t's Here - FERC Appellate Round-Up 2022

The City of Miami v. Fed. Energy Regulatory Comm'n, 22 F.4th 1039 (D.C. Cir. January 18, 2022)
Oral Argument

This case takes FERC to task for ignoring repeated complaints filed by the City of Miami, Oklahoma against the Grand River Dam Authority (GRDA) for flooding in the City and violating Article 5 of its license by failing to acquire flowage rights (either an easement or other property) necessary for operation of the project. FERC disposed of the City’s complaint by suggesting (without any support) that the Corps, not GRDA, was to blame and accepted GRDA’s denial of responsibility at face value without looking at the evidence.

Returning a case to FERC for summarily ignoring evidence is unusual enough. But this case is also a reminder of why the author, Judge Silberman (who passed away in October) will be so sorely missed: only he could characterize FERC’s conclusion that it lacked jurisdiction to grant relief by compelling GRDA to acquire and bring additional lands into the project boundary as “unlimbering the statutory howitzer” - which wins for the FERC Appellate RoundUp best quip of the year. RIP, Judge Silberman.

Petitioner Win.

Duke Energy Progress, LLC v. Fed. Energy Regulatory Comm'n, 23 F.4th 1008 (D.C. Cir. Jan. 21, 2022)
Oral Argument

In a smackdown over contract interpretation, FERC’s take will prevail under Chevron deference. That’s the moral of this case in which Duke Power claimed that its power purchase agreement prohibited a customer from using battery storage to reduce load, and the customer disagreed. The customer asked FERC to settle the dispute, FERC sided with the customer and Duke appealed. On review, the court noted that the pertinent contract provision was a “model of ambiguity” resulting in “two competing interpretations. Yet the court concluded that “we…defer to the Commission's construction of the provision at issue so long as that construction is reasonable,"

FERC win.

The City of San Francisco v. Fed. Energy Regulatory Comm'n, 24 F.4th 652 (D.C. Cir. January 25, 2022)
Oral Argument

This case began with two complaints filed by City of San Francisco against PGE, one for its refusal to provide secondary voltage distribution service at certain interconnection points and the second, concerning PG&E’s interpretation of grandfathering of certain facilities. FERC dismissed the first complaint (on voltage distribution) finding that PG&E’s refusal was consistent with the terms of its tariff. On review, the court found that FERC’s reading of the tariff was arbitrary and capricious, and also that FERC failed to explain why it found PG&E’s refusal nondiscriminatory. On review of the grandfathering orders, the court found for petitioner, and declined to accord deference to FERC’s reading given the plain language of the tariff. At the end of its decision, the court scolded FERC, calling it out for a “troubling pattern of inattentiveness to potential ani-competitive side effects of PG&E’s administration of its open access tariff.” The court concluded that: “Faced with claims that PG&E was frustrating that competition by treating its own retail service preferentially and refusing service for customers San Francisco had served for decades, the Commission failed to meet its "duty" to ensure that rules or practices affecting wholesale rates are "just and reasonable."

Petitioner win.

NGL Supply Wholesale, LLC v. Fed. Energy Regulatory Comm'n, No. 20-1330 (D.C. Cir. Jan. 25, 2022)
Oral Argument

In a change of pace, this case arises out of FERC’s regulatory authority under the Interstate Commerce Act over propane gas lines. NGL, a shipper and propane supplier filed a complaint alleging that the Philips Pipeline unreasonably denied NGL access to its line and instead favored its affiliate, also a propane supplier. FERC denied the complaint mainly because of findings that it lacked jurisdiction over an interconnection point and exchange agreement between NGL and Phillips which involved an exchange of product and did not implicate pipeline service. Though the court characterized FERC’s explanation as “terse,” it nonetheless passed muster under a deferential standard of review.

FERC win.

Cogentrix Energy Power Mgmt. v. Fed. Energy Regulatory Comm'n, 24 F.4th 677 (D.C. Cir. January 28, 2022)
Oral Argument

Tariff provisions providing for cost recovery must still conform to the filed-rate doctrine and the bar on retroactive ratemaking. That’s the upshot of this appeal, which involved a generator’s challenge to an amendment to the NE-ISO Tariff establishing a new cost recovery mechanism for costs incurred by generation and transmission facilities to comply with newly approved mandatory reliability standards. Petitioners challenged FERC’s finding that the amendment was prospective only, arguing that the new schedule “expressly permits” recovery of previously paid costs to comply with reliability standards. But the court agreed with FERC’s conclusion that the new schedule “expressly permits no such thing.”

FERC Win.

In re NTE Conn, LLC, 26 F.4th 980 (D.C. Cir. February 24, 2022)

This is one of those rare cases in which the D.C. Circuit in a 2-1 ruling granted a stay of a FERC order under the All Writs Act after FERC granted NE-ISO’s request to terminate Petitioner NTE’s capacity service obligation (CSO) which among other things would revoke its eligibility to participate in the upcoming 2022 capacity auction just weeks away. Under its rules, NE-ISO could terminate a plant’s participation in auction if it determined that the plant would not come online in time, which NE-ISO found to be the case for NTE’s Killingly facility. NTE filed for rehearing from FERC, and while rehearing was pending sought mandamus relief from the court. The court granted relief, finding evidence of irreparable harm in the absence of a stay (since the plant would be barred from auctions for three years) and likelihood of success on the merits given strong evidence that the plant would come online in time that FERC did not discuss, citing confidentiality. The court did not give FERC a pass, noting that the Administrative Procedure Act “does not contain a confidentiality loophole” for reasoned decision-making (another great quote!). Judge Wilkins dissented, unpersuaded by NTE’s “self-serving” affidavits that its plant would come online in time.

Petitioner win.

