Administrative Dispute Resolution
Federal RegisterNov 18, 1994
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 385
[Docket No. RM91-12-000]
Administrative Dispute Resolution
November 10, 1994.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: The Commission is proposing to amend its regulations to
implement the Administrative Dispute Resolution Act of 1990 (ADRA). In
issuing a Notice of Proposed Rulemaking the Commission proposes to
adopt a policy endorsing the use of alternative dispute resolution
methods in its proceedings under the provisions of the ADRA. Such
methods would be used in lieu of litigation to resolve disputes in
Commission proceedings.
DATES: Written comments must be received by the Commission by January
17, 1995.
ADDRESSES: Send comments to: Office of the Secretary, Federal Energy
Regulatory Commission, 825 North Capitol Street, NE., Washington, DC
20426. Comments should refer to Docket No. RM91-12-000.
FOR FURTHER INFORMATION CONTACT: David N. Cook, Deputy General Counsel,
Office of the General Counsel, Federal Energy Regulatory Commission,
825 North Capitol Street, NE., Washington, DC 20426, Telephone (202)
208-0955.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in room 3104, at 941 North
Capitol Street, NE., Washington, DC 20426.
The Commission Issuance Posting System, (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to use 300, 1200, or 2400 bps, full duplex, no parity, 8 data
bits and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing
(202) 208-1871. The full text of this notice of proposed rulemaking
will be available on CIPS for 30 days from the date of issuance. The
complete text on diskette in WordPerfect format may also be purchased
from the Commission's copy contractor, La Dorn Systems Corporation,
also located in room 3104, 941 North Capitol Street, NE., Washington,
DC 20426.
Table Of Contents
I. INTRODUCTION
II. BACKGROUND
III. APPLICATION OF ALTERNATIVE DISPUTE RESOLUTION TO COMMISSION
PROCEEDINGS
A. The Range of Commission Administrative Proceedings
B. Current Commission Practice and Procedures for Resolving
Disputes by Alternative Means
IV. PROPOSED RULES
A. Initiating the Use of an ADR Method
B. Mechanism for Using ADR in a Commission Proceeding
1. Applicability
2. Definitions
3. Submission of a Proposal to Use ADR
a. The Filing
b. Contents of the Proposal to Use ADR
c. Determination by the Decisional Authority
d. Monitoring ADR Proceedings
e. Terminating an ADR Proceeding
4. Selection and Use of Neutrals
C. Arbitration
1. Applicability to Commission Proceedings
2. Authorization
3. Arbitrator
4. Rules of Conduct for Conducting Arbitration
5. Arbitration Awards
6. Vacating an Award
D. Confidentiality
E. Representation of Parties
V. SETTLEMENT RULES
A. Omnibus Settlements
B. Rule 602(g): Uncontested Offers of Settlement and Adequacy of
the Record
C. Rule 602(h): Contested Settlements
1. Severance of Parties or Issues
2. Rule 602(h)(2): Certification of Contested Settlements
a. Genuine Issue of Material Fact
b. Rule 602(h)(2)(iii): Three Conditions for Certification
if Genuine Issues of Material Fact Exist
D. Deadlines
VI. WRITTEN COMMENT PROCEDURE
VII. ADMINISTRATIVE FINDINGS
I. Introduction
The Federal Energy Regulatory Commission (Commission) is issuing a
notice of proposed rulemaking (NOPR) to implement the Alternative
Dispute Resolution Act of 1990 (ADRA).\1\ In the NOPR, the Commission
is adopting a policy endorsing the use of alternative dispute
resolution (ADR) methods in its proceedings under the provisions of the
ADRA.
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\1\5 U.S.C. 571-83 (1988), as amended by Pub. L. 102-354, 106
Stat. 944 (Aug. 26, 1992).
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To implement its policy in support of alternative dispute
resolution, the Commission proposes to amend Subparts E and F of Part
385 of its Rules of Practice and Procedure2 to add regulations
adopting provisions authorized in the ADRA and to establish procedures
for approving ADR in particular proceedings.
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\2\18 CFR Part 385.
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The Commission proposes to add new Rule 604, adopting guidelines on
applying ADR techniques and definitions from the ADRA and establishing
procedures for the submitting, reviewing, and monitoring proposals to
use ADR in specific proceedings. The Commission also proposes to add
Rule 605, incorporating the provisions of the ADRA regarding binding
arbitration proceedings, arbitral awards, and review of arbitration
results. Third, the Commission proposes to add Rule 606, to adopt the
provisions of the ADRA regarding confidentiality in ADR proceedings
established under proposed new Rules 604 and 605. The Commission also
proposes to amend Subparts E, F, and G of Part 385 of its Rules of
Practice and Procedure to modify existing regulations and to add new
regulations with respect to the submission and review of offers of
settlement.
II. Background
The ADRA amends Chapter 5 of Title 5, United States Code, by adding
a new subchapter to provide explicit statutory authorization allowing
federal agencies to use ADR techniques in lieu of litigation to resolve
a dispute in the agency's administrative programs when all the
participants to the dispute voluntarily agree to its use. ADR methods
include the use of a neutral, an individual who functions to aid the
participants in resolving the controversy. The ADRA provides that ADR
methods may include, but are not limited to, settlement negotiations,
conciliation, facilitation, mediation, factfinding, minitrials, and
arbitration, or any combination of these, as described below.3
\3\Drawn from Administrative Conference of the U.S., Sourcebook:
Federal Agency Use of Alternative Means of Dispute Resolution
(Office of the Chairman, 1987) (Sourcebook) at 44-45.
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Conciliation is an informal process in which the third party
tries to bring the parties to agreement by lowering tensions,
improving communications, interpreting issues, providing technical
assistance, exploring potential solutions and bringing about a
negotiated settlement, either informally or, in a subsequent step,
through formal mediation. Conciliation is frequently used in
volatile conflicts and in disputes where the parties are unable,
unwilling or unprepared to come to the table to negotiate their
differences.
Facilitation is a collaborative process used to help a group of
individuals or parties with divergent views reach a goal or complete
a task to the mutual satisfaction of the participants. The
facilitator functions as a neutral process expert and avoids making
substantive contributions. The facilitator's task is to help bring
the parties to consensus on a number of complex issues.
Mediation is a structured process in which the mediator assists
the disputants to reach a negotiated settlement of their
differences. Mediation is usually a voluntary process that results
in a signed agreement which defines the future behavior of the
parties. The mediator uses a variety of skills and techniques to
help the parties reach a settlement but is not empowered to render a
decision.
Factfinding is a process used from time to time primarily in
public sector collective bargaining. The fact finder, drawing on
both information provided by the parties and additional research,
recommends a resolution of each outstanding issue. It is typically
nonbinding and paves the way for further negotiations and mediation.
The minitrial is a privately-developed method of helping to
bring about a negotiated settlement in lieu of corporate litigation.
A typical minitrial might entail a period of limited discovery after
which attorneys present their best case before managers with the
authority to settle and a neutral advisor who may be a retired judge
or other lawyer. The managers then enter settlement negotiations.
They may call on the neutral advisor if they wish to obtain an
opinion on how a court might decide the matter. The neutral may also
be called upon to mediate the dispute.
Arbitration is a relatively formal process in which parties
jointly select the decisionmaker to whom they turn over the
decisionmaking. The arbitrator, after hearing each side, issues a
decision following the procedures agreed to in advance.
The ADRA requires each agency to adopt a policy that addresses the
use of alternative means of dispute resolution and case management in
connection with the agency's administrative actions. The Commission
will fulfill this requirement with this rulemaking proceeding and
through revisions to its regulations with respect to the matters under
the Commission's substantive jurisdiction.4
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\4\Under the Department of Energy Organization Act, Pub. L. No.
95-91, 91 Stat. 565 (Aug. 4, 1988), the Chair is responsible for the
administrative functions of the agency. With respect to those
matters, the Commission's ADR policy is being developed separately.
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As required by the ADRA, the Commission, in preparing this NOPR,
has consulted with the Administrative Conference of the United States
(ACUS) and reviewed the ACUS guidance to agencies in developing their
ADR policies and in implementing those policies.5 ACUS reviewed a
draft of this NOPR. Its comments were strongly supportive and in
agreement with the overall approach of the Commission's proposed
implementation of the ADRA.
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\5\Administrative Conference of the U.S., The Administrative
Dispute Resolution Act: Guidance for Agency Dispute Resolution
Specialists (Office of the Chairman, 1992).
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The Congress further encouraged the use of ADR procedures in the
Energy Policy Act of 1992. Section 1802(e) of that Act directed the
Commission to establish appropriate ADR procedures, including required
negotiations and voluntary arbitration, early in oil pipeline
proceedings as a method preferable to adjudication in resolving
disputes related to rates. The Commission did so by issuing Order No.
561, Revisions to Oil Pipeline Regulations Pursuant to the Energy
Policy Act of 1992 on October 22, 1993.6 The revisions to Part
343, Chapter I, Title 18, Code of Federal Regulations will be effective
January 1, 1995. Additionally, Vice President Gore's National
Performance Review recommended that federal agencies expand their use
of ADR techniques.
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\6\58 FR 58753 (Nov. 4, 1993), III FERC Stats. & Regs. Preambles
30,985; order on reh'g, Order No. 561-A, 59 FR 40243 (Aug. 8,
1994), III FERC Stats. & Regs. Preambles 31,000 (July 28, 1994).
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On April 17, 1991, the Commission issued a Notice of Inquiry (NOI)
seeking comments on: (1) how best to implement the ADRA, (2) whether
changes in the Commission's regulations are necessary or appropriate to
facilitate the use of alternative means of dispute resolution, and (3)
whether changes in the Commission's regulations governing settlements
are necessary or appropriate.7
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\7\Administrative Dispute Resolution Notice of Inquiry, 56 FR
18789 (Apr. 24, 1991), IV FERC Stats. & Regs. Notices 35,523
(1991).
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The NOI highlighted the statutory amendments promulgated by the
ADRA. These include definitions, guidelines on when ADR techniques
should not be used, guidelines for the selection and use of neutrals,
provisions to protect the confidentiality of ADR proceedings, and
standards for the conduct of binding arbitration proceedings and the
issuance of arbitration awards. Under ADRA, the decision to use, or not
to use, ADR methods is left to the discretion of the agency and is not
subject to judicial review.
Eighteen comments were filed in response to the NOI on behalf of
several pipelines, electric utilities, interest groups, and the
industry. 8 In general, the commenters support the implementation
by the Commission of the ADRA and the use of ADR methods under the
guidelines set out in the ADRA. The commenters commend the Commission's
past use of settlement procedures and various ADR methods to resolve
disputes and expedite the conclusion of proceedings, but believe that
additional measures are needed to resolve contested issues and conclude
proceedings more expeditiously through settlement or other means.
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\8\See Appendix.
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The commenters are divided on whether regulations are needed to
implement the ADRA. Several commenters express concern about the misuse
of ADR methods. The commenters present several suggestions on the
potential uses for ADR methods to resolve disputes concerning a variety
of issues and proceedings.
In addition, the commenters support the Commission's policy in
favor of settlements and do not request changes in the overall
framework established by the settlement regulations. However, a number
of the commenters request a variety of specific changes with a view
toward prompter action on all settlements. Included are requests to
provide for the filing and review of omnibus settlements and to modify
the conditions that govern an ALJ's certification of a contested
settlement to the Commission, including the need for unanimity in a
motion to omit the initial decision.
III. Application of Alternative Dispute Resolution to Commission
Proceedings
The ADRA directs the Commission to consider the potential uses for
ADR methods in connection with: (1) Formal and informal adjudications,
(2) rulemakings, (3) enforcement actions, (4) issuing and revoking
licenses or permits, (5) contract administration, (6) litigation
brought by or against the agency, and (7) other agency actions.
It is the policy of the Commission to conclude its administrative
proceedings as fairly, effectively, efficiently, and expeditiously as
possible. To that end, the Commission has long had in place flexible
settlement regulations that encourage and promote the use of settlement
negotiations and other means to resolve disputes. The ADRA gives the
Commission the opportunity to further develop and refine its policies
to achieve less costly, less contentious, and more timely decisions in
its proceedings. Under the existing framework for the review and
determination of its proceedings, the Commission intends to foster the
effective and sound use of innovative ADR procedures pursuant to the
guidelines established in the ADRA.
The Commission now will encourage participants in its
administrative proceedings to consider the use of ADR procedures to
assist them in resolving any differences among them. ADR techniques are
informal procedures based on the informed consent of all the
participants. Flexibility is the mainstay of ADR. Thus, the Commission
will not attempt to identify in advance all of the ADR methods that may
be used in its proceedings.
Creativity is an essential element in designing the appropriate ADR
method for a particular dispute and for a particular set of parties.
The ADRA opens up possibilities for the expanded use of new and varied
ADR methods not typically used under the current settlement regulations
or otherwise during a proceeding, including roles for third-party
neutrals. The ADRA offers expanded opportunities for alternatives to
protracted litigation in appropriate circumstances where the use of ADR
yields more effective and efficient results.
The opportunities for using ADR can occur at any time during the
processing of any filing, whether the filing is subject to informal
adjudicatory procedures or to the formal hearing process. If a filing
is set for hearing, opportunities for ADR may arise during the initial
settlement process prior to direct testimony in rate cases or prior to
the 30-day post-notice period in gas certificate cases, as well as any
time during the presiding officer's management of the hearing process.
Numerous opportunities for ADR also exist in proceedings where formal
hearings are not used. These include hydropower cases under the revised
licensing process, various enforcement actions, or complaint cases,
among others.
