          United States Court of Appeals
                       For the First Circuit


No. 99-2155

                  TOWN OF NORWOOD, MASSACHUSETTS,

                            Petitioner,

                                 v.

               FEDERAL ENERGY REGULATORY COMMISSION,

                            Respondent.
                             __________

                     NEW ENGLAND POWER COMPANY,

                            Intervenor.


               ON PETITION FOR REVIEW OF AN ORDER OF

              THE FEDERAL ENERGY REGULATORY COMMISSION


                               Before

                      Boudin, Stahl and Lipez,

                          Circuit Judges.


     Charles F. Wheatley, Jr. with whom Wheatley & Ranquist,
Kenneth M. Barna, Alan K. Posner and Rubin & Rudman were on
brief for petitioner.
     Larry D. Gasteiger with whom Douglas W. Smith, General
Counsel, and John H. Conway, Acting Solicitor, were on brief for
respondent.
     Edward Berlin with whom Robert V. Zener, Swidler Berlin
Shereff Friedman, LLP and John F. Sherman, III, Associate
General Counsel, The New England Electric System Companies, were
on brief for intervenor.
                            June 29, 2000

            BOUDIN, Circuit Judge.      In this case, the Town of

Norwood, Massachusetts, seeks review of orders of the Federal

Energy Regulatory Commission ("FERC") denying Norwood's petition

for declaratory rulings.       The case is a sequel to Town of

Norwood v. FERC, 202 F.3d 392 (1st Cir.), petition for cert.

filed (U.S. May 30, 2000) (No. 99-1914) ("Norwood I"), in which

this court sustained related FERC orders.           See also Town of

Norwood v.    New England Power Co., 202 F.3d 408 (1st Cir.),

petition for cert. filed (U.S. May 30, 2000) (No. 99-1913)

("Norwood    II").   The    pertinent   facts,   for   which   detailed

background can be found in Norwood I and II, are as follows.

            For many years, New England Power Company was a major

integrated electric utility in New England:        it generated power,

distributed it as a wholesaler to affiliates and non-affiliates

alike, and retailed power through its local affiliates such as

Massachusetts    Electric   Company.    Norwood,    which   operates   a

municipal electric company that distributes retail power to

residents and businesses in the town, was a long-time purchaser

of power from Boston Edison Company, but in 1983 Norwood began

to purchase power instead from New England Power.




                                 -2-
            This opportunity to switch power suppliers was secured

after Norwood settled an antitrust case against Boston Edison

and New England Power.      See Norwood II, 202 F.3d at 412.           The

settlement agreement obligated New England Power to furnish, and

Norwood   to    accept,   sufficient    power   to   satisfy     Norwood's

requirements for electricity through October 31, 1998.                 The

power was to be supplied pursuant to New England Power's FERC

Tariff No. 1--the same wholesale tariff under which New England

Power then supplied electricity to its own retail affiliates--

"as [it] may be amended from time to time."           Id.

            The requirements contract provided that its term was

from November 1, 1983, to October 31, 1998, but it also stated

that "[n]either [New England Power] nor Norwood will give notice

of termination prior to November 1, 1991 and shall not specify

a termination date prior to November 1, 1998."                 New England

Power's FERC Tariff No. 1, incorporated by reference in its

power   contract   with   Norwood,     said   that   "[o]nce    initiated,

service under this tariff shall continue until terminated by

either party giving to the other at least seven years' written

notice of termination. . . ."

            Thereafter, the parties twice amended the requirements

contract.      First, in 1987 the contract was amended to permit

Norwood to take advantage of allocations of lower-cost power


                                 -3-
from the New York Power Authority.        Second, in 1989 the parties

amended the contract to permit Norwood at its election to extend

the earliest date on which notice of termination could be given

from November 1, 1991, to November 1, 2001.

           On July 25, 1990, Norwood sent a letter to New England

Power stating that Norwood "hereby gives notice . . . that it

extends the date" for giving notice of termination from November

1, 1991, to November 1, 2001.            The letter continued:       "The

effect of this is that the Power Contract between [New England

Power]   and    Norwood   would   be   extended   for   [ten]   years   to

midnight, October 31, 2008 . . . ."        Whether Norwood did intend

to extend the contract and whether the extension was effective

are principal issues in this case.

