This past year was a banner year for FERC appeals - 22 in all where FERC was the respondent. For those keeping count, appeals are up by nine over last year, and in fact, are actually the most appeals ever since 2011 when I started this year end round up tradition. In addition to the 22 FERC appeals, the Third and Fourth Circuit each heard appeals challenging New Jersey and Maryland initiatives to incentivize in-state power through subsidies.
 
This year featured two blockbuster rulings courtesy of the FERC-busting duo of Judge Silberman and Judge Brown. Judge Brown - almost gleefully - dismembered FERC Order No. 745 on demand response compensation (with Judge Edwards dissenting), while Silberman and Brown rode shotgun on Judge Edward’s remand of a FERC pipeline certificate order that improperly segmented a uniform project and failed to take account of environmental impacts in violation of NEPA.  Meanwhile, Judge Silberman crafted another procedural device to dispose of a case in Smith Lake Hydro- by telling the parties after the fact that their first rehearing request rather than their second triggered the deadline for the petition for review and as a result, petitioners’ appeal came too late. I felt strongly enough about the problems with this ruling that I filed a short amicus brief in support of petitioners. Whatever my view on the merits, retroactively applied deadlines are never, ever, ever a good idea.
 
Another major development this year - Obama’s four appointees were approved, meaning that the DC Circuit has a full panel for the first time in years. Although the new judges have only each authored one FERC decision a piece so it’s too early to get a sense of their leanings, I’ve been incredibly impressed with the level of preparation they’ve displayed during oral argument.  What’s more, the court has started resolving appeals again with characteristic efficiency. 
 
Finally, how did FERC fare with 22 cases to defend this year? FERC won 16 cases overall (5 procedural wins and 11 merits wins) for a score of 72% - not as well as in some past years, where FERC racked up a 92 percent affirmed record - but better than last year’s low of 61% affirmed. 
 
Hopefully, this past year will get FERC appeals back on track. Appellate review of FERC decisions is important to provide certainty to the industry, so here’s hoping that this upward trend continues. 
 
 

Full Summary of 2014 FERC Appeals

St. Paul Park Refining Co. v. FERC
Case No. 13-1302 (DC Circ December 19, 2014)
Wilkins, Randolph/ Garland opinion
 
Petitioners St.Paul Park Refining Company challenged an uncontested settlement between shippers and North Dakota Pipeline regarding a 7 year surcharge to offset costs of pipeline expansion.  FERC upheld the reasonableness of the settlement and challenges raised were not properly preserved and therefore can’t be considered by the court
 
Scorecard - FERC win, procedural 
 
Lousiana Public Service Commission v. FERC,
No. 13-1555 (D.C. Cir. December 5, 2014)
Williams, Wilkins/ Judge Rogers - opinion
 
This is a case that’s been up and back to the DC Circuit twice already.  The case dates back to 1995 when the LaPSC filed complaint challenging cost allocations. Initially, FERC dismissed the complaint, which lead to the first appeal and a remand. This time, FERC ordered a change in rates but declined to order refunds, which resulted in the second trip to the court, and a remand back for FERC to consider refunds. This time, FERC initially determined that refunds would issue but reversed itself on rehearing, which sent the case back to the court a third time. Here, the court against agreed with LasPCS, finding that  FERC failed to explain departure fem its policy of ordering refunds as a remedy. 
 
Scorecard- FERC loss, merits
 
Midland Power v. FERC ,
Docket No. 13-1184 (D.C. Cir. Dec 2, 2014) 
 
This case arises out of the ongoing drama between Greg and Beverly Sweckers, who own a small wind generator on their Iowa Farm and Midland Cooperative, the purchasing utility. Following a dispute over Midland’s avoided costs calculation, the Sweckers stopped paying their retail power bill in protest.  Midland disconnected the Sweckers for non-payment.  The Sweckers filed a complaint at FERC alleging that the disconnection violated PURPA since as a consequence of disconnection, Midland could not longer fulfill PURPA’s mandatory purchase obligation. FERC agreed and ordered reconnection. Midland challenged FERC’s order on rehearing and then to the D.C. Circuit.
 
