Justia U.S. D.C. Circuit Court of Appeals Opinion Summaries

Electricity grids are natural monopolies. To prevent utilities such as grid operators from abusing their market power, Congress has given the Federal Energy Regulatory Commission the responsibility to ensure that rates and rules under its jurisdiction are “just and reasonable[.]” 16 U.S.C. Section  824d(a).   The Public Service Corporation of Colorado is a grid owner and subsidiary of petitioner Xcel Energy Services, Inc. (collectively, “PS Colorado”).  PS Colorado filed an application with the Commission to change how it processes power plant requests to interconnect—that is, to plug in—to its grid. The Commission denied PS Colorado’s request. It held that the proposal risked unduly preferring the company’s own power plants over would-be entrants to its grid.   The DC Circuit denied the petitions for review. The court held that the Commission reasonably explained its rejection of PS Colorado’s proposal. There was nothing arbitrary or capricious about its decision to bar a vertically integrated grid operator from adopting a rule that could favor its own generators and so cement its dominant market position. The Commission’s holding is consonant with decades of agency policy reflected in orders upheld by the Supreme Court and our court. The Commission also reasonably applied a different rule to a vertically integrated grid operator than it did to independent grid operators because vertically integrated operators have distinct competitive incentives. View "Xcel Energy Services Inc. v FERC" on Justia Law

Petitioner, Cherokee, owns a qualifying cogeneration facility in South Carolina. Intervenor, Duke Energy Carolinas, LLC, is a public utility that sells wholesale and retail electric services to customers in North Carolina and South Carolina. Petitioner sells the entirety of its generated capacity and energy to Duke “under a Power Sales Agreement (PPA) pursuant to PURPA.”This case arose because Petitioner sought compensation for the reactive service it provides to Duke’s transmission system. Petitioner filed a proposed rate schedule for its reactive service with FERC pursuant to section 205 of the Federal Power Act. 16 U.S.C. Section 824d.   Duke intervened and claimed that FERC lacked jurisdiction over Petitioner’s section 205 filing. Duke contended that Petitioner’s facility is a qualifying facility selling energy or capacity to Duke pursuant to South Carolina’s implementation of PURPA. Petitioner contended that FERC’s dismissal of its section 205 rate filing is arbitrary and capricious.   The DC Circuit denied the petition for review. The court explained that while it clearly has jurisdiction over the petitions, it lacks authority to consider Petitioner’s arguments because they were not adequately presented in its petition for rehearing. The court wrote that FERC did not devise a new rationale out of the blue, instead, Petitioner made the “energy or capacity” argument in its original Answer to Duke’s motion to dismiss, but then dropped it in its petition for rehearing. Thus, Petitioner did not meet its obligation to show that its filing avoided the cogeneration regulation’s exemption from FERC jurisdiction. As such, the court concluded it does not have authority to consider the Petitioner’s arguments. View "Cherokee County Cogeneration Partners, LLC v. FERC" on Justia Law

The Federal Energy Regulatory Commission (“FERC” or “Commission”) required Midcontinent Independent System Operator, Inc.’s (“MISO”) to institute reforms to its interregional planning process and directed MISO to propose a cost allocation method for its share of certain interregional project costs. Since that time, MISO has twice submitted proposals for such cost allocation. Both times, FERC rejected the proposals, finding that they were not just and reasonable as required by the Federal Power Act (the “Act”), because they were inconsistent with the cost causation principle. After the second rejection, FERC, on its own initiative, established a cost allocation method for certain MISO-PJM projects.   Petitioners challenged FERC’s rejection of MISO’s second proposal and FERC’s corresponding implementation of a cost allocation method. The DC Circuit denied the petitions and affirmed FERC’s orders in all respects. The court explained that according to MISO’s own representations to FERC in its filings, the Second Interregional Filing was “designed to work seamlessly with the revisions proposed in the [Second Regional Filing]” and relied on definitions and provisions in the Second Regional Filing As such, it was appropriate and well within FERC’s discretion to reject MISO’s Second Interregional Filing based on its rejection of the Second Regional Filing, as it would obviously suffer from the same critical flaw.   Further, as FERC noted, it made clear that its Third Regional Order was only addressing regional projects, not interregional ones. Thus, because MISO’s SPP Metric would identify regional benefits, disregarding such known benefits in cost allocation is inconsistent with the cost causation principle. Accordingly, FERC reasonably rejected MISO’s Second Interregional Filing. View "Entergy Arkansas, LLC v. FERC" on Justia Law