Long Island Power Auth. v. Fed. Energy Regulatory Comm'n, 27 F.4th 705 (D.C. Cir. March 4, 2022)
Oral Argument

This case involves two issues: whether FERC’s approval of a settlement agreement for a hybrid formula that would apply to cost allocation within PMA was reasonable and consistent with cost causation principles and (2) whether FERC erred in finding that one of the petitioners, Linden, was required to make payments under the historic formula in the settlement agreement. One the first issue of cost allocation, the court described the 15-year history of different cost allocation approaches (practitioner’s note: if you need a primer on cost allocation methodology, this case is your hero), the original formulas used, their invalidation by the Seventh Circuit’s ruling in Illinois Commerce Com'n v. FERC, 576 F.3d 470 (7th Cir. 2009) and ultimate settlement agreement to a hybrid which the court determined checked all boxes on cost causation and affirmed. On the second issue, FERC interpreted the historic formula as requiring payment by one of petitioners - an interpretation for which the court found no support in the plain language of the provision. Finding the error fundamental but also sufficiently narrow as not to affect other aspects of the settlement, the court vacated on the cost payment issue and remanded.

Petitioner win.

Food & Water Watch & Berkshire Envtl. Action Team v. Fed. Energy Regulatory Comm'n, 28 F.4th 277 (D.C. Cir. March 11, 2022)
Oral Argument

Finally, a post Sierra Club (Sabal Trail) case that clarifies what’s needed to prevail in a challenge to FERC’s failure to consider impacts of downstream emissions (full disclosure: I was an advisor on this case). Here, the court found that the record resembles Sabal Trail more than Birkhead in that (1) FERC had evidence that the Upgrade Project would add incremental capacity of 72,400 dekatherms per day to Tennessee Gas's system, 40,400 dekatherms per day of which was under contract with Columbia Gas, (2) FERC knew, with a good deal of specificity, where this gas would be going (to Columbia Gas's existing customers in the Greater Springfield area) and how it would be used (to fuel residential and commercial gas connections) and (3) Commissioner Glick articulated precisely that view in his dissenting opinion, arguing that the record made "this a relatively easy case." Rehearing Order ¶ 8 (Glick, Comm'r, dissenting). FERC still found this evidence too generalized but didn’t explain why so the court remanded to FERC to examine downstream impacts. For other issues, such as failure to consider upstream impacts, significance of impacts or whether FERC should have applied social cost of carbon, the court found that the issues hadn’t been properly preserved. And FERC also found that one of the petitioners failed to establish standing based on assertions of harm given the proximity of the project to a Six Flags amusement park that the petitioner never specified how often she visited. Even with issues waived or where standing was lacking, this case is still key in the progeny on forseeability of indirect impacts - and in fact, it’s already been cited 26 times in the nine months since the ruling.

Petitioner Win.

Louisiana Public Service Commission v. FERC, Docket 20-1215 (D.C. Circuit) March 15, 2022
Oral Argument

FERC cases can span decades - like the cost allocation cases arising out of Entergy System Operating Agreement that we’ve covered in numerous past round-ups. That’s why it helps to understand a concept known as “the law of the case” - meaning that the same issue presented the same time in the same case should lead to the same result. The D.C. Circuit recently applied the law of the case concept in affirming the Commission’s treatment of the Louisiana Commission’s failure to seek rehearing of an order limiting the recalculation period for system costs - even though the order wasn’t final - because an earlier case had also established the same timeframe. The lesson for practitioners here is to seek rehearing of all possible issues, even those that haven’t ripened, or you may lose the chance to challenge them down the line.

FERC win.

Cal. Pub. Utils. Comm'n v. Fed. Energy Regulatory Comm'n, 29 F.4th 454 (9th Cir. March 17, 2022)
Oral Argument

Here’s a question for appellate geeks: what standard of review governs when FERC applies state law? Stay tuned because that’s one of the issues at the heart of this case involving review of a transmission incentive adder. This case returned to the court following a remand from a decision concluding that FERC improperly awarded transmission incentives to PG&E without considering Petitioner California Commissioner’s argument that PG&E’s membership in CAISO is mandated. If PG&E had to join and lacked the power to leave, the incentives would be unnecessary. On remand, FERC determined that under California law, utilities could voluntarily withdraw from CAISO and therefore the adder was incentive to stay. Although the court did not defer to FERC because it interpreted California law which is outside its expertise, applying a de novo standard of review, the court affirmed FERC’s conclusion and upheld the incentive adder.

FERC Win.

Holy Cross Elec. Ass'n v. Fed. Energy Regulatory Comm'n, No. 20-1260 (D.C. Cir. Mar. 23, 2022)
Oral Argument

Petitioner Holy Cross Electric Association challenged a FERC declaratory ruling holding that Holy Cross has no right to firm transmission service to deliver energy across an integrated transmission system in Colorado. The court agreed with FERC that the Holy Cross’ contracts made clear that service was clearly interruptible. Petition for review denied.

FERC Win.

Am. Clean Power Ass'n v. Fed. Energy Regulatory Comm'n, No. 20-1499 (D.C. Cir. Mar. 23, 2022)
Oral Argument

This case involves a challenge to a FERC order approving a pro forma facilities services agreement under which transmission owners advance interconnection construction costs but require generators to maintain security for these costs post-construction. Petitioner, the American Clean Power Association made one main argument: that requiring generators to maintain security after construction conflicts with the Commission's precedent. The court disagreed, finding that earlier cases did not apply because they concerned the filed rate doctrine, and addressed only that interconnection security costs could affect rates, and not whether their assessment was permissible to begin with. The court further held that requiring security served a distinct purpose from default provisions of the facilities agreement in that it protects the transmission owner from the risk of non-recovery" from an insolvent generator. Accordingly, the court affirmed Commission’s determination that the service agreement’s requirement of interconnection security costs was just and reasonable.

FERC Win.

American Municipal Power v. FERC, 20-1249 (March 28, 2022)

Some cases stumble without standing (pun intended). This is one of them.