           Beginning in December 1996, New England Power made a

set of regulatory filings to restructure itself and to revise

its existing tariff for wholesale power sales.             These filings,

described in detail and upheld in Norwood I, aimed to secure

FERC approval for the sale of New England Power's non-nuclear

generating facilities, the release (on payment of termination

charges)   of    affiliates   from     their   long-term    requirements

contracts with New England Power, and the restructuring of New

England Power's wholesale rates to facilitate customer choice




                                   -4-
and    market-based     pricing     at   both       the    wholesale    and    retail

levels.    Norwood I, 202 F.3d at 396-97.

           In a set of orders issued between November 1997 and

June    1998,   FERC    approved      the      sale,      early    termination     by

affiliates on payment of termination charges, the restructuring

of wholesale rates, and a "rate freeze" on New England Power's

existing    charges         with   wholesale        contract      purchasers     like

Norwood.    This freeze was instituted because under the existing

contracts, rates were normally adjusted to reflect increased

costs, and New England Power was now divesting itself of its

low-cost non-nuclear plants.             Norwood II, 202 F.3d at 413.

           Norwood concluded that under the new regime it would

be disadvantaged vis-à-vis New England Power's retail affiliates

whom Norwood regards as retail competitors.                   See Norwood II, 202

F.3d at 414.         On March 4, 1998, Norwood notified New England

Power    that   it    was    switching    to    a    new    wholesale    supplier,

Northeast Utilities.           Two weeks later, on March 18, 1998, New

England Power filed a revised FERC Tariff No. 1 permitting

dissident wholesale customers like Norwood to terminate their

contracts early and on only thirty days' notice, conditioned on

the customers paying a contract termination charge based on an




                                         -5-
avoided cost theory.1        New England Power Co., 83 F.E.R.C. ¶

61,174, reh'g denied, 84 F.E.R.C. ¶ 61,175 (1998).

           To counter New England Power's March 18, 1998, tariff

filing, Norwood not only objected to the charge before FERC, see

Norwood I, 202 F.3d at 398, but also, in an effort to shorten

the period of liability, Norwood petitioned FERC in April 1999

for a declaratory order, 18 C.F.R. § 385.207 (1999), that its

contract with New England Power had terminated on October 31,

1998, and that New England Power therefore had no basis for

claiming   any   contract    termination    charges   after   that   date.

Norwood estimates that if fully allowed, the charges will exceed

$7 million per year until 2008.

           FERC dismissed Norwood's petition on the merits on June

21, 1999, Town of Norwood, 87 F.E.R.C. ¶ 61,341 (1999).                In a

nutshell, the Commission found that Norwood had extended the

contract through October 31, 2008, by its July 25, 1990, letter;

and it concluded that New England Power's failure to file that

letter with FERC was irrelevant.            On August 20, 1999, FERC

denied   without   opinion    Norwood's    motion   for   rehearing,   and


    1The contract termination charge is computed as the revenues
that New England Power would have expected to collect had the
customer continued to pay at the now frozen tariff rate through
the earliest date that the customer could have unilaterally
terminated service under the contract, less the expected costs
avoided by New England Power because it did not have to provide
the power.

                                  -6-
Norwood    has   sought    review     in   this       court    to    challenge      the

Commission's orders, 16 U.S.C. § 825l(b).

            Norwood's arguments on appeal, which we address in a

sequence    somewhat      different    from       Norwood's         brief,    are    in

substance five:      (1) that the requirements contract with New

England Power was never extended beyond October 31, 1998; (2)

that any extension premised on the July 25, 1990, letter is

ineffective because the letter was not filed with FERC and

because reliance upon it violates the so-called filed rate

doctrine;   (3) that the FERC order unilaterally altered the

contract in disregard of the Mobile-Sierra doctrine; (4) that

the failure to file the letter prevents FERC from relying on it

in   construing    the    contract;        and    (5)       that    FERC    committed

procedural error.

            Assuming arguendo that the July 25, 1990, letter was

rightly    considered,     it   is    clear      to    us    that    FERC    properly

construed the contract to extend Norwood's obligation to take

its requirements from New England Power until October 31, 2008.

The standard of review need not be considered because, even if

review of the contract interpretation question were de novo, our

reading would still be precisely that of the Commission.                            Cf.

