TOWN OF NORWOOD, MASSACHUSETTS, Pеtitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. NEW ENGLAND POWER COMPANY, Intervenor.
No. 99-2155
United States Court of Appeals For the First Circuit
June 29, 2000
ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL ENERGY REGULATORY COMMISSION
Before Boudin, Stahl and Lipez, Circuit Judges.
Larry D. Gasteiger with whom Douglas W. Smith, General Counsel, and John H. Conway, Acting Solicitor, were on brief for respondent.
Edward Berlin with whom Robert V. Zener, Swidler Berlin Shereff Friedman, LLP and John F. Sherman, III, Associate General Counsel, The New England Electric System Companies, were on brief for intervenor.
BOUDIN, Circuit Judge. In this case, the Town of Norwood, Massachusetts, seeks review of orders of the Federal Energy Regulatory Commission (“FERC“) denying Norwood‘s petition for declaratory rulings. The case is a sequel to Town of Norwood v. FERC, 202 F.3d 392 (1st Cir.), petition for cert. filed (U.S. May 30, 2000) (No. 99-1914) (“Norwood I“), in which this court sustained related FERC orders. See also Town of Norwood v. New England Power Co., 202 F.3d 408 (1st Cir.), petition for cert. filed (U.S. May 30, 2000) (No. 99-1913) (“Norwood II“). The pertinent facts, for which detailed background can be found in Norwood I and II, are as follows.
For many years, New England Power Company was a major integrated electric utility in New England: it generated power, distributed it as a wholesaler to affiliates and non-affiliates alike, and retailed power through its local affiliates such as Massachusetts Electric Company. Norwood, which operates a municipal electric company that distributes retail power to residents and businesses in the town, was а long-time purchaser of power from Boston Edison Company, but in 1983 Norwood began to purchase power instead from New England Power.
The requirements contract provided that its term was from November 1, 1983, to October 31, 1998, but it also stated that “[n]either [New England Power] nor Norwood will give notice of termination prior to November 1, 1991 and shall not specify a termination date prior to November 1, 1998.” New England Power‘s FERC Tariff No. 1, incorporated by reference in its power contract with Norwood, said that “[o]nce initiated, service under this tariff shall continue until terminated by either party giving to the other at least seven years’ written nоtice of termination. . . .”
Thereafter, the parties twice amended the requirements contract. First, in 1987 the contract was amended to permit Norwood to take advantage of allocations of lower-cost power
On July 25, 1990, Norwood sent a letter to New England Power stating that Norwood “hereby gives notice . . . that it extends the date” for giving notice of termination from November 1, 1991, to November 1, 2001. The letter continued: “The effect of this is that the Power Contract between [New England Power] and Norwood would be extended for [ten] years tо midnight, October 31, 2008 . . . .” Whether Norwood did intend to extend the contract and whether the extension was effective are principal issues in this case.
Beginning in December 1996, New England Power made a set of regulatory filings to restructure itself and to revise its existing tariff for wholesale power sales. These filings, described in detail and upheld in Norwood I, aimed to secure FERC approval for the sale of New England Power‘s non-nuclear generating facilities, the release (on payment of termination charges) of affiliates from their long-term requirements contracts with New England Power, and the restructuring of New England Power‘s wholesale rates to facilitate customer choice
In a set of orders issued between Novembеr 1997 and June 1998, FERC approved the sale, early termination by affiliates on payment of termination charges, the restructuring of wholesale rates, and a “rate freeze” on New England Power‘s existing charges with wholesale contract purchasers like Norwood. This freeze was instituted because under the existing contracts, rates were normally adjusted to reflect increased cоsts, and New England Power was now divesting itself of its low-cost non-nuclear plants. Norwood II, 202 F.3d at 413.
