827 F.3d 75
D.C. Cir.2016Background
- FERC's Order No. 1000 required removal of federal rights of first refusal (ROFRs) from transmission tariffs and agreements to promote competition and lower costs.
- This court previously upheld Order No. 1000 in S.C. Pub. Serv. Auth. v. FERC, rejecting facial challenges to the removal mandate.
- Petitioners (OG&E and others) are members of Southwest Power Pool and had ROFRs in their RTO Membership Agreement (Section 3.3); FERC required deletion at compliance stage.
- Southwest Power Pool complied by proposing deletions but argued Mobile‑Sierra protection applied to the Agreement.
- FERC concluded Mobile‑Sierra applies only to provisions that are the product of individualized, arm’s‑length bargaining; it found Section 3.3 was a generally applicable, anti‑competitive provision and thus not protected.
- The D.C. Circuit holds that Mobile‑Sierra need not extend to anti‑competitive ROFRs that were not the product of adversarial, arms‑length negotiations and denies the petition for review.
Issues
| Issue | Petitioners' Argument | FERC's Argument | Held |
|---|---|---|---|
| Whether Mobile‑Sierra presumption protects ROFRs in the RTO Membership Agreement | Any valid, freely negotiated contract provision automatically gets Mobile‑Sierra protection | Mobile‑Sierra applies only to individualized rates/terms from arm’s‑length bargaining; generally applicable or non‑adversarial terms need not be protected | Court denies petition: Mobile‑Sierra does not protect anti‑competitive ROFRs not produced by arms‑length bargaining |
| Whether Mobile‑Sierra is limited to rates or extends to other contract provisions affecting rates | Mobile‑Sierra applies broadly to contractual provisions that affect rates | FERC treats extension as discretionary and applies an arm’s‑length test before presuming protection | Court assumes arguendo Mobile‑Sierra can apply beyond rates but finds no need to decide; outcome stands because ROFRs are unprotected |
| Whether Section 3.3 was individually negotiated or a generally applicable tariff‑type provision | Petitioners: Section 3.3 was part of their negotiated Membership Agreement and thus individualized | FERC: Section 3.3 was standard, had limited negotiation room, and created barriers to entry — not the product of adversarial bargaining | Court accepts FERC’s finding that Section 3.3 restricted competition and was not the product of arms‑length negotiation |
| Whether anti‑competitive intent or effect removes Mobile‑Sierra protection | Petitioners: dispute characterization; argue contractual protection should apply | FERC: provisions that function to exclude competition (cartel‑like) are not within Mobile‑Sierra’s protection | Court holds Mobile‑Sierra does not protect provisions that are anti‑competitive or otherwise the product of unfair dealing at formation |
Key Cases Cited
- United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332 (1956) (establishes limits on unilateral tariff changes in presence of existing contracts)
- Fed. Power Comm’n v. Sierra Pacific Power Co., 350 U.S. 348 (1956) (Mobile‑Sierra doctrine: contract rates presumed just and reasonable unless contrary to public interest)
- Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527 (2008) (Mobile‑Sierra presumption applies except where contract formation involved fraud, duress, or unfair dealing)
- NRG Power Marketing, LLC v. Maine Pub. Utils. Comm’n, 558 U.S. 165 (2010) (Mobile‑Sierra protection can apply to arrangements outside classical bilateral contracts, but scope is fact‑dependent)
- S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (upheld Order No. 1000’s mandate removing ROFRs)
- New England Power Generators Ass’n, Inc. v. FERC, 707 F.3d 364 (D.C. Cir. 2013) (discusses Mobile‑Sierra logic and FERC’s discretion in applying it to auction/market mechanisms)
- MISO Transmission Owners v. FERC, 819 F.3d 329 (7th Cir. 2016) (characterizes self‑protective ROFR‑type agreements as cartel‑like and anti‑competitive)