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In the United States Court of Appeals for the Sixth Circuit
No. 19-4225 __________
LOUISVILLE GAS & ELECTRIC COMPANY; KENTUCKY UTILITIES COMPANY,
Petitioners, v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent. __________
ON PETITION FOR REVIEW OF ORDERS OF THE FEDERAL ENERGY REGULATORY COMMISSION
__________
BRIEF FOR RESPONDENT FEDERAL ENERGY REGULATORY COMMISSION
__________
David L. Morenoff Acting General Counsel Robert H. Solomon Solicitor Carol J. Banta Senior Attorney For Respondent Federal Energy Regulatory Commission
Washington, DC 20426 June 2, 2020 (202) 502-6433
TABLE OF CONTENTS
PAGE
STATEMENT REGARDING ORAL ARGUMENT .................................. 1 STATEMENT OF THE ISSUE ................................................................. 2 STATUTORY PROVISIONS ..................................................................... 4 STATEMENT OF THE CASE .................................................................. 4 I. STATUTORY AND REGULATORY BACKGROUND .................... 4
A. The Federal Power Act ............................................................ 4
B. Regional Transmission Organizations ................................... 5 II. THE DE-PANCAKING PROVISIONS IN LOUISVILLE’S
TARIFF ............................................................................................. 9
A. The Merger Order (1998) ...................................................... 10
B. The Withdrawal Order (2006) .............................................. 12
C. The De-Pancaking Tariff Provisions ..................................... 15 III. THE COMMISSION PROCEEDINGS AND ORDERS NOW
ON REVIEW................................................................................... 18
A. Background: Owensboro’s Transmission Arrangements And Complaint For De-pancaking Reimbursement ............. 18
B. Complaint Order ................................................................... 20
C. Rehearing Order.................................................................... 22
ii
TABLE OF CONTENTS
PAGE
D. Related Proceeding: Louisville’s Filing to Remove the Rate De-Pancaking Provisions.............................................. 22
SUMMARY OF ARGUMENT ................................................................. 24 ARGUMENT ........................................................................................... 26 I. STANDARD OF REVIEW ............................................................. 26
II. THE COMMISSION REASONABLY INTERPRETED THE
TARIFF, BASED ON THE TEXT AND CONTEXT OF THE DE-PANCAKING PROVISION, CONCLUSIVE FACTUAL FINDINGS, AND AGENCY EXPERTISE ..................................... 28
A. The Commission Appropriately Considered The Purpose
And Context Of The Rate De-Pancaking Provision, Which Arose From And Referenced The Commission’s Orders ...... 28
B. The Commission Relied Both On Conclusive Factual
Findings And On Technical Expertise In Interpreting The Tariff............................................................................... 34
C. The Commission Appropriately Rejected Louisville’s
Interpretation ........................................................................ 41 III. LOUISVILLE’S REMAINING ARGUMENTS, TO THE
EXTENT THEY ARE PROPERLY RAISED ON APPEAL, ARE MERITLESS .......................................................................... 47
A. Subsidization ......................................................................... 48
B. Corresponding Services ......................................................... 50
CONCLUSION ........................................................................................ 54
iii
TABLE OF AUTHORITIES
COURT CASES: PAGE Aburto-Rocha v. Mukasey, 535 F.3d 500 (6th Cir. 2008) .................................................... 27, 34 Allegheny Power v. FERC, 437 F.3d 1215 (D.C. Cir. 2006)....................................................... 48 Burlington Truck Lines, Inc. v. United States, 371 U.S. 156 (1962) ........................................................................ 26 Cincinnati Gas & Electric Co. v. FERC, 724 F.2d 550 (6th Cir. 1984) ........................................ 27, 35, 40, 47 Columbia Gas Transmission Corp. v. FPC, 530 F.2d 1056 (D.C. Cir. 1976)....................................................... 40 Complex Consolidated Edison Co. v. FERC, 165 F.3d 992 (D.C. Cir. 1999)......................................................... 44 Connecticut Department of Public Utility Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009)........................................................... 7 Consolidated Gas Transmission Corp. v. FERC, 771 F.2d 1536 (D.C. Cir. 1985)................................................. 29, 45 Consolo v. Federal Maritime Commission, 383 U.S. 607 (1966) ........................................................................ 28 DTE Energy Co. v. FERC, 394 F.3d 954 (D.C. Cir. 2005)......................................................... 47 FERC v. Electric Power Supply Association, 136 S. Ct. 760 (2016) ............................................................ 7, 26, 53
iv
TABLE OF AUTHORITIES
COURT CASES (continued): PAGE Illinois Commerce Commission v. FERC, 721 F.3d 764 (7th Cir. 2013) ............................................................ 9 Indiana Utility Regulatory Commission v. FERC, 668 F.3d 735 (D.C. Cir. 2012)......................................................... 48 Karimijanaki v. Holder, 579 F.3d 710 (6th Cir. 2009) .......................................................... 28 Kentucky Utilities Co. v. U.S. FERC, 766 F.2d 239 (6th Cir. 1985) .......................................................... 28 Louisiana Public Service Commission v. FERC, 761 F.3d 540 (5th Cir. 2014) .......................................................... 40 Midwest ISO Transmission Owners v. FERC, 819 F.3d 329 (7th Cir. 2016) ............................................................ 9 Midwest ISO Transmission Owners v. FERC, 860 F.3d 837 (6th Cir. 2017) .......................................... 9, 27, 35, 46 Morgan Stanley Capital Group Inc. v. Public Utility District No. 1, 554 U.S. 527 (2008) .................................................................... 6, 26 Motor Vehicle Manufacturers Association of the United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) .......................................................................... 26 Municipal Resale Service Customers v. FERC, 43 F.3d 1046 (6th Cir. 1995) .......................................................... 47 National Fuel Gas Supply Corp. v. FERC, 899 F.2d 1244 (D.C. Cir. 1990)....................................................... 40
v
TABLE OF AUTHORITIES
COURT CASES (continued): PAGE NLRB v. Kentucky May Coal Co., 89 F.3d 1235 (6th Cir. 1996) .......................................................... 28 New York v. FERC, 535 U.S. 1 (2002) .......................................................... 4, 5, 6, 38, 39 NRG Power Marketing, LLC v. FERC, 718 F.3d 947 (D.C. Cir. 2013)................................................... 27, 34 NRG Power Marketing, LLC v. Maine Public Utilities Commission, 558 U.S. 165 (2010) .......................................................................... 6 NSTAR Electric & Gas Corp. v. FERC, 481 F.3d 794 (D.C. Cir. 2007)......................................................... 27 Permian Basin Area Rate Cases, 390 U.S. 747 (1968) ........................................................................ 26 R.P. Carbone Construction Co. v. Occupational Safety & Health
Review Commission, 166 F.3d 815 (6th Cir. 1998) .......................................................... 28 Southwest Power Pool, Inc. v. FERC, 736 F.3d 994 (D.C. Cir. 2013)........................................................... 9 Thornton v. Graphic Communications Conference of the International Brotherhood of Teamsters Supplemental
Retirement & Disability Fund, 566 F.3d 597 (6th Cir. 2013) .......................................................... 27 Transmission Access Policy Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000)..................................................... 6, 39
vi
TABLE OF AUTHORITIES
COURT CASES (continued): PAGE United States v. Western Pacific Railroad Co., 352 U.S. 59 (1956) .......................................................................... 29 Universal Camera Corp. v. NLRB, 340 U.S. 474 (1951) ........................................................................ 28 Wabash Valley Power Association v. FERC, 268 F.3d 1105 (D.C. Cir. 2001)................................................... 8, 11 ADMINISTRATIVE CASES: E.ON U.S. LLC, [Withdrawal Compliance Order] 116 FERC ¶ 61,019 (2006) ............................... 14, 15, 17, 29, 30, 33 E.ON U.S. LLC, [Withdrawal Rehearing Order] 116 FERC ¶ 61,020 (2006) ............................................................. 12 Louisville Gas & Electric Co., [Merger Order] 82 FERC ¶ 61,308 (1998) .................................. 10-11, 17, 28, 30, 33 Louisville Gas & Electric Co., [Withdrawal Order] 114 FERC ¶ 61,282 (2006), on reh’g, E.ON U.S. LLC, 116 FERC ¶ 61,020 (2006) ................................. 12-17, 28-31, 33, 34 Louisville Gas & Electric Co., 166 FERC ¶ 61,206, reh’g denied, 168 FERC ¶ 61,152 (2019) ....................................................... 23, 50
vii
TABLE OF AUTHORITIES
ADMINISTRATIVE CASES (continued): PAGE Owensboro Municipal Utilities v. Louisville Gas & Electric Co., [Complaint Order] 166 FERC ¶ 61,131, on reh’g, 169 FERC ¶ 61,030 (2019) ....................... 3, 18-21, 23, 30-32, 34-37,
41, 44, 48, 49, 51-53 Owensboro Municipal Utilities v. Louisville Gas & Electric Co., [Rehearing Order] 169 FERC ¶ 61,030 (2019) ............................ 3, 22, 30, 37, 43-46, 52 PJM Interconnection, L.L.C., 104 FERC ¶ 61,105 (2003) ............................................................... 8 Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, FERC Stats. & Regs., Regs. Preambles ¶ 31,036 (1996), clarified,
76 FERC ¶ 61,009 and 76 FERC ¶ 61,347 (1997), on reh’g, Order No. 888-A, FERC Stats. & Regs., Regs. Preambles ¶ 31,048, on reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998) ................ 6-7, 19, 38-39 Xcel Energy Services Inc. v. American Transmission Co., 140 FERC ¶ 61,058 (2012) ............................................................. 46
viii
TABLE OF AUTHORITIES
STATUTES: PAGE Federal Power Act Section 201, 16 U.S.C. § 824 ............................................................ 4 Section 203, 16 U.S.C. § 824b .............................................. 4, 10, 22 Section 205, 16 U.S.C. § 824d .................................................. 10, 22 Section 205(a), (b), (e), 16 U.S.C. § 824d(a), (b), (e) ......................... 5 Section 206, 16 U.S.C. § 824e .......................................................... 5 Section 306, 16 U.S.C. § 825e .................................................... 5, 20 Section 313(b), 16 U.S.C. § 825l(b) ........................ 27, 34, 38, 47, 48
ix
GLOSSARY
Appx. Appendix page Commission or FERC Respondent Federal Energy Regulatory
Commission Complaint Order Order Granting Complaint in Part,
Owensboro Mun. Utils. v. Louisville Gas & Elec. Co., 166 FERC ¶ 61,131 (Feb. 21, 2019), R. 9, Appx. 359
De-pancaking “Merger Mitigation De-pancaking (MMD),”
as defined in Schedule 402, at Appx. 34 FPA Federal Power Act Louisville Petitioners Louisville Gas & Electric
Company and Kentucky Utilities Merger Order Louisville Gas & Elec. Co., 82 FERC
¶ 61,308 (1998) Midwest Operator Midcontinent Independent System
Operator, Inc. (formerly, the Midwest Independent Transmission System Operator, Inc.)
Open Access Rehearing Promoting Wholesale Competition Through
Open Access Non-discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888-A, FERC Stats. & Regs., Regs. Preambles ¶ 31,048 (1997)
x
GLOSSARY
Open Access Rulemaking Promoting Wholesale Competition Through
Open Access Non-discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs., Regs. Preambles ¶ 31,036 (1996)
Owensboro Intervenor Owensboro Municipal Utilities P Paragraph number within a FERC order R. Record item in the Certified Index of Record Rehearing Order Order Denying Rehearing, Owensboro Mun.
