United States Court of Appeals, District of Columbia Circuit
April 6, 2018
Petitions for Review of Orders of the Federal Energy
W. D'Alessandro argued the cause for petitioner Michigan
Public Service Commission. William F. Demarest Jr. argued the
cause for petitioners Tilden Mining Company L.C. and Empire
Iron Mining Partnership. With them on the joint briefs were
Kelly A. Daly, M. Denyse Zosa, Steven A. Neeley Jr., Sylvia
J.S. Bartell, Lauren D. Donofrio, Assistant Attorney General,
Office of the Attorney General for the State of Michigan,
Jennifer U. Heston, Saulius K. Mikalonis, Christopher R.
Jones, Elizabeth W. Whittle, Thomas J. Waters, Christine C.
Ryan, Phyllis G. Kimmel, Robert C. Fallon, and Andrew B.
Young. Steven D. Hughey, Assistant Attorney General, Office
of the Attorney General for the State of Michigan, Francis A.
Taylor Jr., and A. Hewitt Rose III, entered appearances.
E. Cafer, Senior Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief were James P. Danly, General Counsel, Robert H.
Solomon, Solicitor, and Nicholas M. Gladd, Attorney.
William L. Massey argued the cause for intervenor Public
Service Commission of Wisconsin. On the joint brief of
intervenors were Cynthia S. Bogorad, David E. Pomper, Rory
McGarry, Justin M. Vickers, Regina Y. Speed-Bost, and Debra
Before: Rogers, Srinivasan and Wilkins, Circuit Judges.
Wilkins, Circuit Judge
Louisiana Public Service Commission v. Federal Energy
Regulatory Commission, this Court affirmed FERC's
denial of refunds in a cost-allocation case, upholding its
discretion to deny refunds where a flaw in rate design caused
the costs to be borne disproportionately among customers.
See 883 F.3d 929 (D.C. Cir. Mar. 6, 2018). This case
presents a similar scenario with an opposite result: here,
after finding the rate-distribution methodology unjust and
unreasonable upon a Section 206 complaint, FERC ordered
refunds to customers who paid too much, funded by surcharges
on customers who paid too little. Petitioners - who were
subjected to surcharges - challenge FERC's orders as
violating the filed-rate doctrine and the prohibition on
retroactive rate increases. They also argue that FERC's
decisions were supported by insufficient evidence and that
FERC's reliance on the evidence it did employ was
arbitrary and capricious.
conclude that the reallocation at issue here does not
constitute an impermissible retroactive rate increase. FERC
reasonably determined that the prior rate methodology was
unjust and unreasonable, and its reliance on certain evidence
in reaching this conclusion was appropriate. Having
established that the existing rate was unjust and
unreasonable, and having determined that a different
methodology would comply with cost-causation principles, FERC
had authority to order refunds and corresponding surcharges
under Section 206 and its broad remedial authority under
Section 309. Accordingly, we deny the Petitions for review.
case involves system support resource ("SSR") costs
in the territory of the American Transmission Company
("ATC") under the Midcontinent Independent System
Operator, Inc. ("MISO") Tariff. To ensure system
stability, MISO requires energy producers in its territory to
notify MISO prior to ceasing operation. MISO then evaluates
the importance of the would-be retired facility and may
require continued operation if necessary for the reliability
of energy supply. Such providers are designated SSRs, and
they are compensated for the cost of continued operation
under SSR agreements with MISO.
most of the MISO service area, SSR costs have long been
shared by customers based on the load served.
Midwest Indep. Transmission Sys. Operator, Inc.
Pub. Utils. with Grandfathered Agreements in the Midwest Iso
Region, 108 FERC ¶ 61, 163, ¶ 61, 968, P 372
(Aug. 6, 2004). Under this allocation methodology, each
load-serving entity ("LSE") pays for the
reliability resources in proportion to its reliability needs.
ATC area, however, the MISO Tariff allocated SSR costs pro
rata among all customers. See id. at P 368. FERC
originally approved the ATC pro rata allocation as part of
the separate tariff for ATC's territory in Michigan's
Upper Peninsula and Wisconsin. See Wis. Elec. Power Co.
Am. Transmission Co., LLC Madison Gas & Elec. Co. Wis.
Pub. Serv. Corp. Wis. Power & Light Co., 97 FERC
¶ 61, 337, ¶ 62, 582 & n.4 (Dec. 21, 2001).
However, FERC incorporated ATC into the MISO system around
the same time that it approved ATC's SSR-cost-allocation
methodology. See Am. Transmission Co., LLC, 97 FERC
¶ 62, 182, ¶ 64, 269 (Nov. 28, 2001). The MISO
Tariff continued the pro rata allocation methodology for the
ATC area after it became part of MISO. Specifically, Section
38.2.7.k of the Tariff provided that "any costs of
operating an SSR Unit allocated to the footprint of [ATC]
shall be allocated to all LSEs within the footprint of [ATC]
on a pro rata basis." See Midcontinent
Indep. Sys. Operator, Inc. Pub. Serv. Comm'n of
Wis., 148 FERC ¶ 61, 071, ¶ 61, 443, P 12
(July 29, 2014) ("July 29, 2014 Order"). Only the
ATC area was subject to such a specified methodology: for the
rest of the MISO area, the Tariff provided only that
reliability costs were allocated to the LSEs "which
require the operation" of reliability resources.
Id. at P 18. In other words, SSR costs for all
non-ATC service areas were allocated to the LSEs that
actually benefited from the reliability resources.
instant Petitions arise from SSR agreements regarding three
facilities in the ATC service area. MISO filed the first SSR
agreement using the ATC pro rata allocation in October 2012,
for the continued operation of a City of Escanaba, Michigan
facility, which FERC accepted. See Midwest Indep.
Transmission Sys. Operator, Inc., 142 FERC ¶ 61,
170, ¶ 61, 812, P 11 (Mar. 4, 2013). In early 2014, MISO
filed an SSR agreement requiring the continued operation of a
Presque Isle facility located in Marquette, Michigan, with
costs allocated to customers pro rata. FERC accepted the
proposed Presque Isle SSR Agreement on April 1, 2014.
Midcontinent Indep. Sys. Operator, Inc., 147 FERC
¶ 61, 004, ¶ 61, 013, PP 5, 12 (Apr. 1, 2014). MISO
also submitted an SSR agreement regarding the continued
operation of a White Pine Electric Power, LLC unit, which
FERC accepted on June 13, 2014. Midcontinent Indep. Sys.
Operator, Inc., 147 FERC ¶ 61, 199, ¶ 62, 114,
PP 1, 3, 11 (June 13, 2014).
April 3, 2014, two days after FERC accepted the Presque Isle
SSR Agreement, the Public Service Commission of Wisconsin
("Wisconsin Commission" or "PSCW") filed
a complaint under Section 206 of the Federal Power Act, 16
U.S.C. § 824e, to challenge the allocation of the
Presque Isle SSR costs as unjust and unreasonable. The
Complaint relied on a study that MISO conducted, at the
request of stakeholders, to assess which load-serving
entities in the ATC footprint actually benefited from the
continued operation of the Presque Isle facility. PSCW
Complaint at 3 & n.8, FERC Docket No. EL14-34-000 (Apr.
3, 2014). The preliminary load-shed analysis showed that 42
percent of the benefiting load of the Presque Isle ...