Several developers, energy providers and government entities challenged FERC’s approval of revisions to certain planning provisions within PJM’s open access transmission tariff. They argued that they were aggrieved because the changes would deny them the opportunity to compete for transmission projects and increase rates for consumers. FERC challenged petitioners’ standing, arguing that the harms alleged were overly generalized or attenuated. The court agreed, finding that standing was not self-evident and petitioners had not provided more than bare allegations of harm which were insufficient. Accordingly, the court dismissed the petitions for want of jurisdiction - but unfortunately, not until after the parties went to the considerable expense of briefing on the merits.

I haven’t read all the briefs, so I can’t opine on whether the court got it right (after all, dismissing a petition for want of standing is easier than reaching the merits). But the bottom line is this: appeals are too costly to take the risk. That’s why petitioners should establish standing by declaration when they file the petition for review or initial case papers. Establishing standing by declaration early on gets it out of the way, and avoids having to devote precious word count to standing on brief.

Buckeye Partners, L.P. v. Fed. Energy Regulatory Comm'n, No. 22-60100 (5th Cir. May 13, 2022)

Majority doesn’t necessarily rule when it comes to a decision over whether a court should transfer a case. Here, five petitioners filed for review of a FERC Order on Oil Pipeline Index and a sixth filed at the D.C. Circuit. As a result, the D.C. Circuit transferred the sixth petition to the Fifth Circuit. Yet Intervenors moved to send the case to the D.C. Circuit to maintain continuity and consistency of review. The Fifth Circuit agreed, noting that the D.C. Circuit had reviewed similar pipeline index orders for the past 26 years.

N/A

City of Salisbury v. Fed. Energy Regulatory Comm'n, 36 F.4th 1164 (D.C. Cir. June 10, 2022)
Oral Argument

Interesting question as to whether ordinary deference applies when FERC interprets conditions incorporated into a license by way of a state water quality certificate. Here, North Carolina’s water quality certificate for relicensing of the Yadkin Dam project required the licensee to develop a flood protection plan. The project owner proposed to raise the pump station’s equipment rather than instal a new pump station which the Petitioner, City of Salisbury, preferred. FERC found that the project owner’s plan to raise equipment was cheaper and satisfied the condition. The City sought review. FERC defended its choice at the court and argued that it was entitled to deference. But because the condition requiring flood protection was part of a state water quality certificate, the court reserved on deferring. Instead, the court found that FERC’s interpretation of the condition was the more reasonable, and on that basis, affirmed..

FERC Win.

New Fortress Energy Inc. v. Fed. Energy Regulatory Comm'n, 36 F.4th 1172 (D.C. Cir. June 14, 2022)
Oral Argument

New Fortress Energy, owner of an LNG handling facility in San Juan, Puerto Rico, challenged the Commission’s assertion of Section 3 jurisdiction over the facility which receives and gasifies imported LNG and sends it to an abutting powerplant via a 75-foot pipe. New Fortress was apparently told by staff that FERC would not assert jurisdiction, so it must have been surprised when FERC found otherwise (practice tip: never rely on staff advice because it doesn’t bind the Commission). On appeal, New Fortress argued that the facility was non-jurisdictional because the 75-foot pipe was not the type of pipeline that transports gas in commerce, thereby triggering jurisdiction. But FERC ruled that the size of the pipeline was not dispositive but its purpose which here, helped continue the flow of gas in interstate commerce thus giving rise to jurisdiction. The court found that FERC’s finding of jurisdiction tracked prior precedent and affirmed.

Incidentally, New Fortress isn’t the end of LNG jurisdictional questions. Teed up for next year is Public Citizen’s September 2022 petition for review of a FERC Order finding no jurisdiction over the Noepetro natural gas liquefaction and truck loading facility and proposed transloading operations in Port St. Joe, Florida, which would offload gas by truck, not pipe.

FERC Win.

Belmont Mun. Light Dep't v. Fed. Energy Regulatory Comm'n, 38 F.4th 173 (D.C. Cir. June 17, 2022)
Oral Argument

If you have an interest in rate incentives, that should be incentive enough to read this case. Petitioners, a group of municipal-owned utilities and environmental groups challenged ISO New England’s Inventoried Energy Program (IEP), designed to incent market participants to acquire more inventoried energy than they otherwise would and compensate resources for improving winter energy reliability. Petitioners’ broad claims that the IEP was ineffective in ensuring fuel security fell flat (as do most policy arguments). But they hit pay dirt with their claim that the IEP was unreasonable because it would add $40 million per year in new payments for nuclear, coal, biomass and hydro – even though the incentives would not cause these resources to change their behavior. The court first found that FERC failed to address this argument and in so doing, neglected its duty to provide a reasoned analysis for approving the IEP. And the court also found that FERC’s summary approval of rate incentives without evidence that they would even work diverged from FERC’s “ longstanding policy that rate incentives must be prospective and that there must be a connection between the incentive and the conduct meant to be induced.” The court left the bulk of the IEP intact, but vacated the portion granting incentives for nuclear, coal, biomass and hydro and remanded to FERC for further proceedings.

Petitioner Win.

Turlock Irrigation Dist. v. Fed. Energy Regulatory Comm'n, 36 F.4th 1179 (D.C. Cir. June 17, 2022)
Oral Argument

As discussed in a later summary, Section 401 of the Clean Water Act gives a state a year to grant or deny a water quality certification or the requirement is deemed waived. Here, California denied a 401 certificate without prejudice to Turlock for its hydroelectric project two years in a row since Turlock had not complied with California’s environmental review statute. Turlock applied a third time, then withdrew its application but despite that, California granted the certificates and included 45 compliance conditions. Turlock asked FERC to find that California had waived certification since more than a year had passed since Turlock filed. FERC found that California’s denials constituted action so certification wasn’t waived. The court affirmed.

FERC Win.

