Federal Energy Regulatory Commission Proposes Limiting Policy on Tariff Waivers

May 21, 2020

At the May 21, 2020, Federal Energy Regulatory Commission (FERC) meeting, which addressed momentous issues such as revisions to return-on-equity policy and ongoing disputes of liquefied natural gas and pipeline certifications, only one issue attracted comments from all four commissioners: a proposed policy statement on the waiver of tariff provisions and petitions or complaints for remedial relief.

In the proposed policy statement, FERC proposes to clarify its policy regarding requests for waiver of tariff provisions in light of the fact that its waiver orders have sometimes “drifted” beyond the limits imposed by the filed rate doctrine and the rule against retroactive ratemaking. Despite the importance attached to the policy, FERC set a shortened two-week period for comments, which are due June 4, 2020, with a week for reply comments, which are due June 11, 2020.

The proposed policy will both clarify and modify waiver standards, and in some instances, make it harder to obtain waivers. At the meeting, the commissioners emphasized the need for industry participation in the proceeding:

  • Commissioner Richard Glick: “Each commissioner believes in the [filed rate] doctrine, but the courts have not addressed how it applies. I hope interested parties will take a close look at this proposal because I believe there are more open questions than it suggests.”
  • Commissioner Bernard McNamee: “The issues that used to be more simple [regarding] the filed rate doctrine have become more complicated; it’s appropriate we issue this draft policy statement to demonstrate how we believe that this process is likely to work out.”
  • Commissioner James Danly: This is “a very important proceeding … I encourage all interested parties to file comments … This proceeding is being instituted for the very purpose of having the Commission address the legal standards we intend to apply going forward, to relieve regulated utilities and all interested parties in proceedings from [] uncertainty.”

This is a particularly timely issue because FERC recently granted, then reversed course and denied, a waiver of the Southwest Power Pool, Inc.’s tariff on cost recovery for nine-figure transmission upgrades. See Southwest Power Pool, Inc., 170 FERC ¶ 61,125 (2020), on appeal, D.C. Circuit Nos. 20-1062, 20-1101 (appeal docketed Mar. 2, 2020).

In the proposed policy statement, FERC reviewed the statutory bases and precedent underpinning the filed rate doctrine and the rule against retroactive ratemaking and noted that, while FERC has the authority to grant prospective waivers of deadlines or other tariff provisions, it may not grant retroactive relief unless the applicant makes a showing that either (1) the request for remedial relief does not violate the filed rate doctrine or the rule against retroactive ratemaking due to adequate prior notice, or (2) granting the requested relief conforms with the purposes and policies of Congress and does not contravene any terms of the Federal Power Act (FPA) or Natural Gas Act (NGA).

FERC proposes to implement a new approach for granting waivers of tariff provisions, and to no longer grant retroactive waivers except as consistent with the proposed policy statement. Specifically, FERC provides a three-part guidance on how the new approach would work:

  1. When seeking remedial relief in connection with actions or omissions that occurred prior to the date relief is sought, requesting entities should not describe the requested relief as a waiver. Rather, such filings should be characterized as a request for remedial relief. In response to such a request, FERC will focus on what remedy, if any, is required to cure acknowledged or alleged deviations from a filed tariff.
  2. When the entity requesting remedial relief is the entity that acted in a manner inconsistent with the tariff, such requests should be filed as petitions for declaratory order under Rule 207 of FERC’s Rules of Practice and Procedure. When the filing entity alleges that a different entity has acted in a manner inconsistent with the tariff, such requests should be filed as complaints under Rule 206. Notably, petitions for declaratory order are expensive. Commissioner Glick noted concern over this fact at the May 21 Commission meeting and expressed interest in comments on the subject: “the [Proposed Policy Statement] proposes to require parties to pay $30,000 to get a judgment under this new policy. That strikes me as punitive and I’m eager to review other options regarding filing fees and considering what are waiver requests.”
  3. For petitions or complaints seeking remedial relief for actions or omissions that occurred prior to the date of filing, where the petitioner acknowledges or the complainant alleges violation of a tariff filed under the FPA or the NGA, the petitions or complaints should expressly request FERC action pursuant to FPA section 309 or NGA section 16.

FERC stated that it recognizes that this policy represents a change from its past approach, particularly in situations where inadvertent failures to comply with ministerial tariff requirements have not been protested. To avoid the harsh outcomes of past practice, the proposed policy statement suggests several ways tariffs may be modified to avoid conflict with the filed rate doctrine and the rule against retroactive ratemaking, though it is initially difficult to envision how this will work well in practice.

FERC further explained that under current practice, it has granted waivers of tariff provisions where: (1) the underlying error was made in good faith; (2) the waiver is of limited scope; (3) the waiver addresses a concrete problem; and (4) the waiver does not have undesirable consequences, such as harming third parties. FERC proposed to clarify that going forward it will apply this four-part analysis to both prospective waiver requests and petitions for remedial relief. It stressed, however, that the four-part analysis will be applied to petitions for remedial relief only in those limited circumstances when (1) the request for remedial relief does not violate the filed rate doctrine or the rule against retroactive ratemaking due to adequate prior notice, or (2) the requested relief is within FERC’s authority to grant under FPA section 309 or NGA section 16.

Lastly, FERC proposed requiring a stronger showing when a petitioner is seeking remedial relief for its own failure to comply with a tariff. For example, FERC stated that it proposes to find arguments that a petition for remedial relief was made in good faith will be more compelling when the petition contends that the failure to comply was due to something more than inadvertent error or administrative oversight. Further, FERC proposed that petitions for remedial relief will generally be denied when a protestor credibly contends that the requested remedial relief will result in undesirable consequences, such as harm to third parties. FERC noted, however, that it still could find that the effects of a waiver would result in harm to third parties, even in the absence of a protester. In short, it appears that the intent of this policy statement is not only to provide clarity and guidance, but also to discourage certain types of waiver filings.