2020 FERC APPELLATE ROUNDUP
Though I enjoy my FERC appellate round-ups, this year’s batch of cases were a bit of a slog. With the exception of the D.C. Circuit’s historic en banc ruling eliminating FERC tolling orders in Allegheny, most of the remaining cases involved review of complicated rate proposals or cost allocation schemes which for me are snoozers if only because the ending is generally predictable: FERC wins due to the highly deferential standard in complex cases within the agency’s expertise. And that may explain FERC’s near perfect record this year in ordinary panel appeals (FERC lost en banc in Allegheny). Out of 11 cases (a scant number to begin with), FERC won every time with the exception of losing on a few issues in one case.
As for the low appeal count, it’s difficult to discern the reason. COVID hasn’t seemed to really slow the DC Circuit’s pace so it’s hard to say why the count is low. Perhaps with a new Commission composition in 2021 and expedited rulings now that tolling orders no longer create a backlog, we’ll see more cases at the end of next year.
Narragansett Indian Tribal Historic Pres. Office v. Fed. Energy Regulatory Comm'n, 949 F.3d 8 (D.C. Cir. February 2020)
This case is a cautionary tale of how a party can lose rights while FERC and the courts dither. Here, FERC denied as untimely a Tribe’s motion to intervene in a pipeline proceeding in order to challenge FERC’s violation of the National Historic Preservation Act. The Tribe sought rehearing of the denial and while it was pending at FERC, construction moved ahead and the pipeline destroyed 20 ceremonial features. The Tribe sought review at the D.C. Circuit. The court disposed of the appeal, finding that the Tribe lacked standing because the ceremonial features had already been destroyed, leaving the court without any ability to grant meaningful redress. It’s an awful outcome - though potentially avoidable had the Tribe recast its request for relief. For example, had the pipeline asked FERC to vacate the certificate instead of merely engaging in consultation, the outcome may have been different.
Although FERC has since limited a company’s ability to commence construction while a rehearing request is pending, and Allegheny Def. Project v. Fed. Energy Regulatory Comm'n, 964 F.3d 1 (D.C. Cir. 2020) eliminated use of tolling orders, the Narragansett facts are capable of repetition since a company could still move forward while a court case is pending. To avoid this outcome, those challenging FERC orders should request a stay of construction at every level and seek substantive relief of vacating the certificate as well as cures for procedural infirmities.
Scorecard - Judge Millett Opinion 3-0 (FERC Win) (No argument)
Balt. Gas & Elec. Co. v. Fed. Energy Regulatory Comm'n, 954 F.3d 279 (D.C. Cir. March 27, 2020)
This case arises out of FERC’s effort to apply its "matching" principles to divergences between the timing of deductions for tax purposes and timing for purposes of allocating costs to ratepayers. Thus, it requires utilities to include these costs in their “next” rate filing which for Petitioner BGE was in 2005. BGE failed to do so, so FERC denied recovery of past amounts and found that the circumstances that had justified leniency for other utilities did not apply to BGE. The court affirmed.
Scorecard: Judge Williams Opinion, 3-0 (FERC Win)
Oral Argument Audio
Fed. Energy Regulatory Comm'n v. Powhatan Energy Fund, LLC, 949 F.3d 891 (4th Cir. 2020)
Powhatan Energy Fund, the subject of a FERC enforcement action moved to dismiss the case arguing that FERC’s claims accrued outside the applicable five year statute of limitations on civil penalties under 28 U.S.C. §2462. The Fourth Circuit disagreed, holding that the statute of limitation did not begin to run on FERC’s claims until the Commission had fulfilled each of the Federal Power Act’s prerequisites to filing suit in federal district court under 16 U.S.C. §823b.
Scorecard: Judge Wilkinson Opinion, 3-0 (FERC Win)
Gulf S. Pipeline Co. v. Fed. Energy Regulatory Comm'n, 955 F.3d 1001 (D.C. Cir. April 10, 2020)
Courts frequently defer to FERC approval of rates, because they’re highly complex and technical matters that fall within an agency’s expertise, but also (if you ask me), because ratemaking issues are snoozers so cursory review offers the quickest way through. This decision however, breaks that pattern and vacates in part FERC’s rejection of Gulf South Pipeline’s request for incremental-plus rates for a new project which would charge a higher rate to shippers using the facility. The court found that FERC’s decision violated bedrock principles of cost causation that gave FERC little wiggle-room for departure, and in any event, FERC failed to provide a rational explanation for doing so.
Scorecard: Rao Opinion, 3-0 (Petitioner Win with remand)
Oral Argument Audio
Allegheny Def. Project v. Fed. Energy Regulatory Comm'n, 964 F.3d 1 (D.C. Cir. June 2020)
This is the unprecedented en banc ruling that struck down FERC’s practice of blocking judicial review through issuance of tolling orders. I covered the oral arguments and issues raised in an earlier newsletter.