Declining to tread where FERC had gone so many times before in the Midland/Swecker spat, the D.C. Circuit dismissed Midland’s appeal for want of jurisdiction. The court found that Section 313 only authorizes reviews of orders issued under the FPA and Section 210 of PURPA is not part of the Federal Power Act.  The court bolstered its jurisdictional finding by reference to PURPA itself, which vests enforcement of FERC orders in the federal district court. The court explained that “for us to review [the Midland orders] would effectively preempt PURPA’s enforcement scheme.” 
 
Scorecard - FERC win, jurisdictional
 
Louisiana Public Service Commission v. FERC,
Docket No. 13-60874 (5th Cir. November 14, 2014) and 
Louisiana Public Service Commission v. FERC,
Docket No. 13-6040 5th Cir. December 5, 2014)
 
 These opinions are so similar and so complicated that I’ve consolidated the discussion. Louisiana Public Service Commission sought review of FERC orders relating to allocate of production costs among Enetergy’s six operating companies, alleging that FERC inaccurately interpreted the requirements of the System Agreement and incorrectly applied the filed rate doctrine. The court found that FERC acted reasonably - even though early on in the case, FERC had changed its interpretation of the System Agreement with little explanation. There’s lots of inside baseball in this opinion, and little judicial analysis. I suspect that given the complexity and protracted nature of these disputes, the decision was largely drafted by some unfortunate clerk who reconciled the briefs with earlier FERC orders and court decisions. Not much presidential value here, though the opinion is sufficiently detailed to offer some guidance to other parties challenging cost allocation under system agreements.
 
Scorecard- 2 FERC wins, merits
 
Smith Lake Improvement and Stakeholders  V. FERC
Docket No 13-1074, (D.C. Cir. September 26, 2014) 
Brown, Wilkens Silberman - Silberman author
 
Believe it or not, this procedural sleeper case could become one of the one or two en banc petitions granted by the D.C. Circuit each year.  Smith Lake Improvement arises out of petitioners’ efforts to seek review of a FERC licensing order. The petitioners sought rehearing, which FERC denied, so they filed a second rehearing request based on new evidence that had not been available two years earlier. FERC summarily denied the second rehearing request finding that no new grounds for a challenge had been raised. 
 
Petitioners filed a petition for review of FERC’s decision at the D.C. Circuit which the court dismissed on jurisdictional grounds. The court found that Petitioners’ second rehearing request was in error under Town of Norwood v. FERC, since FERC did not change the original rationale for its order following the first rehearing request. Because the jurisdictional clock for seeking judicial review was not tolled by the second rehearing request, the petition for review came too late. 

Petitioners sought rehearing en banc, arguing that the court’s ruling created a conflict between Clifton Power v. FERC  (my unfortunate precedent) which holds that a petition filed while a second rehearing request is pending is incurably premature and Western Area Power Administration v. FERC which held that the second unnecessary rehearing petition does not toll the jurisdictional clock, but did not state whether Clifton Power  had been overruled. Following Petitioners’ en banc request, the court issued an order to FERC and the intervenors to respond - which suggests that the court is seriously considering the en banc petition.
 
Interestingly, FERC did not oppose the petitioners’ en banc request. In fact, in its papers below, FERC took the position that the court’s opinion could encourage parties to seek review prematurely, instead of allowing FERC an opportunity to resolve the issues.
 
I felt strongly about this case for several reasons. For starters, I’d already been burned once in Clifton Power v. FERC by filing too early. But more importantly, I believed that Smith Lake sets a dangerous precedent because the determination as to whether a second rehearing petition is unnecessary is made after the fact - at which point, the petitioner is out of luck and can’t file any petition. It’s one thing for attorneys to be penalized for missing a deadline but quite another to be held accountable for an error of judgment regarding whether a second petition for review should be filed.  I’ve never previously filed an amicus brief or had an opportunity to litigate an arcane legal issue that impacts me directly so I’ll be keeping a close eye out for a decision.
 
Scorecard- FERC win, jurisdiction
 
PPL Energy Plus LLC v. Lee Solomon
Docket No. 13-4330, (3rd Cir. September 11, 2014) and
PPL Plus v. Nazarian,
Docket No. 13-2419 (4th Cir. June 2, 2014). 
 