Utils. v. Louisville Gas & Elec. Co., 169 FERC ¶ 61,030 (Oct. 17, 2019), R. 14, Appx. 403
Schedule 402 First Revised Rate Schedule FERC No. 402
in Louisville’s open access transmission tariff, at Appx. 34
Withdrawal Compliance E.ON U.S. LLC, 116 FERC ¶ 61,019 (2006) Order Withdrawal Order Louisville Gas & Elec. Co., 114 FERC
¶ 61,282 (2006) Withdrawal Rehearing E.ON U.S. LLC, 116 FERC ¶ 61,020 (2006) Order
In the United States Court of Appeals
for the Sixth Circuit
No. 19-4225 _______________
LOUISVILLE GAS & ELECTRIC COMPANY; KENTUCKY UTILITIES COMPANY,
Petitioners,
v.
FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
_______________
ON PETITION FOR REVIEW OF ORDERS OF THE FEDERAL ENERGY REGULATORY COMMISSION
_______________
BRIEF FOR RESPONDENT FEDERAL ENERGY REGULATORY COMMISSION
_______________
STATEMENT REGARDING ORAL ARGUMENT
In accordance with Sixth Circuit Rule 28(b)(1)(B) and Federal
Rule of Appellate Procedure 34(a)(1), Respondent Federal Energy
Regulatory Commission (“Commission” or “FERC”) submits that oral
argument would assist the Court’s resolution of this case. The issues in
this appeal concern the interpretation of a mitigation mechanism that
the Commission had required to shield transmission customers from
2
paying multiple charges for service between interconnected systems.
Oral argument will enable counsel to answer any questions the Court
may have regarding not only the particular issues presented in the
orders on review but also the broader context of electricity markets,
transmission systems, and related Commission proceedings.
STATEMENT OF THE ISSUE
This case concerns the interpretation of a tariff provision that
implemented a requirement established in previous Commission orders.
Here, the Commission found that Petitioners Louisville Gas & Electric
Company and Kentucky Utilities Company (together, “Louisville”)
violated the FERC-jurisdictional transmission tariff by failing to
reimburse Intervenor Owensboro Municipal Utilities (“Owensboro”) for
certain transmission charges. In previous orders that approved
Louisville’s 1998 merger and its 2006 withdrawal from a regional
transmission organization (the Midwest Independent Transmission
System Operator, Inc. (“Midwest Operator”)), the Commission required
Louisville to shield certain customers, including Owensboro, from
paying multiple charges for transmission service across interconnected
3
systems (called rate pancaking). The Commission approved a
“de-pancaking” tariff provision to implement that requirement.
In the orders challenged here, the Commission determined that
the “de-pancaking” mechanism required Louisville to reimburse
Owensboro for a transmission reservation on the Midwest Operator’s
system that Owensboro used to serve retail customers. See Owensboro
Mun. Utils. v. Louisville Gas & Elec. Co., et al., 166 FERC ¶ 61,131
(Feb. 21, 2019), R. 9, Appx. 359 (“Complaint Order”); Order Denying
Rehearing, Owensboro Mun. Utils. v. Louisville Gas & Elec. Co., et al.,
169 FERC ¶ 61,030 (Oct. 17, 2019), R. 14, Appx. 403 (“Rehearing
Order”). The question presented on appeal is:
Whether the Commission reasonably determined — based on its
previous orders, on its technical expertise, and on substantial evidence
in the record — that Owensboro was entitled to reimbursement of
certain transmission costs under the rate “de-pancaking” provision that
the Commission had previously required Louisville to include in its
tariff, to protect transmission customers such as Owensboro against
multiple charges arising after Louisville’s merger and subsequent
departure from the Midwest Operator.
4
STATUTORY PROVISIONS
Pertinent statutory provisions are contained in the attached
Addendum. (Relevant tariff provisions are attached at the back of the
Brief.)
STATEMENT OF THE CASE
I. STATUTORY AND REGULATORY BACKGROUND
A. The Federal Power Act
Section 201 of the Federal Power Act (“FPA”), 16 U.S.C. § 824,
gives the Commission jurisdiction over the rates, terms, and conditions
of service for the transmission and wholesale sale of electric energy in
interstate commerce. This grant of jurisdiction is comprehensive and
exclusive. See generally New York v. FERC, 535 U.S. 1 (2002)
(discussing statutory framework and FERC jurisdiction). Mergers and
other dispositions of FERC-regulated facilities require Commission
authorization, based on a finding that the disposition is consistent with
the public interest, and upon such terms and conditions as the
Commission finds necessary or appropriate. FPA § 203, 16 U.S.C.
§ 824b. All rates for or in connection with jurisdictional sales and
transmission services are subject to FERC review to assure they are
just and reasonable, and not unduly discriminatory or preferential; the
5
Commission also may, on its own initiative or on a third-party
complaint, investigate whether existing rates are lawful. FPA § 205(a),
(b), (e), 16 U.S.C. § 824d(a), (b), (e); FPA § 206, 16 U.S.C. § 824e. In
addition, a party “complaining of anything done or omitted to be done
by any . . . public utility in contravention of the provisions of” the
Federal Power Act may bring a complaint before the Commission. FPA
§ 306, 16 U.S.C. § 825e.
B. Regional Transmission Organizations
Since the 1970s, a combination of technological advances and
policy reforms has given rise to market competition among electric
power suppliers. The expansion of vast regional grids and the
possibility of long-distance transmission have enabled electric utilities
to make large transfers of electricity in response to market conditions,
creating opportunities for competition among suppliers. See New York,
535 U.S. at 7-8 (explaining evolution of competitive markets). In 1996,
the Commission furthered the development of such competition with a
landmark rulemaking that ordered functional unbundling of wholesale
generation and transmission services, requiring utilities to provide
6
open, non-discriminatory access to their transmission facilities to
competing suppliers.1 See New York, 535 U.S. at 11-13.
The Commission’s efforts to foster wholesale electricity
competition over broader geographic areas in recent decades have led to
the creation of independent system operators and regional transmission
organizations. See Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist.
No. 1, 554 U.S. 527, 536-37 (2008). These independent regional entities
operate the transmission grid on behalf of transmission-owning member
utilities and are required to maintain system reliability. See NRG
Power Mktg., LLC v. Me. Pub. Utils. Comm’n, 558 U.S. 165, 169 & n.1
(2010) (explaining responsibilities of regional system operators); Open
Access Rulemaking at p. 31,731 (“Reliability and security of the
transmission system are critical functions for a system operator. . . .
1 Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, FERC Stats. & Regs., Regs. Preambles ¶ 31,036 (1996) (“Open Access Rulemaking”), clarified, 76 FERC ¶ 61,009 and 76 FERC ¶ 61,347 (1997), order on reh’g, Order No. 888-A, FERC Stats. & Regs., Regs. Preambles ¶ 31,048 (“Open Access Rehearing”), order on reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part, Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002).
7
[The operator] should be responsible for ensuring that services (for all
users, including new users) can be provided reliably, and for developing
and implementing policies related to curtailment to ensure the on-going
reliability and security of the system.”).
Ensuring reliability — simply put, keeping the lights on by
providing adequate transmission capacity and supplies of electricity to
meet demand — is a top responsibility of any electric utility, and of the
Commission itself. See, e.g., FERC v. Elec. Power Supply Ass’n, 136 S.
Ct. 760, 764 (2016) (recognizing FERC’s “statutory duties of holding
down prices and enhancing reliability in the wholesale energy market”);
Conn. Dep’t of Pub. Util. Control v. FERC, 569 F.3d 477, 479 (D.C. Cir.
2009) (“The goal is for [local utilities serving retail consumers] to
purchase sufficient capacity to easily meet expected peaks in electricity
demand on their transmission systems.”); Open Access Rulemaking at
p. 31,688 n.284 (“We emphasize that any transmission customer must
follow prudent utility practices so as to assure reliability.”). See
generally https://omu.org/about-us/ (“Owensboro Municipal Utilities’
mission is to serve our community by providing reliable and quality
utility services at the most economical cost.”); https://lge-ku.com/our-
8
company/vision-mission (“[Louisville’s] Mission: To provide reliable,
safe energy at a reasonable cost to our customers and best-in-sector
returns to our shareowners”).
The Commission determined “that one of the main benefits offered
by [regional transmission organizations] would be ‘increased efficiency
through regional transmission pricing and the elimination of rate
pancaking.’” Wabash Valley Power Ass’n v. FERC, 268 F.3d 1105, 1116
(D.C. Cir. 2001) (citation omitted). “Rate pancaking” refers to multiple
charges that a transmission customer might incur for a single
transmission: “Pancaked rates arise when a transmission travels over
the transmission systems of more than one system that each charge
separate fees, much like the total tolls paid when driving on a route
that includes both the Pennsylvania and New Jersey turnpikes.” Id.
Eliminating rate pancaking within regions “is a central goal of the
Commission’s [regional transmission organization] policy because rate
pancaking restricts the amount of generation that can be economically
delivered to any customer, thereby frustrating the realization of
competitive and efficient bulk power markets.” PJM Interconnection,
L.L.C., 104 FERC ¶ 61,105 at P 29 (2003).
9
As relevant to this case, the Midwest Operator is a regional
transmission organization comprising electric utilities in fifteen states
and one Canadian province. See MISO Transmission Owners v. FERC,
860 F.3d 837, 839 (6th Cir. 2017); see also Sw. Power Pool, Inc. v. FERC,
736 F.3d 994, 995 (D.C. Cir. 2013) (noting that, in 2013, the Midwest
Independent Transmission System Operator was renamed
Midcontinent Independent System Operator, Inc.); MISO Transmission
Owners v. FERC, 819 F.3d 329, 331 (7th Cir. 2016) (describing Midwest
Operator’s region); Ill. Commerce Comm’n v. FERC, 721 F.3d 764, 770,
777 (7th Cir. 2013) (maps of Midwest Operator’s region).
II. THE DE-PANCAKING PROVISIONS IN LOUISVILLE’S TARIFF
The de-pancaking tariff provision central to this case was
developed to avoid multiple charges for a single transmission service
and reduce market power concerns. Its origins lie in Louisville’s
creation following a utility merger more than two decades ago; it was
reinforced following Louisville’s later withdrawal from the Midwest
Operator. Indeed, the tariff provision itself repeatedly references three
Commission orders issued in those earlier proceedings and
requirements that the Commission imposed in those orders. See infra
10
pp. 15-17. For that reason, interpreting that portion of the tariff
requires a review of its history.
A. The Merger Order (1998)
In 1997, Louisville Gas and Electric Company and Kentucky
Utilities Company requested Commission approval, under section 203
of the Federal Power Act, 16 U.S.C. § 824b, of their proposed merger;
they also sought approval, under FPA section 205, id. § 824d, of an open
access transmission tariff for their newly-combined system. See
Louisville Gas & Elec. Co., 82 FERC ¶ 61,308 at p. 62,214 (1998)
(“Merger Order”). The Commission granted both approvals, subject to
various conditions. As relevant here, the Commission determined that
the merging companies — now Louisville — must adopt various
mitigation measures to protect customers in Kentucky Utilities’
destination markets from potential competitive concerns, including rate
pancaking. See id. at pp. 62,222-23.
To that end, the Commission found that Louisville’s participation
in the Midwest Operator, together with other commitments, “satisfies
our concerns regarding the merger’s impact on competition.” Id. at
p. 62,223; see also id. at p. 62,219 (“[W]e find that the Merger
11
Applicants’ proposed mitigation measures and ratepayer protection
mechanisms, in conjunction with [Louisville’s] participation in the
Midwest [Operator], will ensure that the proposed merger is consistent
with the public interest.”). The Commission explained that, under its
policy for considering mergers, membership in an independent system
operator can mitigate concerns about market power. Id. at p. 62,222.
Among other reasons, independent system operators “can ensure
expansion of geographic markets by eliminating pancaked transmission
rates in regions. Through the availability of transmission service at a
single rate, the number of suppliers able to reach markets . . . increases,
thereby lowering market concentration.” Id.; cf. Wabash Valley Power
Ass’n, 268 F.3d at 1116, discussed supra at p. 8.