Of course, parties are encouraged to pursue ADR methods on their
own to resolve potential disputes before an application or other filing
is submitted to the Commission. Parties to a transaction may wish to
include dispute resolution provisions for resolving future conflicts in
a contract or tariff that is filed with the Commission.
This notice will examine certain areas of administrative action
identified by the ADRA to determine the potential for using ADR
methods. These areas include formal and informal adjudications,
enforcement actions, the issuing and revoking of licenses or permits,
and other actions arising under the Commission's substantive statutes.
No particular formula has been developed as to how ADR methods should
be used, how they relate to the traditional processes, and what their
advantages and disadvantages are in particular settings. Thus, the
purpose of the examination is only to indicate the broad spectrum of
the possibilities for expanded ADR use in the Commission's proceedings
as well as the Commission's intention to consider any method for
participants to work towards resolving their differences, in
appropriate circumstances.\9\
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\9\Williams Natural Gas Company suggests that the Commission
require every company that comes before the Commission seeking
affirmative relief to show that it has formally adopted a policy
supporting ADR. Clearly, a commitment by each party in a proceeding
in support of ADR would be helpful to promote the goals established
in the Commission's policy. Parties should attempt to work out their
differences in advance of a filing, as well as in the early stages
of a contested proceeding before the disputes result in lengthy
litigation. However, the Commission believes that imposing this
condition on parties is neither necessary nor appropriate at this
time.
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A. The Range of Commission Administrative Proceedings
The Commission oversees key operating functions of the Nation's
natural gas, electric utility, hydroelectric power, and oil pipeline
transportation industries. To do so, the Commission administers
numerous statutes and regulations that establish procedures for the
filing of applications to authorize, among other things, certificates
for the construction and operation of natural gas facilities, rates and
service conditions for the transportation and sale for resale of
natural gas and electric energy in interstate commerce, rates and terms
and conditions of services for the transportation of petroleum, and
licenses for the construction and operation of hydroelectric power
projects. The regulations also provide for the Commission's review of
enforcement actions, complaints, accounting matters, and other actions
related to its certification or licensing and ratemaking functions.
Because of the complexity of the issues and the number of persons
with interests in the outcome of the issues, many filings are contested
and lead to highly litigated, complicated, and protracted proceedings.
The Commission in many cases sets the filings for adjudication under
the formal, trial-type hearing procedures set forth in Subpart E of
Part 385 of the Commission's Rules of Practice and Procedure. In
response to the NOI, the commenters identified certain significant
issues that are contested in many of the filings and earmark the
filings that could particularly benefit from innovative ADR methods.
For example, in determining whether an application for a
certificate to construct and operate natural gas facilities is
consistent with the public convenience and necessity, the Commission
must resolve such issues as the sources and adequacy of supply and
market for gas, safety and operational aspects, financing, and
environmental impacts. Environmental analysis is becoming increasingly
complex and time-consuming. As a result, the Commission has been
issuing phased orders that provide a preliminary determination on non-
environmental issues or on discrete portions of a project while
continuing the review process.\10\ A major factor in many of these
cases is the timely construction of a proposed project. The use of
innovative ADR methods may help to accelerate the conclusion of these
applications.
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\10\E.g., Northwest Pipeline Corp., 56 FERC 61,006 (1991);
Great Lakes Transmission Limited Partnership, 56 FERC 61,051
(1991).
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Applications to establish natural gas, electric, or oil rates and
terms of service are determined on the basis of whether the proposals
are just, reasonable, and not unduly discriminatory or preferential.
Issues that arise, such as the prudence of the purchasing practices of
the pipeline or electric utility, have in the past proved highly
litigious involving extensive discovery.
The traditional method for setting rates uses a cost-based process,
which can involve extensive analysis. However, the Commission has begun
to approve market-based rates in certain circumstances if the seller
lacks market power. Determining a seller's market power requires an
extremely detailed factual analysis of sophisticated and contentious
issues. As a result, some of the inquiries have led to complicated and
lengthy proceedings in oil rate filings,\11\ natural gas rate
proceedings,\12\ and electric rate cases.\13\ Electric utilities also
seek Commission authority for various corporate transactions, such as
mergers, which can require a hearing to consider issues concerning
costs, rates, and the competitive situation.\14\ Although many of these
filings are settled, innovative ADR methods should be useful in
clarifying the many complex issues and bringing the many parties
together to achieve settlement more quickly.\15\
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\11\E.g., Williams Pipe Line Co., 68 FERC 61,136 (1994), reh'g
pending; Buckeye Pipe Line Co., L.P., 53 FERC 61,473 (1990); reh'g
granted in part and denied in part, 55 FERC 61,084 (1991).
\12\El Paso Natural Gas Co., 54 FERC 61,316 (1991), reh'g, 56
FERC 61,290 (1991); Transcontinental Gas Pipe Line Corp., 55 FERC
61,446 (1991), reh'g, 57 FERC 61,345 (1991).
\13\PSI Energy, Inc., Opinion No. 349, 49 FERC 61,346 (1989).
\14\Northeast Utilities Service Co., Opinion No. 364, 56 FERC
61,269 (1991).
\15\Kansas Power & Light Co., 54 FERC 61,077 (1991).
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ADR may be particularly useful in resolving an array of complex
transmission issues facing the electric utility industry in the
competitive era following the Energy Policy Act of 1992 (EPAct).
Recently, several utilities have volunteered to open their transmission
systems. Other utilities have been ordered to attempt to negotiate
transmission services under the newly amended Sections 211 and 212 of
the Federal Power Act. The Commission is also in the process of
analyzing new concepts for the pricing of transmission services. In
addition, there has been considerable activity across the country in
the development of regional transmission groups to provide vehicles for
the voluntary resolution of transmission access and pricing disputes.
ADR will be an important component of RTG agreements.\16\
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\16\Policy Statement Regarding Regional Transmission Groups, 58
FR 41626 (Aug. 5, 1993), III FERC Stats. & Regs., Regulations
Preambles 30,976 (1993) (Policy Statement).
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Whether transmission access and pricing are voluntary or pursuant
to a Section 211 Commission order, ADR could make an important
contribution by facilitating resolution of complex technical issues.
Prompt resolution of disputes over transmission services could often
mean the difference between success and failure of short-term
transactions under an open access transmission system.
Environmental issues and the balancing of various competing uses
for water resources are significant factors in the review of
applications to license or relicense a hydropower project.\17\ Under
recently revised application procedures, the Commission evaluates the
environmental and developmental impacts of a project by a process that
includes extensive pre-filing consultation, considers the
recommendations of various agencies and other concerned groups, and
balances all relevant public interest considerations.\18\ These issues
can be highly contentious and frequently involve numerous parties with
conflicting interests. In all of these cases, there may be a role for
ADR.
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\17\Central Nebraska Public Power and Irrigation District,
Project No. 1417-017, 50 FERC 61,180 (1990), order on reh'g, 51
FERC 61,256 (1990).
\18\Hydroelectric Relicensing Regulations Under the Federal
Power Act, Order No. 513, 54 FR 23756 (June 2, 1989), FERC Stats. &
Regs. Preambles 1986-90 30,854 (May 17, 1989); Order No. 513-A,
FERC Stats. & Regs. Preambles 1986-90 30,869 (Dec. 26, 1989);
Regulations Governing Submittal of Proposed Hydropower License
Conditions and Other Matters, Order No. 533, 56 FR 23108 (May 20,
1991), III FERC Stats. & Regs. Preambles 30,921 (May 8, 1991);
Order No. 533-A, III FERC Stats. & Regs. Preambles 30,932 (Nov.
22, 1991).
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B. Current Commission Practice and Procedures for Resolving Disputes by
Alternative Means
The Commission has for a long time relied on voluntary settlement
procedures to avoid litigation and for the orderly, expeditious conduct
of its business. Over the years, the Commission, the ALJs, and the
federal courts have agreed that voluntary settlements are important and
desirable methods of avoiding the delays and uncertainties of
litigation.19
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\1\9Texas Gas Transmission Corp. v. FPC, 441 F.2d 1392, 1394
(6th Cir. 1971); Texas Eastern Transmission Corp. v. FPC, 306 F.2d
345, 347 n.2 (5th Cir. 1962).
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In response to the NOI, the commenters commend in general the
Commission's settlement rules and procedures, which they state have
provided beneficial mechanisms for resolving contested issues.
According to the Federal Energy Bar Association (FEBA), the Commission
is far ahead of many other federal agencies in promoting the settlement
process. The commenters request that the Commission's existing
procedures not be undermined in implementing the ADRA and that the
Commission continue to promote the innovative settlement techniques
allowed under the current rules.
As the commenters point out, the current settlement rules provide a
simplified, flexible mechanism for initiating and approving a
settlement in any proceeding. Specifically, Rule 601 provides for the
convening of conferences by the Commission or the decisional authority,
upon motion of any participant or otherwise, in any proceeding for any
purpose, including consideration of offers of settlement, related to
the conduct or disposition of the proceeding. Rule 602 provides the
procedures for the submission of offers of settlement and for their
review by the ALJ or the Commission. The rules were adopted to
encourage participants in all proceedings to avoid the alternative of
costly and sometimes lengthy litigation before the Commission.20
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\2\0Procedures for Submission of Settlement Agreements, Order
No. 32, 44 FR 34936 (June 18, 1979), FERC Stats. & Regs. Preambles
1977-81 30,061 (June 13, 1979); Order No. 32-A, 8 FERC 61,160
(1979).
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In any proceeding set for hearing, Rule 603 allows the Commission,
the presiding ALJ, or a participant to request appointment of a neutral
settlement judge to preside over settlement negotiations.21 This
procedure was added to the settlement rules to reduce the inherent and
tactical delays in the settlement process and to provide structure and
control over the pace of negotiations.22 The Commission has found
that these rules are sufficiently broad to enable the Commission and
the ALJs to convene conferences and handle settlements
expeditiously.23
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\2\1The Commission's settlement judge procedures are recommended
by the Administrative Conference of the United States as one of the
settlement techniques that the Administrative Conference urges
agencies to use routinely. Sourcebook at 116, n.3.
\2\2Rules of Practice and Procedure, Order No. 90, 45 FR 45902
(July 8, 1980), FERC Stats. & Regs. Preambles 1977-81 30,169 (June
23, 1980).
\2\3Revision of Rules of Practice and Procedures to Expedite
Trial-Type Hearings, Order No. 225, 47 FR 19014 (May 3, 1982), FERC
Stats. & Regs. Preambles 1982-85 30,358 (Apr. 26, 1982); Order No.
225-A, 47 FR 35952 (Aug. 18, 1982), FERC Stats. & Regs. Preambles
1982-85 30,385 (Aug. 12, 1982).
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The Commission has taken an active role in promoting the settlement
rules and providing opportunities for the initiation of settlements at
the outset of all its proceedings. For example, the Commission adopted
top sheet procedures that provide for a settlement conference to be
convened during the pre-hearing stage of a rate case set for
hearing.24 Whether under these or other procedures, Commission
trial staff presents a settlement position which serves as a basis for
negotiations among the parties in an effort to reduce the need for
detailed testimony or formal hearing. Procedures were also adopted to
encourage settlement in each gas certificate application filed for
blanket authority and certain other authority.25 If a protest is
filed in response to the notice of the filing of such an application, a
30-day period is established for the parties and Commission staff to
establish informal settlement conferences to resolve the protest.
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\2\4Initiated by Administrative Order No. 157, Apr. 1, 1976.
\2\518 CFR 157.205(g).
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The Commission also directs the parties to consider settlements on
a case-by-case basis. In Order No. 528, the Commission encouraged
pipelines and their customers to reach settlements concerning any
proposed method for recovery of take-or-pay costs, and determined that
settlement conferences should be used to that end.26 Consequently,
the Commission has directed the convening of a settlement conference in
each proceeding in which the Commission accepts and suspends rate
filings pursuant to Order No. 528. This has resulted in the settlement
of many of these cases.27 In fiscal year 1993, the Commission
established 30 proceedings under Order Nos. 528 and 528-A to resolve
issues by settlement. By September 30, 1993, the Commission had
approved 19 settlements and more settlements were pending.28
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\2\6Mechanisms for Passthrough of Pipeline Take-or-Pay Buyout
and Buydown Costs, 53 FERC 61,163 (1990); Order No. 528-A, 54 FERC
61,095 (1991); Order No. 528-B, 55 FERC 61,372 (1991).
\2\7E.g., Arkla Energy Resources, 54 FERC 61,011 (1991) and 58
FERC 61,359 (1992).
\2\8FERC 1993 Annual Report at 7.
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Under the current settlement procedures, the Commission has been
able to settle a large number of contested proceedings. Approximately
70 to 80 percent of electric and gas rate cases settle without the need
to complete the litigation process. During fiscal year 1992, the
Commission issued 50 hearing orders involving 64 electric rate filings
and accepted 45 settlement agreements in electric rate cases. During
fiscal year 1993, the Commission issued 28 orders instituting hearing
or settlement judge procedures involving 31 electric rate filings and
accepted 29 offers of settlement resolving some or all of the issues
presented. An examination of the electric proceedings that settled
reveals that settlement generally is reached shortly after the
establishment of hearing procedures and the commencement of settlement
conferences.29
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\2\9E.g., Indiana Michigan Power Co., 51 FERC 61,191 (1990);
reh'g, 56 FERC 61,019 (1991); Cincinnati Gas & Electric Co., 46
FERC 61,298 (1989) and 51 FERC 61,162 (1991).