Recall back in 2012, when states like New Jersey and Maryland, dissatisfied with high prices and inadequate supply resulting from PJM’s reliability pricing model (RPM) took matters into their own hands by adopting programs that would incentivize in-state generation?  The programs - known as LCAPP in New Jersey contract for differences  (CfD)in Maryland — would compensate generators in rates the difference between the price bid into PJM markets and the cost to make in-state generation financially viable. 
 
Anticipating that they might be underbid by subsidized generation, PJM generators challenged both the New Jersey and Maryland programs in federal district court. PJM arguing that the New Jersey and Maryland programs essentially set rates for sales into the PJM market and thus were preempted by the Federal Power Act which gives FERC exclusive jurisdiction over wholesale markets.  As I described in an earlier article, the Maryland federal district court found the Maryland program preempted, and a somewhat derivative New Jersey court  ruling did too. 
 
Thereafter both cases advanced to the Third and Fourth Circuit where both rejected the states’ efforts to characterize the subsidies as something other than a rate. Explained the Fourth Circuit:
 

The CfD payments, which are conditioned on CPV clearing the federal market, plainly qualify as compensation for interstate sales at wholesale, not simply for CPV's construction of a plant. Furthermore, the Order ensures — through a system of rebates and subsidies calculated on the basis of the PJM market rate — that CPV receives a fixed sum for every unit of capacity and energy that it clears (up to a certain ceiling). The scheme thus effectively supplants the rate generated by the auction with an alternative rate preferred by the state. See Appalachian Power Co., 812 F.2d at 904 (holding that the agreement at issue did not "set a rate per se," but that it nevertheless "sufficiently resemble[d] a filed rate to come within the realm of exclusive federal jurisdiction"). The Order thus compromises the integrity of the federal scheme and intrudes on FERC's jurisdiction.

 
The Third and Fourth Circuit decisions have implications for other types of state-sponsored procurement. For example, in January 2014, opponents of the Cape Wind project filed a complaint against the Massachusetts Department of Public Utilities, arguing that the states’ merger condition, requiring the utility to purchase power from Cape Wind under a long term contract was preempted by the Federal Power Act. The court dismissed the complaint, finding the suit barred by the 11th Amendment which immunizes states from federal court lawsuits seeking retroactive relief. (See Decision, [insert barnstablecapewind.pdf] here </A>). 
 
Scorecard- 2 wins for FERC preemption, merits 
 
West Deptford Energy LLC v. FERC,
Docket No. 12-1340 (D.C Cir August 26, 2014)
Garland, Srinivisan, Millett- opinion
 
As is typical of most FERC appeals, this one arises out of a complex set of facts involving PJM’s changing policies for interconnection cost allocation. The upshot is that FERC eventually upheld a PJM methodology that assigned all interconnection upgrade costs to the petitioner, West Deptford. The PJM policy was not in effect under the tariff on file, but had since been adopted - and FERC found that PJM had given adequate notice to West Deptford of PJM’s intent to enforce the new tariff. New Deptford argued that the filed rate doctrine requires that enforcement of the tariff on file; FERC claimed that it can pick and choose which rate applies on a case by case basis. Ultimately, the court vacated the offending portions of the decision and remanded t FERC for further explanation of its decision to apply the superseded tariff.
 
Scorecard- FERC loss, merits
 
Southwestern Power Administration v. FERC ,
Docket No. 13-1033 (DC Cir. August 22, 2014)
Garland, Pillard, Srinivasan - opinion
 
As I’ve said before, whenever there’s a smackdown between FERC and another federal agency, FERC invariably loses. And Southwestern Power is no different. Relying on its authority under Section 215 of the Federal Power Act, FERC imposed monetary penalties for reliability standards violations on the Southwestern Power Administration, a federal power marketing agency. The court vacated FERC’s order finding that while Section 215(b) generally subjects federal government entities to FERC jurisdiction to enforce compliance, the section does not “speak with the requisite clarity to waive the federal government’s sovereign immunity from monetary penalties.” 
 