Norwood concluded that under the new regime it would be disadvantaged vis-à-vis New England Power‘s retail affiliates whom Norwood regards as retail competitors. See Norwood II, 202 F.3d at 414. On March 4, 1998, Norwood notified New England Power that it was switching to a new wholesale supplier, Northeast Utilities. Two weeks later, on March 18, 1998, New England Power filed а revised FERC Tariff No. 1 permitting dissident wholesale customers like Norwood to terminate their contracts early and on only thirty days’ notice, conditioned on the customers paying a contract termination charge based on an
To counter New England Power‘s March 18, 1998, tariff filing, Norwood not only objected to the charge before FERC, see Norwood I, 202 F.3d at 398, but also, in an effort to shorten the period оf liability, Norwood petitioned FERC in April 1999 for a declaratory order,
FERC dismissed Norwood‘s petition on the merits on June 21, 1999, Town of Norwood, 87 F.E.R.C. ¶ 61,341 (1999). In a nutshell, thе Commission found that Norwood had extended the contract through October 31, 2008, by its July 25, 1990, letter; and it concluded that New England Power‘s failure to file that letter with FERC was irrelevant. On August 20, 1999, FERC denied without opinion Norwood‘s motion for rehearing, and
Norwood‘s arguments on appeal, which we address in a sequence somewhat different from Nоrwood‘s brief, are in substance five: (1) that the requirements contract with New England Power was never extended beyond October 31, 1998; (2) that any extension premised on the July 25, 1990, letter is ineffective because the letter was not filed with FERC and because reliance upon it violates the so-called filed rate doctrine; (3) that the FERC order unilaterally altered the contract in disregard of the Mobilе-Sierra doctrine; (4) that the failure to file the letter prevents FERC from relying on it in construing the contract; and (5) that FERC committed procedural error.
Assuming arguendo that the July 25, 1990, letter was rightly considered, it is clear to us that FERC properly construed the contract to extend Norwood‘s obligation to take its requirements from New England Power until October 31, 2008. The standard of review need not be considered becаuse, even if review of the contract interpretation question were de novo, our reading would still be precisely that of the Commission. Cf. Boston Edison Co. v. FERC, 856 F.2d 361, 363-64 (1st Cir. 1988). The documents may be inartfully drafted, but taken together,
It is arguable that even without the July 25, 1990, letter, the proper reading of the original 1983 contract made it self-extending absent notice of termination.2 However, there is no reason to decide how matters would stand if there had been no 1989 amendment and letter. Norwood‘s July 25, 1990, letter triggered a provision in the 1989 amendment to the original 1983 contract and when both the amendment and the letter are considered, it is crystal clear that--subject to any other possible legal barrier--Norwood‘s obligatiоn was extended through October 31, 2008.
The 1989 amendment explicitly replaced the article of the 1983 agreement specifying the term of the contract with a new article which specified that the contract continued through midnight, October 31, 1998, except: (1) neither side could give notice of termination prior to November 1, 1991, or specify a termination date prior to November 1, 1998; and (2):
Nоrwood may elect to extend the earliest date by which either party can give notice of intent to terminate service by a total of
[twenty] years in two ten-year increments. In order to exercise this election, Norwood agrees to provide [New England Power] with written notice of each such election at least one year prior to the date that it is to be extеnded, viz, to November 1, 2001 initially and to November 1, 2011 ultimately.
Citing this amended article, Norwood on July 25, 1990, wrote New England Power giving notice that it extended the date by which either side could give notice of an intent to terminate “to November 1, 2001. The effect of this is that the Power Contract between [New England Power] and Norwood would be extended for [ten] years to midnight, October 31, 2008 . . . .”
Norwood argues that the lettеr was an offer that New England Power failed to accept; but the 1989 amendment, which Norwood explicitly invokes in the 1990 letter, gives Norwood a unilateral election to extend by written notice, which is just what the 1990 letter comprises. Norwood also says that the 1990 letter merely extends the earliest date on which the notice of termination can be given and does not extend the agreеment itself; but this is just word play in the context of this contract.
Norwood makes a further contract interpretation argument based on the 1987 amendment which was designed to allow Norwood to reduce its obligation to purchase from New England Power to the extent that Norwood could obtain a lower-cost
Norwood‘s seсond multi-part argument is that the July 25, 1990, letter was ineffective to extend the contract until 2008 because the letter was never filed with FERC. The governing provision of the Federal Power Act provides that utilities subject to its terms, which includes New England Power with respect to wholesale power sales, must file with FERC:
schedules showing all rates and charges for any transmission or sale subject to the jurisdiction of the Commission, and the classifications, practices, and regulations affecting such rates and charges, together with all contracts which in any manner affect or relate to such rates, charges, classifications, and services.