Therefore, the Commission not only conditioned its approval on
Louisville’s “continued participation” in the Midwest Operator but
noted that, if Louisville later sought to withdraw from the Midwest
Operator, the Commission would evaluate that request “in light of its
impact on competition in the [Kentucky Utilities] destination
markets[.]” Merger Order at pp. 62,222-23.
12
B. The Withdrawal Order (2006)
In 2005, Louisville submitted a proposal to withdraw its
transmission facilities from the Midwest Operator’s system. See
Louisville Gas & Elec. Co., 114 FERC ¶ 61,282 at P 1 (2006)
(“Withdrawal Order”), on reh’g, E.ON U.S. LLC, 116 FERC ¶ 61,020
(2006) (“Withdrawal Rehearing Order”). As the Merger Order had
indicated the Commission would require, Louisville proposed to
maintain rate de-pancaking for certain customers (including
Owensboro). See Withdrawal Order at PP 99-100.
The Commission reiterated its earlier finding that Louisville’s
merger raised market power concerns that its participation in the
Midwest Operator had adequately addressed — specifically because
“non-pancaked rates[] increased the number of suppliers” able to serve
Kentucky markets. Withdrawal Order at P 109. Therefore, following
Louisville’s withdrawal, maintaining rate de-pancaking between
Louisville’s system and the Midwest Operator’s footprint would provide
comparable mitigation and satisfy the merger conditions. Id. at P 110.
See generally id. at PP 108-16; see also Withdrawal Rehearing Order at
P 4 (“The Withdrawal Order also found that [Louisville’s] proposal will
13
satisfy concerns related to horizontal market power, if [Louisville]
ensure[s] that loads in [certain] customers’ destination markets do not
pay pancaked transmission rates.”). The Commission repeatedly
emphasized its priority to “preserve the expanded geographic scope of
the market” that Louisville’s participation in the Midwest Operator had
made available to Kentucky customers. Withdrawal Order PP 95, 111
n.67, 114.
The Commission advised that Louisville could ensure rate de-
pancaking either by a reciprocity agreement with the Midwest Operator
or by a hold-harmless agreement with the customers. Withdrawal
Order at P 113; see id. (“One way [Louisville] could mitigate this re-
pancaking of rates for [certain] customers is to reimburse [those]
customers for all additional costs incurred by such customers that are
due to re-pancaking of transmission and ancillary service rates and that
occur as a result of [Louisville’s] withdrawal.”).
Louisville submitted a compliance filing in April 2006, proposing
“to implement the Commission’s suggested alternative” — that is, “to
hold the . . . customers harmless from any transmission service rate re-
pancaking” between Louisville’s system and the Midwest Operator’s,
14
using an existing rate schedule with certain Kentucky customers.
E.ON U.S. LLC, 116 FERC ¶ 61,019 at P 35 (2006) (“Withdrawal
Compliance Order”). The Commission, however, found that the
proposal did not “unconditionally comply with the rate de-pancaking
conditions in the Withdrawal Order” (id. at P 36) and directed
Louisville to modify the rate schedule to “specif[y] a mechanism through
which [it] will shield the . . . customers from increased transmission
costs, including pancaked ancillary service charges, resulting from rate
re-pancaking caused by [Louisville’s] withdrawal.” Id. at P 38. The
Commission even suggested the mechanism: “For example, [Louisville]
could propose a mechanism under [its tariff] that grants a credit to
the . . . customers for any charges those customers pay to Midwest
[Operator] for imports from Midwest [Operator] after [Louisville]
withdraw[s] that result in rate pancaking.” Id. n.33.
Louisville’s subsequent compliance filings to revise its
transmission tariff were accepted by the Commission in unpublished
letter orders issued on August 23 and November 8, 2006, in FERC
Docket No. ER06-20.
15
C. The De-Pancaking Tariff Provisions
The rate de-pancaking provisions that the Commission required in
the Withdrawal Order and Withdrawal Compliance Order (and
ultimately accepted) are codified in Rate Schedule FERC No. 402
(“Schedule 402”) in Louisville’s open access transmission tariff.
(Schedule 402 is Attachment A to Owensboro’s Complaint, at Appx. 33-
43.) Excerpts of the relevant tariff provisions are included in a separate
attachment at the back of this Brief (“Relevant Tariff Provisions”).
Schedule 402 states its purpose, as directed by the Commission,
and explicitly references earlier Commission orders, in several
provisions. First, the central term, used throughout Schedule 402, is
“Merger Mitigation De-pancaking (‘MMD’),” which “shall mean the
commitment of [Louisville Gas and Electric and Kentucky Utilities] to
‘shield [certain customers] from any re-pancaking of rates for
transmission service between [Louisville’s] transmission system and the
remaining members of the Midwest [Operator] . . . .” Schedule 402 at 1,
Appx. 34 (quoting and citing 2006 Withdrawal Order). The tariff goes
on to define the transactions and parties covered by reference to that
“MMD” definition. See id. at 1-2, Appx. 34-35. (This Brief will use “De-
16
pancaking” (rather than “MMD”) to refer to “Merger Mitigation De-
pancaking.”)
Second, the specific tariff provision at issue in this case, Section
1.a (titled “Transmission Service and Depancaking”), sets out the
mitigation mechanism that the Commission approved on compliance in
the withdrawal proceeding. Schedule 402 at 2-4, Appx. 35-37. That
provision begins by stating that Louisville “shall shield MMD Parties
from any pancaking of transmission and ancillary services charges for
MMD Transactions.” Id. at 2, Appx. 35.
Third, after defining the scope of charges to be offset, Section
1.a.iv states that nothing in that subsection “shall be construed as
limiting” the rights of certain customers “to ‘enjoy the same service and
pricing that they would have been entitled to receive, absent
[Louisville’s] withdrawal’ established in [the Withdrawal Order] at
P 45” and as established under other parts of the tariff. Schedule 402
at 3, Sec. 1.a.iv, Appx. 36.
Schedule 402 makes clear that its purpose derives from the
Commission’s orders. After the initial definition of “Merger Mitigation
De-pancaking,” the tariff cites the 2006 Withdrawal Order three more
17
times, sometimes in conjunction with the 1998 Merger Order and the
2006 Withdrawal Compliance Order. See Schedule 402 at 2, Appx. 35
(defining “Requirements Customer”); id. at 3, Appx. 36 (Sections 1.a.iv,
quoted supra, and 1.a.v). In particular, Section 1.a.v, concerning
“Changes to MMD,” states that the Merger Mitigation De-pancaking
“described under this Section 1 is intended to implement the [FPA]
Section 203 mitigation requirements ordered by the Commission in [the
Merger Order], as modified by” the Withdrawal Order and the
Withdrawal Compliance Order. Id. at 3, Appx. 36.
Two substantive provisions are pertinent to this case. Section
1.a.i provides that, with respect to a De-pancaking transaction in which
a party “purchases electricity from a source in the Midwest [Operator]
for delivery to such party’s load interconnected with” Louisville’s
system, Louisville will credit its own charges to the party “by an
amount equal to the Midwest [Operator] Charge which [that party]
incurs to deliver such purchased electricity to” the interface between
the Midwest Operator’s and Louisville’s systems. Id. at 2, Appx. 35.
For any transaction eligible to be credited under Section 1.a.i,
Section 1.a.iv limits the waived charges to “only those charges for
18
transmission service and ancillary services where both the Midwest
[Operator] and [Louisville] provide and charge for corresponding
services.” Id. at 3, Appx. 36. That subsection goes on to provide non-
exclusive examples of charges that are not pancaked, as where one
transmission provider charges amounts (such as congestion charges)
that the other provider does not, or where the customer purchases a
portion of particular ancillary service from one provider and the rest
from the other. Id.
III. THE COMMISSION PROCEEDINGS AND ORDERS NOW ON REVIEW
A. Background: Owensboro’s Transmission Arrangements And Complaint For De-pancaking Reimbursement
Owensboro is a municipally-owned utility that serves retail
electric customers in Owensboro, Kentucky. Owensboro has an annual
peak load of approximately 185 megawatts. See Complaint Order P 2,
Appx. 360. To serve its retail customers, and to make off-system sales
when market conditions are beneficial, Owensboro owns the Elmer
Smith coal-fired generating plant, which at the times relevant to this
case had a capacity in excess of 400 megawatts, and a 62-megawatt
entitlement to power from the Southeastern Power Administrations.
19
See id. Owensboro planned to retire Elmer Smith Unit No. 1 in 2019,
and Unit No. 2 in 2020. Id.
Owensboro obtained a 115-megawatt long-term firm point-to-point
reservation on the Midwest Operator’s system, beginning on February
1, 2018, to export power out of that system into Louisville’s system. See
id. at PP 8, 37, Appx. 363, 374. Owensboro received secondary non-firm
network service from Louisville to deliver energy from that point to
Owensboro’s customer load. See id. at P 37, Appx. 374.2
Beginning on July 20, 2018, Owensboro contracted for firm system
power from Big Rivers Electric Corporation (located in Kentucky, but
within the Midwest Operator’s footprint), as a backup source of supply.
See id. at PP 30, 49, Appx. 372, 379-80. Owensboro began taking firm
network service from Louisville on August 4, 2018, while continuing to
take firm point-to-point service from the Midwest Operator’s system to
the border of Louisville’s system. See id. at P 37, Appx. 374.
2 Point-to-point service “involv[es] designated points of entry into and exit from the transmitting utility’s system, with a designated amount of transfer capability at each point.” Open Access Rulemaking, at p. 31,646 n.65 (citation omitted). By contrast, network service allows a transmission customer to use the transmitting utility’s entire network to match specified generation resources to specified loads without paying separately for each resource-load pairing. Id.
20
On September 21, 2018, Owensboro filed a complaint with the
Commission, pursuant to section 306 of the Federal Power Act, 16
U.S.C. § 825e. See Rate Schedule Enforcement Complaint of Owensboro
Municipal Utilities, R. 1, Appx. 1. (Owensboro also cited FPA section
206, 16 U.S.C. § 824e, and other provisions as bases for the relief
requested. Complaint at 1 n.1, Appx. 1.) Owensboro asserted that
Louisville was violating its tariff by declining to credit Owensboro for
pancaked transmission service charges under Schedule 402, and sought
reimbursement for its Midwest Operator charges from February 1, 2018
forward. Id. at 1, Appx. 1.
B. Complaint Order
On February 21, 2019, the Commission issued the Complaint
Order, granting the Complaint in part. The Commission found that
Owensboro’s transmission reservation from the Midwest Operator met
the requirements for De-pancaking and directed Louisville to reimburse
Owensboro for all Midwest Operator charges for that reservation from
February 1, 2018. Specifically, the Commission found that the
reservation satisfied the requirements of Schedule 402, Section 1.a.i
(Appx. 35), that it be used for a purchase of electricity from a source in
21
the Midwest Operator for delivery to Owensboro’s load in Louisville’s
system, making it eligible for De-pancaking. Complaint Order PP 41,
43, Appx. 376-78. The Commission also found that the firm
transmission reservation that Owensboro purchased from the Midwest
Operator and the network service (both firm and non-firm) that it
purchased from Louisville were “corresponding services” under
Schedule 402, Section 1.a.iv (Appx. 36), for all times at issue, so all of
the Midwest Operator charges must be de-pancaked. Complaint Order
PP 41, 45-48, Appx. 376, 378-79.
The Commission denied, without prejudice, a portion of the
Complaint in which Owensboro sought reimbursement for two smaller
one-month reservations of transmission capacity in the Midwest
Operator; the Commission found that Owensboro had not provided
information about how it had used those reservations. Id. at PP 36, 42,
Appx. 374, 377.