Bohon v. Fed. Energy Regulatory Comm'n, 37 F.4th 663 (D.C. Cir. June 21, 2022)
Oral Argument

Over the years, numerous parties have tried (my own clients included), with absolutely zero success, to circumvent FERC review of pipelines under the Natural Gas Act by bringing constitutional, NEPA and religious freedom claims (see Adorers of the Blood of Christ United States Province v. Transcon. Gas Pipe Line Co., No. 21-2898 (3d Cir. Nov. 8, 2022) (discussed in bonus section). This case is no exception. In 2016, a year after FERC issued a certificate for the Mountain Valley Pipeline, the Bohons sued in federal district court asserting that Congress’ delegation of authority to FERC to award certificates that convey eminent domain powers was unconstitutional. The district court dismissed the case, finding that the exclusive review provisions of the Natural Gas Act precluded jurisdiction. On appeal, the Bohons argued that constitutional claims are an exception to exclusive review, but the court disagreed. It reasoned that if the Bohons prevailed, the FERC certificate would need to be vacated which shows that the constitutional claims were anchored in the pipeline proceeding and should have been raised there.

FERC Win.

Sierra Club v. Fed. Energy Regulatory Comm'n, 38 F.4th 220 (D.C. Cir. June 28, 2022)
Oral Argument

Back in 2018, before the Mountain Valley Project (MVP) had cleared all the permits needed for its project, the project sponsors optimistically moved forward with the Southgate Project that would extend the pipeline from its planned terminus point in Virginia to North Carolina. Petitioners, Sierra Club challenged FERC’s certificate for the project, arguing that (1) a 14 percent return on equity was unreasonable given that Southgate was not a greenfield project but an extension and (2) FERC’s environmental review and proposed mitigation fell short under NEPA. On review, the court affirmed FERC’s explanation that 14 percent ROE was justified because Southgate shared the same risks as MVP which was granted the same ROE, and that even though MVP was technically not a new entrant in that it already held a certificate, FERC properly treated Southgate as new because the mainline was still unconstructed and not yet generating revenue. On the environmental impact claims, the court found that FERC adequately identified and discussed mitigation and cumulative impacts which is all NEPA requires.

FERC Win.

City of Oberlin v. Fed. Energy Regulatory Comm'n, 39 F.4th 719 (D.C. Cir. July 8, 2022)
Oral Argument
This case was my own personal heartbreaker (disclosure: I was counsel for the City) in that it essentially rolled back the higher standard of need that the court set out in Oberlin I that FERC must demonstrate for a pipeline that will export gas. Let’s take a step back. In Oberlin I, the court remanded to FERC to explain why it is lawful to credit precedent agreements for export toward a Section 7 finding that an interstate pipeline is required by the public convenience and necessity. The court warned, however, that it was not sufficient to rely on the relaxed public interest standard to justify a Section 7 pipeline that authorizes eminent domain. Finally, the court also noted that FERC could justify the pipeline by showing that it is required by the public convenience and necessity independent of any of its precedent agreements for export. On remand, FERC did everything Oberlin said it could not: it said that a Section 3 finding and export agreements could be used to justify a Section 7 pipeline and that in any event, even removing exports, the pipeline was 41 percent subscribed which was sufficient to support a finding of need.

The City appealed to the court which ruled as if Oberlin I never existed. The court bought FERC’s reliance on Section 3 as a proxy for Section 7, and contended that so long as some part of the pipeline served domestic need, it could be justified even without exports. That said, the court did leave open one possible avenue for challenge, stating that “We need not, and do not, decide whether it is within FERC's Section 7 authority to grant a certificate for a pipeline that crosses state lines but exclusively transports gas ultimately bound for export.” This considerable loophole keeps open the door petitioners to challenge pipelines (such as the one for the defunct Jordan Cove Project) that are approved under Section 7 but are 100 percent subscribed to transport gas for export and serve no interstate transportation function. Also significant, while Judge Sentelle concurred in judgment (i.e., finding that the pipeline could be justified by the interstate gas it transported), he did not join in the majority opinion that FERC appropriately may rely on exports under Section 3 to justify a Section 7 pipeline.

FERC Win.

Peregrine Oil & Gas II, LLC v. Fed. Energy Regulatory Comm'n, No. 21-1106 (D.C. Cir. July 15, 2022)
Oral Argument

This case stands out not so much for its facts, but for the ALJ’s scathing commentary on one of Petitioner’s witnesses in the proceeding below. Let me explain…

A leak in one of Texas Eastern’s pipelines shut it down i 2014 and 2016, forcing Peregrine, a producer that used the line for delivery to stop gas production. After the 2016 shutdown, Texas Gas entered into a Reimbursement Agreement with several producers to compensate Texas Eastern for repair costs. Peregrine was not a party to the agreement and did not pay for repairs but filed a complaint at FERC arguing that Texas Eastern had not acted quickly enough to fix the pipeline, and used shutdowns to force producers to pay for repairs, and also argued that the Reimbursement Agreement should have been filed at FERC because it affected rates. FERC set the case for hearing, and the ALJ found Texas Eastern did not delay in repairing its pipeline.

But here’s the juicy party. The court added some of the ALJ’s commentary in a footnote - such as her finding that the credibility of Peregrine’s expert witness was”significantly undermined by his lack of attention to detail, confusion about simple concepts, and contradictions of his own testimony displayed during cross-examination….while his credibility as a fact witness is similarly undermined by his live testimony, where he admits that he has little firsthand knowledge of the events in 2013, 2014, and 2016. Thus, the ALJ found that she would rely on Mr. Timothy's testimony to the extent he unwittingly corroborates other witnesses.”

Let’s just say that it should come as no surprise that the court found FERC acted reasonably, and rejected the bulk of Peregrine’s arguments as an attempt to relitigate the facts.

FERC Win.