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A total of 41 new gas and oil pipeline filings were set for
hearings in fiscal year 1993. Also during fiscal year 1993, the
Commission approved 34 settlements of gas and oil pipeline rate cases.
For example, one settlement resolved issues in 33 different dockets,
many of which were at different stages of processing at hearing.30
Settlements also are frequently used to resolve disputes between the
Commission's Enforcement section and violators of pertinent statutory
or regulatory requirements in order to terminate enforcement
proceedings before full litigation.31
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\3\0El Paso Natural Gas Co., 54 FERC 61,316 (1991), reh'g, 56
FERC 61,290 (1991).
\3\1The Washington Water Power Co., Project No. 2545, 56 FERC
61,048 (1991).
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For the most part, the Commission's existing settlement procedures
fit into a category that might be called ``unassisted negotiation.''
What distinguishes the ADR techniques highlighted in the ADRA from
settlement negotiations under the Commission's existing rules is the
addition of a neutral, so that the process becomes one of ``assisted
negotiation.'' However, many commenters point out that, under the
Commission's current settlement rules, parties are able to avail
themselves of a wide variety of ADR techniques that involve the
informal use of a neutral. They urge the Commission to continue
supporting the flexible use of these procedures in developing
mechanisms to resolve disputes.
The Commission has incorporated the use of a wide variety of ADR
techniques in attempting to resolve disputes and bring its cases to
settlement. The settlement conference and settlement judge procedures
often involve techniques characteristic of those identified in the
ADRA. The convener of the conference or the settlement judge employs
such ADR techniques as conciliation, facilitation, mediation, and fact-
finding to bring the parties together to discuss their differences. The
settlement judge is expected to take an active role in the process as a
facilitator or mediator to keep the parties talking. In cases set for
hearing, trial staff plays an active and important role in facilitating
settlements at the prehearing conference (for example, through its top
sheets), other settlement conferences, or any time during the hearing.
The Commission and the ALJs have begun to encourage the use of more
structured ADR methods not typically used in the settlement procedures
but that specifically include the additional methods identified in the
ADRA. The Commission has recently made more use of the settlement judge
procedure in an effort to resolve a case without having to institute a
hearing or some other form of investigation.32 In July, 1994, the
Commission initiated a multi-party negotiation process in the New Don
Pedro proceeding, Project No. 2299. The negotiations are being led by
mediators from the Federal Mediation and Conciliation Service. The goal
of the mediators is to obtain a consensus on the issues surrounding the
in-stream flow from the New Don Pedro Dam. In another example, under
section 343.5 of the new oil pipeline regulations, which go into effect
in January 1995, all protested rate filings will be sent initially to a
settlement judge for possible resolution by negotiation. The
participants may also request the use of other ADR procedures to
resolve all or part of any pending matter.33 There is substantial
commonality between the ADR provisions for oil pipelines and the rules
proposed here. The Commission is interested in obtaining comment on
whether to integrate the oil pipeline provisions into these proposed
rules, so that the Commission would then have a single set of ADR
rules.
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\3\2See Central Maine Power Co., 65 FERC 61,296 (1993);
Edwards Manufacturing Company, Inc., 63 FERC 61,199 (1993); UNITIL
Power Company v. Public Service Company of New Hampshire and
Northeast Utilities, 62 FERC 61,055 (1993).
\3\3Revisions to Oil Pipeline Regulations Pursuant to the Energy
Policy Act of 1992, 58 FR 58753, 58781 (Nov. 4, 1993).
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In addition, the Commission has adopted shortened and simplified
procedures to resolve disputes on an informal basis in a wide range of
proceedings. These include the Enforcement Task Force Hotline to
resolve complaints before a filing is made and, under the accounting
rules, the option of an abbreviated process for resolving accounting
disputes.34 Under the revised regulations governing the filing and
review of hydropower licensing applications, the Commission has
incorporated mechanisms in the pre-filing consultation process that
permit the applicant or parties to refer disputes to the Director of
OHL for resolution.35 The Commission has made clear that it
intends to do everything possible to encourage all the participants to
work out their differences at any stage of the consultation
process.36 The Commission has also used settlement processes to
attempt to resolve hydropower environmental and water resource issues
after an application has been filed.37
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\3\418 CFR 41.2, 158.2.
\3\5Order No. 513, FERC Stats. & Regs. Preambles, 1986-1990
30,854, at 31,393-96, Rule 16.8(b)(5); Order No. 533, III FERC
Stats. & Regs. Preambles 30,921, at 30,125-27 (1991), Rule 4.38(b)
and (c).
\3\6Order No. 533, III FERC Stats. & Regs. Preambles 30,921,
at 30,126.
\3\7See, e.g., Edwards Manufacturing Company, Inc., 63 FERC
61,199 (1993) (order directing appointment of settlement judge).
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The Commission's settlement procedures have provided a framework of
sufficient flexibility to enable the Commission to pursue settlement
and the expeditious conclusion of proceedings before the full
litigation of the issues at formal hearing. The Commission does not
propose to undermine the existing settlement procedures, but instead
will continue to promote their use through specific regulations or on a
case-by-case basis.
The Commission expects the use of settlement and other procedures
to continue to reduce the conflicts in cases and promote conclusion of
cases without full litigation. The procedures currently used would not
be interrupted or affected by the policies proposed in this notice. The
ALJs and other Commission staff are expected to continue to take the
initiative not only in implementing traditional methods of establishing
settlements through negotiation or mediation, but also in considering
the newer methods, such as minitrials, reflected in recent cases. The
ADR rules proposed here would supplement the Commission's existing
rules and practices regarding settlement.
IV. Proposed Rules
The Commission believes that regulations are needed to provide
guidance to the parties in instituting an ADR procedure under the
provisions of the ADRA and to avoid confusion or uncertainty about the
integration of ADR methods into the Commission's overall decision-
making process. Therefore, the Commission is proposing regulations to
facilitate the use of ADR in Commission proceedings and to provide
guidance for such proceedings. The new ADR provisions are intended to
supplement existing Commission settlement regulations, and not to limit
or replace them in any way. The Commission expects that the new rules
will result in more effective, fair, timely, and less costly dispute
resolution.
Because the use of ADR complements current settlement practices,
the Commission proposes to include the proposed rules in Subpart F of
Part 385 of the Commission's Rules of Practice and Procedure concerning
settlements. Specifically, Rule 601(a) would be revised to provide for
the convening of conferences to evaluate whether ADR is practicable in
a particular proceeding. New Rule 604 is proposed to establish a
mechanism for filing proposals to use ADR, Rule 605 to adopt the
provisions in the ADRA for binding arbitration procedures, and Rule 606
to adopt the provisions in the ADRA for confidentiality in ADR
proceedings. The settlement rules are retained separately so that as
many options as possible would be available for expediting resolution
of disputes before the Commission.
Apart from the provisions in proposed Rule 605 for binding
arbitration proceedings, these proposed rules do not include separate
provisions for the Commission's review of the ultimate outcome of an
ADR proceeding. It is the Commission's intent that the ultimate outcome
of an ADR proceeding, like any other settlement, be subject to
Commission review in a manner that conforms with the Commission's
statutory duties using existing procedures for evaluating settlements.
As with the outcome of any settlement, the Commission's approval of the
outcome of the ADR method used in a particular proceeding would not
constitute approval of, or precedent regarding, any principle or issue
in that proceeding. To the extent ADR techniques are used to resolve
issues in licensing or certificate cases, that resolution would become
part of the Commission's evaluation of any license or certificate that
might be issued.
A. Initiating the Use of an ADR Method
The Commission seeks to encourage parties to consider the use of
ADR as a routine part of the Commission's decision-making processes.
Accordingly, the Commission proposes to amend Rule 601(a) by adding at
the end of Rule 601(a) the words ``or the use of alternative dispute
resolution procedures'' to specifically provide for a conference to
address the possibility of using ADR techniques. The Commission also
proposes to amend Rule 504(b)(7) to conform to the amendment proposed
in Rule 601(a).
By amending the rules to expressly identify ADR as a potential
topic for conferences convened by ALJs or any other decisional
authority, participants will be encouraged to request a conference for
the purpose of determining whether an ADR proceeding would be
appropriate for resolving the participants' differences. In addition,
the proposed amendments would comport with the ADRA, which amended
Section 556(c) of the Administrative Procedure Act (APA) to authorize
ALJs to consider the use of ADR methods when they are holding
conferences for settlement of the issues.
The Commission does not propose to require ADR or to impose a
deadline on parties to decide whether to use ADR. Thus, as under the
existing rule, a conference could be convened at any time during any
proceeding.
The ADRA also amended Section 556(c) of the APA to allow the
presiding officer to require the attendance at any such conference of
at least one representative of each party who has authority to
negotiate concerning resolution of issues in controversy. This
authority already is included in existing Rule 601(b)(2), which
requires that any person in a representative capacity at a conference
be authorized to act as a principal with respect to the matters to be
addressed.
In addition, the Commission's Rule 601(b)(3) provides that the
failure of any party to attend a conference convened under Rule 601(a)
constitutes waiver of all objections that party may have to any order
or ruling arising out of, or agreement reached at, the conference. That
condition would apply as well in the context of a conference at which
an agreement to use ADR was reached. Rule 601(b)(3) would operate to
waive an absent party's objections to an ADR proposal reached in the
conference if the conference was noticed in advance as a conference
addressing the possibility of using ADR.
The Commission does not believe that such provisions are
inconsistent with the voluntary nature of ADR. First, while a party may
be required to attend a conference that is convened for purposes of
discussing whether ADR would be appropriate, attendance does not
require a party to agree to the use of any dispute resolution proposal.
Second, because a proposal to use ADR must be supported by all
participants, it is not unreasonable to require the participants to
attend or consider non-attendance as consent to the process.
The Commission proposes an exception for proposals to use binding
arbitration under proposed new Rule 605. In those cases, it is proposed
in Rule 605(a)(5) to require the express consent of all interested
parties to such an agreement. Thus, a party's absence from a conference
under Rule 601 would not waive the party's rights to object to use
binding arbitration under Rule 605.
ADRA further amended Section 556(c) of the APA to require ALJs to
inform the parties as to the availability of ADR methods and to
encourage the use of such methods. The Commission expects all of its
staff, including its ALJs, to use the conference procedures, among
others, to facilitate the use of ADR in appropriate proceedings.
B. Mechanism for Using ADR in a Commission Proceeding
Rule 603 provides procedures for the parties or the Commission to
incorporate the use of settlement negotiations in Commission
proceedings. Rule 602 establishes procedures for the submission and
review of written offers of settlement. The Commission proposes to
provide in new Rule 604 similar procedures that participants can use to
incorporate in a proceeding the use of any ADR method, apart from
settlement negotiations which are covered in Rule 603. The mechanism
would consist of procedures for the filing and review of a proposal to
use a particular ADR method. Rule 604 proposes to adopt the standards
set out in the ADRA for the Commission to determine whether the use of
ADR in a proposal would be appropriate in that proceeding. Proposed
Rule 604 also adopts most of the definitions in the ADRA to facilitate
the use of ADR methods.
The written approval mechanism is intended to allow for the orderly
processing of the Commission's business. The Commission does not intend
the new written mechanism to replace the current practice of parties
using informal means to reach settlements. As a general rule, the
Commission allows parties flexibility in resolving their disputes.
1. Applicability
Proposed new Rule 604(a)(1) provides that participants may, subject
to the limitations of subparagraph (a)(2) of that section, use ADR to
resolve any issue in a pending matter, so long as all of the
participants agree to using the procedures.
The ADRA lists six factors for an agency to consider when
identifying cases in which the use of ADR would not be appropriate. The
Commission proposes to adopt these factors in subparagraph (a)(2) of
Rule 604 and to require that they be considered whenever a proposal to
use ADR is made. Thus, the new rule would provide that the appropriate
decisional authority will consider not using ADR if: (1) a definitive
resolution is required for precedential value; (2) the matter involves
significant questions of policy requiring additional procedures before
final resolution; (3) maintaining established policy is of special
importance; (4) the matter significantly affects persons or
organizations who are not parties to the proceeding; (5) a full public
record of the proceeding is important and the record cannot be provided
by dispute resolution; or (6) the Commission must maintain continuing
jurisdiction of the matter and dispute resolution would interfere with
the Commission's authority to alter the disposition of the matter if
circumstances change.
The use of alternative means of dispute resolution when any of
these factors is present is not absolutely prohibited under the
proposed rule. As proposed, Rule 604(a)(3) provides that ADR may be
used if the dispute resolution proceeding can be structured to avoid
the identified problem or if other concerns significantly outweigh one
or more of the factors.
Rule 604(a)(4) incorporates the ADRA's provision that the agency's
decision to use or not to use an ADR proceeding is not subject to
judicial review. Proposed Rule 604(a)(5) provides that settlement
agreements reached through the use of ADR will be subject to the
Commission's existing Rule 602, notice and comment procedures, unless
the decisional authority, upon motion or otherwise, orders a different
procedure.
2. Definitions
The Commission believes that certain of the definitions found in
the ADRA are helpful and proposes to incorporate these in Rule 604(b).
In the proposed rules, the Commission will use ``party'' and
``participant'' as defined in Rule 102.\38\ While staff is not included
in the definition of ``party,'' it is a ``participant.'' As discussed
below, the proposed rules provide for the full participation of parties
and staff in the ADR process to the same extent as in the settlement
process.