Finally, the Commission rejected Louisville’s arguments that,
because Owensboro did not use the firm transmission reservation
frequently, its purchase of that capacity was “akin to hoarding” or
arbitrage. Id. at PP 51-52, Appx. 380; see id. (summarizing contentions
22
that Louisville raised in its Answer to Complaint at 19-20, Appx. 194-
95).
C. Rehearing Order
Louisville timely filed a request for agency rehearing. R. 10,
Appx. 383. Louisville sought rehearing of the Commission’s factual
findings and its interpretation of Schedule 402, Section 1.a.i. See id. at
2-3, Appx. 384-85. Louisville did not seek rehearing of the
Commission’s determination that, for the period from February 1
through August 3, 2018, the firm point-to-point transmission service
from the Midwest Operator and the secondary network service from
Louisville were “corresponding services” for purposes of Section 1.a.iv.
(See infra pp. 51-53.) Louisville also chose not to seek rehearing as to
its hoarding and arbitrage arguments. On October 17, 2019, the
Commission denied rehearing. Rehearing Order PP 13-20, Appx. 408-
11.
This appeal followed.
D. Related Proceeding: Louisville’s Filing to Remove the Rate De-Pancaking Provisions
On August 3, 2018, Louisville submitted a filing, pursuant to
Federal Power Act sections 203 and 205, 16 U.S.C. §§ 824b and 824d,
23
seeking to remove the De-pancaking provision from its tariff. See
Louisville Gas & Elec. Co., 166 FERC ¶ 61,206, reh’g denied &
clarification granted, 168 FERC ¶ 61,152 (2019), reh’g pending. The
Commission conditionally granted the request, allowing Louisville to
remove the provisions but requiring a “transition mechanism”
(continued rate de-pancaking) for certain customers that have “acted in
reliance” on that mitigation in entering into power purchase
agreements. 166 FERC ¶ 61,206 at PP 2, 79-80, 82. For Owensboro,
that transition covers the initial term of its supply contract with Big
Rivers. Id. at PP 77, 82. Both Louisville and certain customers
(including Owensboro) submitted requests for clarification and/or
rehearing and “protective” petitions for review in the D.C. Circuit; the
court is holding those petitions in abeyance pending further agency
proceedings. Ky. Mun. Energy Agency v. FERC, D.C. Cir. No. 19-1236;
Louisville Gas & Elec. Co. v. FERC, D.C. Cir. No. 19-1237.
In the instant case on review to this Court, the Commission
clarified that Louisville’s obligation to pay rate de-pancaking credits to
Owensboro going forward would be subject to the outcome of the
removal proceeding. Complaint Order P 36 n.71, Appx. 374.
24
SUMMARY OF ARGUMENT
Where the relevant portion of the FERC-approved tariff itself
explicitly identifies its purpose — to implement a rate mitigation
mechanism that the Commission previously found necessary in the
public interest — the Commission has a responsibility to take that
context into account. In this case, the Commission’s analysis is
appropriately guided by its expectations when it required mitigation in
the earlier proceeding.
In the orders challenged on review, the Commission reasonably
determined — based upon the text and context of the tariff provision,
conclusive factual findings, and its own technical expertise — that
Owensboro was entitled to credits for charges it paid to the Midwest
Operator for a transmission reservation that it used to purchase energy
to serve its customer load. Schedule 402 of Louisville’s tariff is
expressly intended to shield certain transmission customers, including
Owensboro, from multiple (“pancaked”) rates for transmission service
between Louisville’s system and that of the Midwest Operator.
Informed by that context, the Commission determined that
Owensboro’s firm transmission reservation with the Midwest Operator
25
met the tariff requirements for rate de-pancaking. The Commission
found, based on substantial record evidence, that Owensboro needed the
reservation to ensure access to backup energy supplies in the Midwest
Operator’s region in case of unexpected outages as Owensboro’s
generation units approached retirement. The Commission also found
that Owensboro had used the transmission reservation to deliver such
backup supplies, purchased from the Midwest Operator’s region, to
serve Owensboro’s customer load in such circumstances.
In addition to those factual findings, the Commission drew on its
technical expertise as to transmission service arrangements and
utilities’ reliability needs, as well as its particular experience with
Schedule 402 and its own prior orders. Therefore, its reasonable
interpretation of the tariff deserves deference under this Circuit’s case
law.
Louisville’s arguments to the contrary are without merit. The
Commission reasonably rejected Louisville’s narrow reading of the tariff
because — despite Louisville’s claim that the provision has a plain
meaning — Louisville imputes a requirement, based on the number of
energy purchases that a customer delivers using a transmission
26
reservation, that does not appear in the tariff. Louisville also ignores
language that is in the tariff regarding the express, pro-competitive
purpose of de-pancaking transmission rates to protect customers’ access
to power suppliers within the Midwest Operator’s footprint.
ARGUMENT
I. STANDARD OF REVIEW
The Court reviews FERC orders under the Administrative
Procedure Act’s arbitrary and capricious standard; the “scope of review
under [that] standard is narrow.” FERC v. Elec. Power Supply Ass’n,
136 S. Ct. 760, 782 (2016) (citation omitted). The relevant inquiry is
whether the agency has “articulate[d] a satisfactory explanation for its
action including a ‘rational connection between the facts found and the
choice made.’” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck
Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)).
The Commission’s decisions regarding rate issues are entitled to
broad deference, because of “the breadth and complexity of the
Commission’s responsibilities.” Permian Basin Area Rate Cases, 390
U.S. 747, 790 (1968); see also Morgan Stanley, 554 U.S. at 532
(affording “great deference” to Commission’s rate decisions). In
27
addition, “[a]n agency’s interpretation of its own precedents receives
considerable deference.” Aburto-Rocha v. Mukasey, 535 F.3d 500, 503
(6th Cir. 2008) (citing NSTAR Elec. & Gas Corp. v. FERC, 481 F.3d 794,
799 (D.C. Cir. 2007)); see also, e.g., NRG Power Mktg., LLC v. FERC,
718 F.3d 947, 957 (D.C. Cir. 2013) (“we afford FERC substantial
deference in its interpretation of its own orders”).
As to contracts and tariffs, this Court “do[es] not automatically
give deference to the Commission’s interpretations . . . .” MISO
Transmission Owners, 860 F.3d at 841 (citing Cincinnati Gas & Elec.
Co. v. FERC, 724 F.2d 550, 554 (6th Cir. 1984)). Nevertheless, this
Court does defer to “contract interpretations based upon an agency’s
factual findings or technical expertise.” Cincinnati Gas & Elec., 724
F.2d at 554; accord MISO Transmission Owners, 860 F.3d at 841; see
also Thornton v. Graphic Commc’ns Conference of the Int’l Bhd. of
Teamsters Supplemental Ret. & Disability Fund, 566 F.3d 597, 615 (6th
Cir. 2013) (citing deference “due to the agency’s institutional
expertise”).
The Commission’s factual findings are conclusive if supported by
substantial evidence. Federal Power Act § 313(b), 16 U.S.C. § 825l(b);
28
see Ky. Utils. Co. v. U.S. FERC, 766 F.2d 239, 241 (6th Cir. 1985). The
substantial evidence standard requires “more than a scintilla, but less
than a preponderance, of the evidence.” R.P. Carbone Constr. Co. v.
Occupational Safety & Health Review Comm’n, 166 F.3d 815, 818 (6th
Cir. 1998). Substantial evidence means “such relevant evidence as a
reasonable mind might accept as adequate to support the conclusion
reached.” Id.; accord Universal Camera Corp. v. NLRB, 340 U.S. 474,
477 (1951). If the evidence is susceptible of more than one rational
interpretation, the Court must uphold the agency’s findings. See
Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966); Karimijanaki v.
Holder, 579 F.3d 710, 714 (6th Cir. 2009); NLRB v. Ky. May Coal Co.,
89 F.3d 1235, 1242 (6th Cir. 1996).
II. THE COMMISSION REASONABLY INTERPRETED THE TARIFF, BASED ON THE TEXT AND CONTEXT OF THE DE-PANCAKING PROVISION, CONCLUSIVE FACTUAL FINDINGS, AND AGENCY EXPERTISE
A. The Commission Appropriately Considered The Purpose And Context Of The Rate De-Pancaking Provision, Which Arose From And Referenced The Commission’s Orders
The tariff explicitly references the Commission’s 1998 Merger
Order and 2006 Withdrawal Order and expressly incorporates the
purpose of “de-pancaking” rates that customers pay for transmission
29
service between the Midwest Operator and Louisville. See supra pp. 15-
17. The Commission’s analysis appropriately reflected that purpose:
“Our analysis turns on whether the 115 [megawatt] firm point-to-point
[Midwest Operator] transmission reservation satisfies the requirements
for reimbursement set forth in [Schedule 402], which were intended to
implement the mitigation conditions set forth in the Withdrawal Order
and the [Withdrawal Compliance Order].” Complaint Order P 38,
Appx. 375; see also Rehearing Order P 15, Appx. 408 (relevant tariff
provisions “implement various orders related to [Louisville’s] merger
and withdrawal from” the Midwest Operator); supra pp. 10-14
(discussing those mitigation conditions).
Courts have long held that the Commission should consider a
tariff’s purpose. See, e.g., Consol. Gas Transmission Corp. v. FERC, 771
F.2d 1536, 1545 (D.C. Cir. 1985) (“The purposes for which a tariff was
imposed should be considered when interpreting the tariff, for ‘to decide
the question of the scope of [a] tariff without consideration of the factors
and purposes underlying the terminology employed would make the
process of adjudication little more than an exercise in semantics’”)
(quoting United States v. W. Pac. R.R. Co., 352 U.S. 59, 67 (1956)),
30
quoted in Complaint Order P 40 n.78, Appx. 376 and Rehearing Order
P 19, Appx. 410. (Indeed, earlier in the Commission proceeding,
Louisville agreed that the purpose mattered: “First, it is important to
look at the overall purpose behind [De-pancaking].” Answer at 18,
Appx. 193.)
That general principle “is especially important here,” where the
tariff itself references the Commission’s 1998 and 2006 orders and
“expressly incorporate[s]” the purpose of “de-pancaking” transmission
rates. Rehearing Order P 19, Appx. 410. See Schedule 402 at 1,
Appx. 34 (quoting Withdrawal Order in definition of “Merger Mitigation
De-Pancaking”); id. at 2, Appx. 35 (citing Merger, Withdrawal, and
Withdrawal Compliance Orders in definition of “Requirements
Customers”); id. at 4, Appx. 36 (citing Withdrawal Order in Section
1.a.iv); id. (stating, in Section 1.a.v: “The [De-pancaking] described
under this Section 1 is intended to implement” the mitigation required
by the Commission in all three orders), quoted in Complaint Order P 38,
Appx. 375.
Beyond citing the orders, Schedule 402 repeatedly declares the
tariff’s intended purpose: to “shield [De-Pancaking] Parties from any
31
pancaking of transmission and ancillary services charges for [De-
pancaking] Transactions.” Schedule 402 at 2, Section 1.a, Appx. 35
(emphasis added); see also id. at 3, Section 1.a.iv, Appx. 36 (referring to
the customers’ “rights to ‘enjoy the same service and pricing that they
would have been entitled to receive, absent Applicants’ withdrawal’”
from the Midwest Operator). See generally Relevant Tariff Provisions
(at the back of this Brief).
Louisville nevertheless dismisses these references as “general”
and “generic statements of purpose” (Br. 38). But the text itself defies
such a reading. Schedule 402 defines its central term, “Merger
Mitigation De-Pancaking,” to mean Louisville’s commitment to shield
customers like Owensboro “‘from any re-pancaking of rates for
transmission service . . . .’” Schedule 402 at 1, Appx. 34 (quoting
Withdrawal Order) (emphasis added); see also Complaint Order P 39,
Appx. 375. That term then defines the Transaction, the Party, and the
Section 1.a mechanism itself. Every part of Section 1.a incorporates not
only the name “Merger Mitigation De-pancaking” but also its defined
purpose.