Boston Edison Co. v. FERC, 856 F.2d 361, 363-64 (1st Cir. 1988).

The documents may be inartfully drafted, but taken together,


                                      -7-
they make clear that Norwood's contract interpretation argument

is hopeless.

           It is arguable that even without the July 25, 1990,

letter, the proper reading of the original 1983 contract made it

self-extending absent notice of termination.2           However, there is

no reason to decide how matters would stand if there had been no

1989 amendment and letter.           Norwood's July 25, 1990, letter

triggered a provision in the 1989 amendment to the original 1983

contract   and   when   both   the    amendment   and   the   letter   are

considered, it is crystal clear that--subject to any other

possible   legal   barrier--Norwood's       obligation     was   extended

through October 31, 2008.

           The 1989 amendment explicitly replaced the article of

the 1983 agreement specifying the term of the contract with a

new article which specified that the contract continued through

midnight, October 31, 1998, except:        (1) neither side could give

notice of termination prior to November 1, 1991, or specify a

termination date prior to November 1, 1998; and (2):

             Norwood may elect to extend the earliest
           date by which either party can give notice
           of intent to terminate service by a total of


    2The original contract said that its term was through
October 31, 1998, but FERC Tariff No. 1. said that seven years'
notice is required to terminate; while the contract has an
overrule provision, it is not clear that the two terms are
inconsistent.

                                     -8-
            [twenty] years in two ten-year increments.
            In order to exercise this election, Norwood
            agrees to provide [New England Power] with
            written notice of each such election at
            least one year prior to the date that it is
            to be extended, viz, to November 1, 2001
            initially   and   to   November   1,   2011
            ultimately.

Citing this amended article, Norwood on July 25, 1990, wrote New

England Power giving notice that it extended the date by which

either side could give notice of an intent to terminate "to

November 1, 2001.     The effect of this is that the Power Contract

between [New England Power] and Norwood would be extended for

[ten] years to midnight, October 31, 2008 . . . ."

            Norwood argues that the letter was an offer that New

England Power failed to accept; but the 1989 amendment, which

Norwood explicitly invokes in the 1990 letter, gives Norwood a

unilateral election to extend by written notice, which is just

what the 1990 letter comprises.      Norwood also says that the 1990

letter merely extends the earliest date on which the notice of

termination can be given and does not extend the agreement

itself; but this is just word play in the context of this

contract.

            Norwood   makes   a   further   contract   interpretation

argument based on the 1987 amendment which was designed to allow

Norwood to reduce its obligation to purchase from New England

Power to the extent that Norwood could obtain a lower-cost

                                  -9-
allocation      from    the    New    York    Power    Authority.       Norwood's

explanation as to how this 1987 amendment supports its position

is not persuasive enough to merit detailed response.                    The short

answer is that the 1987 amendment, which had a quite limited

focus, was followed by a 1989 amendment providing Norwood an

election   to    extend       the    obligations      through   2008;   and   this

provision for an election, which Norwood exercised, controls any

prior terms, whether adopted in 1983 or in 1987.

           Norwood's second multi-part argument is that the July

25, 1990, letter was ineffective to extend the contract until

2008   because    the    letter       was    never    filed   with   FERC.     The

governing provision of the Federal Power Act provides that

utilities subject to its terms, which includes New England Power

with respect to wholesale power sales, must file with FERC:

           schedules showing all rates and charges for
           any transmission or sale subject to the
           jurisdiction of the Commission, and the
           classifications, practices, and regulations
           affecting such rates and charges, together
           with all contracts which in any manner
           affect or relate to such rates, charges,
           classifications, and services.

16 U.S.C. § 824d(c) (1994) (emphasis added).                    The statute also

requires that any change in a rate or contract must be reflected

in a filing with the Commission which, absent a waiver, must be

made in advance of the effective date and on sixty days' notice.

Id. § 824d(d).

                                        -10-
          Although the statute does not say so explicitly, it

might be read as saying that an unfiled contract is ineffective;

and in any event, FERC regulations say that a public utility may

not (to shorten the language to pertinent terms) "collect . . .

any rate" or "impose any . . . contract" for FERC-regulated

service   "which   is   different    from    that    provided    in     a   rate

schedule required to be on file with this Commission unless

otherwise specifically provided by order of the Commission for

good cause shown."      18 C.F.R. § 35.1(e) (1999).         "Rate schedule"

is defined to include both a statement of rates and charges for

electric service and "all classifications, practices, rules,

regulations or contracts which in any manner affect or relate to

the aforementioned service, rates, and charges."                 Id. § 35.2.