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\38\18 CFR 385.102(b) and (c).
---------------------------------------------------------------------------
The definition of participant in Rule 102 does not expressly
identify the additional entities that are permitted to participate in
the application procedures in the Commission's rules for a license or
exemption to construct, operate, and maintain a hydroelectric project.
To ensure that all participants in such hydroelectric proceedings also
may participate in any matters concerning ADR under Subpart F of the
Commission's regulations, the Commission proposes to adopt a definition
of ``participant'' in Proposed Rule 604(b)(8) that includes these
entities, which may be state and federal agencies and Indian tribes
having statutory roles or a direct interest in the hydroelectric
proceedings, as participants in ADR proceedings.
3. Submission of a Proposal to Use ADR
The ADRA does not address the process for participants to follow in
implementing ADR. As indicated, the Commission believes that it would
be helpful to have in place a process for approving the use of certain
ADR methods in Commission proceedings. This would give the participants
a framework within which to use ADR. The proposal should be written to
avoid procedural disagreements during the ADR proceeding. A written
proposal also is needed by the decisional authority to determine the
appropriateness of using ADR in the proceeding and whether to suspend
action on a matter to give participants the opportunity to resolve
their disputes by means of an ADR process.
a. The Filing. Existing Rule 602 permits participants to file an
offer of settlement at any time during a proceeding. Because ADR is
meant to supplement existing settlement procedures, the Commission
proposes that the same opportunities be available for filing ADR
proposals. Consequently, Proposed Rule 604(e)(1) permits the
participants to submit a written proposal at any time during a
proceeding to use ADR to resolve all or part of any matter in
controversy or anticipated to be in controversy in the proceeding.
Except for the binding arbitration process identified in the ADRA
and incorporated in proposed Rule 605, the Commission does not propose
to identify the specific ADR methods available to the parties nor to
mandate specific procedures for each type of ADR, but leaves the
selection and procedures to the discretion of the participants. The
ADRA does not limit the ADR procedures available to the participants,
and the Commission does not propose to do so independently. The
proposed rules are intended to allow participants the flexibility to
create their own ADR procedures. ADR may be appropriate in particular
proceedings, but the Commission will not try to identify in advance the
various types of cases in which ADR would be appropriate. The
participants should feel free to propose any type of ADR in any
proceeding.
Proposed Rule 604(e)(2) provides that, if a proceeding is pending
before an ALJ, the proposal must be filed with the ALJ. Proposed Rule
604(e)(3) provides that, if a proposal involves binding arbitration, it
must be filed with the Secretary for consideration by the Commission.
For all other matters, proposed Rule 604(e)(4) provides that a proposal
to use ADR may be filed with the Secretary, who would transmit the
proposal to the appropriate decisional authority. If authority to act
on a matter has already been delegated to the staff, the staff member
would also consider a related ADR proposal. For matters not delegated
to the staff, the Commission would be the appropriate authority to
review an ADR proposal.
Proposed Rule 604(e)(6) allows the participants to modify the ADR
proposal once it has been approved and provides that requests to modify
must follow the same procedure as proposals for ADR.
b. Contents of the Proposal to Use ADR. Proposed Rule 604(f)
identifies the information that the proposal should contain. The
proposal should be written. It should be signed by all participants to
demonstrate that all participants support the use of ADR, or include
other evidence to indicate unanimous support.\39\
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\39\This evidence could include attendance at a conference where
the proposal is adopted, or waiver of the right to consent by
documented failings to attend.
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Under the ADRA, any use of ADR proceedings must be voluntary on the
part of the participants. The Commission is not willing to create
different levels of participants for purposes of determining whether
the participants support using an ADR proceeding. The Commission does
not propose to require less than the unanimous consent contemplated by
the ADRA. Nonetheless, the Commission requests further comment on
whether some limitation, based upon directness of interest or
otherwise, should be considered.
It should be restated, however, that under Rule 601(b)(3), any
party who fails to attend a conference convened for the purpose of
determining whether to use ADR waives any objection to decisions made
about an ADR proposal at that conference. Thus, the unanimous consent
is by those participants who choose to attend a conference convened for
the purpose of determining whether to use ADR. As indicated, there
would be an exception for binding arbitration proposals under proposed
Rule 605(a)(5), which proposes to require express consent of all
parties in such a proposal.
A proposal to use ADR should also include a general description of
the matters to be pursued so that the ALJ or other decisional authority
can assess the proposal under the criteria set forth in proposed Rules
604(a) (2) and (3). An ADR proposal could also provide a description of
the ADR process to be used. If the participants desire a neutral, the
proposal could indicate the neutral that is chosen by the participants,
or the mechanism by which a neutral would be chosen. (The neutral is
further discussed below.) Because the agreement will govern the
process, the participants should carefully consider and define issues
in advance. Points to be covered could include the option of having a
neutral, the neutral's role, issues to be considered, and procedural
matters such as the order and schedule of proceeding.
c. Determination by the Decisional Authority. Proposed Rule
604(e)(5) provides for the issuance of an order by the decisional
authority approving or denying a proposal filed under Rule 604 or Rule
605. The decisional authority would determine whether ADR would be
appropriate for a particular proceeding on a case-by-case basis, using
the guidelines set forth in proposed Rules 604(a) (2)and (3). If the
decisional authority approves a proposal to use ADR, an order to that
effect would be issued. If the proposal is disapproved, an order would
be issued setting forth the reasons. Further, a proposal to use ADR
would be deemed approved unless the decisional authority issues an
order denying approval within 30 days after the proposal is filed.
d. Monitoring ADR Proceedings. The Commission proposes to provide
for monitoring an ADR proceeding. Proposed Rule 604(f) allows the
decisional authority to require status reports on the proceeding at any
time. The Commission is concerned about the possibility of delay. This
provision is designed to prevent parties from using ADR as a stalling
tactic.
e. Terminating an ADR Proceeding. In proposed Rule 604(g), the
Commission would give the decisional authority, upon motion or
otherwise, the authority to terminate an ADR proceeding under Rule 604
or 605 if it appears that ADR is no longer appropriate. The decision to
terminate would be in the form of an order. Proposed Rule 604(g)(2)
provides that a decision to terminate an ADR proceeding is not subject
to judicial review because the decision is interlocutory in nature.
This is consistent with our existing settlement negotiation procedures
in Rules 603 (h) and (i). Parties may seek Commission review of such a
decision under Rule 715 in cases pending before an ALJ or, in all other
cases, under Rule 212 as a motion for reconsideration.
4. Selection and Use of Neutrals
The ADRA contains a full section concerning the selection and use
of neutrals in ADR proceedings. The Commission proposes to adopt the
definition of neutral in the ADRA and to incorporate most of the
provisions in the ADRA regarding neutrals.
Rule 604(c) proposes that a neutral may be a permanent or temporary
officer or employee of the Federal Government, (including an ALJ), or
any other individual who is acceptable to the participants in an ADR
proceeding. A neutral may not have any official, financial, or personal
conflict of interest with respect to the issues in controversy. While
the Commission proposes to adopt the proviso in the ADRA that such a
neutral may nevertheless serve if such interest is fully disclosed in
writing to all participants and if the participants agree that the
neutral may serve, the Commission proposes to exclude such a neutral
who is a Government employee. This qualification as to Government
employees is necessary because of the prohibition of conflicts of
interest found in other statutes for Federal employees.
Although the ADRA recognizes the right of the participants to
choose outsiders as neutrals, ALJs or other staff members may also be
neutrals in the ADR process. This provides an alternative for
participants who want to forgo the expense of using an outside neutral.
Another reason for using ALJs might be if participants require a
neutral familiar with the Commission's decisions, policies, and
programs.
ALJs are the most likely class of the Commission's staff to be
chosen as neutrals to decide disputes, but other staff members may be
chosen for their expertise as facilitators/mediators. However, if a
staff member served as a neutral in no event could that person
thereafter serve in any other capacity in the proceeding.\40\
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\40\This is consistent with the Commission's current settlement
procedures. Under Rule 603, the settlement judge serves a single
function as a mediator or facilitator and cannot be a decisionmaker
or advisor in that proceeding.
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The Commission also proposes in Rule 604(c)(3) to provide that
neutrals may be selected from rosters kept by the Federal Mediation and
Conciliation Service, ACUS, and the American Arbitration Association,
as well as any other source. Pursuant to proposed Rule 604(c)(2),
neutrals would be selected by the participants and would serve at the
will of the participants, unless the ADR agreement provides otherwise.
When it is the desire of the participants to select an ALJ to act as
the neutral, upon a request made to the Chief ALJ, that individual, if
available, would be designated as the neutral in the particular
proceeding. If the requested ALJ is not available, the participants
would be informed and they could select another ALJ if they desired.
C. Arbitration
The ADRA establishes procedures for binding arbitration
proceedings. Proposed Rule 605 incorporates the arbitration provisions
as they appear in the ADRA, with a few modifications as discussed
below. To the extent participants wish to use a different arbitration
procedure, they are free to propose one, rather than using the
procedure set forth in Rule 605.
1. Applicability to Commission Proceedings
The Commission recognizes that arbitration may not be appropriate
for many types of Commission proceedings given the number of parties
typically involved and the nature of the issues. However, arbitration
should be one of the dispute resolution tools that is available to
parties and trial staff when considering ADR.
2. Authorization
Proposed Rule 605(a) provides that the participants may at any time
submit a proposal to use the binding arbitration provisions of Rule 605
to resolve all or part of any matter in controversy before the
Commission. Proposed Rule 605(a)(2) would require that a proposal to
use binding arbitration follow the procedures outlined in Rule 604(d).
Proposed Rule 605(a)(3) would require that the proposal be submitted in
writing and contain the information listed in Rule 604(e). Under
proposed Rule 605(a)(4), the arbitration process could be monitored and
terminated just as other ADR methods under Rules 604 (f) and (g). To
ensure that arbitration is truly voluntary on all sides, proposed Rule
605(a)(5) provides that the Commission will not require any person to
consent to an arbitration proposal as a condition of receiving a
contract or benefit. Similarly, no company regulated by the Commission
may impose such a condition. Proposed Rule 605(a)(5) further proposes
to require that an arbitration proposal under Rule 605 have the express
written consent of all parties to the dispute.
3. Arbitrator
Under new Rule 605(b), participants in an arbitration proceeding
would be entitled to select the arbitrator. The particular procedure to
be used in selecting an arbitrator is not provided; however, the
arbitrator is required to meet the requirements of the neutral as
described in new Rule 604(d). Rule 605(c) sets forth the arbitrator's
duties, including conducting hearings, administering oaths, issuing
subpoenas to compel attendance of witnesses and production of evidence
at hearing. The arbitrator would be expressly authorized to make
awards, i.e., issue decisions.\41\ As the Senate Report explains:
\41\The power to issue awards does not include the authority to
issue licenses and certificates.
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This section is intended to provide arbitrators with the
appropriate authority and flexibility to conduct arbitral
proceedings in an informal and efficient manner and to keep the
arbitral proceedings from becoming, in essence, full-blown
litigation proceedings. An arbitrator should not use the authority
granted in this section to indulge in or permit excessive discovery.
Instead, the arbitrator should make appropriate use of the authority
provided in this section to gather the necessary materials and
information to conduct a fair, effective and expeditious inquiry.
The section also limits arbitrators to the subpoena authority
granted by the Arbitration Act and to the agency sponsoring the
arbitral proceeding. This language is intended to ensure that the
same practices and body of law apply to all arbitrations of disputes
with federal agencies, whether initiated under the ADR subchapter in
Title 5 or the Arbitration Act in Title 9. It is also intended to
ensure that federal agencies do not gain, as a consequence of this
Act, any subpoena powers that they do not already possess.\42\
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\42\S. Rep. No. 543, 101st Cong., 2d Sess. at 13 (1990).
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4. Rules of Conduct for Conducting Arbitration
Proposed Rule 605(d) incorporates the provisions in Section 579 of
the ADRA that establish basic rules for the conduct of binding
arbitration proceedings, including hearings. Rule 605(d)(1) provides
that the arbitrator will set the time and place for the hearing and
notify the participants. Proposed Rules 605(d) (2) and (3) provide for
preparation of a record, if desired, and for presenting evidence. The
rule would require the hearing to be conducted expeditiously and
informally and would establish basic rights of the participants. Under
proposed Rule 605(d)(3)(iv), the arbitrator may exclude evidence that
is irrelevant, immaterial, unduly repetitious or privileged. According
to the Senate Report, this common arbitral standard ensures informal
and expeditious proceedings.\43\ Proposed Rule 605(d)(4) would prohibit
ex parte communications with the arbitrator, allowing the arbitrator to
impose sanctions for a violation of this prohibition. Proposed Rule
605(d)(5) would require the arbitrator to issue an award within 30 days
of the close of the hearing, unless the participants and arbitrator
agree to a different schedule.
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\43\Id.
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5. Arbitration Awards
The ADRA provides standards for issuing and appealing arbitral
awards. The Commission proposes to incorporate those standards in new
Rule 605(e). The award would be in writing and include a brief,
informal discussion of the factual and legal basis for the award. The
prevailing participants would file the award with the Commission and
any other relevant agencies and serve all participants. The award would
become final 30 days after it is served on all participants. However,
the Commission, upon motion or otherwise, could extend this period for
one additional 30-day period upon notice of the extension to all
participants.
Proposed Rule 605(e)(3) provides that a final award will be binding
on the participants.