32
Furthermore, that pervasiveness reflects the centrality of the
Commission’s role in Schedule 402’s creation. As discussed more fully
supra at pp. 10-14, the Commission (1) required Louisville to shield
customers from rate pancaking as a condition of its merger, (2) directed
Louisville to assure de-pancaked rates as a condition of its withdrawal
from the Midwest Operator, (3) suggested the very
credit/reimbursement mechanism that Louisville subsequently adopted,
and (4) approved the tariff provisions as compliant with the
Commission’s directive. One cannot analyze the parties’ intent in
negotiating Schedule 402 without considering the Commission’s
intent — and the parties’ intent to comply. For that reason,
interpreting the tariff provision in light of its provenance and purpose
was not only reasonable but necessary.
Starting from that vantage point, then, the Commission
reasonably approached its interpretation of the tariff with an eye
toward shielding customers from “any rate re-pancaking effects” of
Louisville’s withdrawal from the Midwest Operator. Complaint Order
P 40, Appx. 376. “Our holding is guided by the Commission’s
33
expectations as discussed in the Withdrawal Order and the
[Withdrawal Compliance Order].” Id.
On appeal, Louisville argues that de-pancaking Owensboro’s firm
transmission reservation does not serve the purpose of that mitigation.
See Br. 40 (Owensboro’s “purported ‘reliability’ concern . . . has nothing
to do with the competition-related concerns addressed in the Merger
Order and Withdrawal Order”); see also Br. 46. To the contrary —
Owensboro’s need for available transmission capacity to purchase
energy in the Midwest Operator’s markets has everything to do with
those concerns. Indeed, access to competitive power suppliers was the
point of market-power mitigation. In the 1998 Merger Order, the
Commission explained that non-pancaked rates in regional systems,
like that of the Midwest Operator, increase the number of power
suppliers available to markets and thereby reduce market
concentration. Merger Order p. 62,222. For precisely that reason, in
approving Louisville’s 2006 withdrawal from the Midwest Operator, the
Commission insisted on “preserv[ing] the expanded geographic scope of
the market” so that Louisville’s customers could continue to access
34
competitive suppliers. Withdrawal Order PP 95, 111 n.67, 114; see also
id. at P 109.
Because the Commission’s detailed analysis of market power and
rate effects in the merger and withdrawal proceedings informs the
context and explicit purpose of Schedule 402, deference to the
Commission’s interpretation of Schedule 402 is especially warranted
here. See, e.g., Aburto-Rocha, 535 F.3d at 503; NRG Power Mktg., 718
F.3d at 957.
B. The Commission Relied Both On Conclusive Factual Findings And On Technical Expertise In Interpreting The Tariff
In determining that Schedule 402 rate de-pancaking applied to
Owensboro’s transmission reservation, the Commission relied on key
factual findings: that Owensboro needed firm transmission capacity,
and in fact used that capacity, to ensure access to backup power
supplies as its own generation resources approached retirement. See
Complaint Order P 43, Appx. 377. Those findings were supported by
substantial record evidence and therefore are conclusive. See Federal
Power Act § 313(b), 16 U.S.C. § 825l(b). In addition, because the
Commission relied on those findings in interpreting the tariff, its
35
reasonable interpretation warrants deference. See, e.g., Cincinnati Gas
& Elec., 724 F.2d at 554, cited in MISO Transmission Owners, 860 F.3d
at 841. Moreover, the Commission assessed Owensboro’s need for, and
use of, the firm transmission reservation based on the Commission’s
technical expertise.
At the core of Louisville’s arguments on appeal is the
Commission’s finding that Owensboro “currently needs the 115
[megawatt] MISO firm point-to-point transmission reservation for
reliability purposes . . . .” Complaint Order P 43, Appx. 377. Louisville
insists that Owensboro did not need the 115-megawatt firm point-to-
point transmission reservation (see Br. 1-2, 37, 43), that its need is
irrelevant to whether the charges for the reservation must be de-
pancaked (see Br. 3, 29), and that transmission used for reliability
purposes is not eligible for de-pancaking (see Br. 25). The Commission,
however, found that Owensboro had demonstrated, with substantial
evidence, that it did need the reservation and that it used the
reservation as required for reimbursement under Schedule 402.
Complaint Order P 43, Appx. 377-78.
36
The Commission’s determination as to need rests on several other
findings. First, Owensboro showed that its Elmer Smith Plant, with
which it had long been able to serve its load, was increasingly
susceptible to forced outages as it approached its units’ scheduled
retirements in 2019 and 2020. Id. at P 9, Appx. 364. In the event of
such outages, Owensboro would need to purchase power to replace that
lost supply; to obtain the requisite amount on short notice, Owensboro
would need to turn to suppliers in the Midwest Operator’s region. Id.
See Complaint at 10, Appx. 10; Lyons Aff. at paras. 4-5, Appx. 45. And
Owensboro did, in fact, experience unexpected outages at the Elmer
Smith Plant on at least two occasions, in July and September 2018, and
purchased energy from suppliers in the Midwest Operator’s system that
was necessary to serve its load. Complaint Order P 43, Appx. 377; see
Owensboro (October 2018) Reply at 5-6, Appx. 323-24.
To ensure that it could deliver energy purchased from competitive
suppliers to its customer load — quickly and without curtailment —
Owensboro made a long-term firm transmission reservation on the
Midwest Operator’s system. Complaint Order P 43, Appx. 377.
Owensboro supported the 115-megawatt reservation, explaining that it
37
would deliver enough backup electricity to replace one of the Elmer
Smith units. Complaint at 11, Appx. 11; Lyons Aff. at para. 9, Appx. 46.
Owensboro also demonstrated that it needed a long-term firm
reservation, rather than short-term non-firm service, because
“transmission service is not always available from [the Midwest
Operator] on short notice” and non-firm service may be curtailed.
Complaint Order P 43, Appx. 377. Owensboro provided data to support
those concerns, showing that during a period spanning 2013 to 2018, of
nearly 500 short-term reservations that Owensboro sought from the
Midwest Operator, more than 60 percent were refused. Id., Appx. 377-
78; Complaint at 10, Appx. 10; Lyons Aff. at para. 14, Appx. 47.
Based on that evidence, the Commission reasonably found that,
“without the long-term firm point-to-point transmission reservation
beginning February 1, 2018, Owensboro risked not being able to secure
[Midwest Operator] transmission service when needed to deliver
electricity to its load in [the Louisville footprint].” Complaint Order
P 43, Appx. 378. Therefore, the Commission agreed that Owensboro
needed the long-term firm reservation. Id.; see also id. at P 51,
Appx. 380; Rehearing Order P 20, Appx. 410-11. Under section 313(b)
38
of the Federal Power Act, that finding, supported as it is by substantial
record evidence, is conclusive. 16 U.S.C.§ 825l(b).
That finding also is grounded in the Commission’s own technical
expertise. The Commission has long institutional experience with
transmission tariffs and the arrangements that transmission customers
use to serve their demand reliably and economically. See generally New
York, 535 U.S. at 5-14. Indeed, its rulemakings requiring open access to
transmission services and encouraging development of regional
transmission operators are the backdrop for the history of Louisville’s
participation in, and withdrawal from, the Midwest Operator. See
supra pp. 5-8.
Here, Louisville criticizes Owensboro’s purchase of long-term firm
transmission capacity to deliver short-term purchases. See, e.g., Br. 23,
34, 36. The Commission, however, has long recognized that
transmission customers may need firm service to ensure their ability to
serve their loads, and do not necessarily use that transmission capacity
continuously. See, e.g., Open Access Rulemaking at p. 31,693 (“Firm
transmission customers that have reserved capacity and paid a
reservation charge generally do not use the entire amount of reserved
39
capacity at all times. . . . Firm transmission customers are in the best
position to know the levels of electric energy they will be transmitting
and the level of flexibility they need in carrying out their transmission
activities.”). If a local utility’s own generation goes out of service, that
utility “faces the risk that . . . the transmission provider may not have
firm transmission capacity available” to deliver the needed power —
exactly Owensboro’s concern here. Open Access Rehearing at p. 30,260.
Thus, the Commission has suggested that utilities can minimize that
risk by reserving additional firm point-to-point transmission service to
ensure service to their customer load if their own generation becomes
unavailable. Id.; see also Open Access Rulemaking at p. 31,743
(cautioning that transmission customers might, in some circumstances,
“need to secure alternative transmission arrangements such as point-to-
point transmission service on an as-available basis” to access reserves).
See also, e.g., Transmission Access Policy Study Grp. v. FERC, 225 F.3d
667 (D.C. Cir. 2000) (discussing transmission customers’ options to
choose network service or point-to-point service, depending on their
needs to serve their retail customer loads) (affirming Open Access
Rulemaking), aff’d sub nom. New York, 535 U.S. 1.
40
Drawing upon that background, the Commission determined that
the charges Owensboro incurred for long-term firm transmission were
eligible for reimbursement, where it had purchased the service to
ensure access to backup power supplies on short notice and had in fact
used the reservation to deliver a few short-term power purchases from
the Midwest Operator region to its load during outages. Accordingly,
deference is appropriate because the Commission interpreted the tariff
using its own technical expertise. See Columbia Gas Transmission
Corp. v. FPC, 530 F.2d 1056, 1059 (D.C. Cir. 1976) (deference to an
agency’s interpretation is appropriate “where the understanding of the
documents involved is enhanced by technical knowledge of industry
conditions and practices”), cited in Cincinnati Gas & Elec. Co., 724 F.2d
at 554; accord Nat’l Fuel Gas Supply Corp. v. FERC, 899 F.2d 1244,
1249 (D.C. Cir. 1990); see also La. Pub. Serv. Comm’n v. FERC, 761
F.3d 540, 554 (5th Cir. 2014) (“FERC utilized its technical and factual
expertise to interpret the ambiguous language”).
Louisville simply ignores the Commission’s finding. It argues that
the Commission interpreted Schedule 402 to produce “absurd results”
(Br. 26, 37-38, 43) because a hypothetical utility “could buy
41
transmission rights bearing no relationship to what it needs or uses to
deliver purchased electricity” (Br. 1-2) — notwithstanding that the
Commission closely considered Owensboro’s asserted need, actual uses,
and supported reasons for the specific size and terms of the reservation.
In fact, the Commission denied Owensboro’s claims for rate
de-pancaking as to two other transmission reservations — both smaller
and short-term — precisely because Owensboro had not provided
sufficient information for the Commission to determine whether they
met the tariff requirements. Complaint Order P 42, Appx. 377. Here,
the Commission considered the evidence actually presented and
reasonably concluded that Owensboro had appropriately incurred
pancaked transmission costs to deliver purchased electricity from the
Midwest Operator’s system to Owensboro’s customer load in Louisville’s
system.
C. The Commission Appropriately Rejected Louisville’s Interpretation
Louisville asserts that the “plain language” of the rate de-
pancaking provision precludes credits for the transmission charges that
Owensboro paid for the firm reservation. See Br. 28-29. Louisville
further claims that the Commission never explained why Louisville’s
42
interpretation is unreasonable. Br. 41, 44-45. But the Commission
rejected that interpretation because it conjures limitations that do not
appear in the tariff and fails to account for Owensboro’s actual energy
purchases. Louisville also ignores the context of Schedule 402 and
downplays inconvenient tariff language.
Louisville focuses on Section 1.a.i of Schedule 402, which it reads
as limiting reimbursement to transmission service charges associated
with a specific purchase and delivery of power. See Br. 28-30; see also
Request for Rehearing at 3, Appx. 385 (“The requirement that there be
both a purchase of electricity and a delivery of such purchased
electricity to the [De-pancaking] Party’s load as conditions precedent to
any transmission charge reimbursement obligation is clearly and
explicitly stated” in Section 1.a.i); id. at 4, Appx. 386 (Louisville “agreed
to credit [Midwest Operator] transmission service charges incurred for
delivery of an actual purchase of electricity”). But Louisville’s narrow
interpretation of the rate de-pancaking provision clashes with the
undisputed facts of this case: that Owensboro “in fact purchased and
had delivered some electricity” using the long-term reservation.