The importance attributed to filings is reinforced by the so-

called filed rate doctrine.

          The filed rate doctrine, discussed at greater length

in   Norwood II, 202 F.3d at 416, 418-22, is actually a set of

rules that have evolved over time but revolve around the notion

that under statutes like the Federal Power Act, utility filings

with the regulatory agency prevail over unfiled contracts or

other   claims   seeking    different      rates    or   terms   than       those

reflected in the filings with the agency.                See, e.g., AT&T v.

Central Office Tel., Inc., 524 U.S. 214, 221-24 (1998); Montana-


                                    -11-
Dakota Utils. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 251-

52 (1951).    Norwood's theory is that the unfiled July 25, 1990,

letter was ineffective because not filed (as required by statute

and regulations) and because giving the unfiled letter effect

would violate the filed rate doctrine.

            In both variations, Norwood's argument depends on the

proposition    that    the   July   25,    1990,   letter    was    a   contract

required to be filed.        The gist of the Commission's holding is

that the contract was what was set forth in the 1983 contract

and the 1989 amendment, both of which were filed with the

Commission; the letter merely exercised an election already

spelled out in those filings.             The Commission also gave other

alternative reasons for relying on the 1990 letter, which we

will defer for the present.

            The reference in the statute and regulations to the

filing   of   "contracts"     which      affect    rates    and    services     is

ambiguous.     On the one hand, the July 25, 1990, letter is not

itself a contract in common usage; it is the exercise of a

unilateral election by one party under an already existing

contract.     On the other hand, the election had the effect of

extending the contract term by multiple years, albeit within the

framework of the existing contract.           If the Commission wanted to

characterize    such    notices     as    "contracts,"      it     would   be    a


                                    -12-
linguistic    stretch      but   arguably     within      the   Commission's

authority to construe its organic statute and regulations.

            However, the Commission has construed the statute and

regulations    not   to    encompass   a   notice    of   election   already

provided for by a duly filed contract.              This interpretation is

subject to substantial deference under the Chevron doctrine.3

Further, in the Towns of Concord and Wellesley v. FERC, 844 F.2d

891 (1st Cir. 1988), this court upheld a decision of FERC giving

effect to an unfiled letter terminating a provision in a filed

agreement    where   the    agreement      itself    contemplated    such   a

termination letter.        The analogy offered was to automatic rate

adjustment clauses which, "[o]nce the rate schedule is approved,

[permit] rate adjustments [to] be made in accordance with the

internally-prescribed        automatic      adjustment      clause   without

further notice to action by the Commission."              Id. at 896 (citing

16 U.S.C. § 824d(f)); see also Transwestern Pipeline v. FERC,

897 F.2d 570, 578 (D.C. Cir.), cert. denied, 498 U.S. 952

(1990).

            Norwood counters by citing Arkansas Louisiana Gas Co.

v. Hall, 453 U.S. 571 (1981) ("Arkla"), but we think that case


    3Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 842-45 (1984); see also Mississippi Power &
Light Co. v. Mississippi, 487 U.S. 354, 380-82 (1988) (Scalia,
J., concurring); City of Cleveland v. FERC, 773 F.2d 1368, 1376
(D.C. Cir. 1985).

                                   -13-
is distinguishable.           There, the Supreme Court held that a filed

tariff rate for the purchase of natural gas prevailed over

Arkla's promise, made in a filed agreement, to pay a higher rate

if Arkla paid more to other producers (the "favored nations"

clause).     But the Supreme Court stressed that it was unclear

whether FERC would have accepted the higher rate resulting from

the favored nations clause--by contrast to our case; and FERC

said    in   Arkla that its acceptance of the contract did not

constitute pre-approval of any rate generated by the favored

nations clause.         See Arkla, 453 U.S. at 578-82 & n.11.

             Needless to say, without the filing of the July 25,

1990, letter, no outsider could visit the Commission's files and

determine       whether the election to extend had been exercised.