6. Vacating an Award
As provided in the ADRA, the Commission proposes Rule 605(f) to
provide procedures for the Commission to vacate an award. Proposed Rule
605(f)(1) permits any person to request, within 10 days of the filing
of an award under Rule 605(e), that the Commission vacate the award and
requires that person to provide notice of the request to all
participants. Responses to such a request must be filed within 10 days
after the request is filed. Under proposed Rule 605(f)(2), the
Commission, upon request or otherwise, may vacate an arbitration award
before the award becomes final, and, to do so, must issue a written
order to that effect. The Commission's review of an arbitration award
would be based on the statutory standard that applies to the issues
resolved, and depends, therefore, on whether the issues involve rate,
certificate, or other matters in the Commission's jurisdiction. In
proposed Rule 605(e), the Commission would adopt the ADRA's provision
that the award need only discuss informally the factual and legal bases
for the award. If the participants wish to require that an award
include formal findings of fact and conclusions of law, they may do so
by adopting a different standard.
Proposed Rule 605(f)(4) adopts the ADRA's provision for monetary
relief. Thus, if the Commission vacates an arbitration award, a party
to the arbitration proceeding may petition the Commission for an award
of the attorney fees and expenses incurred in connection with the
arbitration proceeding. The Commission must award the petitioning party
those fees and expenses that would not have been incurred in the
absence of the arbitration proceeding, unless the Commission finds that
special circumstances make the award unjust.
As provided by the ADRA, proposed Rule 605(f)(6) establishes that a
decision by the Commission to vacate an arbitration award is not
subject to judicial review.
D. Confidentiality
The ADRA contains extensive confidentiality provisions.\44\ The
Commission proposes to establish new Rule 606 regarding confidentiality
in ADR proceedings. The confidentiality provisions set forth in Rule
606 would apply only to ADR proceedings established under proposed new
Rules 604 and 605, and are necessary for the neutral in dispute
resolution proceedings to remain effective. The participants should
feel free to be forthcoming and frank without fear that their
statements may later be used against them. As well, a neutral should be
protected from being required to divulge such information.
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\44\5 U.S.C. 574.
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The Commission's proposed Rule 606 incorporates most of the
confidentiality provisions for neutrals and participants that are found
in the ADRA. Under proposed Rule 606(a), confidentiality must be
maintained by a neutral unless: (1) All participants in the ADR
proceeding and the neutral consent in writing to the disclosure; (2)
the communication has already been made public; (3) the communication
is required by statute to be made public; or (4) a court determines,
after a balancing of considerations, that disclosure is necessary to
prevent a manifest injustice, to help establish a violation of law, or
to prevent harm to the public health or safety.
Under proposed Rule 606(b), a participant in the ADR proceeding
must not disclose information concerning any dispute resolution
communication unless, pursuant to five of the seven exceptions set out
in the ADRA: (1) All participants consent in writing; (2) the
communication has already been made public; (3) the communication is
required by statute to be made public; (4) a court determines, after
balancing considerations, that disclosure is necessary to prevent
manifest injustice, establish a violation of law, or prevent harm to
the public health or safety; or (5) the communication is relevant to
determining the existence or meaning or the enforcement of an agreement
or award resulting from the proceeding. The Commission does not propose
to include the remaining two exceptions, which permit a participant to
disclose a communication that was prepared by the party seeking
disclosure or that was available to all parties to the ADR proceeding,
because the exceptions could lead to the disclosure of material that
may need protection.
Under proposed Rule 606(c), any communication disclosed in
violation of this section would not be admissible in any proceeding
relating to the issues in controversy. Proposed Rule 606(d) provides
that the participants may agree to alternative confidentiality
procedures for disclosure by a neutral, but should inform the neutral
of any modifications prior to the commencement of the ADR procedure. If
the neutral is not so informed, the provisions of proposed Rule 606(a)
would apply. Under proposed Rule 606(e), the participants must be
notified of a demand for disclosure, whether by discovery or other
legal process. Proposed Rule 606 (f) through (i) adopt the remaining
provisions of the ADRA, including the provision that nothing in the
section would prevent discovery or admissibility of evidence that is
otherwise discoverable, merely because the evidence was presented in
the course of a dispute resolution proceeding.
E. Representation of Parties
The ADRA requires each agency to consider whether to allow non-
attorney representation in ADR proceedings, and, if non-attorneys are
allowed, to develop a policy on the disqualification of non-attorney
representatives when warranted.
The Commission has already incorporated such policies in its rules
and those existing rules would apply to ADR proceedings as well.
Existing Rule 2101 permits a participant to appear in a proceeding in
person or by an attorney or other qualified representative, and
existing Rule 2102 provides for suspension or disqualification
(temporary or permanent) of representatives when necessary.
V. Settlement Rules
The settlement procedures in Rules 601 through 603 generally work
well and, under the framework established by the rules, various ADR
methods are now used to great advantage to bring Commission proceedings
to more efficient and effective outcomes. Nevertheless, the NOI invited
comments on whether the settlement regulations in general should be
revised and, if so, in what manner. Specific comments were requested on
whether changes are necessary to accommodate the filing and processing
of omnibus settlements. Also, comments were requested on whether to
permit an ALJ to certify a contested settlement on less than unanimous
concurrence of the parties in a motion to omit an initial decision.
As discussed previously in this notice, the commenters responding
to the NOI uniformly support in general the current settlement
procedures as a successful method for resolving countless controversies
in numerous and varied proceedings. They support the use of the ADR
methods promoted by the ADRA as an additional tool to complement the
tools already available under the rules providing for settlement
conferences, settlement judge proceedings, and the submission and
review of settlements.
Although the commenters request that any changes that may be
proposed in this notice to existing rules or policy not in any way
diminish the effectiveness of the settlement process, they urge that
the Commission should consider a number of changes that would improve
and expedite that process. For the most part, they propose changes to
certain procedures in Rule 602 that govern the submission and review of
settlements and, specifically, to the certification process in subparts
(g) and (h) for the transmission from the ALJ to the Commission of
uncontested or contested settlements.
Based on the comments and a reexamination of the settlement rules,
the Commission proposes to adopt certain of the changes requested by
the commenters and not to adopt other requested changes, as more fully
discussed below. The Commission invites comments on its proposals and
any information that would be useful and appropriate in assisting in
the formulation of rules to improve the settlement process.
A. Omnibus Settlements
Rules 602 (a) and (b) now provide that any participant in a
proceeding may submit a written offer of settlement in any proceeding
pending before the Commission or set for hearing. The Secretary
transmits the offer either to the ALJ, if the offer is filed after a
proceeding is set for hearing and before the ALJ has certified the
record to the Commission, or to the Commission, as appropriate.
Omnibus settlements may cover multiple proceedings, as well as
multiple parties, involving pipelines, electric utilities, or other
regulated entities. These settlements have grown in importance in
recent years, in particular for pipelines, as parties attempt to
resolve the numerous issues that arise in the many proceedings
generated by the company's shift to a more competitive environment. The
many and diverse parties recognize that the resolution of an issue will
be affected by the resolution of other issues and, as a result, they
seek to settle the interrelated proceedings in a single settlement.
As the commenters acknowledge, parties to multiple proceedings that
wish to resolve overlapping issues through the filing of a single,
omnibus settlement are able to do so under the existing regulations.
Parties are free to include any number of proceedings and issues in an
offer of settlement submitted under Rules 602 (a) and (b). Settlement
discussions to develop omnibus settlements involving multiple
proceedings may be readily established by the Commission, the ALJs, or
upon motion by any participant under Rule 601 (which provides for
informal conferences) or under the more structured settlement judge
procedures of Rule 603. The discussions may involve multiple
proceedings pending before ALJs, the Commission, or both. Under the
rules, the Commission, the ALJs, or the participants in any underlying
proceeding may seek the appropriate procedural relief to facilitate
discussion, including stay of any of the proceedings during the course
of the discussion. The Commission believes that, as modified earlier in
this NOPR to include discussions for purposes of the use of ADR
techniques, these rules are sufficiently flexible to accommodate and
facilitate settlement discussions in any situation, including the
discussion of possible omnibus settlements involving proceedings before
the Commission and the ALJs.
However, the Commission agrees in part with the commenters that
amendments to the regulations would be useful and appropriate
specifically to provide participants the opportunity to consolidate
proceedings in settlements filed at the Commission. Rule 503(a)
provides the Chief ALJ with the authority, on motion or otherwise, to
order multiple proceedings pending before ALJs consolidated for
hearing. Under this authority, the Chief ALJ also has been able to
consolidate multiple proceedings if they are included in a settlement
and to assign the settlement to a single ALJ for the efficient and
effective treatment of the settlement.
The Commission proposes to codify current practice and amend Rule
503(a) by adding that the Chief ALJ may order multiple proceedings that
are pending before ALJs to be consolidated for settlement, as well as
hearing, on any or all matters in issue. By specifically designating
settlements as a basis for consolidation of multiple proceedings
pending before ALJs, the proposed amendment to Rule 503 recognizes the
importance of omnibus settlements as an alternative to hearings and may
encourage the participants or the ALJs to pursue alternatives.
There is no provision in the regulations for the consolidation of
multiple proceedings that are pending in part before ALJs and in part
before the Commission for disposition of an offer of settlement. Unless
otherwise delegated in its rules, the Commission has the authority, on
its own or upon the filing of a motion with the Commission, to take
appropriate action to waive its rules, consolidate proceedings, or any
other action permitted by law.45 If a settlement is filed that
includes multiple proceedings pending in part before one or more ALJs
or that involves issues in common with other settlements pending before
one or more ALJs, it is the Commission's current practice to consider
any motion to waive its rules as necessary to permit consolidation of
all the proceedings for the Commission to evaluate the
settlement.46
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\4\518 CFR 385.101(e) and 385.212.
\4\6El Paso Natural Gas Co., 53 FERC 61,014; clarified, 53
FERC 61,187 (1990); Transcontinental Gas Pipe Line Corp., 53 FERC
61,301 (1990), order on reh'g, 54 FERC 61,072 (1991).
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The Commission proposes to codify its current practice by amending
the procedures in Rule 602(b) for the submission of offers of
settlement to provide specifically for requests to be filed with the
Commission for consolidation or other appropriate procedural relief to
enable proceedings pending before ALJs to be transmitted to the
Commission for consideration in an omnibus settlement together with
proceedings pending before the Commission. The amendment would add new
paragraph (b)(3) to permit any participant in a proceeding covered by
an offer of settlement submitted under (b)(1) to file a consolidation
request when the settlement covers multiple proceedings pending in part
before the Commission and in part before one or more ALJs. As
indicated, the authority of the ALJ and the Commission to consolidate
multiple proceedings exclusively under their respective jurisdictions
for review in an omnibus settlement is established, respectively, in
Rules 503(a), 101(e), and 212.
In keeping with current practice, under the proposed rule the
Commission would determine whether to have all the related proceedings
brought together, regardless of where they are pending, to consider an
omnibus settlement. To consolidate multiple proceedings in such
situations in the past, the Commission has waived Rule 602's
certification requirements and ordered certification. The Commission
has found that its evaluation of the settlement at that time was
necessary to ensure consistent treatment of the underlying proceedings
and to prevent the limitations on an ALJ's ability to certify
settlements from frustrating the Commission's consideration of
interrelated proceedings, including interrelated settlements, that are
pending before the ALJs.47 The proposed rule gives the Commission
the discretion to deny the request to consolidate and waive the
certification requirements. If necessary, the Commission can order a
hearing in any underlying docket, including a docket that is pending
before an ALJ. Any expediency to be gained by this consolidation
procedure may not outweigh the need for adherence to the procedural
rules or the development of a record on the merits.
---------------------------------------------------------------------------
\4\7El Paso Natural Gas Co., 53 FERC 61,014, at 61,055 (1990);
Transcontinental Gas Pipe Line Corp., 53 FERC 61,301, at 62,123
(1990).
---------------------------------------------------------------------------
The Commission believes that codification of its current practice
is necessary and appropriate to clarify these procedures and establish
their availability. Participants may be encouraged to seek settlements
of interrelated issues that are involved in proceedings both before
ALJs and the Commission without concern for the different
jurisdictions.
B. Rule 602(g): Uncontested Offers of Settlement and Adequacy of the
Record
Rule 602(g) provides for the certification to the Commission of
uncontested settlements filed with an ALJ. If an offer is uncontested,
the ALJ is required under Rule 602(g)(1) to certify to the Commission
the offer of settlement with the hearing record and any related
pleadings. Under the standard set out in Rule 602(g)(3), the Commission
may approve an uncontested offer ``upon a finding that the settlement
appears to be fair and reasonable and in the public interest.''
It is well established that the agreement of the parties alone is
not necessarily a sufficient basis upon which the Commission may
approve an uncontested settlement. Whether disregarding or relying on
the settlement, the Commission must fully consider and justify its
action. The court in Tejas Power Co. v. FERC, (Tejas) held that the
Commission is required to make an independent determination that the
settlement is in the public interest.48 On some issues, an
exercise of the Commission's independent review may be required even
though the parties may not want to develop a record. In these
circumstances, the Commission is entitled to require the development of
an adequate record before it can determine whether an uncontested
settlement is in the public interest.
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\4\8Tejas Power Co. v. FERC, 908 F.2d 998 (D.C. Cir. 1990).
Specifically, the court found that the issues in that rate
proceeding required the Commission to examine the impact of the
settlement and collect evidence that the consumers' interest would
be served by the agreement, that the parties had adequate bargaining
power to produce an equitable agreement, and that the agreement's
terms are acceptable under the Commission's requirements.