43
Rehearing Order P 17, Appx. 409 (Louisville “does not explain how its
plain meaning interpretation renders this fact irrelevant”).
To justify its cramped reading of its de-pancaking obligation,
Louisville both reads a non-existent limitation into the tariff and
brushes aside language that is in the tariff. First, by insisting that
reimbursement must be limited to transmission service charges only for
the period when a specific purchase of power is delivered to load,
Louisville necessarily imputes a requirement that does not appear in
the tariff — meaning that charges for a long-term firm transmission
reservation would be de-pancaked only if the customer also made a
long-term power purchase. Thus, a customer who purchased a long-
term reservation of capacity to secure access to power supplies for any
recurring needs, such as serving peak demand or backing up aging
resources, would necessarily pay pancaked charges for much of that
reservation. See Request for Rehearing at 6-9, Appx. 388-91. But this
limitation is absent from the tariff itself; “[Schedule] 402 does not
contain any language that imposes a minimum transmission
reservation load factor requirement . . . nor does it limit [De-pancaking]
credits to only those periods when electricity was actually purchased
44
and scheduled.” Complaint Order P 44, Appx. 378; see also Rehearing
Order P 17, Appx. 409 (Louisville “does not explain where this
requirement is found in the plain language of [Schedule] 402”).3 (On
appeal, Louisville further refines this phantom requirement, allowing
that long-term firm transmission charges might be de-pancaked if the
customer made “some semblance of continuous and regular purchases of
electricity[.]” Br. 36. This, too, has no basis in the text.) To the
contrary, the tariff language only requires Owensboro to purchase
electricity from a source in the Midwest Operator’s footprint for delivery
to Owensboro’s load interconnected with Louisville’s system. Complaint
Order P 44, Appx. 378.
Furthermore, Louisville strains to explain away the first sentence
of Section 1.a, which states that “Applicants shall shield [De-pancaking]
Parties from any pancaking of transmission and ancillary services
charges for [De-pancaking] Transactions.” Schedule 402 at 2, Appx. 35.
Louisville dismisses that language as a “generic statement[] of purpose”
(Br. 38) and makes no effort to reconcile its constricted view of Section
3 “Load factor” refers, in general, to a ratio measuring a customer’s actual use of capacity to the maximum possible use. See Complex Consol. Edison Co. v. FERC, 165 F.3d 992, 998 (D.C. Cir. 1999).
45
1.a.i with the stated premise of the De-pancaking mechanism. As
shown supra at pp. 30-32, however, the De-pancaking purpose is so
pervasively incorporated into the definitions and terms of Schedule 402
that any interpretation that fails to account for it is “‘little more than an
exercise in semantics.’” Rehearing Order P 19, Appx. 410 (quoting
Consol. Gas Transmission Corp., 771 F.2d at 1545).
Louisville does not appear to dispute that — had Louisville not
withdrawn from the Midwest Operator — Owensboro could have
obtained firm transmission service for a single, un-pancaked charge.
Instead, to access electricity resources within the Midwest Operator’s
region, Owensboro needed to purchase transmission service both from
the Midwest Operator and from Louisville, incurring two separate
charges. Rather than address this rate pancaking, Louisville questions
Owensboro’s need to purchase firm transmission service at all.
The Commission reasonably concluded that Louisville’s reading
fails to account for the entire provision: “[Louisville]’s ‘plain meaning’
arguments rely on isolated readings” of Section 1.a (Rehearing Order
P 17, Appx. 409), whereas both case law and Commission precedent
look to the entire context. Id. at P 16, Appx. 408 (the Commission “does
46
not look at individual sentences in isolation from the rest of an
agreement”); see also Xcel Energy Servs. Inc. v. Am. Transmission Co.,
140 FERC ¶ 61,058 at P 60 (2012) (“the Commission “must review the
entire agreement and particular words should be considered, not as if
isolated from the context, but in light of the obligations as a whole and
the intention of the parties as manifested therein”). Indeed, this Court
took the same view in MISO Transmission Owners. Interpreting a
tariff provision regarding cost allocation, the Court turned to other
sections of the tariff and rejected parties’ interpretations that did not
account for all of the tariff language and introduced conflicts between
provisions. See 860 F.3d at 842 (“Another section of the Tariff points in
the same direction” as the Court’s reading); id. at 843 (petitioners’
“interpretation has an uncomfortable relationship with the text of the
Tariff”).
For these reasons, the Commission appropriately rejected
Louisville’s contention that the rate de-pancaking provision has a plain
meaning that precludes rate de-pancaking in this case. See Rehearing
Order P 18, Appx. 409-10 (“consideration of all of the terms of
[Schedule] 402 does not support [Louisville’s] contention that [Schedule]
47
402 has an unambiguous plain meaning with respect to the
reimbursement requirement”).
III. LOUISVILLE’S REMAINING ARGUMENTS, TO THE EXTENT THEY ARE PROPERLY RAISED ON APPEAL, ARE MERITLESS
Louisville’s remaining arguments fail on various grounds. Several
of its contentions are barred because Louisville did not raise them on
agency rehearing, as required by the Federal Power Act as a
jurisdictional prerequisite for judicial review. See FPA § 313(b), 16
U.S.C. § 825l(b) (“No objection to the order of the Commission shall be
considered by the court unless such objection shall have been urged
before the Commission in the application for rehearing unless there is
reasonable ground for failure so to do.”); see also Mun. Resale Serv.
Customers v. FERC, 43 F.3d 1046, 1051 (6th Cir. 1995)
(“Noncompliance with § 313 imposes a jurisdictional bar to appellate
review.”); Cincinnati Gas & Elec., 724 F.2d at 553 (court has no
jurisdiction to consider issue, even sua sponte, if not preserved in
request for agency rehearing); DTE Energy Co. v. FERC, 394 F.3d 954,
961 (D.C. Cir. 2005) (“This well-settled principle is ‘an unusually strict
48
requirement that will not be ignored by the courts’”) (citation omitted).
All are without merit.
A. Subsidization
Louisville devotes much of its brief to claiming that the
Commission has unreasonably required Louisville to “subsidize”
Owensboro’s transmission reservation. See Br. 20, 25, 28, 35, 39, 40, 43,
46, 47. But Louisville failed to raise these subsidization arguments on
agency rehearing. See 16 U.S.C. § 825l(b). Louisville did raise
arguments about subsidization and the size of the transmission
reservation at an earlier stage in the agency proceeding, asserting that
Owensboro’s transmission reservation was akin to hoarding or
arbitrage (see Answer to Complaint at 19-20, Appx. 194-95), and the
Commission did address those arguments in the Complaint Order (at
PP 51-52, Appx. 380). But this is insufficient to satisfy statutory
prerequisites to judicial review. See Ind. Util. Regulatory Comm'n v.
FERC, 668 F.3d 735, 739 (D.C. Cir. 2012) (party could not raise issue on
appeal that it failed to raise specifically to the agency on rehearing,
even though it had raised the issue earlier in the agency proceeding);
Allegheny Power v. FERC, 437 F.3d 1215, 1220 (D.C. Cir. 2006) (same).
49
The Commission disagreed that infrequent use of the
transmission reservation was akin to hoarding capacity; it further noted
its finding that Owensboro needed the capacity and had in fact used it
to access backup supply. Complaint Order P 51, Appx. 380. The
Commission also found “assertions that Owensboro is using the [De-
pancaking] to ensure a competitive and financial advantage for its
market activities through arbitrage are without merit” because
Owensboro had shown it used the reservation to serve its load. Id. at
P 52, Appx. 380. Louisville did not challenge those rulings on agency
rehearing.
In any event, if Louisville believes that the costs to de-pancake
transmission rates — de-pancaking that the Commission found
necessary to protect the public interest when Louisville’s predecessor
entities chose to merge and when Louisville elected to withdraw from
the Midwest Operator — have become onerous, its remedy is to seek
modification or removal of the de-pancaking provisions. And, in fact,
that is what Louisville did. In July 2018, Louisville proposed to remove
the rate de-pancaking provisions from its transmission tariff. The
Commission granted that request, finding that “competitive conditions
50
have changed” and that customers within Louisville’s system will
continue to have access to numerous suppliers without mitigation.
Louisville, 166 FERC ¶ 61,206 at PP 45, 73. But the Commission
conditioned its approval on a “transition mechanism” for customers that
had reasonably relied on mitigation, thereby continuing rate de-
pancaking for certain arrangements — including Owensboro’s
transmission reservation — for a limited time. See id. at PP 2, 79-80,
82; supra p. 23. Notwithstanding Louisville’s objections to the costs of
rate de-pancaking, the Commission — charged by Congress with the
responsibility to guard the public interest in electric transmission —
concluded that it “would not be consistent with the public interest” to
remove the rate de-pancaking provision without accounting for that
reliance. Id. at P 79.
B. Corresponding Services
At the end of its Brief, Louisville revives another argument that it
initially pressed before the agency and then abandoned. Louisville
asserts that, “[a]lternatively,” the Court should vacate the
Commission’s ruling as to reimbursement for Owensboro’s transmission
reservation from February 1 to August 4, 2018, because the firm point-
51
to-point transmission from the Midwest Operator and the secondary
network service from Louisville were not “corresponding services” as
defined in Schedule 402, Section 1.a.iv. See Br. 48-51. Here, again,
because Louisville failed to raise this issue on agency rehearing, it is
jurisdictionally barred.
In any event, as with hoarding and arbitrage, the Commission
answered Louisville’s claim in the Complaint Order, at PP 45-50,
Appx. 378-80. Briefly, the Commission found no relevant difference
between the two periods because the firmness of the transmission
services need not match for the services to be “corresponding” for the
purpose of rate de-pancaking. See id. at PP 46, 48, Appx. 378-79.
Moreover, the Commission interpreted Section 1.a.iv as defining which
charges would be de-pancaked — i.e., if one provider charges for
congestion and the other does not, for the same transaction, there is not
a corresponding charge in need of de-pancaking — not, as Louisville
contended, defining which transactions are eligible for de-pancaking.
Complaint Order P 47, Appx. 379.
In its request for agency rehearing, Louisville said nothing about
corresponding services. It referred to the pre-August 4 time period only
52
to argue that Owensboro had not purchased any electricity using the
firm transmission reservation before August 4, 2018. See Request for
Rehearing at 2, 4-5, Appx. 384, 386-87. But that is simply wrong, as the
Commission made a conclusive factual finding that Owensboro used the
reservation to deliver backup electricity that it purchased on July 9 and
10, 2018, to cover an outage of its Elmer Smith Plant. Complaint Order
P 43, Appx. 377. The Commission’s finding that Owensboro had
demonstrated its need for the reservation, based on substantial
evidence and the Commission’s technical expertise regarding the use of
firm transmission arrangements to ensure reliability, also put this
claim to rest. See Rehearing Order P 20, Appx. 410; see also supra
pp. 34-41.
Furthermore, Louisville’s assertion (Br. 48) that “FERC seemingly
attached some significance” to Owensboro’s having obtained firm
network service from Louisville beginning on August 4 is, at best,
misleading. The Commission addressed the pre- and post-August 4
periods separately only because Louisville itself raised separate grounds
to deny rate de-pancaking for the pre-August 4 period. See Complaint
Order PP 20-23, Appx. 368-70 (summarizing Louisville’s argument); id.
53
at PP 41, 45-50, Appx. 376-77, 378-80 (rejecting that argument). In
fact, the Commission made clear that it found no relevant difference
between the two periods.