Scorecard - FERC loss, merits 
 
South Carolina Public service Authority v. FERC,
Docket 12-1222 (D.C. Cir. 2014)
Rogers, Griffiths and Pillard
 
So after thousands of pages of comments, rehearing requests and appellate briefs, seems that the challenges to FERC Order No. 1000 were finally resolved not with a bang but with the judicial equivalent of a whimper in the form of a per curiam opinion.  Essentially, the court found that FERC justified the need to adopt Order No. 1000 and acted in reasonably in finding that it had authority to implement Order No. 1000 under the FPA. 
Of course, if you’re a regular reader of my newsletter, the outcome shouldn’t come as a surprise: with the exception of the court’s ruling affirming FERC’s decision to require removal of rights of first refusal from transmission owners’ tariffs, the outcome is pretty much what I predicted.
 
Scorecard - FERC win, merits
 
Minisink Residents for Environmental Preservation v. FERC,
Docket No. 12-1481 (D.C. Cir. August 15, 2014)
Kavanaugh, Millette, Wilkins – opinion
 
This is a tough appeal to cover because it was mine. My clients, a group of Minisink residents challenged the siting of a compressor station just 650 feet from residential homes when an environmentally, operationally and economically preferable alternative was available in a remote location. Placing the compressor station at the alternative site would have required the pipeline to upgrade seven miles of pipeline, but the company’s own plans showed that an upgrade was already in the works.

Our argument was sufficient to persuade then - Chairman Wellinghoff and Commissioner LaFleur to dissent from the order issuing the certificate. But the presence of the dissent didn’t help at the court, which deferred to FERC’s expertise in making hard siting decisions.
 
One of the most troubling aspects of FERC’s decision was its statement that it generally assumes that a pipeline’s chosen alternative has merit, because otherwise, the company would not invest money in the project. FERC’s presumption is inconsistent with precedent that holds that the pipeline bears the burden of proof. I’d also argued that because FERC “showed a preference, its ruling did not deserve deference,”- but my Johnnie Cochranism didn’t even make it into the opinion. 
 
Scorecard- FERC win, merits
 
Thomas Anderson v. FERC,
 Docket No. 12-72266 (9th Cir. July 23, 2014)
 
This case concerns a rare pro se appeal of  FERC decision rejecting a complaint regarding a licensees’ compliance with FERC requirements. Apparently, this case has a history that the court didn’t recite, so it’s difficult to tell whether the petitioner would have fared better had he been represented by FERC counsel.
 
Scorecard - easy FERC win, merits
 
First Energy v. FERC,
Docket No. 12-1461 (D.C. Cir. July 18, 2014)
Griffith, Srinvasan, Sentelle - opinion
 
As a result of its decision to leave regional transmission operator (RTO) MISO for PJM, First Energy’s transmission affiliate found itself subject to transmission costs imposed on departing members by MISO as well as annual transmission costs imposed by PJM. First Energy filed a complaint, alleging that PJM’s cost allocation policy was unjust and unreasonable because it violated principles of cost causation. FERC denied relief, finding that there was nothing wrong with the tariff- and that First Energy found itself subject to dual charges by both RTOs as a result of its voluntary decision to leave one RTO and join another. There’s some discussion as to whether First Energy’s complaint is properly reviewed under the standards in Section 205 or Section 206 but otherwise, the decision involves a fairly straight-up ruling that FERC’s decision denying First Energy relief was reasonable.
 
Scorecard - FERC win, merits
 
New England Power Generators v. FERC
Docket No. 12-1074 (July 8, 2014)
Brown, Griffith, Sentelle- opinion
 
Various New England ISO market participants proposed revisions to NEISO’s forward capacity market auction rules. FERC approved the new rules, but imposed buyer-side and seller side market power mitigation measures (for the uninitiated, seller side market power involves the ability of a firm to use monopoly power in markets to set prices above competitive levels, while buyer power concerns the ability of a larger buyer can force sellers to reduce prices below competitive levels). A group of suppliers argued that FERC’s buyer-side mitigation measures were too lenient while the seller side measures were too harsh. Not surprisingly, in a complex case like this one, the court found that FERC acted reasonably.
 
Meanwhile, public power and state intervenors argued that FERC’s buyer-side mitigation measures improperly encroached on state regulation of generation facilities and were therefore, non-jurisdictional. The court disagreed, finding that the buyer-side mitigation measures regulated only capacity prices which could have an effect on generators’ decisions to build capacity, but did not constitute direct regulation.
 