---------------------------------------------------------------------------
As a general proposition, the Commission has in the past and
expects in the future to approve most uncontested settlements as they
are presented by the parties and the trial staff. It is the
Commission's practice to review uncontested settlements as a whole in
determining whether they are in the public interest and to approve them
as presented where important objectives are to be achieved. There are
circumstances, however, when the Commission may be seeking to implement
specific policies in particular types of cases. In these circumstances,
the Commission may direct the parties to make a showing beyond what
would normally accompany an uncontested settlement. If changes in the
terms of the settlement are ordered when the Commission approves the
settlement, it is to conform the settlement to Commission policy to
ensure that the settlement is fair, reasonable, and in the public
interest.
C. Rule 602(h): Contested Settlements
Rule 602(h) provides for processing settlements that are contested
in whole or in part by any participant. Rule 602(h)(1) governs the
Commission's evaluation and decision of contested settlements. Rule
602(h)(2) sets out the standards that govern the ALJ's evaluation of
contested settlements in proceedings before the ALJ and provides for
the certification of the settlement to the Commission for a decision on
the merits of the contested issues.
Under Rule 602(h)(1), the Commission may decide the merits of the
issues in a contested settlement if the record contains substantial
evidence upon which to base a reasoned decision or the Commission
determines there is no genuine issue of material fact. Under Rule
602(h)(2), a settlement that is contested by a party and that is before
an ALJ may be certified to the Commission for a merits decision if,
under Rule 602(h)(2)(ii), no genuine issue of material fact exists. If
genuine issues of material fact exist, the ALJ may still certify the
contested settlement but only if the following three conditions
specified in Rule 602(h)(2)(iii) are met: (1) the parties concur on a
motion for omission of the initial decision, (2) the presiding officer
determines that the record contains substantial evidence from which the
Commission may reach a reasoned decision on the merits of the contested
issues, and (3) the parties have an opportunity to avail themselves of
their rights with respect to the presentation of evidence and cross-
examination of opposing witnesses.
1. Severance of Parties or Issues
The rules permit either the Commission or the ALJ, as appropriate,
to sever contested issues from a settlement and resolve them
separately.49 The uncontested issues may be considered under the
expedited procedures for Commission review of uncontested settlements,
while the contested issues proceed with further review on the merits.
In establishing the settlement rules in 1979, the Commission encouraged
the parties to a settlement to indicate whether parts of the settlement
are severable and to advise the ALJ or the Commission to permit a
prompt decision on the uncontested parts of the settlement.50
Although the rules speak of severing issues, the Commission has also
construed the rules to permit contesting parties to be severed and
given a separate hearing, while approving the settlement for consenting
parties.51
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\4\9Rule 602(h)(1)(iii) and Rule 602(h)(2)(iv). See, e.g.,
Tennessee Gas Pipeline Co., 31 FERC 61,308 (1985), in which the
Commission approved a settlement in the public interest on issues
where the record was sufficient, but severed an issue for later
decision where the record was insufficient.
\5\0FERC Stats. & Regs. Preambles, 1977-1981 30,061, at
30,433.
\5\1United Gas Pipeline Co., 22 FERC 61,094; reh'g denied, 23
FERC 61,101 (1983); approved sub nom., United Municipal
Distributors Group v. FERC, 732 F.2d 202 (D.C. Cir. 1984); reaff'd,
Arctic Slope Regional Corp. v. FERC, 832 F.2d 158 (D.C. Cir. 1987).
---------------------------------------------------------------------------
The determination whether to sever a party under the regulations is
made, as are other decisions under the regulations, on a case-by-case
basis. The practice of severing contesting parties from settlements has
been adopted when such action preserved the benefits of the settlement
for the consenting parties while affording contesting parties the
opportunity to establish a record upon which their rates could be
based. When certain essential services, such as transportation or
storage, are at issue, the Commission has refused to sever parties.
This is based on the view that it is unduly discriminatory to provide
service to some on different terms, or to withhold service because some
parties choose to exercise their rights to present their positions to
the Commission for decision.52
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\5\2Tennessee Gas Pipeline Co., 57 FERC 61,360 (1991), reh'g,
59 FERC 61,045 (1992).
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When parties cannot be severed, the Commission has pointed out the
many options available under its rules and policies that might allow
certification of the contested settlement.53 In such
circumstances, the ALJ can examine the record under the guidelines
previously discussed in this NOPR to determine whether genuine issues
of material fact are contained in the settlement and, if so, whether
the written record was sufficient to resolve the issues. Another option
is to sever the disputed issues of material fact for a decision on the
merits if the parties would continue to support the settlement. Also,
the ALJ could hold a brief, limited hearing to develop enough of a
record on certain issues to permit certification.
---------------------------------------------------------------------------
\5\3Williams Natural Gas Co., 53 FERC 61,060 (1990), 53 FERC
61,231 (1990).
---------------------------------------------------------------------------
While some commenters have urged otherwise, the Commission believes
that codification in the rules of the cases in which it has approved,
or not approved, motions to sever parties would be unnecessary,
cumbersome, and unduly restrictive. The Commission's policy has been
established by case law in these areas. Because the situations tend to
be fact specific, this case-by-case approach is preferred.
Additionally, codification of the precise language to protect a
settlement from severance of any party or issue is unnecessary and
unduly restrictive. Parties may prevent severance of issues by
expressly making the settlement a non-severable package. If an issue is
contested in those settlements, the Commission may consider whether to
approve the settlement as to all parties that do not contest that issue
and to require a decision on the merits on that issue as to the
contesting parties.54 In some cases, settlements may provide that
the terms are to apply only to those parties electing to be
bound.55
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\5\4United Municipal Distributors Group v. FERC, 732 F.2d 202,
208 (D.C. Cir. 1984).
\5\5However, the Commission has imposed limits on the ability of
a regulated company to coerce parties into waiving their statutory
rehearing and appeal rights in a settlement by denying them certain
services if they seek rehearing or judicial review of an order
accepting a settlement. Tennessee Gas Pipeline Co., 57 FERC 61,360,
at 62,167-68 (1991), order on reh'g, 59 FERC 61,045, at 61,172-74
(1992); ANR Pipeline Co., 59 FERC 61,347 (1992).
---------------------------------------------------------------------------
As indicated, the existing rules do not provide for the severance
of contesting parties, but only for the severance of contested issues.
Thus, the existing rules do not reflect existing practice. The
Commission proposes to modify those provisions to permit the ALJ or the
Commission to sever contesting parties as well. As provided in the
rules, the uncontested portions would be decided in accordance with the
procedures for uncontested settlements under Rule 602(g). Accordingly,
Rules 602(h)(1)(ii) and (iii) and Rule 602(h)(2)(iv) would be changed
by adding the phrase ``contesting parties or'' before the discussion
beginning with ``contested issues''.
2. Rule 602(h)(2): Certification of Contested Settlements
Rule 602(h)(2) sets out the procedures by which the ALJ may certify
a contested settlement to the Commission. The Commission does not
propose to change the general framework it has established in Rule
602(h)(2). As discussed below under the various certification
requirements, the ALJ fulfills an important function in transmitting to
the Commission a settlement that, if it raises material issues,
contains an adequate record on which the Commission can then base a
decision on the merits.
a. Genuine Issue of Material Fact. Under paragraph (ii) of Rule
602(h)(2), the ALJ determines whether a settlement that is contested by
any participant contains a genuine issue of material fact. If the
settlement does not, the ALJ may certify the settlement directly to the
Commission. If the settlement contains a genuine issue of material
fact, the ALJ may certify the settlement only if the three conditions
under paragraph (iii) are met.
The Commission has recognized the potential roadblocks to the
expedited resolution of settlements created by claims of materiality of
issues in a settlement before an ALJ. It has never been Commission
policy to provide a forum for litigation of each and every contested
issue at the expense of another reasonable resolution of disputed
issues. Not every fact is material, and the ALJ should let a settlement
promptly go to the Commission if no material facts are found. The
Commission has provided guidance for narrowing the scope of contested
issues and preventing a hearing from covering unnecessarily broad
issues by requiring objections raised to a settlement to be closely
scrutinized.56
---------------------------------------------------------------------------
\5\6Williams Natural Gas Co., 53 FERC 61,060, at 61,187 and 53
FERC 61,231, at 61,966-67 (1990).
---------------------------------------------------------------------------
However, the Commission believes that measures could be taken to
improve the ALJ's ability to scrutinize contested issues for their
materiality and factual content. In this regard, the Commission
proposes to modify Rule 602(f) by adding the requirement that
contesting parties submit affidavits with their initial comments
detailing any genuine issues of material fact that they contend exist.
Reply comments, including responding affadavits would also be allowed.
The ALJs and the Commission will thus have necessary information
concerning materiality at the outset of the settlement review process.
This may avoid the delays created later in the process when the ALJ or
the Commission may be required to have further proceedings to sort
through claims and determine materiality of those claims.
To ensure the completeness of the information to be provided by
contesting parties in the affidavits, the parties would include
specific references to documents, testimony, or other items included in
the offer of settlement as required under Rule 602(c)(iii) that are
related to and support the claims of the contesting party that there
are genuine issues of material fact in the settlement. This requirement
would also extend to documents, testimony, or other matters that may
not have been included in the settlement, but that are relevant to
support the claims of the contesting party.
This change in the regulations makes the consideration of a
contested settlement comparable to the practice in federal court for
ruling on motions for summary judgment. Under Rule 56(e) of the Federal
Rules of Civil Procedure, an affidavit must identify certain facts
showing that a genuine issue of material fact exists for trial.57
---------------------------------------------------------------------------
\5\7Fed. R. Civ. P. 56(e).
---------------------------------------------------------------------------
The Commission does not propose to modify subparagraph (ii) of Rule
602(h)(2) to narrow or limit by rule the definition of what constitutes
a genuine issue of material fact. The determination of what is a
material fact depends on what is at issue in the case. The definition
is sufficiently flexible to permit the ALJ to identify a material fact
based on the substantive issues in the case and to determine if the
record is adequate. The ALJ also has the ability to develop the record
further, if it is inadequate, and then to certify the settlement to the
Commission. Rather than amend the standard under which the ALJs
currently operate in determining the genuineness of any disputed facts
and the sufficiency of a record, the Commission believes that its
proposal to amend Rule 602(f) to require a strong showing by contesting
parties is a sufficient barrier to superficial claims of material fact
that can block certification of a settlement to the Commission.
Contrary to the request of some commenters, the Commission does not
propose to modify the rule to require the ALJ to issue an initial
decision in all settlements. This essentially would eliminate the
certification process and the Commission's procedures for ruling on all
settlements either under the public interest standard or, if contested,
on the merits. Under Section 557(b) of the Administrative Procedure Act
and Rule 708, an ALJ is only required to issue an initial decision in
those proceedings in which the ALJ presided over the taking of
evidence, and that may be waived under Rule 710 upon motion of the
parties. To delay the Commission's review of all settlements until the
parties seek review on exceptions of a mandatory initial decision not
only is inconsistent with the APA, it establishes an additional
roadblock to the Commission's ultimate review of settlements.
b. Rule 602(h)(2)(iii): Three Conditions for Certification if
Genuine Issues of Material Fact Exist. Under current Rule
602(h)(2)(iii), the ALJ may certify an offer of settlement or part of
any offer of settlement even if the settlement contains genuine issues
of material fact. In these circumstances, the ALJ is entitled to
certify an offer that is contested by a party if all of the following
conditions, contained in subparts (A), (B), and (C), are met:
(A) The parties concur on a motion for omission of the initial
decision as provided in Rule 710;
(B) The presiding officer determines that the record contains
substantial evidence from which the Commission may reach a reasoned
decision on the merits of the contested issues; and
(C) The parties have an opportunity to avail themselves of their
rights with respect to the presentation of evidence and cross-
examination of opposing witnesses.
If any one of these conditions is not present, the judge may direct
further procedures as deemed appropriate, including certification of
the settlement at a later time if the conditions are then met.
Modifications to conditions (A) and (C) are necessary and
appropriate. The barriers to certification by the ALJ under the rules
are at times formidable. The ALJs, under Rule 602(h)(2), have less
discretion than the Commission in reviewing offers of settlement. These
limitations on the ALJ's ability to certify settlements can frustrate
the Commission's ability to review the contested settlements on the
merits. As discussed previously, the Commission in particular cases has
waived the certification conditions to permit immediate transfer of a
settlement, or parts of a settlement, to the Commission.58 By
refusing to agree to a waiver request, a single party can delay a
settlement and prevent the Commission's review on the merits until an
initial decision issues, even though the settlement has broad-based
support and there exists a sufficient record on the disputed issues of
fact. Nevertheless, unless all parties agree or the Commission
otherwise waives the initial decision under Rule 710, the settlement
cannot be certified to the Commission without the initial
decision.59
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\5\8Williams Natural Gas Co., 53 FERC 61231, at 61,967 (1990);
El Paso Natural Gas Co., 53 FERC 61,014, at 61,055 (1990).
\5\9Williams Natural Gas Co., 53 FERC 61,060, at 61,185, order
on reconsideration, 53 FERC 61,231, at 61,967 (1990).
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Condition (C) allows a single party to insist on cross-examination
of all opposing witnesses or, simply, to present additional evidence.
Again, this could slow or stall the certification of the settlement,
even though the parties have presented evidence and the ALJ believes
the record is sufficient for the Commission to reach a decision.