This agency judgment, like its other judgments, was based upon
substantial record evidence and is entitled to respect. See, e.g., FERC v.
Elec. Power Supply Ass’n, 136 S. Ct. at 784 (“not [the reviewing court’s]
job to render that judgment, on which reasonable minds can differ”;
instead, court’s “important but limited role is to ensure that the
Commission engaged in reasoned decisionmaking — that it weighed
competing views, selected [a result] with adequate support in the
record, and intelligibly explained the reasons for making that choice.”).
54
CONCLUSION
For the reasons stated, the petition should be denied and the
challenged FERC Orders should be affirmed.
Respectfully submitted,
David L. Morenoff Acting General Counsel Robert H. Solomon Solicitor /s/ Carol J. Banta Carol J. Banta Senior Attorney
Federal Energy Regulatory Commission Washington, DC 20426 Tel.: (202) 502-6433 Fax: (202) 273-0901 [email protected] June 2, 2020
CERTIFICATE OF COMPLIANCE
In accordance with Fed. R. App. P. 32(a)(7)(B), (f), and (g), I certify that the Brief for Respondent has been prepared in a proportionally spaced typeface (using Microsoft Word, in 14-point Century Schoolbook) and contains 10,317 words, including the Relevant Tariff Provisions attached at the back of the Brief, but not including the tables of contents and authorities, the glossary, the certificates of counsel, and the addendum. /s/ Carol J. Banta
Carol J. Banta
CERTIFICATE OF SERVICE
I hereby certify that on the 2d day of June, 2020, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Sixth Circuit by using the CM/ECF system. All participants in the case are registered CM/ECF users and will be served by the CM/ECF system.
/s/ Carol J. Banta Carol J. Banta
Federal Energy Regulatory Commission Washington, DC 20426 Tel.: (202) 502-6433 Fax: (202) 273-0901 June 2, 2020
TABLE OF CONTENTS STATUTES: PAGE Federal Power Act Section 201, 16 U.S.C. § 824 ..................................................................... A-1 Section 203, 16 U.S.C. § 824b ................................................................... A-3 Section 205, 15 U.S.C. § 824d ................................................................... A-5 Section 206, 16 U.S.C. § 824e .................................................................... A-7 Section 306, 16 U.S.C. § 825e .................................................................. A-10 Section 313(b), 16 U.S.C. § 825l(b) ......................................................... A-11
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A-9
Page 1317 TITLE 16—CONSERVATION § 825f
1 See References in Text note below.
(c) Statement of prior positions; definitions (1) On or before April 30 of each year, any per-
son, who, during the calendar year preceding the
filing date under this subsection, was an officer
or director of a public utility and who held, dur-
ing such calendar year, the position of officer,
director, partner, appointee, or representative of
any other entity listed in paragraph (2) shall file
with the Commission, in such form and manner
as the Commission shall by rule prescribe, a
written statement concerning such positions
held by such person. Such statement shall be
available to the public.
(2) The entities listed for purposes of para-
graph (1) are as follows—
(A) any investment bank, bank holding com-
pany, foreign bank or subsidiary thereof doing
business in the United States, insurance com-
pany, or any other organization primarily en-
gaged in the business of providing financial
services or credit, a mutual savings bank, or a
savings and loan association;
(B) any company, firm, or organization
which is authorized by law to underwrite or
participate in the marketing of securities of a
public utility;
(C) any company, firm, or organization
which produces or supplies electrical equip-
ment or coal, natural gas, oil, nuclear fuel, or
other fuel, for the use of any public utility;
(D) any company, firm, or organization
which during any one of the 3 calendar years
immediately preceding the filing date was one
of the 20 purchasers of electric energy which
purchased (for purposes other than for resale)
one of the 20 largest annual amounts of elec-
tric energy sold by such public utility (or by
any public utility which is part of the same
holding company system) during any one of
such three calendar years;
(E) any entity referred to in subsection (b);
and
(F) any company, firm, or organization
which is controlled by any company, firm, or
organization referred to in this paragraph.
On or before January 31 of each calendar year,
each public utility shall publish a list, pursuant
to rules prescribed by the Commission, of the
purchasers to which subparagraph (D) applies,
for purposes of any filing under paragraph (1) of
such calendar year.
(3) For purposes of this subsection—
(A) The term ‘‘public utility’’ includes any
company which is a part of a holding company
system which includes a registered holding
company, unless no company in such system is
an electric utility.
(B) The terms ‘‘holding company’’, ‘‘reg-
istered holding company’’, and ‘‘holding com-
pany system’’ have the same meaning as when
used in the Public Utility Holding Company
Act of 1935.1
(June 10, 1920, ch. 285, pt. III, § 305, as added Aug.
26, 1935, ch. 687, title II, § 213, 49 Stat. 856; amend-
ed Pub. L. 95–617, title II, § 211(a), Nov. 9, 1978, 92
Stat. 3147; Pub. L. 106–102, title VII, § 737, Nov.
12, 1999, 113 Stat. 1479.)
REFERENCES IN TEXT
The Public Utility Holding Company Act of 1935, re-
ferred to in subsec. (c)(3)(B), is title I of act Aug. 26,
1935, ch. 687, 49 Stat. 803, as amended, which was classi-
fied generally to chapter 2C (§ 79 et seq.) of Title 15,
Commerce and Trade, prior to repeal by Pub. L. 109–58,
title XII, § 1263, Aug. 8, 2005, 119 Stat. 974. For complete
classification of this Act to the Code, see Tables.
AMENDMENTS
1999—Subsec. (b). Pub. L. 106–102 inserted subsec.
heading, designated existing provisions as par. (1), in-
serted heading, and substituted ‘‘After 6’’ for ‘‘After
six’’, and added par. (2).
1978—Subsec. (c). Pub. L. 95–617 added subsec. (c).
EFFECTIVE DATE OF 1978 AMENDMENT
Pub. L. 95–617, title II, § 211(b), Nov. 9, 1978, 92 Stat.
3147, provided that: ‘‘No person shall be required to file
a statement under section 305(c)(1) of the Federal
Power Act [subsec. (c)(1) of this section] before April 30
of the second calendar year which begins after the date
of the enactment of this Act [Nov. 9, 1978] and no public
utility shall be required to publish a list under section
305(c)(2) of such Act [subsec. (c)(2) of this section] be-
fore January 31 of such second calendar year.’’
§ 825e. Complaints
Any person, electric utility, State, municipal-
ity, or State commission complaining of any-
thing done or omitted to be done by any li-
censee, transmitting utility, or public utility in
contravention of the provisions of this chapter
may apply to the Commission by petition which
shall briefly state the facts, whereupon a state-
ment of the complaint thus made shall be for-
warded by the Commission to such licensee,
transmitting utility, or public utility, who shall
be called upon to satisfy the complaint or to an-
swer the same in writing within a reasonable
time to be specified by the Commission. If such
licensee, transmitting utility, or public utility
shall not satisfy the complaint within the time
specified or there shall appear to be any reason-
able ground for investigating such complaint, it
shall be the duty of the Commission to inves-
tigate the matters complained of in such man-
ner and by such means as it shall find proper.
(June 10, 1920, ch. 285, pt. III, § 306, as added Aug.
26, 1935, ch. 687, title II, § 213, 49 Stat. 856; amend-
ed Pub. L. 109–58, title XII, § 1284(a), Aug. 8, 2005,
119 Stat. 980.)
AMENDMENTS
2005—Pub. L. 109–58 inserted ‘‘electric utility,’’ after
‘‘Any person,’’ and ‘‘, transmitting utility,’’ after ‘‘li-
censee’’ wherever appearing.
§ 825f. Investigations by Commission
(a) Scope The Commission may investigate any facts,
conditions, practices, or matters which it may
find necessary or proper in order to determine
whether any person, electric utility, transmit-
ting utility, or other entity has violated or is
about to violate any provision of this chapter or
any rule, regulation, or order thereunder, or to
aid in the enforcement of the provisions of this
chapter or in prescribing rules or regulations
thereunder, or in obtaining information to serve
as a basis for recommending further legislation
concerning the matters to which this chapter re-
A-10
Page 1320 TITLE 16—CONSERVATION § 825k
Commission, including the generation, trans-mission, distribution, and sale of electric energy by any agency, authority, or instrumentality of the United States, or of any State or municipal-ity or other political subdivision of a State. It shall, so far as practicable, secure and keep cur-rent information regarding the ownership, oper-ation, management, and control of all facilities for such generation, transmission, distribution, and sale; the capacity and output thereof and the relationship between the two; the cost of generation, transmission, and distribution; the rates, charges, and contracts in respect of the sale of electric energy and its service to residen-tial, rural, commercial, and industrial consum-ers and other purchasers by private and public agencies; and the relation of any or all such facts to the development of navigation, indus-try, commerce, and the national defense. The Commission shall report to Congress the results of investigations made under authority of this section.
(June 10, 1920, ch. 285, pt. III, § 311, as added Aug. 26, 1935, ch. 687, title II, § 213, 49 Stat. 859.)
§ 825k. Publication and sale of reports
The Commission may provide for the publica-tion of its reports and decisions in such form and manner as may be best adapted for public information and use, and is authorized to sell at reasonable prices copies of all maps, atlases, and reports as it may from time to time publish. Such reasonable prices may include the cost of compilation, composition, and reproduction. The Commission is also authorized to make such charges as it deems reasonable for special statis-tical services and other special or periodic serv-ices. The amounts collected under this section shall be deposited in the Treasury to the credit of miscellaneous receipts. All printing for the Federal Power Commission making use of en-graving, lithography, and photolithography, to-gether with the plates for the same, shall be contracted for and performed under the direc-tion of the Commission, under such limitations and conditions as the Joint Committee on Print-ing may from time to time prescribe, and all other printing for the Commission shall be done by the Director of the Government Publishing Office under such limitations and conditions as the Joint Committee on Printing may from time to time prescribe. The entire work may be done at, or ordered through, the Government Publish-ing Office whenever, in the judgment of the Joint Committee on Printing, the same would be to the interest of the Government: Provided, That when the exigencies of the public service so require, the Joint Committee on Printing may authorize the Commission to make imme-diate contracts for engraving, lithographing, and photolithographing, without advertisement for proposals: Provided further, That nothing contained in this chapter or any other Act shall prevent the Federal Power Commission from placing orders with other departments or estab-lishments for engraving, lithographing, and photolithographing, in accordance with the pro-visions of sections 1535 and 1536 of title 31, pro-viding for interdepartmental work.
(June 10, 1920, ch. 285, pt. III, § 312, as added Aug. 26, 1935, ch. 687, title II, § 213, 49 Stat. 859; amend-
ed Pub. L. 113–235, div. H, title I, § 1301(b), (d),
Dec. 16, 2014, 128 Stat. 2537.)
CODIFICATION
‘‘Sections 1535 and 1536 of title 31’’ substituted in text
for ‘‘sections 601 and 602 of the Act of June 30, 1932 (47
Stat. 417 [31 U.S.C. 686, 686b])’’ on authority of Pub. L.
97–258, § 4(b), Sept. 13, 1982, 96 Stat. 1067, the first sec-
tion of which enacted Title 31, Money and Finance.
CHANGE OF NAME
‘‘Director of the Government Publishing Office’’ sub-
stituted for ‘‘Public Printer’’ in text on authority of
section 1301(d) of Pub. L. 113–235, set out as a note
under section 301 of Title 44, Public Printing and Docu-
ments.
‘‘Government Publishing Office’’ substituted for
‘‘Government Printing Office’’ in text on authority of
section 1301(b) of Pub. L. 113–235, set out as a note pre-
ceding section 301 of Title 44, Public Printing and Docu-
ments.