Scorecard - en banc ruling, Petitioner Win
Oral Argument Audio
Neb. Pub. Power Dist. v. Fed. Energy Regulatory Comm'n, 957 F.3d 932 (8th Cir. April 2020)
Another day, another rate case. Nebraska Public Power challenged Southwest Power Pools Placement of TriState Generation Association into Zone 17 arguing that the benefits received by Nebraska Public Power and other facilities from Tri-State’s transmission are not roughly commensurate with the resulting allocated costs. The decision goes into plenty of detail on the allocation decisions but ultimately, affirmed FERC’s decision.
Scorecard - Smith Opinion 3-0 (FERC Win)
SFPP, L.P. v. Fed. Energy Regulatory Comm'n, C/w 19-1082 (D.C. Cir. July 31, 2020)
This appeal arose out of FERC policy change in 2018, holding that it would no longer allow MasterLimited Partnerships (MLP) to recover an income tax allowance in their cost of service. FERC denied an SFPP tax allowance the same day, saying it would result in a double recovery.SFPP challenged FERC's decisions to deny SFPP an income tax allowance, to decline to reopen the record on that issue, and to deny SFPP's retroactive adjustment to its index rates. The court denied the petitions for review. With respect to SFPP's challenges, the court held that FERC's denial of an income tax allowance to SFPP was both consistent with our precedent and well-reasoned and that FERC did not abuse its discretion or act arbitrarily in declining to reopen the record on that issue. The court further held that FERC reasonably rejected retroactive adjustment to SFPP's index rates. Finally, with respect to Shippers' challenges, the court found that FERC correctly found that the rule against retroactive ratemaking prohibited it from refunding or continuing to exclude from rate base SFPP's ADIT balance, and that FERC reasonably allocated litigation costs.
Scorecard - Per Curiam 3-0 (FERC Win)
Oral Argument Audio
El Paso Nat. Gas Co. v. Fed. Energy Regulatory Comm'n, No. 15-1323 (D.C. Cir. July 24, 2020)
You know that a case starting with the year 2015 in the docket is going to be long, dull and convoluted...and this one didn’t disappoint. Here, El Paso sought review of three FERC determinations regarding the company’s rate proposals under Section 4 of the Natural Gas Act. The company challenged certain cost exclusions from rates, removal of certain items from El Paso’s capital structure, FERC’s conclusion that the rates did not comply with an earlier settlement agreement and FERC’s approval of zone-of-delivery rate design measured by contract path. The court affirmed, finding all of FERC’s rulings reasonable.
Srinivasan, Garland & Wilkins per curiam 3-0 (FERC win)
Oral Argument Audio
NARUC v. Fed. Energy Regulatory Comm'n, 964 F.3d 1177 (D.C. Cir. July 2020)
State regulatory agencies went head to head with FERC, challenging Order 841, FERC’s rule aimed at removing barriers to energy storage participation in wholesale markets. Under Order 841, RTOs and ISOs were required to establish market rules for storage, and states could not prohibit storage resources from participating in wholesale markets. The states argued that FERC’s prohibition on states’ ability to keep storage resources from accessing wholesale markets intruded on state jurisdiction to regulate distribution systems. The DC Circuit rejected the states’ claims, finding that Order 841 does not directly regulate distribution or take from states any of the tools they possessed prior to the order to manage distribution systems. The court also found a reasonable basis for FERC’s refusal to allow states to opt out of wholesale storage markets since the benefits of these markets outweighed any cost to states. Moreover, states still retain authority to prohibit local storage from simultaneously participating in wholesale and retail markets, which would force resources to choose between the two.
Score - Wilkins 3-0 (FERC Win)
Oral Argument Audio
Enable Mississippi Gas v. FERC, Docket No. 18-1252 (August 2020)
Enable Gas and other petitioners asserted a facial challenge to FERC’s statement of its policy regarding income-tax allowances for master limited partnership pipelines. In a companion case, SPPP v. FERC argued the same day, another company challenged FERC’s policy as applied to its individual situation. Therefore, held that “because of our resolution in the as-applied case of the merits arguments proffered by the facial petitioners,” “we dismiss CAPP’s challenge as moot .”
Srinivasan Opinion 3-0 (unpublished) FERC Win
Oral Argument Audio
Pac. Gas & Elec. Co. v. Fed. Energy Regulatory Comm'n, No. 19-71615 (9th Cir. Oct. 7, 2020)
This short decision addresses whether a court should vacate an unreviewed FERC order rendered moot by an intervening case in another court. PG&E had sought review of a FERC order requiring approval of a Chapter 11 debtor’s rejection of a wholesale power contract. After FERCs ruling but before the 9th Circuit’s review, the bankruptcy court confirmed a reorganization plan that required PG&E to assume rather than reject the contracts, thus rendering the appeal moot. The court then granted vacateur of the FERC orders to avoid FERC’s analysi from adversely impacting PG&E or any other utility down the road.
Score: Disposed on on mootness grounds.