Entergy Ark., LLC v. Fed. Energy Regulatory Comm'n, 40 F.4th 689 (D.C. Cir. July 15, 2022)
Oral Argument

This case involves challenges to the cost allocation method approved by FERC for MISO's share of a MISO-PJM interregional transmission project. The facts are complicated, with three different interregional filings by MISO and changes or refinement to its methodology. Petitioner’s customers located throughout MISO would pay the costs to rebuild an existing line, which the court found sufficient to confer standing. Petitioner argued that FERC erred in rejecting MISOS’s second cost proposal and that the proposal ultimately approved by FERC did not consider regional benefits provided by interregional transmission projects and violated cost causation principles. Applying a deferential standard, the court found that the methodology approved by FERC was reasonable and adequately explained.

FERC win.

Cherokee Cnty. Cogeneration Partners v. Fed. Energy Regulatory Comm'n, 40 F.4th 638 (D.C. Cir. July 15, 2022)
Oral Argument

Incorporating past arguments by reference won’t suffice to preserve them under the court’s “unusually strict preservation requirement” under the Federal Power Act. For that reason, the petitioner found itself out of luck in challenging FERC’s determination that it lacked jurisdiction over Petitioner’s section 205 rate filing seeking compensation for provision of reactive service because as a qualifying facility, Petitioner was exempt from the Federal Power Act. The failure to preserve must have been all the more frustrating because Judge Silberman commented during oral argument that he was impressed by the elegance of Petitioner’s argument.

It’s hard to fault Petitioner’s counsel here because it seemed (at least from oral argument) that they’d laid sufficient seeds on rehearing to preserve the claims. Indeed, FERC didn’t even raise the failure to preserve argument which suggests that FERC believed the claims had been preserved (and preservation gives the agency a chance to rule on an issue in the first instance). But the adequacy of an argument for preservation purposes is highly subjective – I’ve seen arguments addressed with far less preservation than what was presented here – and unfortunately, this time, the Petitioner came up short.

FERC win.

Gulfport Energy Corp. v. Fed. Energy Regulatory Comm'n, 41 F.4th 667 (5th Cir. July 19, 2022)
Oral Argument

For the third time, the Fifth Circuit rebuffed FERC’s efforts to prevent debtors from rejecting rate contracts in bankruptcy without first obtaining FERC approval. Expecting that Gulfport, a gas supplier which contracted with Rover to transport gas, might declare bankruptcy and reject its transportation contracts, Rover sought a declaratory ruling from FERC that the contracts could not be rejected without FERC approval. FERC agreed, finding that it had exclusive jurisdiction over rejection of the contracts and set the matter for hearing. Gulfport sought review, and the court found that the issue was ripe notwithstanding the ongoing FERC proceeding since Gulfport would suffer immediate hardship. On the merits, the court laid down the law for FERC, emphasizing that “FERC cannot prevent rejection. It cannot bind a debtor to continue paying the filed rate after rejection. And it cannot usurp the bankruptcy court’s power to decide the debtor’s rejection motions.”

Petitioner win.

Xcel Energy Servs. v. Fed. Energy Regulatory Comm'n, 41 F.4th 548 (D.C. Cir. July 19, 2022)
Oral Argument

Similar interconnection policies aren’t guaranteed similar approval in dissimilar circumstances. That’s the upshot of this case which affirmed FERC’s rejection of PS Colorado’s fast-track interconnection policy that was largely modeled on a similar interconnection policy developed by the Midwest Independent System Operator (MISO) that FERC had previously blessed. Under PS Colorado’s proposal, the utility would fast track interconnection requests by generators looking to replace an existing powerplant on the same site. Trouble was, PS Colorado owned most of the generators in the territory so its policy would naturally favor its own plants over new entrants. By contrast, because MISO does not own generation, FERC had less concern that it would prefer certain generators over others. The court found reasonable FERC’s explanation for treating PS Colorado’s and MISO’s similar interconnection policies differently and affirmed.

Wabash Valley Power Ass'n v. Fed. Energy Regulatory Comm'n, 45 F.4th 115 (D.C. Cir. August 2, 2022)
Oral Argument

Were the rates set by a contract between a coop, Wabash Valley and its members for a “contractually negotiated rates” or “prescriptions of general applicability?” That distinction matters because if the former is true, the Mobile Sierra presumption of reasonableness applies; if the latter is true, then the presumption goes out the window. Here, FERC found the Mobile Sierra presumption did not apply, after determining that the Wabash Valley’s contract generally applied to all members and not individually negotiated and were unilateral, not bilateral because Wabash Valley could increase rates over objections of dissenting members. Wabash Valley appealed, and the court sided with FERC. The court noted that “we do not read FERC’s decision as resting on a per se rule that the presumption can never apply to form contracts,” but [lack of member bargaining power ad standardized nature of the contract” supports FERC’s conclusion that the contracts impose a unilateral rate and the presumption does not apply.

FERC Win.

Del. Riverkeeper Network v. Fed. Energy Regulatory Comm'n, 45 F.4th 104 (D.C. Cir. August 2, 2022)
Oral Argument

Despite the recent spate of pipeline cancellations, and the Environmental Defense Fund’s blockbuster win vacating FERC’s order approving the Spire Pipeline in Envtl. Defense Fund v. Fed. Energy Regulatory Comm'n, 2 F.4th 953 (D.C. Cir. 2021), most FERC pipeline approvals - particularly smaller ones - are notoriously difficult to upend - with this case being a primary example. Petitioner, Delaware Riverkeeper raised every possible challenge to FERC’s certificate authorizing acquisition of an existing pipeline along with construction of two short lateral lines and a compressor station - from failure to consider indirect upstream and downstream GHG emissions, improper segmentation and alternatives and reliance on precedent agreements to show need - only to fall short.

