Indicating that it intends to hold California complainants to the higher Mobile-Sierra standard in their attempts to overturn power contracts signed by state agencies with Allegheny Energy Supply and certain other power generators, FERC said last week the full Commission alone will render a decision on those companies — and soon.

While rejecting Allegheny’s petition to dismiss the complaint by the California Public Utilities Commission (CPUC), the three-person Commission took an unusual action in wresting the power to issue an initial decision on those companies (Mirant is one) away from the administrative law judge (ALJ). Commissioner William Massey dissented on the procedure of by-passing an initial decision.

In an order issued last Tuesday FERC directed the administrative law judge not to issue a decision on those companies, but to send the hearing record directly to the Commission. The order made the distinction between the “just and reasonable” standard of review, versus the Mobile-Sierra “public interest” standard, noting that contrary to complainants’ pleadings, the two are not the same. “The burden of showing that a contract is contrary to the public interest is a higher burden than showing that a contract is not just and reasonable,” FERC said.

The Commission said it had reviewed the record so far in the overall case lodged by California to undo long-term contracts it signed in the heat of the western energy crisis, which appear to be above-market now. It noted the California complainants appeared to be lumping all the companies together under the just and reasonable standard. “The fact that a contract may be found to be unjust and unreasonable under sections 205 or 206 of the Federal Power Act does not in and of itself demonstrate that the contract is contrary to the public interest under the Supreme Court cases. Accordingly, we instruct the parties to apply the correct legal standards in developing this case and making their arguments.”

Other parties in the long-term contract case have argued that the Mobile-Sierra doctrine applies to all contracts unless there is a specific provision in the contract negating it.

Responding to Allegheny’s emergency plea that the uncertainty engendered by the lengthy hearing has aggravated its financial problems, FERC said it would “expedite resolution of the proceeding as to Allegheny and other parties whose contracts contain Mobile-Sierra provisions.” It noted the hearings were to be completed on about Dec. 13 and directed the ALJ to submit the record directly to the Commission. The parties are to file initial briefs and reply briefs directly with the Commission by Jan. 10 and Jan. 27, 2003 respectively.

Allegheny had argued that the contracts reflected benchmarks issued by FERC in the $74/MWh range for five-year around-the-clock service and were signed at a time when the spot market prices were exceeding $250/MWh and were projected to go up to $450 MWh. Also, the contracts provided substantial benefits to California when its load-serving entities were not credit-worthy, and Allegheny had to buy power specifically to fulfill the contracts.

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