not in awarding the prize. The majority’s analysis on this point is untenable.
The second flaw in the majority’s review comes in its determination that the Merwin proceeding arose under the second half of section 7(a) — the “as between other applicants” clause. The majority already has detailed one problem with its interpretation: the second clause of 7(a) refers to “other applicants.” The obvious meaning of this phrase is “applicants other than municipal entities,” and Clark-Cowlitz is a municipal entity. But there is a more subtle, although no less significant, problem with the majority’s analysis. A careful reading of section 7(a) demonstrates that a proceeding cannot arise under the second half of that provision. Section 7(a) first specifies three situations to which it pertains. It then instructs FERC how to proceed in any of these situations, depending on the identity of the applicants. Those instructions are: 1) if an equally well-adapted state or municipality is among the applicants, award it the license; 2) as between other applicants, the Commission may give preference to the best-adapted candidate as defined in the clause. In short, the “as between other applicants” clause refers back to the three situations section 7(a) addresses; it is not a general catch-all clause designed to cover any and all other situations. Thus, FERC’s decision to rely on the “as between other applicants” clause as a separate jurisdictional provision, and the court’s deference to that decision, are at odds with Congress’ statutory scheme.
III.
The rule of law is premised on a concept of reliance. Courts and policymakers have struggled to give full measure to that concept, while recognizing that the results are not always comfortable for society. Retroactivity conflicts are particularly acute when an administrative agency seeks to balance the need for flexibility and change in the administrative law sector with the parties’ right to rely on what the agency has said and done previously. Here FERC generated considerable reliance on a rule it then proceeded to reverse without notice. The retroactive application of its new standard to Clark-Cowlitz was unlawful and unreasoned. It also violated well-established principles of preclusion doctrine. Finally, it was premised on a statutory inter*85pretation that at least in some respects was unreasonable. Although Congress’ recent amendment to the Federal Power Act has greatly diminished the scope of the dispute, the court today works a grave disservice to the one municipal applicant who still has a right, preserved by statute, to have its application decided under FERC’s prior interpretation.

I dissent.