Commissioner Danly Objects to FERC’s Continued Practice of Granting Retroactive Waivers

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On October 16, 2020, FERC issued a number of orders at its open meeting that addressed unrelated requests for retroactive waiver of various Regional Transmission Organization and utility tariff provisions. Commissioner James Danly issued a separate statement in each proceeding. Commissioner Danly dissented from many of the orders granting waiver and concurred in the result when the orders dismissed the requests for waiver or granted waiver in certain specific circumstances. In his dissent from an order granting Sunflower Electric Power Cooperative’s (“Sunflower’s”) petition for waiver of certain Southwest Power Pool, Inc. Tariff provisions, Commissioner Danly stated his belief that FERC has no legal discretion to grant retroactive waivers unless the waivers meet certain well-defined exceptions: first, if the parties had notice that tariff provision could be waived retroactively, or second, if the tariff provision is embodied in a private contract between parties who have agreed in the contract to make the rate effective prior to filing the contract with the Commission.

Pointing back to FERC’s May 2020 proposed policy statement on retroactive waivers (see May 28, 2020 edition of the WER), Commissioner Danly explained that FERC’s ability to grant retroactive waivers is circumscribed by the filed rate doctrine and the rule against retroactive ratemaking. While Commissioner Danly acknowledged that the proposed policy statement has not yet been finalized, he pointed out that the precedent cited in the policy statement is controlling. Commissioner Danly pointed to a decision by the United States Court of Appeals for the District of Columbia Circuit, which he characterized as holding that the filed rate doctrine and rule against retroactive ratemaking leave FERC no discretion to waive the operation of a filed rate or to retroactively adjust a rate for good cause or for any other equitable considerations. Commissioner Danly noted that although these doctrines were developed in cases concerning rates, the logic applies equally to non-rate terms and conditions.

Commissioner Danly stated that he would continue to dissent from orders granting retroactive waiver as exceeding FERC’s legal authority “unless and until [FERC] issues an order that is consistent with applicable precedent.” Commissioner Danly concluded that utilities have the ability to include provisions in their tariffs that would permit retroactive waivers, and that utilities are in a better position than FERC to determine which of their tariff provisions could reasonably be subject to such a waiver. But according to Commissioner Danly, only when FERC “cease[s] granting waivers [it is] not authorized to issue in the first place will utilities have any incentive to make such filings.” Further, during FERC’s October open meeting, Commissioner Danly encouraged parties aggrieved by such waivers to protest, request rehearing of, and appeal the waiver orders, stating his belief that the orders likely would be vacated on appeal.

FERC’s October 16 Sunflower order is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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