The Federal Energy Regulatory Commission (“FERC”) granted NEXUS Gas Transmission, LLC (“Nexus”) a certificate of public convenience and necessity to construct and operate a natural gas pipeline from Ohio to Michigan. After FERC granted Nexus the certificate, the City of Oberlin (“City”) petitioned for review claiming, among other things, that FERC did not adequately justify its reliance on agreements to transport gas ultimately bound for export to Canada as evidence of need for the pipeline.   The DC Circuit denied the petition, explaining that the FERC’s explanation on remand from was reasonable and because its decision comported with the Natural Gas Act and the Takings Clause. The court wrote FERC’s justification for considering the agreements to transport gas bound for export is well reasoned and comports with both the Natural Gas Act and the Takings Clause. FERC’s alternative explanation that it would have granted Nexus a certificate even without considering the export agreements also passes muster. View "City of Oberlin, Ohio v. FERC" on Justia Law

The City of Salisbury, North Carolina relies on the Yankin River for its drinking water. The City constructed a pump station on the Yankin River, which the City believed was threatened by a plan proposed by the operator of a nearby hydroelectric damn and approved by FERC. The City challenged the plan and FERC's approval.The D.C. Circuit dismissed the City's petition, finding that the proposed rule was within the license granted to the dam operator and was not arbitrary. The operator of the dam was required to implement a flood protection plan, including 1.) physical modifications to the facilities such as a protective dike for the pump station, 2.) improved access to the pump station with the road consistent with the City of Salisbury’s design or 3.) other feasible options for achieving the same benefits. The proposed plan meets the requirement of the flood protection plan. Additionally, the court determined that FERC's approval of the plan was not arbitrary. View "City of Salisbury, North Carolina v. FERC" on Justia Law

LSP, an independent electric transmission developer, bids on proposals to build transmission projects throughout the U.S. LSP sought judicial review of a Federal Energy Regulatory Commission (FERC) decision under 16 U.S.C. 824e concerning ISO New England’s compliance with Commission Order 1000, which required “the removal from Commission-jurisdictional tariffs and agreements” of rights of first refusal to construct transmission facilities and directed incumbent transmission providers to engage in competitive selection of developers. FERC recognized an exception if the time needed to solicit and conduct competitive bidding would delay the project and thereby threaten system “reliability.” FERC found “insufficient evidence” that ISO was incorrectly implementing Order 1000.The D.C. Circuit denied LSP’s petition for judicial review, first holding that FERC’s ruling bears all the indicia of a substantive decision produced after a contested proceeding involving ISO and numerous intervenors and is subject to judicial review. The court found nothing irrational in FERC’s response to LSP’s general criticism of ISO’s use of more conservative assumptions regarding its system capacity and future management in determining when to apply the exception. Although the number of reliability projects exempted from competitive bidding exceeded those open to competition, the appropriate balance between competitive procurement and quick redress of reliability needs is a policy judgment for FERC. View "LSP Transmission Holdings II, LLC v. Federal Energy Regulatory Commission" on Justia Law

Petitioners sought review of the Commission's decision to authorize a new natural gas pipeline and compressor station in Agawam, Massachusetts. One of the petitioners, Berkshire, has failed to establish standing to challenge the Commission's decision. The other petitioner, Food & Water Watch, has raised challenges related to the Commission's compliance with the National Environmental Policy Act.The DC Circuit mainly rejected Food & Water Watch's claims, but agreed with its contention that the Commission's environmental assessment failed to account for the reasonably foreseeable indirect effects of the project—specifically, the greenhouse-gas emissions attributable to burning the gas to be carried in the pipeline. Accordingly, the court granted Food & Water Watch's petition for review on that basis and remanded for preparation of a conforming environmental assessment. View "Food & Water Watch v. Federal Energy Regulatory Commission" on Justia Law

