News 
2006
| Statement: October 19, 2006 | 
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Commissioner Spitzer's statement on Mobile-Sierra Doctrine
"I thank Commissioners Wellinghoff and Kelly for their thoughtful statements
regarding the Mobile Sierra doctrine. This is an opportunity for me to express my
own views.
The competing interests to be balanced are certainty and sanctity of contracts versus
a governmental obligation to ensure just and reasonable rates. I am sensitive to the
interpretation of the Federal Power Act and the Natural Gas Act by the appellate
courts as well as the specific facts of each case. In general terms, however, the
reasonable expectations of parties to a contract should be respected.
In circumstances of stipulated settlements and bi-lateral executory contracts, a
public interest standard is appropriate between the contracting parties, and appellate
precedent informs us that the Commission should also be bound to that standard.
However, that precedent also indicates the public interest standard, although clearly
more rigorous than "just and reasonable", is not "practically insurmountable." In the
alternative, in instances where there are generic concerns, such as when the
agreement broadly implicates interests of non-parties, a just and reasonable
standard for this Commission is appropriate.
I view the Mobile Sierra doctrine as an important tool to induce lower and less
volatile energy prices. For example, federal and state regulators often advocate that
market participants enter into long-term contracts as a means to reduce exposure to
price fluctuations. However, we cannot expect parties to enter into such contracts if
they believe the Commission will easily disrupt their arrangements. Parties entering
into voluntary contracts, and those who finance such undertakings, have a
reasonable expectation such agreements will not lightly be disturbed, by post hoc
buyer's remorse or otherwise.
The fact that we apply the "public interest" standard, even to the Commission, does
not mean that consumers are left unprotected. In fact, the Mobile Sierra cases
themselves involved attempts by utilities to raise their rates in a manner that was
inconsistent with the parties' contracts. The application of the public interest
standard in those cases precluded those rate increases. Further, my own experience
is evidence that the public interest standard may advance consumer interests. The
Arizona Commission asserted the public interest standard in a FERC proceeding on a
proposed modification to the so called "East of California contract" between shippers
and El Paso Natural Gas. Although the FERC ultimately "surmounted" the public
interest standard in that case, the point is that the public interest standard is not
simply a tool for sellers to use to protect their contractual expectations.
In sum, I believe that, in appropriate cases contract certainty and sanctity brought
about by the application of the "public interest standard" works to the benefit of
consumers.
For these reasons, I support the standard of review enunciated in the Entergy ICT
order."
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