Scorecard - FERC win, merits
 
No Gas Pipeline v. FERC,
Docket No. 12-1474 (D.C. Cir. July 1, 2014)
Henderson, Griffith, Sentelle - opinion
 
A coalition of environmental groups and the City of Jersey City challenged a FERC pipeline certificate (disclosure: I was involved in this case in the early stages but my role in the appeal was limited). The environmental groups argued that the pipeline would result in higher radon levels that would harm group members which the court dismissed for want of standing, since the potential harm was speculative. To me, the court’s reasoning here improperly conflates standing with the merits of the case particularly because some of the environmental group members were more directly impacted by the pipeline since they lived directly within its vicinity. But the reality is that as an environmental group, it’s often a crapshoot to challenge a FERC order without the ability to show a direct impact to members.
7014419
 
 Meanwhile, Jersey City alleged that the Commission’s certificate approval process was unconstitutional because FERC’s budget is funded by pipelines, and therefore, FERC cannot act as an impartial decision maker. The court characterized the argument as “novel…even creative.” Though intrigued by Jersey City’s argument, the court evaded review also on jurisdictional grounds, finding that Jersey City had not been aggrieved by FERC’s certificate decision (a requirement for jurisdiction under Section 717r of the Natural Gas Act) and instead, that the City’s beef was really with the way that FERC is funded under the Budget Act. 
 
There’s one final, and somewhat troubling point. The court also rejected Jersey City’s bias argument because the City had failed to raise it prior to rehearing.  Since when does FERC require parties to raise issues prior to rehearing? In many cases, FERC’s errors don’t become apparent until it issues the final order. That may not have been the case here - but if it’s true that FERC won’t consider arguments on rehearing unless they were raised earlier in the proceeding, that requirement will impose even more of a burden on resource constrained participating parties.
 
Scorecard - FERC win, procedural
 
Illinois Commerce Commission v. FERC,
Docket No. 13-1674 (7th Cir. June 25, 2014)
 
If you didn’t love Judge Posner, you’ve got to love him after this decision. Whether you agree with the result or not, there’s no one who can so eviscerate a complex FERC decision while making it look easy.
 
In this ruling, Judge Posner’s lost his patience. Five years ago, Posner remanded a FERC order that allocated the cost of high-voltage transmission across all of PJM without any consideration of principles of cost causation.  Yet the case returned with basically the same allocation in place (a region wide post-stamp cost allocation which Posner dubs “FERC-speak”) and no additional satisfactory explanation. So once again - albeit with regret given the age of the case -  Posner sent the FERC order packing, remanding the case once more. 
 
Scorecard - FERC loss, merits
 
Delaware Riverkeeper v. FERC,
Docket No. 13-1015 (D.C. Cir. June 6, 2014)
 
For me, this case was the sleeper shocker of the year. Who would have thought that the D.C. Circuit would reverse a FERC decision on NEPA grounds? Particularly when the court could have availed itself of a procedural escape hatch in the form by finding that completion of the project rendered NEPA arguments moot.  But the court confronted this one head on and reversed. 
 
Tennessee Gas involved a challenge by Delaware Riverkeeper to the third piece of a larger pipeline infrastructure project that Tennessee Gas had sliced and diced into four different segments to downplay the environmental impact of the project as a whole. FERC denied that the project had been segmented, finding that each piece could function as an independent unit and each was supported by independent precedent agreements. The court didn’t bite - and in fact, at oral argument, one of the judges seemed incredulous that FERC hadn’t caught on to what Tennessee Gas was doing even after the third segment was added. Accordingly, based on factors such as the close proximity of the pipeline segments, a shared terminus point and the financial and operational dependence of each segment on the other, the court found that the segments comprised a single unit and should be subject to uniform review. In addition to unlawfully segmenting the project for purposes of environmental review, the court also ruled that FERC failed to consider the cumulative impacts of the other pipeline segments.  
 
Judge Brown joined in the opinion on FERC’s failure to address cumulative impacts. Brown was not persuaded that segmentation was applicable since most of the segmentation cases relate to highways and railways which are different from pipelines. Meanwhile, Judge Silberman publicly reprimanded the petitioner for the crime of over-acronymization in its brief. TMI , but OMG, after reading the reprimand, I was ROFL! OITDCC! (only in the DC Circuit).
 