For seven years, NTE worked to build a natural gas-fueled power plant in Killingly, Connecticut to sell electricity on the New England grid. NTE worked with ISO, the independent system operator authorized by the Federal Energy Regulatory Commission (FERC) to manage the regional grid, to have the project “qualified” to bid for the right to sell electricity. NTE secured a “capacity supply obligation” (CSO) for the 2022 commitment period. NTE secured a guaranteed income stream for the first seven years of the plant’s operation.NTE subsequently encountered setbacks that prevented it from meeting its financing and construction goals. On November 4, 2021, NTE told ISO that it remained confident it could complete construction on time but ISO-NE asked FERC to terminate the Killingly plant’s CSO. In January 2022, FERC did so. In February, the Second Circuit issued an emergency stay of FERC’s order. FERC likely fell short of its obligation under the Administrative Procedure Act to explain its decision. Absent emergency relief, FERC’s order would have irreparably harmed NTE, preventing it from participating in an auction to sell future electricity capacity to New England consumers. Nothing in FERC’s reasoning suggests the risk that incumbents may have to reallocate electricity capacity amongst themselves outweighs the harm of delaying NTE’s project, which could benefit consumers through more efficient, less expensive electricity. View "In re: NTE Connecticut, LLC" on Justia Law

The owners of New England electric generation facilities are paid through formula rates established by ISO New England’s (a regional transmission organization) open access transmission tariff. The owners challenged Federal Energy Regulatory Commission’s (FERC) orders approving Schedule 17, an amendment to the ISO tariff, establishing a new recovery mechanism for costs incurred by certain electric generation and transmission facilities to comply with mandatory reliability standards FERC had approved.FERC ruled that the owners could use Schedule 17 to recover only costs incurred after they filed and FERC approved a cost-based rate under the Federal Power Act (FPA), 16 U.S.C. 824d. FERC reasoned that recovery was limited to prospective costs, citing the filed rate doctrine, which forbids utilities from charging rates other than those properly filed with FERC, and its corollary, the rule against retroactive rate-making, which prohibits FERC from adjusting current rates to make up for a utility’s over- or under-collection in prior periods.The D.C. Circuit denied the petition for review. FERC’s application of the filed rate doctrine and the rule against retroactive rate-making to Schedule 17 was not arbitrary or capricious. Schedule 17 does not expressly permit recovery of mandatory reliability costs incurred prior to a facility’s individual FPA filing. View "Cogentrix Energy Power Management, LLC v. Federal Energy Regulatory Commission" on Justia Law

The San Francisco Public Utilities Commission owns a power supply system in the Hetch Hetchy Valley and transmission lines but does not own distribution lines and relies on PG&E’s distribution system. The Commission is both a customer and a competitor of PG&E. The Federal Energy Regulatory Commission (FERC) approved PG&E’s Tariff, which stated the generally applicable terms for “open-access” wholesale distribution service. In 2019, San Francisco filed a complaint under the Federal Power Act (FPA), 16 U.S.C. 824e, 825e, 825h, challenging PG&E’s refusal to offer secondary-voltage service in lieu of more burdensome primary-voltage service to certain San Francisco sites and provide service to delivery points that San Francisco maintains are eligible for service under the Tariff’s grandfathering provision. PG&E maintained that it had not given customers the right to dictate the level of service to be received and that any denials of secondary-voltage service were supported by “technical, safety, reliability, and operational reasons.”FERC denied San Francisco’s complaint, ruling that PG&E should retain discretion to determine what level of service is most appropriate for a customer because the provider “is ultimately responsible for the safety and reliability of its distribution system.” The D.C. Circuit vacated and remanded, citing FERC’s own precedent and noting a “troubling pattern of inattentiveness to potential anticompetitive effects of PG&E’s administration of its open-access Tariff.” View "City and County of San Francisco v. Federal Energy Regulatory Commission" on Justia Law