§ 825l. Review of orders
(a) Application for rehearing; time periods; modi-fication of order
Any person, electric utility, State, municipal-
ity, or State commission aggrieved by an order
issued by the Commission in a proceeding under
this chapter to which such person, electric util-
ity, State, municipality, or State commission is
a party may apply for a rehearing within thirty
days after the issuance of such order. The appli-
cation for rehearing shall set forth specifically
the ground or grounds upon which such applica-
tion is based. Upon such application the Com-
mission shall have power to grant or deny re-
hearing or to abrogate or modify its order with-
out further hearing. Unless the Commission acts
upon the application for rehearing within thirty
days after it is filed, such application may be
deemed to have been denied. No proceeding to
review any order of the Commission shall be
brought by any entity unless such entity shall
have made application to the Commission for a
rehearing thereon. Until the record in a proceed-
ing shall have been filed in a court of appeals, as
provided in subsection (b), the Commission may
at any time, upon reasonable notice and in such
manner as it shall deem proper, modify or set
aside, in whole or in part, any finding or order
made or issued by it under the provisions of this
chapter.
(b) Judicial review Any party to a proceeding under this chapter
aggrieved by an order issued by the Commission
in such proceeding may obtain a review of such
order in the United States court of appeals for
any circuit wherein the licensee or public utility
to which the order relates is located or has its
principal place of business, or in the United
States Court of Appeals for the District of Co-
lumbia, by filing in such court, within sixty
days after the order of the Commission upon the
application for rehearing, a written petition
praying that the order of the Commission be
modified or set aside in whole or in part. A copy
of such petition shall forthwith be transmitted
by the clerk of the court to any member of the
Commission and thereupon the Commission
shall file with the court the record upon which
the order complained of was entered, as provided
A-11
Page 1321 TITLE 16—CONSERVATION § 825m
in section 2112 of title 28. Upon the filing of such
petition such court shall have jurisdiction,
which upon the filing of the record with it shall
be exclusive, to affirm, modify, or set aside such
order in whole or in part. No objection to the
order of the Commission shall be considered by
the court unless such objection shall have been
urged before the Commission in the application
for rehearing unless there is reasonable ground
for failure so to do. The finding of the Commis-
sion as to the facts, if supported by substantial
evidence, shall be conclusive. If any party shall
apply to the court for leave to adduce additional
evidence, and shall show to the satisfaction of
the court that such additional evidence is mate-
rial and that there were reasonable grounds for
failure to adduce such evidence in the proceed-
ings before the Commission, the court may
order such additional evidence to be taken be-
fore the Commission and to be adduced upon the
hearing in such manner and upon such terms
and conditions as to the court may seem proper.
The Commission may modify its findings as to
the facts by reason of the additional evidence so
taken, and it shall file with the court such
modified or new findings which, if supported by
substantial evidence, shall be conclusive, and its
recommendation, if any, for the modification or
setting aside of the original order. The judgment
and decree of the court, affirming, modifying, or
setting aside, in whole or in part, any such order
of the Commission, shall be final, subject to re-
view by the Supreme Court of the United States
upon certiorari or certification as provided in
section 1254 of title 28.
(c) Stay of Commission’s order The filing of an application for rehearing
under subsection (a) shall not, unless specifi-
cally ordered by the Commission, operate as a
stay of the Commission’s order. The commence-
ment of proceedings under subsection (b) of this
section shall not, unless specifically ordered by
the court, operate as a stay of the Commission’s
order.
(June 10, 1920, ch. 285, pt. III, § 313, as added Aug.
26, 1935, ch. 687, title II, § 213, 49 Stat. 860; amend-
ed June 25, 1948, ch. 646, § 32(a), 62 Stat. 991; May
24, 1949, ch. 139, § 127, 63 Stat. 107; Pub. L. 85–791,
§ 16, Aug. 28, 1958, 72 Stat. 947; Pub. L. 109–58,
title XII, § 1284(c), Aug. 8, 2005, 119 Stat. 980.)
CODIFICATION
In subsec. (b), ‘‘section 1254 of title 28’’ substituted
for ‘‘sections 239 and 240 of the Judicial Code, as amend-
ed (U.S.C., title 28, secs. 346 and 347)’’ on authority of
act June 25, 1948, ch. 646, 62 Stat. 869, the first section
of which enacted Title 28, Judiciary and Judicial Proce-
dure.
AMENDMENTS
2005—Subsec. (a). Pub. L. 109–58 inserted ‘‘electric
utility,’’ after ‘‘Any person,’’ and ‘‘to which such per-
son,’’ and substituted ‘‘brought by any entity unless
such entity’’ for ‘‘brought by any person unless such
person’’.
1958—Subsec. (a). Pub. L. 85–791, § 16(a), inserted sen-
tence to provide that Commission may modify or set
aside findings or orders until record has been filed in
court of appeals.
Subsec. (b). Pub. L. 85–791, § 16(b), in second sentence,
substituted ‘‘transmitted by the clerk of the court to’’
for ‘‘served upon’’, substituted ‘‘file with the court’’ for
‘‘certify and file with the court a transcript of’’, and in-
serted ‘‘as provided in section 2112 of title 28’’, and in
third sentence, substituted ‘‘jurisdiction, which upon
the filing of the record with it shall be exclusive’’ for
‘‘exclusive jurisdiction’’.
CHANGE OF NAME
Act June 25, 1948, eff. Sept. 1, 1948, as amended by act
May 24, 1949, substituted ‘‘court of appeals’’ for ‘‘circuit
court of appeals’’.
§ 825m. Enforcement provisions
(a) Enjoining and restraining violations Whenever it shall appear to the Commission
that any person is engaged or about to engage in
any acts or practices which constitute or will
constitute a violation of the provisions of this
chapter, or of any rule, regulation, or order
thereunder, it may in its discretion bring an ac-
tion in the proper District Court of the United
States or the United States courts of any Terri-
tory or other place subject to the jurisdiction of
the United States, to enjoin such acts or prac-
tices and to enforce compliance with this chap-
ter or any rule, regulation, or order thereunder,
and upon a proper showing a permanent or tem-
porary injunction or decree or restraining order
shall be granted without bond. The Commission
may transmit such evidence as may be available
concerning such acts or practices to the Attor-
ney General, who, in his discretion, may insti-
tute the necessary criminal proceedings under
this chapter.
(b) Writs of mandamus Upon application of the Commission the dis-
trict courts of the United States and the United
States courts of any Territory or other place
subject to the jurisdiction of the United States
shall have jurisdiction to issue writs of manda-
mus commanding any person to comply with the
provisions of this chapter or any rule, regula-
tion, or order of the Commission thereunder.
(c) Employment of attorneys The Commission may employ such attorneys
as it finds necessary for proper legal aid and
service of the Commission or its members in the
conduct of their work, or for proper representa-
tion of the public interests in investigations
made by it or cases or proceedings pending be-
fore it, whether at the Commission’s own in-
stance or upon complaint, or to appear for or
represent the Commission in any case in court;
and the expenses of such employment shall be
paid out of the appropriation for the Commis-
sion.
(d) Prohibitions on violators In any proceedings under subsection (a), the
court may prohibit, conditionally or uncondi-
tionally, and permanently or for such period of
time as the court determines, any individual
who is engaged or has engaged in practices con-
stituting a violation of section 824u of this title
(and related rules and regulations) from— (1) acting as an officer or director of an elec-
tric utility; or (2) engaging in the business of purchasing or
selling— (A) electric energy; or (B) transmission services subject to the ju-
risdiction of the Commission.
A-12
RELEVANT TARIFF PROVISIONS
i
The following provisions are excerpted from the full version of First Revised Rate Schedule 402, included as Attachment A to Owensboro’s Complaint, which is reproduced at Appx. 34-43. Schedule 402 at pp. 1-2, Appx. 34-35:
“Merger Mitigation De-pancaking (‘MMD’)” shall mean the commitment of Applicants to “shield . . . [Requirements Customers] from any re-pancaking of rates for transmission service between Applicants’ transmission system and the remaining members of the Midwest ISO,” 114 FERC ¶ 61,282, as provided for in Section 1 of this Amended Agreement. . . .
* * *
“MMD Transaction” shall mean a transaction that (a) sources in the Midwest ISO and sinks in Applicants’ control area; or (b) sources in Applicants’ control area and sinks in the Midwest ISO.
“MMD Party” or “MMD Parties” shall include the KU Municipals . . . .
“Requirements Customer” shall mean transmission customers in the KU destination market (as that term is used and defined in certain Commission orders, 82 FERC ¶ 61,308, 114 FERC ¶ 61,282, and 116 FERC ¶ 61,019) who purchase requirements electric service from LG&E/KU.
[“Applicants” means “Louisville Gas and Electric Company (‘LG&E’) and Kentucky Utilities Company (‘KU’)”; “KU Municipals” is defined to include Owensboro. Id. at p. 1, Appx. 34.]
RELEVANT TARIFF PROVISIONS
ii
Schedule 402 at p. 2, Sec. 1.a.i, Appx. 35:
1. Transmission Service and Depancaking --
a. MMD: Applicants shall shield MMD Parties from any pancaking of transmission and ancillary services charges for MMD Transactions. For any MMD Transaction: (i) Applicants shall provide (a) transmission services and (b) ancillary services (as applicable), at de-pancaked rates, consistent with the terms in this Amended Agreement; (ii) transmission service on the Transmission System shall be provided at rates, terms and conditions under Applicants’ OATT; and (iii) charges to MMD Parties shall be as follows:
i. “Drive-Out” of the Midwest ISO: With respect to any MMD Transaction in which an MMD Party purchases electricity from a source in the Midwest ISO for delivery to such party’s load interconnected with the Transmission System: (i) Applicants shall credit their TO Charges to the MMD Party by an amount equal to the Midwest ISO Charges which the MMD Party incurs to deliver such purchased electricity to the Midwest ISO/LG&E/KU interface (provided, however, that no credit shall be applied for any Midwest ISO Charges for service that is not provided and charged by Applicants, i.e., where there would be no pancaked charge); and (ii) the MMD Party shall continue to be responsible for the TO Charges incurred to deliver such electricity to their loads on the Applicants’ transmission system.
* * *
RELEVANT TARIFF PROVISIONS
iii
Schedule 402 at p. 3, Sec. 1.a.iv, Appx. 36:
iv. Scope of MMD: With respect to any MMD Transactions in which TO Charges will be waived, such waived TO Charges shall include only those charges for transmission service and ancillary services where both the Midwest ISO and the Transmission Owner provide and charge for corresponding services.
Thus, as a non-exclusive example, in a “Drive Out” MMD Transaction, the Transmission Owner shall not be obligated to credit any amounts charged to an MMD Party for congestion or marginal losses incurred in the Midwest ISO market, so long as there are no corresponding congestion or marginal loss charges for the use of Applicants’ system. Further, also as a non-exclusive example, if an MMD Party purchases a portion of particular ancillary service from the Transmission Owner and a portion from the Midwest ISO, this would not be considered a rate pancake subject to waiver or credit under this Amended Agreement, so long as the MMD Party is not required to purchase more than 100% of the ancillary service.
Nothing herein shall be construed as limiting the KU Municipals’ rights to “enjoy the same service and pricing that they would have been entitled to receive, absent Applicants’ withdrawal” established in Louisville Gas & Electric Co., et al., 114 FERC ¶ 61,282 at P 45 (2006), and as established under Section 15.8 and Attachment E of Applicant’s OATT.
RELEVANT TARIFF PROVISIONS
iv
Schedule 402 at p. 3, Section 1.a.v, Appx. 36:
v. Changes to MMD: The MMD described under this Section 1 is intended to implement the Section 203 mitigation requirements ordered by the Commission in Louisville Gas and Electric Co., 82 FERC ¶ 61,308 (1998), as modified by Louisville Gas & Electric Co., et al., 114 FERC ¶ 61,282 (2006), and E.ON U.S., LLC, 116 FERC ¶ 61,019 (2006). Any proposed changes to these requirements are governed by Section 203 of the FPA.