Scorecard- FERC loss, merits
 
Electric Power Supply Association v. FERC,
Docket No. 11-1486 (May 23, 2014)
Brown and Silberman - majority, Edwards Dissent
Silberman, opinion
 
This case represented a huge loss for FERC - probably one of the worst of the past few years. After all, the ruling overturned a FERC’s rule on compensation for demand response, not just overturning the methodology selected by FERC (payment of full wholesale price for demand response resources) but gutting FERC’s jurisdiction to regulate demand response transactions at all. I covered the ruling extensively here.
 
There are a few updates since May 2014 when the order issued. FERC filed for rehearing en banc which was denied, and the Solicitor General announced its intent to seek cert, which increases the chance of the Supreme Court accepting the ruling. Still, while the results of the FERC decision have caused uncertainty within the industry, there’s really no circuit conflict that would warrant the cert grant. Moreover, there’s a possible fix: Congress could amend the Federal Power Act to expressly authorize FERC to regulate demand response. It remains to be seen what approach the Solicitor General will take to persuade the Supremes to grant cert. 
 
Scorecard - FERC loss, merits
 
TC Ravenswood v. FERC,
Docket No. 12-1434 (May 12, 2014)
Henderson Millett, Randolph - opinion
 
Petitioner, an electric generator filed a complaint against NYISO with FERC, claiming that the tariff failed to adequately compensate Ravenswood. Ravenswood also filed its own proposed rate under Section 205 of the FPA. FERC rejected the rate schedule, finding it duplicative of the complaint. 
 
NYISO and the generator settled the complaint. But Ravenswood still sought rehearing on the legality of FERC’s rejection of its Section 205 filing. The court found that the settlement mooted the generator’s appeal. 
 
Scorecard - FERC win, procedural
 
G. Gordon Gooch v. FERC
Opinion- Garland, Wilkins, Sentelle
 
The petitioner had complained that he overpaid for gasoline as a retail customer because of Colonial Pipeline Company’s allegedly excessive oil rates but was unable to show that the gas that he paid for came from Colonial’s lines. Case dismissed for lack of standing.
 
Scorecard - FERC win, procedural
 
BNP Paribas v. FERC,
Docket No. 12-1242 (February 21, 2014)
 
Tatel, Randolph, Williams - opinion
 
Apparently, the Commission does not fare well with cost allocation cases. <I<BNP Paribas </I> involved a Transco tariff that assessed charges for new gas to BNP Paribas. At a hearing, an ALJ concluded that the new gas purchases were as crucial t meeting the needs of Tranco’s existing customers as Paribas - and found a rate allocating costs only to Paribas unjust and unreasonable. The Commission reversed the ALJ but failed to explain its logic and the court remanded the case for the Commission to do just that.
 
Scorecard - FERC loss, merits
 
New Jersey BPU v. FERC
Case No. 11-4245 (3rd Cir. Feb. 20, 2014)
 
This Third Circuit decision affirming FERC’s approval of PJM’s changes to its minimum offer pricing rule (MOPR) opens with a confession that review of a FERC order is a “relatively unusual task” for the court. Bringing a challenge to a complicated market rules case outside the D.C. Circuit is tends to result in thorough decision since the court is seeing the issues for the first time. At the same time, these cases are more likely to result in a straight up opinion affirming FERC’s order which is precisely what happened here.
 
Scorecard - FERC win, merits
 
North Carolina Utilities Commission v. FERC
Docket No. 12-1881 (4th Cir. Jan 24, 2014)
 
The North Carolina Utilities Commission (“NCUC”) challenges incentives granted by the Federal Energy Regulatory Commission (“FERC”) to Virginia Electric Power Company d/b/a Dominion Virginia Power (“VEPCO”) to encourage investment in transmission infrastructure projects. NCUC argues that FERC violated § 219 of the Federal Power Act (“FPA”) and abused its discretion by granting these incentives in 2008 and by denying its petition for rehearing in 2012. The court, constrained by the narrow standard of review, affirmed.
 
Scorecard - FERC win, merits