On the issue of indirect emissions, the court found that unlike in Food & Water Watch & Berkshire Envtl. Action Team v. Fed. Energy Regulatory Comm'n, 28 F.4th 277 (D.C. Cir. 2022). FERC lacked sufficient information on the destination of the gas (despite having tried to get it from the applicants) and so downstream impacts weren’t reasonably foreseeable. On segmentation, the court found that the cancellation of the Penn East project made any failure to consider its impacts harmless error. On the availability of alternative locations for a compressor station that would be plopped down near historic homes, farmlands and wetlands, the court noted that Petitioner’s opposition was “understandable,” but that an environmental assessment only requires consideration of alternatives and does not dictate a particular result. And on precedent agreements, the court found that FERC’s new policy statement (which said FERC would look to other evidence of need along with precedent agreements) did not apply, and that the four precedent agreements between the pipeline and customers offered far stronger evidence of need than the scant single customer contract in Spire.

For those looking for a checklist of issues to apply to future pipeline challenges, this case fits the bill - though it’s also a reminder of just how tough these pipeline cases are to win at the courts.

FERC Win.

DTE Elec. Co. v. Fed. Energy Regulatory Comm'n, No. 20-1493 (D.C. Cir. Aug. 2, 2022)
Oral Argument

This case is a little bit of a procedural gotcha. Petitioners challenged a FERC order approving MISO’s amendment to its tariff subject to the condition that MISO submit a compliance filing to modify the amendment per the FERC order. Petitioners sought rehearing and then a petition for review of the conditional order, but failed to seek rehearing or review of MISO’s compliance filing which FERC accepted without protest. The court dismissed the petition for review finding that petitioners lacked standing as they were not aggrieved by a conditional order subject to a future compliance filing. Meanwhile, petitioners had not sought rehearing of the compliance filing, so they couldn’t seek review of that either. FERC issues plenty of conditional orders that don’t take effect until subsequent events accrue - so it’s unclear why the court chose to single this particular incident out. The moral here - seek rehearing of both conditional orders and the later compliance filings, or you may find yourself out of luck on review.

Ky. Mun. Energy Agency v. Fed. Energy Regulatory Comm'n, 45 F.4th 162 (D.C. Cir. August 5, 2022)
Oral Argument

If pancakes are your fancy, you’ll flip for this case on whether pancaked rate practices that flip flop against the backdrop of a changing utility industry are consistent with the public interest. Not only did the court griddle FERC for its ostrich-like approach in ignoring rate impacts, but it threw the FERC decision out of the frying and into the fire by not just remanding, but vacating the order.

Lest this pancake analogy fall flat, let’s turn back to the beginning. This case started decades ago with FERC’s approval of a merger back in 1998 between two Kenucky utilities. As a condition of the merger, FERC required the new company, Louisville Utilities to join MISO which would protect customers from otherwise having to pay pancaked rates, i.e., redundant fees across different providers’ service areas, which would have resulted. Seven years later, Louisville Utilities sought to exit MISO which FERC allowed on the condition that the company agree to “depancake rates.” In 2018, Louisville Utilities then asked FERC to end its de-pancaking obligations too. FERC granted the request, noting that open access and other changes in the utility industry would guard against anti-competitive impacts even without de-pancaking. Petitioners, a group of customers, challenged FERC’s ruling, arguing that FERC disregarded the significant effect that newly pancaked charges would have on customer rates. On review, the court chided FERC for its “ostrich-like” refusal to consider rate impacts - which the court found “quite consequential” given that all parties agreed that rate increases would happen. The court also vacated FERC’s order allowing the because FERC’ failure to consider a major public interest factor like rate impacts was a “major shortcoming” and it was doubtful that FERC could correct the error given that the material impact on rates was undisputed.

The court then considered (and largely rejected) various other challenges to FERC’s transition mechanism to provide the Commission guidance on remand, should it conclude—after considering the relevant factors—that ending de-pancaking is in the public interest.

Cal. State Water Res. Control Bd. v. Fed. Energy Regulatory Comm'n, 43 F.4th 920 (9th Cir. August 4, 2022)
Oral Argument

Under Section 401 of the Clean Water Act, states must grant or deny a water quality certificate for a hydroelectric project within one year of application or the certification is deemed waived. Sounds simple and straightforward, but the one-year standard could lead to gamesmanship. For example, a state agency, needing more than a year to act, could threaten a denial and promise additional consideration if an applicant would agree to withdraw or resubmit. In 2019, the D.C. CIrcuit put a stop to the withdraw and resubmit dance in Hoopa Valley Tribe v. Fed. Energy Regulatory Comm'n, 913 F.3d 1099 (D.C. Cir. 2019) which held that states’ engagement in a coordinated withdrawal and resubmission scheme constituted a failure or refusal to act under Section 401 and resulted in waiver.
Which finally brings us to this appeal - one of the many that has emerged i the wake of Hoopa Valley. Here, FERC found that the state waived water quality certification for two projects by engaging in four years of a coordinated withdrawal and resubmittal scheme with the applicant. But the court found no evidence that the withdrawal came at the behest of the state, but that instead, the applicants voluntarily decided to withdraw their applications after determining that they needed to furnish additional documents. The court noted that the applicants had an alternative: they could have allowed the state to deny the applications and appealed the denial, rather than withdraw and restart the process. Absent evidence of state involvement or collusion in the withdrawal scheme, the court vacated the FERC orders finding waiver.

Petitioner win.

Midship Pipeline Co. v. Fed. Energy Regulatory Comm'n, 45 F.4th 867 (5th Cir. August 5, 2022)
Oral Argument

I’d classify this case as a one-hit wonder: a clarification of FERC’s lack of authority to order pipelines to compensate landowners for construction damages, wrapped up in a scenario that’s unlikely to ever repeat. (Full disclosure: I represented the intervenor landowner before FERC before the Niskanen Center mercifully took over on interlocutory appeal to the court.)