This provides whatever policy argument there might be for a

broad interpretation of "contracts" in the statute.                  But even in

the    halcyon    days   of    strict    public     utility   regulation,   now

receding at FERC as elsewhere, see Norwood I, 202 F.3d at 396,

there    were    gaps    in    what   could    be   gleaned   from   Commission

filings.     And this is the kind of grey area--the determination

of just what the Commission needs to have filed beyond formal

contracts themselves--in which great weight must be given to the

Commission's judgment.            City of Cleveland v. FERC, 773 F.2d

1368, 1376 (D.C. Cir. 1985).


                                        -14-
            We    thus    conclude       that   the    Commission     did    not    act

contrary to the Federal Power Act or its own regulations in

giving    effect    to    the   unfiled        July   25,   1990,    letter    as    an

election to extend the term of the contract.                   By the same token

it   is   unnecessary      to   elaborate       on    the   filed    rate   doctrine

because giving effect to the notice does not circumvent any

filing requirement or contradict any extant filing.                           This is

enough to resolve the claims made by Norwood and makes it

unnecessary for us to consider what we regard as more doubtful

alternative reasons given by the Commission for its order.

            Third,        because        we      accept       the     Commission's

interpretation of the July 25, 1990, letter as representing

Norwood's election to extend its contract to 2008, the Mobile-

Sierra    doctrine       invoked    by    Norwood      does   not    apply.        That

doctrine    prohibits       a   regulated        utility      from    unilaterally

changing    the    fixed    terms    of    a    utilities     contract      absent    a

finding by FERC that the existing term adversely affects the

public interest.         FPC v. Sierra Pacific Power co., 350 U.S. 348,

353-55 (1956); United Gas Pipe Line v. Mobile Gas Serv. Corp.,

350 U.S. 332, 343-45 (1956).              FERC's reasonable construction of

a contract in favor of a public utility is not a unilateral

change in the contract.




                                         -15-
          In its fourth argument for reversal, Norwood argues

that, if New England Power was not required to file the July 25,

1990, letter, then FERC lacked the authority to interpret it.

This might be so if the letter's subject matter were outside

FERC's   jurisdiction--for   example,   if   it   addressed   only

intrastate power sales.   Cf. Pennzoil v. FERC, 645 F.2d 360, 382

(5th Cir. 1981), cert. denied, 454 U.S. 1142 (1982).     However,

there is no doubt that the letter in this case related to a

filed contract for the wholesale supply of electric power within

FERC's jurisdiction.

          FERC sometimes declines to address contract issues even

for sales unquestionably within its jurisdiction,      see, e.g.,

Southern Cal. Edison Co., 85 F.E.R.C. ¶ 61,023 (1998), but

Norwood makes no claim that FERC is forbidden from interpreting

contracts filed with FERC or otherwise relevant to FERC tariffs.

Here, the duration of the contract directly affects Norwood's

liability under the March 1998 tariff imposing a termination

charge; and Norwood itself sought the declaration from FERC as

to whether the contract continued past October 1998.   The letter

was properly considered as a document pertinent to determining

the duration of the contract.     Cf. Southern Union Co. v. FERC,

857 F.2d 812, 815-16 (D.C. Cir. 1988), cert. denied, 493 U.S.

1072 (1990).


                                -16-
              Finally, Norwood offers a procedural objection to the

Commission's proceedings.            After FERC issued its notice of the

filing of Norwood's petition for a declaratory ruling, FERC

granted New England Power leave to intervene out of time, and it

accepted      New   England    Power's      answer   to    Norwood's       petition.

Norwood now complains because FERC then denied Norwood's motion

for   leave    to   file   a   reply,    citing      a    FERC   procedural     rule

prohibiting answers to answers.                 18 C.F.R. § 385.213(a)(2)

(1999).

              Perhaps in some situations it might be improper for an

agency effectively to deny the petitioner the right to respond

to    assertions     raised    for    the    first       time    in   an   answering

document, although refusal to allow a formal "reply" is not

automatically the same as precluding evidence or argument.                       The

short answer in this case is that nothing in Norwood's proffered

reply, which is included in the appendix filed with this court,

alters the result:         in general, the reply sets forth arguments

that were effectively addressed by FERC in its orders or could

not affect the outcome in light of dispositive rulings by FERC.

              The petition for review is denied.




                                        -17-