Conditions (A), (B), and (C) in paragraph (iii) of Rule 602(h)(2)
were designed to ensure that, in providing the ALJ with the authority
to certify a contested settlement or a portion of a settlement, a
sufficiently developed record existed on which a reasoned decision
could be based.60 As long as there is substantial evidence in the
record for a decision by the Commission on the contested issues and
each of the participants has been afforded an opportunity to be heard,
no further proceedings before the ALJ are necessary and the ALJ is
permitted by the rules to certify the settlement to the
Commission.61
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\6\0Order No. 32, FERC Stats. & Regs. Preambles 1977-1981
30,062, at 30,431-32.
\6\1Id. at 30,435-36.
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In establishing these rules, the Commission intended to reduce the
length of time required for processing settlements to encourage
participants in proceedings to seek the benefits of the settlement
process for the expeditious resolution of contested issues.
Under condition (B), the ALJ may not certify a contested settlement
unless the ALJ determines that the record contains substantial evidence
from which the Commission may reach a reasoned decision on the merits
of the contested issues. The Commission believes that this condition
should be the core of the ALJ's decision to certify a contested
settlement. As noted, this is consistent with the Commission's
intention in establishing the certification requirements. Moreover, it
conforms to Rule 602(h)(1)(i), requiring that the Commission may decide
the merits of any contested issues in a settlement before it for
evaluation if the record contains substantial evidence or else there is
no genuine issue of material fact.
Thus, if there are genuine issues of material fact and the record
contains substantial evidence to allow for the decision on the merits,
certification of the settlement should be permitted at the ALJ's
discretion.
With this background in mind, the Commission proposes to make the
following changes to conditions (A) and (C). The Commission proposes to
modify the regulations to permit the ALJ to certify a settlement if
there is less than unanimous concurrence of the parties under condition
(A) to a motion filed under Rule 710 for omission of the initial
decision. To accomplish this, the Commission proposes to amend both
condition (A) and Rule 710 to delegate to the ALJ the authority to
determine that, if a motion filed under Rule 710 has less than
unanimous concurrence, omission of the initial decision is appropriate
to the same extent the Commission is able to make that determination
under Rule 710. The Commission believes that delegating authority to
the ALJ to dispose of the Rule 710 motion when omission of the initial
decision is requested pursuant to the certification requirement in
condition (A) of Rule 602(h)(2)(iii) will streamline the certification
process.
In reaching its determination, the Commission relies on a
functional test in which it examines the significance of the issues
raised by the settlement, the substantial record evidence, and the
importance of a prompt Commission decision.62 The Commission
proposes that the same requirements and considerations govern the ALJ.
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\K\Id.
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The Commission has concluded that condition (C) is subsumed by
condition (B) and proposes to eliminate condition (C) entirely. This is
consistent with authority delegated to the ALJ when the Commission
promulgated condition (C) and with Commission practice and policy
concerning the use of cross-examination. In Order No. 32-A, the
Commission denied that condition (C) requires each party to a
proceeding to have the opportunity to present evidence and cross-
examine opposing witnesses. Rather,
the rule assures only the opportunity for all parties to avail
themselves of such rights as they may have to present evidence and
to cross-examine opposing witnesses. The rule leaves to the
presiding officer, based on the nature of the contested issues and
the state of the record, to determine whether due process requires
the presentation of evidence and cross-examination prior to
certification for Commission resolution of a contested settlement.
The opportunity to present evidence and to cross-examine is not
always a matter of right. It is for the presiding officer to apply
the law in deciding whether certification is appropriate. This rule
does not provide any greater rights to those contesting a settlement
than they had previously.63
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\6\38 FERC 61,160, at 61,603-04 (1979).
In considering the scope of an ALJ's authority to consider a cross-
examination request pursuant to condition (C), the Commission has
stated that its rules permit cross-examination only as necessary to
assure true and full disclosure of the facts.64 If the record is
developed, the ALJ may deny a request for cross-examination.65 As
the Commission stated, answering written testimony generally will be
sufficient to adequately ventilate the issues. If not, the ALJ could
ensure that the record is adequately developed by according the
participants the opportunity to put their views in the record. In these
circumstances, condition (C) serves no useful purpose in the
certification process. Rather, the due process considerations that it
covers are subsumed in condition (B), inasmuch as the ALJ, in
determining whether the record contains substantial evidence from which
the Commission may reach a reasoned decision on the merits of the
contested issues, must conclude that all participants have had the
opportunity to make their views known.
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\6\4Williams Natural Gas Co., 53 FERC 61,231, at 61,966-67
(1990).
\6\518 CFR 385.505.
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D. Deadlines
The Commission does not propose to adopt specific deadlines to
govern the determinations to be made either by the Commission or the
ALJ under Rules 602(g) and (h). Additional measures have been taken in
this order to streamline the process further by giving the ALJ the
discretion to remove certain roadblocks to certifying a contested
settlement to the Commission on the merits. Neither the ALJ nor the
Commission should be bound by the restrictions of deadlines, which may
impede the ability to ensure the adequacy of the record or the issuance
of an appropriate decision.
VI. Written Comment Procedure
The Commission invites all interested persons to submit written
data, views, and other information concerning the proposals in this
NOPR. All comments in response to this NOPR should be submitted to the
Secretary of the Federal Energy Regulatory Commission, 825 North
Capitol Street, N.E., Washington, D.C. 20426, and should refer to
Docket No. RM91-12-000. An original and fourteen copies should be filed
with the Commission February 2, 1995. Commenters are urged to double
space their comments and to provide a heading for each issue. Written
submissions will be placed in the Commission's public files and will be
available for inspection during regular business hours in the
Commission's Public Reference Room, Room 3308, 941 North Capitol
Street, N.E., Washington, D.C. 20426.
VII. Administrative Findings
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)66 generally requires the
Commission to describe the impact that a proposed rule would have on
small entities or to certify that the rule will not have a significant
economic impact on a substantial number of small entities. The
Commission is not required to make an analysis if a proposed rule will
not have such an impact.67
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\6\65 U.S.C. 601-612.
\6\75 U.S.C. 605(b).
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Pursuant to section 605(b) of the RFA, the Commission certifies
that the proposed amendments, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
B. Environmental Review
The Commission is not preparing an environmental assessment or
environmental impact statement in this proceeding because the proposed
amendments are procedural only, changing only the Commission's rules of
practice and procedure, and therefore have no significant effect on the
human environment.68
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\6\8Section 380.4(a)(2)(ii) of the Commission's regulations
categorically exempts from environmental review Commission proposals
for promulgation of rules that are clarifying, corrective, or
procedural, or that do not substantially change the effect of the
regulations being amended. See 18 CFR 380.4(a)(2)(ii).
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C. Information Collection Requirements
Office of Management and Budget (OMB) regulations require OMB to
approve certain information collection requirements imposed by agency
rules.69 However, this rule contains no new information collection
requirements in Part 385 and therefore is not subject to OMB approval.
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\6\95 CFR 1320.13.
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List of Subjects in 18 CFR Part 385
Administrative practice and procedure, Electric power, Penalties,
Pipelines, Reporting and recordkeeping requirements.
By direction of the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
Part 385, Chapter I, Title 18, Code of Federal Regulations, as set
forth below.
PART 385--RULES OF PRACTICE AND PROCEDURE
1. The authority citation for Part 385 is revised to read as
follows:
Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16
U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352; 49
U.S.C. 60502; 49 App. U.S.C. 1-85.
2. In Sec. 385.503, paragraph (a) is revised to read as follows:
Sec. 385.503 Consolidation, severance and extension of close-of-record
date by Chief Administrative Law Judge (Rule 503).
(a) The Chief Administrative Law Judge may, on motion or otherwise,
order proceedings pending under this subpart consolidated for hearing
on, or settlement of, any or all matters in issue in the proceedings,
or order the severance of proceedings or issues in a proceeding. The
order may be appealed to the Commission pursuant to Rule 715.
* * * * *
3. In Sec. 385.504, paragraph (b)(7) is revised to read as follows:
Sec. 385.504 Duties and powers of presiding officers (Rule 504).
* * * * *
(b) Powers. * * *
(7) Hold conferences of the participants, as provided in Subpart F
of this part, including for the purpose of considering the use of
alternative dispute resolution procedures;
* * * * *
4. In Sec. 385.601, paragraph (a) is revised to read as follows:
Sec. 385.601 Conferences (Rule 601).
(a) Convening. The Commission or other decisional authority, upon
motion or otherwise, may convene a conference of the participants in a
proceeding at any time for any purpose related to the conduct or
disposition of the proceeding, including submission and consideration
of offers of settlement or the use of alternative dispute resolution
procedures.
* * * * *
5. In Sec. 385.602, paragraphs (b)(3) and (f)(4) are added and
paragraphs (h)(1)(ii) introductory text, (h)(1)(iii), (h)(2)(iii),
(h)(2)(iv) are revised to read as follows:
Sec. 385.602 Submission of settlement offers (Rule 602).
* * * * *
(b) Submission of offer. * * *
(3) If an offer of settlement pertains to multiple proceedings that
are in part pending before the Commission and in part set for hearing,
any participant may by motion request the Commission to consolidate the
multiple proceedings and to provide any other appropriate procedural
relief for purposes of disposition of the settlement.
* * * * *
(f) Comments. * * *
(4) Any comment that contests an offer of settlement by alleging a
dispute as to a genuine issue of material fact must include an
affidavit detailing any genuine issue of material fact by specific
reference to documents, testimony, or other items included in the offer
of settlement, or items not included in the settlement, that are
relevant to support the claim. Reply comments may include responding
affidavits.
* * * * *
(h) Contested offers of settlement.
(1) * * *
(ii) If the Commission finds that the record lacks substantial
evidence or that the contesting parties or contested issues can not be
severed from the offer of settlement, the Commission will:
* * * * *
(iii) If contesting parties or contested issues are severable, the
contesting parties or uncontested portions may be severed. The
uncontested portions will be decided in accordance with paragraph (g)
of this section.
(2) * * *
(iii) Any offer of settlement or part of any offer of settlement
may be certified to the Commission, if:
(A) The parties concur on a motion for omission of the initial
decision as provided in Rule 710, or, if all parties do not concur in
the motion, the presiding officer determines that omission of the
initial decision is appropriate under Rule 710(d), and
(B) The presiding officer determines that the record contains
substantial evidence from which the Commission may reach a reasoned
decision on the merits of the contested issues.
(iv) If any contesting parties or contested issues are severable,
the uncontested portions of the settlement may be certified immediately
by the presiding officer to the Commission for decision, as provided in
paragraph (g) of this section.
* * * * *
6. In Subpart F, Secs. 385.604 through 385.606 are added to read as
follows:
Sec. 385.604 Alternative means of dispute resolution (Rule 604).
(a) Applicability. (1) Participants may, subject to the limitations
of paragraph (a)(2) of this section, use alternative means of dispute
resolution to resolve all or part of any pending matter if the
participants agree. The alternative means of dispute resolution
authorized under Subpart F of this part will be voluntary procedures
that supplement rather than limit other available dispute resolution
techniques.
(2) Except as provided in paragraph (a)(3) of this section, the
decisional authority will not consent to use of an alternative dispute
resolution proceeding if:
(i) A definitive or authoritative resolution of the matter is
required for precedential value;
(ii) The matter involves or may bear upon significant questions of
policy that require additional procedures before a final resolution may
be made, and the proceeding would not likely serve to develop a
recommended policy;
(iii) Maintaining established policies is of special importance;
(iv) The matter significantly affects persons or organizations who
are not parties to the proceeding;
(v) A full public record of the proceeding is important, and a
dispute resolution proceeding cannot provide a record; or
(vi) The Commission must maintain continuing jurisdiction over the
matter with authority to alter the disposition of the matter in the
light of changed circumstances, and a dispute resolution proceeding
would interfere with the Commission's fulfilling that requirement.
(3) If one or more of the factors outlined in paragraph (a)(2) of
this section is present, alternative dispute resolution may
nevertheless be used if the alternative dispute resolution proceeding
can be structured to avoid the identified factor or if other concerns
significantly outweigh the identified factor.
(4) A determination to use or not to use a dispute resolution
proceeding under Subpart F of this part is not subject to judicial
review.
(5) Settlement agreements reached through the use of alternative
dispute resolution pursuant to Subpart F of this part will be subject
to the provisions of Rule 602, unless the decisional authority, upon
motion or otherwise, orders a different procedure.
(b) Definitions. For the purposes of Subpart F of this part:
(1) Alternative means of dispute resolution means any procedure
that is used, in lieu of an adjudication, to resolve issues in
controversy, including but not limited to, settlement negotiations,
conciliation, facilitation, mediation, factfinding, minitrials, and
arbitration, or any combination thereof;
(2) Award means any decision by an arbitrator resolving the issues
in controversy;
(3) Dispute resolution communication means any oral or written
communication prepared for the purposes of a dispute resolution
proceeding, including any memoranda, notes or work product of the
neutral, parties or non-party participant. A written agreement to enter
into a dispute resolution proceeding, or a final written agreement or
arbitral award reached as a result of a dispute resolution proceeding,
is not a dispute resolution communication;
(4) Dispute resolution proceeding means any alternative means of
dispute resolution that is used to resolve an issue in controversy in
which a neutral may be appointed and specified parties participate;
(5) In confidence means information is provided:
(i) With the expressed intent of the source that it not be
disclosed, or
(ii) Under circumstances that create a reasonable expectation on
behalf of the source that the information will not be disclosed;
(6) Issue in controversy means an issue which is or is anticipated
to be material to a decision in a proceeding before the Commission and
which is the subject of disagreement between participants who would be
substantially affected by the decision or between the Commission and
any such participants;
(7) Neutral means an individual who, with respect to an issue in
controversy, functions specifically to aid the parties in resolving the
controversy;
(8) Participants in a dispute resolution proceeding that is used to
resolve an issue in controversy in a proceeding involving an
application for a license or exemption to construct, operate, and
maintain a hydroelectric project pursuant to the Federal Power Act or
the Public Utility Regulatory Policies Act shall include such state and
federal agencies and Indian tribes as have statutory roles or a direct
interest in such hydroelectric proceedings.
