Legal Definitions - Sierra–Mobile doctrine

The Sierra–Mobile doctrine is another name for the Mobile–Sierra doctrine, a significant legal principle in U.S. administrative law, particularly relevant to regulated industries like energy, natural gas, and telecommunications.

This doctrine establishes a high bar for regulatory agencies to change rates that have been voluntarily agreed upon between a utility company and its customers (or a regulatory body acting on their behalf). When such an agreement is made, the agreed-upon rate is presumed to be "just and reasonable." A regulatory agency can only modify or reject this agreed rate if it can demonstrate that the rate is *detrimental to the public interest* – a much more difficult standard to meet than simply proving a rate is "unjust or unreasonable" in the absence of an agreement. The doctrine aims to provide stability and predictability for long-term contracts in regulated markets.

Here are some examples to illustrate the Sierra–Mobile doctrine:

• Example 1: Electricity Supply Contract

  Imagine a large industrial factory enters into a five-year contract with a regional electricity provider. This contract specifies a fixed rate for the factory's electricity consumption, negotiated and agreed upon by both parties. Under the Sierra–Mobile doctrine, this agreed-upon rate is presumed to be fair and reasonable. If the state's Public Utility Commission (PUC) later wanted to change this rate, perhaps because it believed the utility could charge more, the PUC would face a very high burden. It would need to prove that the *existing, agreed-upon rate* was actively harmful or contrary to the broader public interest, not just that a different rate might be slightly more optimal or profitable for the utility.

• Example 2: Natural Gas Pipeline Agreement

  A natural gas pipeline company and a municipal gas distribution utility sign a long-term agreement for the transportation of natural gas, outlining specific tariffs and service terms for the next decade. This contract is filed with the Federal Energy Regulatory Commission (FERC). Due to the Sierra–Mobile doctrine, FERC would generally uphold these agreed-upon rates. Even if market conditions shift and FERC believes a different rate might be more appropriate, it cannot simply impose a new rate. FERC would have to demonstrate that the *contractually agreed-upon rate* is so detrimental that it harms the public interest, such as threatening the reliability of gas supply or causing widespread economic instability, before it could intervene and modify the terms.

• Example 3: Telecommunications Service for Schools

  A school district negotiates a multi-year contract with a telecommunications provider for internet and phone services across all its schools, securing a specific bundled rate. This rate is the result of mutual agreement. If a state telecommunications regulator later reviews this contract, the Sierra–Mobile doctrine would protect the agreed-upon terms. The regulator could not easily force the provider to charge the school district a higher or lower rate, even if it found that similar services were priced differently elsewhere. To intervene, the regulator would need to show that the *existing contract rate* itself was actively harmful to the public, perhaps by demonstrating it was so low it jeopardized the provider's ability to maintain essential infrastructure, or so high it was clearly exploitative and detrimental to public education funding.