Proposed Policy May Signal Significant Change
FERC has regularly granted parties case-specific waivers of public utility tariffs where the following four-part test is met: (i) the applicant acted in good faith; (ii) the waiver is of limited scope; (iii) the waiver addresses a concrete problem; and (iv) the waiver does not have undesirable consequences, such as harming third parties. However, in May, FERC issued a proposed policy statement that may signal a significant change to FERC's policy on waivers related to remedial relief.
FERC proposed three-part guidance on how parties should approach waiver applications going forward:
- Parties seeking relief from actions or omissions that occurred prior to the date relief is sought should frame their request as one for remedial relief. In such cases, FERC will consider potential remedies to cure deviations from a filed tariff. Requests for "waiver" will be applicable only in very limited circumstances.
- Parties seeking relief in instances where they acted in a manner inconsistent with the tariff should submit their requests as a petitions for declaratory order under Rule 207. If the filing entity claims that a different entity acted in a manner inconsistent with the tariff, the filing should be styled as a complaint under Rule 206.
- Parties seeking relief for actions or omissions that occurred prior to the date of filing and where the party admits a tariff violation should request FERC action pursuant to Federal Power Act ("FPA") section 309 or Natural Gas Act ("NGA") section 16.
FERC clarified that the four-part test described above will apply to both prospective wavier requests and petitions for remedial relief. Furthermore, the four-part test will only apply to requests for remedial relief when: (i) the request does not violate the filed rate doctrine or the rule against retroactive ratemaking; or (ii) the requested relief is within FERC's authority to grant under FPA section 309 or NGA section 16.
According to FERC, the revised policy is required to avoid violation of the filed rate doctrine and the rule against retroactive ratemaking. FERC explains that it has greater authority to grant prospective waiver (i.e., waiving a deadline that has not yet passed), than granting retroactive relief absent more specific showings. As a possible remedy, FERC urges utilities to modify their tariffs to expressly state that specific tariff provisions may be waived or to allow errors to be cured within a certain time period.
Interested parties submitted initial comments in mid-June and reply comments in early July. Commenters voiced broad support for FERC's existing tariff-waiver framework on grounds that it allows FERC to grant prospective and retroactive relief for noncompliance with tariffs on a case-by-case basis within a 60-day timeline. Participants assert this approach allows entities commercial flexibility to deal with minor tariff violations that do not impact rates, as they occur, without, as FERC proposes, the burden of having to file a petition for declaratory order and satisfy its heightened evidentiary burden. Commenters also explain that the existing tariff framework adequately considers the filed rate doctrine and the rule against retroactive ratemaking and properly rejects retroactive rate changes disguised as waiver requests.
Commenters Recommend Specific Revisions
While commenters generally urge maintaining the status quo, commenters also urge specific revisions to aspects of FERC's proposal. Included among these are requests that:
- FERC reconsider its statement that it "has long found that waiver of the prior notice requirement will generally be granted in certain circumstances, and we propose that this policy will remain in effect to the extent that entities seek an effective date no earlier than the day after the date a rate change is submitted to the Commission." Parties assert that FERC's proposed interpretation is not supported by the FPA, the NGA, FERC's regulations, or judicial precedent. Participants argue that such implementation should be accomplished through a rulemaking proceeding, not a policy statement.
- FERC decline to apply the proposed policy statement to waivers of non-rate terms and conditions because the policy rationale of the filed rate doctrine and the rule against retroactive ratemaking are not appropriately applied to non-rate terms and such application would inappropriately burden entities' ability to obtain relief for minor violations unrelated to rates.
- FERC clarify its guidance that entities modify their tariffs to include advance notice that specific tariff provisions can be waived applies to tariff provisions other than deadlines, encompasses advance waiver notices in existing tariffs, and does not require the filing of a petition for declaratory order when an entity's tariff includes such an advance notice.
- FERC limit its requirement that requests for remedial relief by a party at fault be made through petitions for declaratory order under Rule 207(a)(2), which impose significant filing fees, or, alternatively, eliminate this requirement, and allow such petitions to be made through Rule 207(a)(5) petitions.
While certain commenters voiced more general support for the proposed policy statement, these participants also urge FERC to clarify the breadth of the its suggested guidance that entities modify their tariffs to include advance notice that specific tariff provisions can be waived by specifying whether these waivers are time-limited and what constitutes an overbroad waiver provision; and in the case of Regional Transmission Organization tariffs, to include all advance waiver provisions in one separate tariff section.
While it is still too soon to know the extent to which FERC will adopt the proposed policy statement, the potential implications are significant. At the very least, FERC appears likely to diminish the flexibility it currently has to grant case-specific waivers. As FERC explains, this diminished flexibility would limit FERC's authority to waive tariff provisions even when equity supported the requested waiver. Accordingly, missed deadlines and other relatively minor departures from tariff rules could have highly adverse effects that FERC could no longer remedy. This could have a disproportionate effect on emerging technology companies due to the complex nature of complying with RTO and ISO tariffs for new companies.
In addition, it could be especially burdensome for companies that administer tariffs to identify and modify each tariff provision that might require advance notice of waiver. Furthermore, where remedial relief is available, entities will be held to a higher standard if they are requesting relief related to their own non-compliance. For these reasons, the stakes are high. We will provide an update when FERC issues a final order in this proceeding.