Briefly, the facts. Following a disagreement between Midship Pipeline and the landowner, FERC set for hearing the issue of the scope of work remaining to restore the landowner’s property and the cost. While the hearing process moved forward, Midship brought an interlocutory challenge to the FERC order, arguing that the Natural Gas Act does not empower FERC to compel a company to pay damages, and as such, FERC lacked authority to determine the cost of restoration.   The Fifth Circuit first found the case ripe for review because mere consideration of cost at the hearing would pose a direct and immediate hardship on Midship even if FERC never ordered Midship to pay. As to the merits, the Fifth Circuit ruled for Midship, holding that consideration of the cost of restoration was ultra vires. That said, the court clarified that the parties could raise cost at the hearing to assist the ALJ in comparing competing restoration proposals.

Petitioner win.

MISO Transmission Owners v. Fed. Energy Regulatory Comm'n, 45 F.4th 248 (D.C. Cir. August 9, 2022)
Oral Argument

In this case, a group of customers filed a complaint against MISO for an excessive return on equity. They asked FERC to reduce that aspect of MISO's rates. FERC did but in the process, it completely overhauled its approach to setting an appropriate Return. Both the customers and transmission owners challenged FERC’s order. The court agreed with the customers that FERC's development of the new Return methodology was arbitrary and capricious, vacated the orders and remanded for further proceedings.   Not much earth-shattering here in terms of precedent, but the case is worth bookmarking for its detailed primer on calculating return on equity.

Petitioner win.

Indep. Power Producers of N.Y. v. Fed. Energy Regulatory Comm'n, No. 21-1166 (D.C. Cir. Aug. 9, 2022)
Oral Argument

As states enact climate legislation, FERC may interpret that legislation differently than the entities governed by it. That’s what happened here.   NYISO used a 17 rather than 20-year amortization period for a hypothetical peaking plant based on assumptions that New York’s Climate Act required consumption of zero-emissions electricity. As a result, a gas-fired peaking plant on which capacity prices were modeled was unlikely to remain in service after 2039. FERC rejected NYISO’s 17-year amortization period, finding that it hinged on overly speculative assumption that fossil fuel plants would cease operation by 2040. The court found that FERC’s analysis of New York’s Climate Act was conclusory and not adequately explained, and remanded for a more detailed explanation.

Petitioner win.

Consol. Edison Co. of N.Y. v. Fed. Energy Regulatory Comm'n, 45 F.4th 265 (D.C. Cir. August 9, 2022)
Oral Argument

When there’s money at stake - in this case, $1.3 billion worth of upgrades - petitions for review will come out of the woodwork. That’s all I can see to explain why this highly technical case drew a whopping 13 petitions for review challenging 20 different FERC orders. Those orders (1) approved PJM’s initial assignment of $1.3 billion in upgrades to the electricity grid to entities sending electricity into New York and reassignment of costs to PSEG when New York entities surrendered their rights to withdraw power from New Jersey and (2) denied complaints by two utilities protesting PJM’s cost allocation. The court affirmed the initial cost allocation, but vacated the Cost Reallocation Order and denial of complaints.

Petitioner win.

LSP Transmission Holdings II, LLC v. Fed. Energy Regulatory Comm'n, 45 F.4th 979 (D.C. Cir. August 19, 2022)
Oral Argument

This case arises out of FERC’s approval of MISO’s regional transmission plan. After two unsuccessful tries, FERC approved MISO’s third regional transmission plan which among other things, would (1) lower the minimum voltage threshold for Market Efficiency Projects from 345 kV to 230kV which in MISO’s view would expand the universe of projects open to competition bidding and (2) include a category for certain reliability projects that would be exempt from competition. Petitioners challenged these changes, arguing that the first change on voltage thresholds deviated from past FERC policy and the second change would be abused. Petitioners also separately filed a complaint on some of these issues.

Before reaching the merits, the court addressed jurisdictional issues and found LS Power had standing because it was a transmission developer ready, willing and able to perform the work being challenged and harmed LS Power by preventing it from competing for projects. But on the merits, the court found FERC’s decision was reasonable and affirmed. Judge Rogers concurred, noting that Petitioners’ supplemental briefs on standing were necessary to ensure the court’s jurisdiction.

FERC Win.

Coal. of MISO Transmission Customers v. Fed. Energy Regulatory Comm'n, 45 F.4th 1004 (D.C. Cir. 2022)
Oral Argument

Petitioners argue that new evidence acquired over the intervening years shows that MISO's cost-allocation method for Baseline Reliability Projects is unjust and unreasonable and impermissibly favors incumbent transmission owners over would-be competitors. The Commission contends that Petitioners lack standing to challenge its orders and, in any event, Petitioners’ new evidence fails to undermine the Commission's previous conclusions. The court held that LS Power has standing to challenge the Commission's decision because it has shown that it is "ready, willing and able" to compete for Baseline Reliability Projects if allowed, yet the existing cost-allocation regime categorically deprives LS Power of the opportunity to do so. On the merits, though, the court agreed with the Commission that Petitioners’ new evidence—which was limited to a few Baseline Reliability Projects—did not demand a categorical finding that location-based cost allocation is unjust and unreasonable for all Baseline Reliability Projects.

FERC Win.

Constellation Mystic Power, LLC v. Fed. Energy Regulatory Comm'n, 45 F.4th 1028 (D.C. Cir. August 23, 2022).
Oral Argument

What a mess two years can make. This behemoth of an appeal arises out of a cost of service agreement known as the Mystic Agreement between New England ISO and Mystic Generating Station that would retain two of the station units in operation for two additional years past the date of intended retirement to minimize stress to the region’s electrical system. FERC approved the Mystic Agreement and both Mystic and various state and local entities petitioned for review. The court denied Mystic’s challenges which related to FERC’s application of the original cost test in determining rate base, selection of capital structure and inclusion and exclusion of certain costs from rate base and fuel supply charges. But the court granted the state petitioners’ challenges, finding that FERC’s approval of the agreement’s cost allocation methodology violated principles of cost-causation and unreasonably ignored arguments raised by the state committee seeking a request for clarification about revenue credits. There’s nothing particularly earth-shattering about this massive opinion, but it’s a good primer on the basics of cost of service ratemaking for newer attorneys who rarely see those kinds of cases anymore.