The filed rate doctrine, discussed at greater length in Norwood II, 202 F.3d at 416, 418-22, is actually a set of rules that have evolved over time but revolve around the notion that under statutes like the Federal Power Act, utility filings with the regulatory agency prevail over unfiled contracts or other claims seeking different rates or terms than those rеflected in the filings with the agency. See, e.g., AT&T v. Central Office Tel., Inc., 524 U.S. 214, 221-24 (1998); Montana-Dakota Utils. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 251-52 (1951).
In both variations, Norwood‘s argument depends on the proposition that the July 25, 1990, letter was a contract required to be filed. The gist of the Commission‘s holding is that the contract was what was set forth in the 1983 contract and the 1989 amendment, both of which were filed with the Commission; the letter merely exercised an election already spelled out in those filings. The Commission also gave other alternative reasons for relying on the 1990 letter, which we will defer for the present.
The reference in the statute and regulations to the filing of “contracts” which affect rates and services is ambiguous. On the one hand, the July 25, 1990, letter is not itself a contract in common usage; it is the exercise of a unilateral election by one party under an already existing contract. On the other hand, the election had the effect of extending the contract term by multiple years, albeit within the framework of the existing contract. If the Commission wanted to characterize such notices as “contracts,” it would be a
However, the Commission has construed the statute and regulations not to encompass a notice of election already provided for by a duly filed contract. This interpretation is subject to substantial deference under the Chevron doctrine.3 Further, in Towns of Concord and Wellesley v. FERC, 844 F.2d 891 (1st Cir. 1988), this court upheld a decision of FERC giving effect to an unfiled letter terminating a provision in a filed agreement where the agreement itself contemplated such a termination letter. The analogy offered was to automatic rate adjustment clauses which, “[o]nce the rate schedule is approved, [permit] rate adjustments [to] be made in accordance with the intеrnally-prescribed automatic adjustment clause without further notice to action by the Commission.” Id. at 896 (citing
Norwood counters by citing Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571 (1981) (“Arkla“), but we think that case
Needless to say, without the filing of the July 25, 1990, letter, no outsider could visit the Commission‘s files and determine whether the election to extend had been exercised. This provides whatever policy argument there might be for a broad interpretation of “contracts” in the statute. But even in the halcyon days of strict public utility regulation, now receding at FERC as elsewhere, see Norwood I, 202 F.3d at 396, there were gaps in what could be gleaned from Commission filings. And this is the kind of grey area--the determination of just what the Commission needs to have filed beyond formal contracts themselves--in which great weight must be given to the Commission‘s judgment. City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir. 1985).
Third, because we accept the Commission‘s interpretation of the July 25, 1990, lеtter as representing Norwood‘s election to extend its contract to 2008, the Mobile-Sierra doctrine invoked by Norwood does not apply. That doctrine prohibits a regulated utility from unilaterally changing the fixed terms of a utilities contract absent a finding by FERC that the existing term adversely affects the public interest. FPC v. Sierra Pacific Power Co., 350 U.S. 348, 353-55 (1956); United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332, 343-45 (1956). FERC‘s reasonable construction of a contract in favor of a public utility is not a unilateral change in the contract.
FERC sometimes declines to address contract issues even for sales unquestionably within its jurisdiction, see, e.g., Southern Cal. Edison Co., 85 F.E.R.C. ¶ 61,023 (1998), but Norwood makes no claim that FERC is forbidden from interpreting contracts filed with FERC or otherwise relevant to FERC tariffs. Here, the duration of the contract directly affects Norwood‘s liability under the March 1998 tariff imposing a termination charge; and Norwood itself sought the declaration from FERC as to whether the contract continued past October 1998. The letter was properly considered as a document pertinent to determining the duration of the contract. Cf. Southern Union Co. v. FERC, 857 F.2d 812, 815-16 (D.C. Cir. 1988), cert. denied, 493 U.S. 1072 (1990).
Perhaps in some situations it might be improper for an agency еffectively to deny the petitioner the right to respond to assertions raised for the first time in an answering document, although refusal to allow a formal “reply” is not automatically the same as precluding evidence or argument. The short answer in this case is that nothing in Norwood‘s proffered reply, which is included in the appendix filed with this court, alters the result: in general, the reply sets forth arguments that were effectively addressed by FERC in its orders or could not affect the outcome in light of dispositive rulings by FERC.
The petition for review is denied.