(c) Neutrals. (1) A neutral may be a permanent or temporary officer
or employee of the Federal Government (including an administrative law
judge), or any other individual who is acceptable to the participants
to a dispute resolution proceeding. A neutral must have no official,
financial, or personal conflict of interest with respect to the issues
in controversy, except that a neutral who is not a government employee
may serve if the interest is fully disclosed in writing to all
participants and all participants agree.
(2) A neutral serves at the will of the participants, unless
otherwise provided.
(3) Neutrals may be selected from among the Commission's
administrative law judges or other employees, from rosters kept by the
Federal Mediation and Conciliation Service, the Administrative
Conference of the United States, the American Arbitration Association,
or from any other source.
(d) Submission of proposal to use alternative means of dispute
resolution. (1) The participants may at any time submit a written
proposal to use alternative means of dispute resolution to resolve all
or part of any matter in controversy or anticipated to be in
controversy before the Commission.
(2) For matters set for hearing under Subpart E of this part, a
proposal to use alternative means of dispute resolution other than
binding arbitration must be filed with the presiding administrative law
judge.
(3) A proposal to use binding arbitration must be filed with the
Secretary for consideration by the Commission.
(4) For all other matters, a proposal to use alternative means of
dispute resolution may be filed with the Secretary for consideration by
the appropriate decisional authority.
(5) The appropriate decisional authority will issue an order,
approving or denying, under the guidelines in Rule 604(a)(2) and (3), a
proposal to use alternative means of dispute resolution. Denial of a
proposal to use alternative dispute resolution will be in the form of
an order and will identify the specific reasons for the denial. A
proposal to use alternative dispute resolution is deemed approved
unless an order denying approval is issued within 30 days after the
proposal is filed.
(6) Any request to modify a previously-approved ADR proposal must
follow the same procedure used for the initial approval.
(e) Contents of proposal. A proposal to use alternative means of
dispute resolution must be in writing and include:
(1) A general identification of the issues in controversy intended
to be resolved by the proposed alternative dispute resolution method,
(2) A description of the alternative dispute resolution method(s)
to be used,
(3) The signatures of all participants or evidence otherwise
indicating the consent of all participants; and
(4) A certificate of service pursuant to Rule 2010(h).
(f) Monitoring the alternative dispute resolution proceeding. The
decisional authority may order reports on the status of the alternative
dispute resolution proceeding at any time.
(g) Termination of alternative dispute resolution proceeding. (1)
The decisional authority, upon motion or otherwise, may terminate any
alternative dispute resolution proceeding under Rule 604 or 605 by
issuing an order to that effect.
(2) A decision to terminate an alternative dispute resolution
proceeding is not subject to judicial review.
Sec. 385.605 Arbitration (Rule 605).
(a) Authorization of arbitration. (1) The participants may at any
time submit a written proposal to use binding arbitration under the
provisions of Rule 605 to resolve all or part of any matter in
controversy, or anticipated to be in controversy, before the
Commission.
(2) The proposal must be submitted as provided in Rule 604(d).
(3) The proposal must be in writing and contain the information
required in Rule 604(e).
(4) An arbitration proceeding under this rule may be monitored and
terminated as provided in Rule 604(d) and (g).
(5) No person may be required to consent to arbitration as a
condition of entering into a contract or obtaining a benefit. All
interested parties must expressly consent before arbitration may be
used.
(b) Arbitrators. (1) The participants to an arbitration proceeding
are entitled to select the arbitrator.
(2) The arbitrator must be a neutral who meets the criteria of a
neutral under Rule 604(c).
(c) Authority of arbitrator. An arbitrator to whom a dispute is
referred under this section may:
(1) Regulate the course of and conduct arbitral hearings;
(2) Administer oaths and affirmations;
(3) Compel the attendance of witnesses and the production of
evidence to the extent the Commission is authorized by law to do so;
and
(4) Make awards.
(d) Arbitration proceedings. (1) The arbitrator will set a time and
place for the hearing on the dispute and must notify the participants
not less than 5 days before the hearing.
(2) Any participant wishing that there be a record of the hearing
must:
(i) Prepare the record;
(ii) Notify the other participants and the arbitrator of the
preparation of the record;
(iii) Furnish copies to all identified participants and the
arbitrator; and
(iv) Pay all costs for the record, unless the participants agree
otherwise or the arbitrator determines that the costs should be
apportioned.
(3) (i) Participants to the arbitration are entitled to be heard,
to present evidence material to the controversy, and to cross-examine
witnesses appearing at the hearing to the same extent as in a
proceeding under Subpart E of this part;
(ii) The arbitrator may, with the consent of the participants,
conduct all or part of the hearing by telephone, television, computer,
or other electronic means, if each participant has an opportunity to
participate.
(iii) The hearing must be conducted expeditiously and in an
informal manner.
(iv) The arbitrator may receive any oral or documentary evidence,
except that irrelevant, immaterial, unduly repetitious, or privileged
evidence may be excluded by the arbitrator.
(v) The arbitrator will interpret and apply relevant statutory and
regulatory requirements, legal precedents, and policy directives.
(4) No interested person will make or knowingly cause to be made to
the arbitrator an unauthorized ex parte communication relevant to the
merits of the proceeding, unless the participants agree otherwise. If a
communication is made in violation of this prohibition, the arbitrator
will ensure that a memorandum of the communication is prepared and made
a part of the record, and that an opportunity for rebuttal is allowed.
Upon receipt of such communication, the arbitrator may require the
offending participant to show cause why the claim of the participant
should not be resolved against the participant as a result of the
improper conduct.
(5) The arbitrator will make the award within 30 days after the
close of the hearing or the date of the filing of any briefs authorized
by the arbitrator, whichever date is later, unless the participants and
the arbitrator agree to some other time limit.
(e) Arbitration awards. (1)(i) The award in an arbitration
proceeding under Subpart F of this part will include a brief, informal
discussion of the factual and legal basis for the award.
(ii) The prevailing participants must file the award with the
Commission, along with proof of service on all participants.
(2) The award in an arbitration proceeding will become final 30
days after it is filed, unless the award is vacated. The Commission,
upon motion or otherwise, may extend the 30-day period for one
additional 30-day period by issuing a notice of the extension before
the end of the first 30-day period.
(3) A final award is binding on the participants to the arbitration
proceeding.
(4) An award may not serve as an estoppel in any other proceeding
for any issue that was resolved in the proceeding. The award also may
not be used as precedent or otherwise be considered in any factually
unrelated proceeding or in any other arbitration proceeding.
(f) Vacating an award. (1) Within 10 days after the award is filed,
any person may file a request with the Commission to vacate an
arbitration award and must serve the request to vacate on all
participants. Responses to such a request are due 10 days after the
request is filed.
(2) Upon request or otherwise, the Commission may vacate any award
issued under this rule before the award becomes final by issuing an
order to that effect, in which case the award will be null and void.
(3) Rule 2202 regarding separation of functions applies with
respect to a decision to vacate an arbitration award.
(4) If the Commission vacates an award under paragraph (f)(3) of
this section, a party to the arbitration may, within 30 days of the
action, petition the Commission for an award of attorney fees and
expenses incurred in connection with the arbitration proceeding. The
Commission will award the petitioning party those fees and expenses
that would not have been incurred in the absence of the arbitration
proceeding, unless the Commission finds that special circumstances make
the award unjust.
(5) An arbitration award vacated under this paragraph will not be
admissible in any proceeding relating to the issues in controversy with
respect to which the award was made.
(6) A decision by the Commission to vacate an arbitration award is
not subject to rehearing or judicial review.
Sec. 385.606 Confidentiality in dispute resolution proceedings (Rule
606).
(a) Except as provided in paragraphs (d) and (e) of this section, a
neutral in a dispute resolution proceeding shall not voluntarily
disclose, or through discovery or compulsory process be required to
disclose, any information concerning any dispute resolution
communication or any communication provided in confidence to the
neutral, unless:
(1) All participants in the dispute resolution proceeding and the
neutral consent in writing;
(2) The dispute resolution communication has already been made
public;
(3) The dispute resolution communication is required by statute to
be made public, but a neutral should make the communication public only
if no other person is reasonably available to disclose the
communication; or
(4) A court determines that the testimony or disclosure is
necessary to:
(i) Prevent a manifest injustice;
(ii) Help establish a violation of law; or
(iii) Prevent harm to the public health or safety of sufficient
magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of
participants in future cases that their communications will remain
confidential.
(b) A participant in a dispute resolution proceeding shall not
voluntarily disclose, or through discovery or compulsory process be
required to disclose, any information concerning any dispute resolution
communication, unless:
(1) All participants to the dispute resolution proceeding consent
in writing;
(2) The dispute resolution communication has already been made
public;
(3) The dispute resolution communication is required by statute to
be made public;
(4) A court determines that the testimony or disclosure is
necessary to:
(i) Prevent a manifest injustice;
(ii) Help establish a violation of law; or
(iii) Prevent harm to the public health and safety of sufficient
magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of
participants in future cases that their communications will remain
confidential; or
(5) The dispute resolution communication is relevant to determining
the existence or meaning of an agreement or award that resulted from
the dispute resolution proceeding or to the enforcement of the
agreement or award.
(c) Any dispute resolution communication that is disclosed in
violation of paragraphs (a) or (b) of this section shall not be
admissible in any proceeding relating to the issues in controversy with
respect to which the communication was made.
(d) The participants may agree to alternative confidential
procedures for disclosures by a neutral. The participants must inform
the neutral before the commencement of the dispute resolution
proceeding of any modifications to the provisions of paragraph (a) of
this section that will govern the confidentiality of the dispute
resolution proceeding. If the participants do not so inform the
neutral, paragraph (a) of this section shall apply.
(e) If a demand for disclosure, by way of discovery request or
other legal process, is made upon a neutral regarding a dispute
resolution communication, the neutral will make reasonable efforts to
notify the participants of the demand. Any participant who receives the
notice and within 15 calendar days does not offer to defend a refusal
of the neutral to disclose the requested information waives any
objection to the disclosure.
(f) Nothing in Rule 606 prevents the discovery or admissibility of
any evidence that is otherwise discoverable, merely because the
evidence was presented in the course of a dispute resolution
proceeding.
(g) Paragraphs (a) and (b) of this section do not preclude
disclosure of information and data that are necessary to document an
agreement reached or order issued pursuant to a dispute resolution
proceeding.
(h) Paragraphs (a) and (b) of this section do not prevent the
gathering of information for research and educational purposes, in
cooperation with other agencies, governmental entities, or dispute
resolution programs, so long as the participants and the specific
issues in controversy are not identifiable.
(i) Paragraphs (a) and (b) of this section do not prevent use of a
dispute resolution communication to resolve a dispute between the
neutral in a dispute resolution proceeding and a participant in the
proceeding, so long as the communication is disclosed only to the
extent necessary to resolve the dispute.
(j) Nothing in this section precludes parties from seeking
privileged treatment for documents under section 388.112 of this
chapter.
7. In Sec. 385.710, paragraph (d) is added to read as follows:
Sec. 385.710 Waiver of the initial decision (Rule 710).
* * * * *
(d) Waiver by presiding officer. A motion for waiver of the initial
decision, requested for the purpose of certification of a contested
settlement pursuant to Rule 602(h)(2)(iii)(A), may be filed with, and
decided by, the presiding officer. If all parties join in the motion,
the presiding officer will grant the motion. If all parties do not join
in the motion, the motion is denied unless the presiding officer grants
the motion within 30 days of filing the written motion or presenting an
oral motion. The contents of any motion filed under this paragraph must
comply with the requirements in paragraph (b) of this section. A motion
may be oral or written, and may be made whenever appropriate for the
consideration of the presiding officer.
Note: This appendix will not be published in the Code of Federal
Regulations.
Appendix
Alternative Dispute Resolution
Docket No. RM91-12-000
Commenters
American Gas Association
American Public Power Association
Associated Gas Distributors
Center for Dispute Settlement and Donelan, Cleary, Wood & Maser,
P.C.
Colorado Interstate Gas Company and ANR Pipeline Company
Colorado River Energy Distributors Association
Enron Interstate Pipelines
Federal Energy Bar Association
Indicated Producers
Interstate Natural Gas Association of America
Natural Gas Pipeline Company of America
Pacific Gas and Electric Company
The Process Gas Consumers Group,
The American Iron and Steel Institute,
The Chemical Manufacturers Association, and The Georgia
Industrial Group (The Industrials)
Southern California Gas Company and Pacific Interstate Company
Tennessee Gas Pipeline Company
Texas Eastern Transmission Corporation,
Panhandle Eastern Pipe Line Company,
Trunkline Gas Company and Algonquin Gas Transmission Company
(PEC Pipeline Group)
City of Willcox, Arizona
Williams Natural Gas Company
[FR Doc. 94-28447 Filed 11-17-94; 8:45 am]
BILLING CODE 6717-01-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.