Petitioner win.

United Power, Inc. v. Fed. Energy Regulatory Comm'n, No. 20-1256 (D.C. Cir. Sep. 16, 2022)
Oral Argument

This case arises out of the series of events following Tri-State, a transmission co-op’s admission of Mieco, a FERC jurisdictional entity. Mieco’s admission, over the objection of Petitioner United Power resulted in TriState’s loss of its 60+ year exemption from FERC jurisdiction and prompted United Power to give notice of intent to exit. United Power challenged FERC’s assertion of jurisdiction over TriState, arguing that it was premature given unresolved questions under state law as to whether Mieco could join Tri-State. United Power also argued that the state and not FERC had jurisdiction to review the proposed exit charges for its departure.

The court found that United Power failed to assert on rehearing that FERC exceeded its authority in asserting jurisdiction over Tri-State and therefore, forfeited the argument. But the court determined that United Power properly preserved the claim that FERC’s assertion of jurisdiction before the resolution of outstanding state issues was premature. That said, the court found that FERC has broad discretion over when to decide a case, and found that FERC’s decision to assert jurisdiction while the state claims were pending would provide clarity to parties and thus was a prudent application of its declaratory judgment powers. The court also agreed with FERC’s finding of exclusive jurisdiction over the exit charges. Although the court observed that exit fees are not rates for jurisdictional interstate service, the court found persuasive FERC’s explanation that because an exit charge protects coop members from rate increases caused by the exit of a member and it is appropriately characterized as a rate “in connection with wholesale service” and as such, is within FERC’s exclusive jurisdiction.

FERC Win.

BP Am. v. Fed. Energy Regulatory Comm'n, No. 16-60604 (5th Cir. Oct. 20, 2022)
Oral Argument

This case involves a challenge to a $20 million dollar penalty by FERC against BP for engaging in manipulation of natural gas markets in the wake of chaos following 2008 Hurricane Ike. And almost fifteen years later, the matter still isn’t resolved! Although the Fifth CIrcuit affirmed much of FERC’s order, it found that FERC lacked jurisdiction over some transactions that were the basis for the penalty, specifically, intrastate gas transactions that affect the price of a jurisdictional transaction under the NGA. “The NGA clearly forbids FERC from exercising jurisdiction over intrastate transactions,” asserted the court. Because FERC predicated its overall $20 million penalty assessment on its erroneous jurisdictional position, the court remanded for re-assesment of the penalty given its jurisdictional holding. Having beaten penalties on jurisdictional grounds myself (see Bluestone Energy Design, Inc. v. FERC 74 F.3d 1288 (D.C. Cir. 1996)) I agree that it’s important to establish limits on the scope of FERC’s authority. That said, 15 years of litigation over a penalty with more to come probably cost BP more than paying the $20 million fine.

Petitioner Win

Cal. ex rel. Bonta v. State, No. 16-70680 (9th Cir. Nov. 10, 2022)
Oral Argument

When it comes to remands, the third time’s the charm. Either that, or the appeals court simply runs out of steam.   This case represents the third chapter in the two-decade long saga of California energy crisis cases. To refresh, in the wake of the California energy crisis, the Ninth Circuit didn’t mince words in finding that FERC had abdicated its regulatory oversight in approving market based rates that were unjust and unreasonable. The court remanded to FERC to determine, among other things, whether sellers’ violations of FERC reporting requirements masked evidence of market manipulation. FERC ignored the court’s instructions, so the Ninth Circuit sent the case back a second time in California ex. rel. Harris v. Fed. Energy Regulatory Comm'n, 784 F.3d 1267 (9th Cir. 2015).   Petitioners challenged the outcome of the remand but this time, the Ninth Circuit affirmed in a short decision. The court found that FERC appropriately investigated the connection between reporting deficiencies and rates as instructed, and therefore, complied with the mandate in Harris.

Cal. ex rel. Bonta v. Fed. Energy Regulatory Comm'n, No. 16-70068 (9th Cir. Nov. 10, 2022).
Oral Argument

Petitioners sought review of FERC’s determination that Mobile Sierra presumption of just and reasonableness blocked challenges to TransCanada’s spot market contract. Although the ALJ had applied an incorrect definition of fraud, FERC corrected the error on rehearing and concluded, based on substantial evidence, that the challengers failed to show bad faith or make a prima facie showing sufficient to overcome Mobile Sierra. Overall, a short court order on the heels of a long proceeding.

Am. Clean Power Ass'n v. Fed. Energy Regulatory Comm'n, No. 20-1453 (D.C. Cir. Dec. 2, 2022)
Oral Argument

This case involves another review of a remand, this time pitting generators against transmission owners in MISO. Back in 2018, the court ruled in Ameran Services v. FERC that FERC ignored enterprise risk concerns for transmission owners in developing a policy on funding upgrades. On remand, FERC decided that all transmission owners should have unilateral authority to fund upgrades, a practice that would lead to undue discrimination argued the generators. The American Clean Power Group challenged FERC’s order, arguing that FERC hadn’t developed a record on enterprise risk as required by Ameren and that its unilateral funding program was arbitrary and capricious. The court found that FERC developed a record as required but failed to adequately explain why it decided to grant unilateral funding power to all transmission owners to solve the problem of disparate treatment while ignoring the potential for undue discrimination by transmisssion owners in favor of affiliated generators. Thus the court remanded for additional explanation.

Judge Rao dissented. She found FERC’s explanation adequate. More interesting however was Judge Rao’s take on remand: she noted in passing that the majority’s remand without vacatur is a “toothless remedy” that rarely provokes any action from the agencies and leaves courts in the posture of merely prodding an agency to provide a few more words.

Petitioner win.

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